UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. _____]
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials under ss.240.14a-12
GARMIN LTD.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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|_| Fee paid previously by written preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:__________________________________________
2) Form Schedule or Registration Statement No.:_____________________
3) Filing Party:____________________________________________________
4) Date Filed:______________________________________________________
[GARMIN LOGO]
GARMIN LTD.
NOTICE AND PROXY STATEMENT
for
The Annual General Meeting of Shareholders
to be held
Friday, June 3, 2005
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card
and promptly return it in the enclosed envelope.
Mailing of this Notice and Proxy Statement, the accompanying Proxy Card and the
2004 Annual Report commenced on or about April 29, 2005.
[GARMIN LOGO]
Garmin Ltd.
P.O. Box 30464 SMB
5th Floor, Harbour Place
103 South Church Street
George Town, Grand Cayman
Cayman Islands
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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 3, 2005
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You are hereby notified of and cordially invited to attend the Annual
General Meeting (the "Annual Meeting") of Shareholders of Garmin Ltd., a Cayman
Islands company ("Garmin" or the "Company") to be held at the Ritz-Charles
Conference Center, 9000 West 137th Street, Overland Park, Kansas 66221, USA, at
10:00 a.m. Central Time, on Friday, June 3, 2005, to consider and vote upon the
following matters:
1. Election of three directors;
2. Approval of the Garmin Ltd. 2005 Equity Incentive Plan; and
3. Such other matters as may properly be brought before the
Annual Meeting or any adjournment thereof.
Information concerning the matters to be acted upon at the Annual Meeting
is contained in the accompanying Proxy Statement.
In accordance with the Company's Articles of Association, the Company's
audited consolidated financial statements for the fiscal year ending December
25, 2004 will be presented at the Annual Meeting. There is no requirement under
the Company's Articles of Association or Cayman Islands law that such financial
statements be approved by shareholders, and no such approval will be sought at
the Annual Meeting.
Shareholders of record at the close of business on April 18, 2005 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. A shareholder entitled to attend and to vote at the Annual Meeting is
entitled to appoint a proxy to attend and, on a poll, vote instead of him or
her.
It is important that your shares be represented at the meeting. Please vote
your shares regardless of whether you plan to attend the Annual Meeting. Please
use the enclosed Proxy Card to direct the vote of your shares, regardless of
whether you plan to attend the Annual Meeting. Please date the Proxy Card, sign
it and promptly return it in the enclosed envelope, which requires no postage if
mailed in the United States. You may also appoint another person (who need not
be a shareholder) as your proxy to attend and vote at the Annual Meeting.
If you own shares registered in the name of a broker, you should receive a
card from that broker permitting you to direct the broker to vote those shares.
Please promptly complete the card and return it to the broker.
By Order of the Board of Directors
/s/ Andrew R. Etkind
April 29, 2005 Andrew R. Etkind
General Counsel and Secretary
Garmin Ltd.
P.O. Box 30464 SMB
5th Floor, Harbour Place
103 South Church Street
George Town, Grand Cayman
Cayman Islands
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PROXY STATEMENT
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TABLE OF CONTENTS
Page
Proxy Statement.................................................... 2
Information Concerning Solicitation and Voting..................... 2
Stock Ownership of Certain Beneficial Owners and Management........ 4
Proposal 1 - Election of Three Directors........................... 6
The Board of Directors............................................. 7
Audit Matters....................................................... 11
Executive Compensation Matters...................................... 13
Proposal 2 - Approval of the Garmin Ltd. 2005 Equity Incentive Plan..... 19
Shareholder Proposals................................................... 26
Section 16(a) Beneficial Ownership Reporting Compliance................. 26
Householding of Annual Meeting Materials for Broker
Customers............................................................... 26
Other Matters.......................................................... 26
Appendix A - Nominating Committee Charter.............................. A-1
Appendix B - 2005 Equity Incentive Plan................................ B-1
1
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors ("Board") of
Garmin Ltd., a Cayman Islands company, ("Garmin" or the "Company" ) for use at
the Annual General Meeting of Shareholders (the "Annual Meeting") to be held at
10:00 a.m., Central Time, on Friday, June 3, 2005, at the Ritz-Charles
Conference Center, 9000 West 137th Street, Overland Park, Kansas 66221, and at
any adjournment(s) or postponement(s) thereof for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and the accompanying proxy card are first being mailed to shareholders
on or about April 29, 2005.
INFORMATION CONCERNING SOLICITATION AND VOTING
Proposals
At the Annual Meeting, the Garmin Board intends to present the election of
three directors and the approval of the Garmin Ltd. 2005 Equity Incentive Plan
(the "Equity Incentive Plan"). In accordance with the Company's Articles of
Association, the Company's audited consolidated financial statements for the
fiscal year ending December 25, 2004 will be presented at the Annual Meeting.
There is no requirement under the Company's Articles of Association or Cayman
Islands law that such financial statements be approved by shareholders, and no
such approval will be sought at the Annual Meeting. The Garmin Board knows of no
other matters that will be presented or voted on at the Annual Meeting.
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 18, 2005 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, the Company had issued and outstanding 108,432,070 common
shares, par value $0.01 per share ("Common Shares").
Solicitation of Proxies
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting shareholders by mail and through its regular employees not
specifically engaged or compensated for that purpose, the Company will request
banks and brokers, and other custodians, nominees and fiduciaries to solicit
their customers who have shares of the Company registered in the names of such
persons and, if requested, will reimburse them for their reasonable,
out-of-pocket costs. The Company may use the services of its officers, directors
and others to solicit proxies, personally or by telephone, facsimile or
electronic mail, without additional compensation.
Voting
Each shareholder is entitled to one vote on each of the proposals presented
in this Proxy Statement for each share held. There is no cumulative voting in
the election of directors. The required quorum for the transaction of business
at the Annual Meeting is the presence in person or by proxy of shareholders
holding not less than a majority of the Common Shares issued and outstanding on
the Record Date. The affirmative vote of a majority of the Common Shares
represented and voting at the meeting in person or by proxy is required for the
election of directors and the approval of the Equity Incentive Plan.
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Abstentions and Broker Non-Votes
Pursuant to Cayman Islands law, (i) shares represented at the meeting whose
votes are withheld on any matter, and (ii) shares which are represented by
"broker non-votes" (i.e., shares held by brokers or nominees which are
represented at the meeting but with respect to which the broker or nominee is
not empowered to vote on a particular proposal) are not included in the
determination of the shares voting on such matter but are counted for quorum
purposes.
How Shareholders Vote
Shareholders holding Common Shares in their own names on the Record Date
("Record Holders"), persons ("Plan Participants") holding Common Shares on the
Record Date through the Garmin International, Inc. 401(k) and Pension Plan (the
"401(k) Plan") and investors ("Broker Customers") holding Common Shares on the
Record Date through a broker or other nominee, may vote such shares as follows:
Common Shares of Record
Record Holders may only vote their shares if they or their proxies are
present at the Annual Meeting. Record Holders may appoint as their proxy the
Proxy Committee, which consists of officers of the Company whose names are
listed on the Proxy Card. The Proxy Committee will vote all Common Shares for
which it is the proxy as specified by the shareholders on the Proxy Cards. A
Record Holder desiring to name as proxy someone other than the Proxy Committee
may do so by crossing out the names of the Proxy Committee members on the Proxy
Card and inserting the full name of such other person. In that case, the Record
Holder must sign the Proxy Card and deliver it to the person named, and the
person named must be present and vote at the Annual Meeting.
If a properly executed and unrevoked Proxy Card does not specify how the
shares represented thereby are to be voted, the Proxy Committee intends to vote
such shares for the election as directors of the persons nominated by the
Company's Board of Directors ("Board Nominees") and for the approval of the
Equity Incentive Plan, and in accordance with the discretion of the Proxy
Committee upon such other matters as may properly come before the Annual
Meeting.
Common Shares Held Under the 401(k) Plan
Plan Participants may on the voting instructions card instruct the trustee
of the 401(k) Plan how to vote the shares allocated to their respective
participant accounts. The trustee will vote all shares allocated to the accounts
of Plan Participants as instructed by such participants. Common Shares for which
inadequate or no voting instructions are received generally will be voted by the
trustee in the same proportion as those shares for which instructions were
actually received from Plan Participants. The trustee of the 401(k) Plan may
vote shares allocated to the accounts of the participants either in person or
through a proxy.
Common Shares Held Through a Broker or Other Nominee
Each broker or nominee must solicit from the Broker Customers directions on
how to vote the Company's shares, and the broker or nominee must then vote such
shares in accordance with such directions. Brokers or nominees are to forward
soliciting materials to the Broker Customers, at the reasonable expense of the
Company if the broker or nominee requests reimbursement. Most broker-dealers are
members of the National Association of Securities Dealers, which generally does
not allow them to vote shares held in street name unless they are permitted to
do so under the rules of a national securities exchange to which they belong.
Brokers who are members of the New York Stock Exchange ("NYSE") may vote the
shares of Broker Customers on routine matters, including the election of
directors, when they have not received directions from the Broker Customers.
NYSE brokers, however, do not have discretion to vote on the Equity Incentive
Plan proposal without instructions from the Broker Customer. If you do not
3
instruct your broker how to vote on the Equity Incentive Plan proposal, your
broker will deliver a non-vote on such proposal. Shares that are subject to a
broker non-vote are counted for purposes of determining whether a quorum exists
but not for purposes of determining whether a proposal has passed.
Revoking Proxy Authorizations or Instructions
Until the polls close (or in the case of Plan Participants, until the
trustee of the 401(k) Plan votes) votes of Record Holders and voting
instructions of Plan Participants may be recast with a later-dated, properly
executed and delivered Proxy Card or, in the case of Plan Participants, a voting
instruction card. Otherwise, shareholders may not revoke a vote, unless: (a) in
the case of a Record Holder, the Record Holder either (i) attends the Annual
Meeting and casts a ballot at the meeting or (ii) delivers a written revocation
to the Corporate Secretary of the Company at any time before the Chairman of the
Annual Meeting closes the polls; (b) in the case of a Plan Participant, the
revocation procedures of the trustee of the 401(k) Plan are followed; or (c) in
the case of a Broker Customer, the revocation procedures of the broker or
nominee are followed.
Attendance and Voting in Person at the Annual Meeting
Attendance at the Annual Meeting is limited to Record Holders or their
properly appointed proxies, beneficial owners of Common Shares having evidence
of such ownership, and guests of the Company. Plan Participants and Broker
Customers, absent special direction to the Company from the respective 401(k)
Plan trustee, broker or nominee, may only vote by instructing the trustee,
broker or nominee and may not cast a ballot at the Annual Meeting. Record
Holders may vote by casting a ballot at the Annual Meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, the Company had outstanding 108,432,070 Common
Shares. The following table sets forth information as of the Record Date
concerning the beneficial ownership of Common Shares by: (i) beneficial owners
of Common Shares who have publicly filed a report acknowledging ownership of
more than 5% of the number of outstanding Common Shares; (ii) the directors and
certain executive officers of the Company; and (iii) all of the Company's
executive officers and directors as a group. Beneficial ownership generally
means either the sole or shared power to vote or dispose of the shares. Except
as otherwise noted, to the Company's knowledge the holders listed below have
sole voting and dispositive power. No officer or director of the Company owns
any equity securities of any subsidiary of the Company.
Common Shares(1) Percent of
Class(2)
Name and Address
Gary L. Burrell(3) 16,031,782(4) 14.8%
Shareholder
Ruey-Jeng Kao(5) 6,475,481 6.0%
Shareholder
Gene M. Betts 4,961(6) *
Director
4
Donald H. Eller, Ph.D. 1,448,017(7) 1.3%
Director
Andrew R. Etkind 21,699(8) *
General Counsel and Corporate
Secretary
Min H. Kao, Ph.D.(9) 24,359,426(10) 22.5%
Director, Chairman and CEO
Gary Kelley 18,201(11) *
Director of Marketing,
Garmin International, Inc.
Charles W. Peffer 1,000 *
Director
Clifton A. Pemble 30,983(12) *
Director and
Director of Engineering
Garmin International, Inc.
Kevin Rauckman 22,636(13) *
Chief Financial Officer and Treasurer
Thomas A. McDonnell 25,398(14) *
Director
All Executive Officers and Directors
as a Group 25,932,321(15) 23.9%
(9 persons)
* Less than 1% of the outstanding Common Shares
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares subject to options
held by that person that are currently exercisable at the Record Date
or within 60 days of such date are deemed outstanding. The holders may
disclaim beneficial ownership of any such shares that are owned by or
with family members, trusts or other entities. Except as indicated in
the footnotes to this table and pursuant to applicable community
property laws, each shareholder named in the table has sole voting
power and investment power with respect to the shares set forth
opposite such shareholder's name.
(2) The percentage is based upon the number of shares outstanding as of
the Record Date and computed as described in footnote (1) above.
(3) Mr. Burrell's address is c/o Garmin International, Inc., 1200 East
151st Street, Olathe, Kansas 66062.
(4) The amount of Common Shares reported includes 431,782 Common Shares
held by Judith M. Burrell, Mr. Burrell's wife, over which Mr. Burrell
does not have any voting or dispositive power. Mr. Burrell disclaims
beneficial ownership of these shares owned by his wife.
(5) Mr. Kao's address is c/o Fortune Land Law Offices, 8th Floor, 132,
Hsinyi Road, Section 3, Taipei, Taiwan. Mr. Kao is the brother of Dr.
Kao. The information is based on Amendment No. 3 filed January 21,
2005 to Schedule 13G filed February 9, 2001.
(6) Mr. Betts' beneficial ownership includes 1,961 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date.
(7) Dr. Eller's beneficial ownership includes 400,000 shares subject to
variable prepaid forward agreements and 5,398 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date.
(8) Mr. Etkind's beneficial ownership includes 395 shares held in the
401(k) Plan and 16,000 shares that may be acquired through options
that are currently exercisable or will become exercisable within 60
days of the Record Date.
(9) Dr. Kao's address is c/o Garmin International, Inc., 1200 East 151st
Street, Olathe, Kansas 66062.
(10) Of the 24,359,426 Common Shares,(i) 6,526,630 Common Shares are held
by the Min-Hwan Kao Revocable Trust 9/28/95, over which Dr. Kao has
sole voting and dispositive power, (ii) 15,221,784 Common Shares are
held by revocable trusts established by Dr. Kao's children over which
Dr. Kao has shared voting and dispositive power, (iii) 2,603,912
Common Shares are held by a revocable trust established by Dr. Kao's
wife, over which Dr. Kao does not have any voting or dispositive
power, power, and (v) 6,400 Common Shares are held jointly by Dr. Kao
and his wife. Dr. Kao disclaims (iv) 700 shares are held by his wife,
over which Dr. Kao does not have any voting or dispositive beneficial
ownership of those shares owned by his wife and the revocable trust
established by his wife and by the revocable trusts established by his
children.
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(11) Mr. Kelley's beneficial ownership includes 11,300 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date.
(12) Mr. Pemble's beneficial ownership includes 29,000 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date.
(13) Mr. Rauckman's beneficial ownership includes 17,500 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date. The amount of Common
Shares reported includes 3,150 Common Shares held by a revocable trust
established by Mr. Rauckman's wife, over which Mr. Rauckman does not
have any voting or dispositive power. Mr. Rauckman disclaims
beneficial ownership of these shares owned by the revocable trust
established by his wife.
(14) Mr. McDonnell's beneficial ownership includes 5,398 shares that may be
acquired through options that are currently exercisable or will become
exercisable within 60 days of the Record Date.
(15) The number includes 86,557 shares that may be acquired through options
that are currently exercisable or will become exercisable within 60
days of the Record Date. Individuals in the group have disclaimed
beneficial ownership as to a total of 17,829,546 of the shares listed.
PROPOSAL 1 - ELECTION OF THREE DIRECTORS
The Company's Articles of Association classify the Company's Board of
Directors into three classes and stagger the three year terms of each class to
expire in consecutive years.
The Company's nominees for election at this Annual Meeting are Donald H.
Eller, Clifton A. Pemble and Charles W. Peffer. Dr. Eller and Mr. Pemble are
being nominated as Class II directors to hold office for a three-year term
expiring in 2008. Mr. Peffer is being nominated as a Class III director to hold
office for a one-year term expiring in 2006.
Dr. Eller, Mr. Pemble and Mr. Peffer are currently directors of the
Company. Dr. Eller was elected as a director at the Company's Annual Meeting in
2002 for a term expiring on the date of this Annual Meeting. Mr. Pemble and Mr.
Peffer were appointed as directors by the Company's Board in August 2004 for a
term expiring on the date of this Annual Meeting. Dr. Eller, Mr. Pemble and Mr.
Peffer have each indicated that they are willing and able to continue serving as
directors if elected and have consented to being named as nominees in this Proxy
Statement. If any of these nominees should for any reason become unavailable for
election, the Proxy Committee will vote for such other nominee as may be
proposed by the Company's Board of Directors.
[Photo] Donald H. Eller, age 62, has been a director of the
Company since March 2001. Dr. Eller has been a private investor
since January 1997. From September 1979 to November 1982 he
served as the Manager of Navigation System Design for a division
of Magnavox Corporation. From January 1984 to December 1996 he
served as a consultant on Global Positioning Systems and other
navigation technology to various U.S. military agencies and U.S.
and foreign corporations. Dr. Eller holds B.S., M.S. and Ph.D.
degrees in Electrical Engineering from the University of Texas.
[Photo] Clifton A. Pemble, age 39, has served as a director
of the Company since August 2004. He has served as a director and
officer of various subsidiaries of the Company since August 2003.
He has been Director of Engineering of Garmin International, Inc.
since 2003. Previously, he was Software Engineering Manager of
Garmin International, Inc. from 1995 to 2002 and a Software
Engineer with Garmin International, Inc. from 1989 to 1995.
Garmin International, Inc. is a subsidiary of the Company. Mr.
Pemble holds BA degrees in Mathematics and Computer Science from
MidAmerica Nazarene University.
[Photo] Charles W. Peffer, age 57, has been a director of
the Company since August 2004. Mr. Peffer was a partner in KPMG
LLP and its predecessor firms from 1979 to 2002 when he retired.
He served in KPMG's Kansas City office as Partner in Charge of
Audit from 1986 to 1993 and as Managing Partner from 1993 to
2000. Mr. Peffer is a director of the Commerce Funds, a family of
eleven mutual funds.
6
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THESE
NOMINEES.
THE BOARD OF DIRECTORS
Information about present directors
In addition to the Board nominees who are described under Proposal 1 -
Election of Three Directors, the following individuals are also on the Company's
Board, for a term ending on the date of the Annual Meeting of shareholders in
the year indicated.
Director Serving Until the Annual Meeting in 2006
[Photo] Min H. Kao, age 56, has served as Chairman of the Company since
August 2004 and was previously Co-Chairman of the Company from August 2000 to
August 2004. He has served as Chief Executive Officer of the Company since
August 2002 and previously served as Co-Chief Executive Officer from August 2000
to August 2002. Dr. Kao has served as a director and officer of various
subsidiaries of the Company since August 1990. Dr. Kao holds Ph.D. and MS
degrees in Electrical Engineering from the University of Tennessee and a BS
degree in Electrical Engineering from National Taiwan University.
Directors Serving Until the Annual Meeting in 2007
[Photo] Gene M. Betts, age 52, has been a director of the Company since
March 2001. Mr. Betts has been a Senior Vice President of Sprint Corporation
("Sprint") since 1990 and has been Treasurer of Sprint since 1998. In these
positions his responsibilities include capital markets and treasury operations,
mergers and acquisitions, taxes, corporate financial planning and budgeting,
pension and savings trust management, and risk management and loss prevention
for Sprint and all of its subsidiaries. Mr. Betts is a Certified Public
Accountant. Prior to joining Sprint he was a partner in Arthur Young & Co. (now
Ernst & Young). Mr. Betts is a director of seven registered investment companies
in the Buffalo Funds complex.
[Photo] Thomas A. McDonnell, age 59, has been a director of the Company
since March 2001. Mr. McDonnell has been President of DST Systems, Inc. ("DST")
since January 1973 (except for a 30-month period from October 1984 to April
1987), Chief Executive Officer of DST since 1984 and a director of DST since
1971. He is also a director of Blue Valley Ban Corp., Commerce Bancshares, Inc.,
Euronet Worldwide, Inc. and Kansas City Southern.
7
Director Independence
The Board of Directors has determined that Messrs. Betts, Eller, Peffer and
McDonnell, who constitute a majority of the Board, are independent directors as
defined in the listing standards for the Nasdaq National Market.
Board of Directors Meetings and Standing Committee Meetings
Meetings
The Board of Directors held eight meetings and took action by unanimous
written consent twice during the fiscal year ended December 25, 2004. Beginning
in 2004, the independent directors met at regularly scheduled executive sessions
without management present. One executive session of the independent directors
was held in 2004. The Board of Directors has established three standing
committees, the Audit Committee, the Compensation Committee and the Nominating
Committee. During the 2004 fiscal year, the Audit Committee held eight meetings,
the Compensation Committee held two meetings and took action by unanimous
written consent once and the Nominating Committee held four meetings. No
director attended fewer than 75% of the aggregate of: (1) the total number of
meetings of the Board of Directors and (2) the total number of meetings held by
all committees on which such director served. It is the Company's policy to
encourage directors to attend the Company's Annual Meeting. Four of the then
five directors of the Company attended the 2004 Annual Meeting.
Audit Committee
Messrs. Betts, McDonnell and Peffer serve as the members of the Audit
Committee. Mr. McDonnell was Chairman of the Audit Committee during 2004. Mr.
Peffer became Chairman of the Audit Committee in 2005. The Board of Directors
has adopted a written charter for the Audit Committee. The functions of the
Audit Committee include overseeing the Company's financial reporting processes
on behalf of the Board, and appointing, and approving the fee arrangement with,
the Company's independent registered public accounting firm. The Board of
Directors has determined that Mr. Betts, Mr. Peffer and Mr. McDonnell are "audit
committee financial experts" as defined by the SEC regulations implementing
Section 407 of the Sarbanes-Oxley Act of 2002. The Board of Directors has
determined that all the members of the Audit Committee are independent (as
defined by the listing standards of the Nasdaq National Market).
Compensation Committee
Messrs. Betts (Chairman), Eller, Peffer and McDonnell serve as the members
of the Compensation Committee. The primary responsibilities of the Compensation
Committee are to make determinations with respect to compensation arrangements
for the Company's executive officers and to administer the Company's benefit
plans, including the Company's 2000 Equity Incentive Plan and the Company's
Employee Stock Purchase Plan. The Board of Directors has determined that all the
members of the Compensation Committee are independent (as defined by the listing
standards of the Nasdaq National Market).
Nominating Committee
Messrs. Betts, Eller (Chairman), Peffer and McDonnell serve as the members
of the Nominating Committee. The Board of Directors has adopted a written
charter for the Nominating Committee. A copy of the current Charter is attached
as Appendix A to this Proxy Statement. The primary responsibilities of the
Nominating Committee are to make recommendations to the Board concerning all
nominees for Board membership, to recruit candidates for new directors as
necessary to fill vacancies, to evaluate the qualifications and performance of
incumbent directors and to establish and periodically re-evaluate criteria for
8
Board membership. The Board of Directors has determined that all the members of
the Nominating Committee are independent (as defined by the listing standards of
the Nasdaq National Market).
In selecting candidates for nomination at the annual meeting of the
Company's shareholders, the Nominating Committee begins by determining whether
the incumbent directors whose terms expire at the meeting desire and are
qualified to continue their service on the Board. The Nominating Committee is of
the view that the continuing service of qualified incumbents promotes stability
and continuity in the board room, giving the Board the familiarity and insight
into the Company's affairs that its directors have accumulated during their
tenure, while contributing to their work as a collective body. Accordingly, it
is the policy of the Committee, absent special circumstances, to nominate
qualified incumbent directors who continue to satisfy the Committee's criteria
for membership on the Board, whom the Committee believes will continue to make a
valuable contribution to the Board and who consent to stand for reelection and,
if reelected, to continue their service on the Board. If there are Board
vacancies and the Committee will not be re-nominating a qualified incumbent, the
Nominating Committee will consider, and evaluate director candidates recommended
by the Board, members of the Nominating Committee, management and any
shareholder owning one percent or more of the Company's outstanding common
shares.
The Nominating Committee will use the same criteria to evaluate all
director candidates, whether recommended by the Board, members of the Nominating
Committee, management or a one percent shareholder. A shareholder owning one
percent or more of the Company's outstanding shares may recommend director
candidates for consideration by the Nominating Committee by writing to the
Company Secretary, by facsimile at (345) 945-2197 or by mail at Garmin Ltd., 5th
Floor, Harbour Place, P.O. Box 30464 SMB, 103 South Church Street, Grand Cayman,
Cayman Islands. Any such recommendation must be delivered to the Company
Secretary not less than 180 days prior to the annual meeting at which the
candidate is proposed for consideration as a nominee. The recommendation must
contain the proposed candidate's name, address, biographical data, a description
of the proposed candidate's business experience, a description of the proposed
candidate's qualifications for consideration as a director, a representation
that the nominating shareholder is a beneficial or record owner of one percent
or more of the Company's outstanding shares (based on the number of outstanding
shares reported on the cover page of the Company's most recently filed Annual
Report on Form 10-K) and a statement of the number of the Company's shares owned
by such shareholder. The recommendation must also be accompanied by the written
consent of the proposed candidate to be named as a nominee and to serve as a
director of the Company if nominated and elected. A shareholder may not
recommend him or herself as a director candidate.
The Nominating Committee requires that a majority of the Company's
directors be independent and that any independent director candidate meet the
definition of an independent director under the listing standards of the Nasdaq
National Market. The Nominating Committee also requires that at least one
independent director qualifies as an audit committee financial expert. The
Nominating Committee also requires that an independent director candidate should
have either (a) at least ten years experience at a policy-making level or other
level with significant decision-making responsibility in an organization or
institution or (b) a high level of technical knowledge or business experience
relevant to the Company's technology or industry. In addition, the Nominating
Committee requires that an independent director candidate have such financial
expertise, character, integrity, ethical standards, interpersonal skills and
time to devote to Board matters as would reasonably be considered to be
appropriate in order for the director to carry out his or her duties as a
director.
In evaluating a director candidate (including the nomination of an
incumbent director), the Nominating Committee considers, among other things,
whether the candidate meets the Committee's requirements for independent
director candidates, if applicable. The Committee also considers a director
candidate's skills and experience in the context of the perceived needs of the
Board at the time of consideration. Additionally, in recommending an incumbent
director for re-election, the Nominating Committee considers the nominee's prior
service to the Company's Board and continued commitment to service on the Board.
9
Shareholder Communications with Directors
The Board of Directors has established a process to receive communications
from shareholders. Shareholders may communicate with the Board or with any
individual director of the Company by writing to the Board or such individual
director in care of the Company Secretary, by facsimile at (345) 945-2197 or by
mail at Garmin Ltd., 5th Floor, Harbour Place, P.O. Box 30464 SMB, 103 South
Church Street, Grand Cayman, Cayman Islands. All such communications must
identify the author as a shareholder, state the number of shares owned by the
author and state whether the intended recipients are all members of the Board or
just certain specified directors. The Company Secretary will make copies of all
such communication and send them to the appropriate director or directors.
Compensation Committee Interlocks and Insider Participation;
Certain Relationships
None of the members of the Compensation Committee is, or has ever been, an
officer or employee of the Company or any of its subsidiaries. During 2004, the
Company had no compensation committee interlocks.
Gene M. Betts, a director of Garmin, is a Senior Vice President of Sprint
Corporation. Garmin International, Inc. made payments to Sprint Corporation in
2004 for cellular telephone services. These payments did not exceed 5% of either
Garmin's consolidated gross revenues for the 2004 fiscal year or Sprint
Corporation's consolidated gross revenues for its last full fiscal year.
Compensation of Directors
Directors who are officers or employees of Garmin or its subsidiaries do
not receive any fees or other compensation for service on the Board or its
committees. Except as set forth below, no fees were paid during 2004 to any
director or Named Executive Officer (as defined herein) of Garmin for service on
any board of directors of any subsidiary of Garmin.
Each director who is not an officer or employee of Garmin or its
subsidiaries (a "Non-Management Director") is paid an annual retainer of
$15,000. Each Non-Management Director who chairs a standing committee of the
Board also receives an annual retainer of $1,500. In addition, each
Non-Management Director is paid $1,000 for each Board meeting attended in person
or $350 for attending a Board meeting convened by teleconference. For each Audit
Committee meeting attended in person or convened by teleconference, each
Non-Management Director is paid $1,000. For each Compensation Committee or
Nominating Committee meeting convened on a separate day from a Board meeting,
each Non-Management Director is paid $1,000 for each committee meeting attended
in person or $350 for attending a committee meeting convened by teleconference.
Directors are also reimbursed for reasonable travel expenses for attending Board
and Committee meetings.
The Non-Management Directors may also be granted awards, including among
others, options to buy Garmin Common Shares, pursuant to the 2000 Non-Employee
Directors' Option Plan, as determined by the Committee (as defined in such
plan).
10
Each year at the Annual Meeting, each Non-Management Director will
automatically be granted an option for a number of shares equal to four times
the annual retainer divided by the fair market value of a share on the grant
date. If a Non-Management Director first joins the Board at a time other than
the Annual Meeting, he or she will receive a pro-rata grant for that year. The
per-share option price will be 100% of the fair market value of a share on the
grant date. The option will vest in equal installments over three years, subject
to acceleration in the event the Non-Management Director terminates his or her
directorship on account of death, disability or an involuntary termination
within one year after a change of control of Garmin. These options will have a
term of 10 years, subject to earlier termination on certain terminations of the
director's service on the Board.
In 2004 Mr. Betts, Dr. Eller and Mr. McDonnell (who were directors at the
date of the 2004 Annual Meeting) each received an automatic grant of options to
purchase 1,764 of the Company's Common Shares. Mr. Peffer, who was appointed as
a director in August 2004, received a pro rata grant of options to purchase
1,329 of the Company's Common Shares.
Under Taiwan banking practice, the directors of a company are generally
required to personally guarantee the company's loans and mortgages. During 2004,
Dr. Kao, as directors of Garmin Corporation, received compensation from Garmin
Corporation in the amount of $50,011 for his personal guarantee of Garmin
Corporation's obligations.
AUDIT MATTERS
Report of Audit Committee
The Audit Committee reviewed and discussed the Company's audited
consolidated financial statements for the fiscal year ended December 25, 2004
with management and with Ernst & Young LLP, the independent registered public
accounting firm retained by the Company to audit its financial statements. The
Audit Committee received and reviewed management's representation and the
opinion of the independent registered public accounting firm that the Company's
audited financial statements were prepared in accordance with United States
generally accepted accounting principles. The Audit Committee also discussed
with the independent registered public accounting firm during the 2004 fiscal
year the matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees), as amended, and other standards of the
Public Company Accounting Oversight Board, rules of the Securities and Exchange
Commission and other applicable regulations.
The Audit Committee received from Ernst & Young LLP the written disclosures
and the letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with Ernst &
Young LLP the independence of their firm.
During 2004, management completed the documentation, testing and evaluation
of the Company's system of internal control over financial reporting in response
to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002
and related regulations. The Audit Committee was kept apprised of the progress
of the evaluation and received periodic updates provided by management and Ernst
& Young LLP at Committee meetings. At the conclusion of the process, the
Committee received and reviewed management's assessment of the effectiveness of
the Company's internal control over financial reporting as of December 25, 2004
and Ernst & Young's Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting.
11
Based upon the review and discussions referenced above, the Audit Committee
recommended to the Company's Board of Directors, and the Board of Directors
approved, that the audited consolidated financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 25,
2004, for filing with the Securities and Exchange Commission.
Audit Committee
Thomas A. McDonnell, Chairman
Gene M. Betts
Charles W. Peffer
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed to
Garmin for the fiscal year ended December 25, 2004 and the fiscal year ended
December 27, 2003 by Garmin's principal accounting firm, Ernst & Young LLP:
2004 2003
---- ----
Audit Fees..... .......................$ 832,438 $ 393,351
Audit Related Fee..................... $ 306,909 (a)(b) $ 123,016 (a)(b)
Tax Fees...............................$ 450,022 (b)(c) $ 600,706 (b)(c)
All Other Fees.........................$ -- $ 5,000 (b)
Total: $ 1,589,369 $1,122,073
(a) Audit related fees for 2004 and 2003 comprise primarily fees for financial
statements audits of employee benefit plans, internal controls review,
transaction due diligence, audit publications and preparation for audit
committee meetings.
(b) The Audit Committee has concluded that the provision of these services is
compatible with maintaining the independence of Ernst & Young LLP.
(c) Tax fees for 2004 comprise $397,362 for tax compliance/preparation and
$52,660 for tax planning and tax advice. Tax fees for 2003 comprise $277,186 for
tax compliance/preparation and $323,520 for tax planning and tax advice.
The Audit Committee has appointed Ernst & Young LLP to serve as independent
registered public accounting firm to audit the Company's financial statements
for the fiscal year ending December 31, 2005. Representatives of Ernst & Young
LLP will be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire and will be available to respond to appropriate
questions.
Pre-Approval of Services Provided by the Independent Auditor
The Audit Committee has adopted a policy that requires advance approval by
the Committee of all audit, audit-related, tax services and other services
performed by Ernst & Young LLP. The policy provides for pre-approval by the
Audit Committee annually of specifically defined audit and non-audit services up
to specifically defined fee levels. Unless the specific service has been
previously pre-approved with respect to that year, the Audit Committee must
approve the permitted service before Ernst & Young LLP is engaged to perform it.
The Audit Committee has delegated to the Committee Chairman authority to approve
permitted services provided that the Chairman reports any such approval
decisions to the Committee at its next meeting.
12
EXECUTIVE COMPENSATION MATTERS
Compensation Committee Report on Executive Compensation
Compensation Principles
The Compensation Committee's executive compensation philosophy is based on
the belief that fair, reasonable and competitive compensation is essential to
attract, motivate and retain highly qualified and industrious executives. In
executing its compensation policy, the Compensation Committee seeks to relate
compensation with the Company's financial performance and business objectives
and reward high levels of individual performance while adhering to the
philosophy established by the Company's founders which is to foster a team
environment where executive compensation is fair and equitable but not
disproportionate relative to that of other employees.
Executive Compensation Program
The compensation of the Company's executive officers consists of three
principal elements: base salary, cash bonus and awards under the 2000 Equity
Incentive Plan. In determining the annual base salaries for the Company's
executives for 2004, the Compensation Committee reviewed the contribution of
each executive along with that of the Company's non-executive key employees. In
determining the annual base salaries, cash bonuses and stock option awards for
executives other than Dr. Kao, the Compensation Committee considered the
recommendations of Dr. Kao and each executive's position, skills,
responsibilities, achievements and tenure with the Company.
Discretionary cash bonuses are awarded based on growth in total Company
revenues and net earnings and other factors such as new product introductions
and innovations and the contribution of the executive to such achievements and
the assumption of new management responsibilities. Cash bonuses to executives
for 2004 were in the range of 6% to 10% of base salary.
Executive officer compensation also includes long-term incentives afforded
by options to purchase shares of the Company's Common Shares pursuant to the
2000 Equity Incentive Plan. The purposes of the Company's 2000 Equity Incentive
Plan are to strengthen key employees' commitment to the success of the Company,
to stimulate employee efforts on behalf of the Company, and to help the Company
attract new employees with skills which are in high demand and retain existing
key employees. Although the plan also permits the award of restricted shares,
bonus shares, deferred shares, stock appreciation rights, performance units and
performance shares, no such awards have been made under the plan. Awards of
stock options during the year under the Company's 2000 Equity Incentive Plan are
made at the grant date fair market value of the Company's Common Shares as
quoted on the Nasdaq National Market. Making the awards at the grant date fair
market value ensures that the options only become valuable upon the continued
appreciation of the Company's share price. Messrs. Etkind, Kelley, Pemble and
Rauckman received stock option grants in 2004 based upon their contribution to
the Company's long-term growth and profitability. Stock option grants to
executive officers in 2004 ranged from 7,500 shares to 12,000 shares. The total
number of stock options granted to executive officers in 2004 represented 5.6%
of the total number of stock options granted to employees.
Chief Executive Officer's Compensation
A base salary of $230,001 for Dr. Kao was determined in the same manner as
the salaries of the Company's other executive officers. No options or cash bonus
were awarded to Dr. Kao since he has a significant ownership interest in the
Company and, therefore, already has a motivation to maximize shareholder value.
13
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits a public company's
deduction for federal income tax purposes of compensation expense in excess of
$1 million paid to the executive officers named in the company's summary
compensation table. Performance-based compensation which meets the requirements
of Section 162(m) is excluded from the compensation subject to the $1 million
deduction limitation. The Company believes it has taken the steps required to
exclude from calculation of the $1 million compensation expense limitation any
performance-based awards granted under the 2000 Equity Incentive Plan to the
executive officers listed in the Summary Compensation Table of this Proxy
Statement.
Compensation Committee
Gene M. Betts (Chairman)
Donald H. Eller
Thomas A. McDonnell
Charles W. Peffer
Stock Performance Graph
The following graph illustrates the cumulative total shareholder return
(rounded to the nearest whole dollar) of Garmin Common Shares during the period
beginning December 8, 2000 (the date of Garmin's initial public offering)
through December 31, 2004, and compares it to the cumulative total return on the
Nasdaq Composite Total Return Index (U.S.) and the Nasdaq 100 Index. The
comparison assumes a $100 investment on December 8, 2000, in Garmin Common
Shares and in each of the foregoing indices and assumes reinvestment of
dividends.
[Stock Performance Graph]
Garmin Limited Garmin Limited NASDAQ NASDAQ Composite Index NASDAQ 100 NASDAQ 100 Index
12/8/00 14 100 2917.43 100 67.33 100
12/31/00 19.4 139 2470.52 85 57.8 86
12/31/01 20.95 150 1950.4 67 38.53 57
12/31/02 28.79 206 1335.51 46 24.13 36
12/31/03 54.01 386 2003.37 69 36.11 54
12/31/04 60.84 435 2175.44 75 39.92 59
14
Summary Compensation Table
The following table sets forth information about the compensation earned in
the fiscal years ended December 25, 2004, December 27, 2003 and December 28,
2002 by the Chief Executive Officer and our other executive officers
(collectively, the "Named Executive Officers").
Long-Term
Compensation
Annual Compensation(1) Awards
--------------------------------------------- -------------------
Securities
Name and Underlying
Principal Other Annual Options/ All Other
Position Year Salary Bonus Compensation SARs Compensation
($) ($)(2) ($) (#) ($)
------------------------------------------------------------------------------------------------------------------------------
Min H. Kao, Ph.D. 2004 230,001 2,391(3) 50,511(4) --- 23,612(5)
Chairman and CEO 2003 214,835 203 48,516 --- 22,122(6)
2002 190,654 203 48,288 --- 20,146
Gary L. Burrell 2004 37,201 216 33,233 --- 3,738(8)
Former 2003 37,201 216 48,516 --- 3,738
Co-Chairman and 2002 168,834 203 48,788 --- 18,039
Co-CEO(7)
Andrew R. Etkind 2004 207,001 20,203 --- 10,000 21,362(9)
General Counsel and 2003 190,000 20,305 --- 8,500 20,622(10)
Secretary 2002 175,154 20,203 --- 8,500 19,606
Clifton A. Pemble 2004 200,001 22,391(11) 3,000(12) 12,000 21,362(13)
Director of 2003 175,000 20,203 1,500 10,000 20,424
Engineering, Garmin 2002 155,004 20,203 3,000 10,000 18,577
International, Inc.
Kevin Rauckman 2004 171,000 15,311(14) --- 10,000 20,541(15)
Chief Financial Officer 2003 154,000 15,203 --- 7,500 18,774
and Treasurer 2002 145,005 15,203 --- 7,500 17,497
Gary Kelley 2004 161,701 10,203 --- 7,500 19,676(16)
Director of Marketing, 2003 154,000 10,203 --- 6,500 18,474
Garmin International, 2002 146,305 22,703 --- 7,500 18,775
Inc.
------------------------------------------------------------------------------------------------------------------------------
(1) All compensation paid to the Named Executive Officers was paid by
Garmin International, Inc. to such Named Executive Officers in their
capacities as officers and employees of Garmin International, Inc.,
except that the other annual compensation amounts for Dr. Kao and Mr.
Burrell include compensation to each from Garmin Corporation in the
following amounts: 2004 -- $50,011 for Dr. Kao and $33,233 for Mr.
Burrell, 2003 -- $48,516 for both, and 2002 -- $48,288 for both. Under
Taiwan banking practice, the directors of a company are generally
required to personally guarantee the company's loans and mortgages.
These amounts from Garmin Corporation were paid as compensation for the
personal guarantees of Garmin Corporation's obligations by Dr. Kao and
Mr. Burrell.
(2) Includes a holiday bonus paid to all employees in a fixed net amount of
$200. This holiday bonus is grossed up to cover taxes (including Social
Security and Medicare taxes) on the bonus.
15
(3) Includes a bonus payment of $2,188.19 payable to an employee upon 15
years of service.
(4) Includes $500 in incentive payments for inventions by Dr. Kao for which
patent applications were filed.
(5) All other compensation for Dr. Kao comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $12,000, a
contribution to his account under Garmin International, Inc.'s pension
plan of $11,472.60, and premiums on life insurance of $139.50.
(6) An error was discovered in the 2003 all other compensation figure for
Dr. Kao as reported in the 2004 Proxy Summary Compensation Table. The
correct figure for 2003 all other compensation is $22,122, not the
$23,024 figure noted in the 2004 Summary Compensation Table.
(7) Mr. Burrell retired as Co-Chairman on August 15, 2004 and as Co-
CEO on August 24, 2002.
(8) All other compensation for Mr. Burrell comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $1,953.12, a
contribution to his account under Garmin International, Inc.'s pension
plan of $1,717.64, and premiums on life insurance of $67.36.
(9) All other compensation for Mr. Etkind comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $9,750, a
contribution to his account under Garmin International, Inc.'s pension
plan of $11,472.60, and premiums on life insurance of $139.50.
(10) An error was discovered in the 2003 all other compensation figure for
Mr. Etkind as reported in the 2004 Proxy Summary Compensation Table.
The correct figure for 2003 all other compensation is $20,622, not the
$21,240 figure noted in the Summary Compensation Table included in the
proxy statement for the 2004 Annual Meeting.
(11) Includes a bonus payment of $2,188.19 payable to an employee upon 15
years of service.
(12) Comprised of incentive payments for inventions by Mr. Pemble for which
patent applications were filed.
(13) All other compensation for Mr. Pemble comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $9,750, a
contribution to his account under Garmin International, Inc.'s pension
plan of $11,472.60, and premiums on life insurance of $139.50.
(14) Includes a bonus payment in the amount of $108 payable to an employee
upon 5 years of service.
(15) All other compensation for Mr. Rauckman comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $9,750, a
contribution to his account under Garmin International, Inc.'s pension
plan of $10,651.30, and premiums on life insurance of $139.50.
(16) All other compensation for Mr. Kelley comprises a contribution to his
account under Garmin International, Inc.'s 401(k) plan of $9,750, a
contribution to his account under Garmin International, Inc.'s pension
plan of $9,786.81, and premiums on life insurance of $139.50.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information about the options
to acquire Garmin Common Shares granted the Named Executive Officers during
2004.
16
----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Share
Price Appreciation for
Option Term(3)
Individual Grants
----------------------------------------------------------------------------------------------------------------
Percent of Total
Number of Options/SARs
Securities Granted to
Underlying Employees in Exercise or
Options/SARs Fiscal Year(2) Base Price Expiration
Name Granted(1) ($/Sh) Date 5% ($) 10% ($)
----------------------------------------------------------------------------------------------------------------
Min H. Kao N/A N/A N/A N/A N/A N/A
Gary L. Burrell N/A N/A N/A N/A N/A N/A
Clifton A. Pemble 12,000 1.7% 39.88 9/23/14 $300,960 $762,720
Andrew R. Etkind 10,000 1.4% 39.88 9/23/14 $250,800 $635,600
Kevin Rauckman 10,000 1.4% 39.88 9/23/14 $250,800 $635,600
Gary Kelley 7,500 1.1% 39.88 9/23/14 $188,100 $476,700
----------------------------------------------------------------------------------------------------------------
(1) The options were granted on September 23, 2004 under Garmin's 2000
Equity Incentive Plan. The options become exercisable in equal
increments over five years, subject to accelerated vesting in the case
of certain events occurring within one year after a change of control
of Garmin.
(2) Options for a total of 697,267 Garmin Common Shares were granted
to eligible employees in 2004.
(3) The 5% and 10% assumed annual rates of compounded stock price
appreciation are permitted by rules of the SEC and do not represent
Garmin's estimate or projection of future prices of its Common Shares.
The actual value realized may be greater or less than the potential
realizable values set forth in the table.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table gives aggregated information about the Named Executive
Officers' exercises during 2004 of options to purchase Garmin Common Shares and
shows the number and value of their exercisable and unexercisable options at
December 25, 2004, Garmin's fiscal year end.
17
------------------------------------------------------------------------------------------------
Number of
Securities Value of Unexercised
Underlying In-the-Money
Shares Unexercised Options/SARs
Acquired Options/SARs At
on Value At December 25, 2004
Name Exercise Realized December 25, ($)(1)
(#) ($) 2004(#)
Exercisable/ Exercisable/
Unexercisable Unexercisable
-------------------------------------------------------------------------------------------------
Min H. Kao N/A N/A N/A N/A
Gary L. Burrell N/A N/A N/A N/A
Clifton A. Pemble N/A N/A 27,000/41,000 $1,132,310/$1,139,810
Andrew R. Etkind N/A N/A 14,300/29,700 $548,012/$732,348
Kevin Rauckman N/A N/A 16,000/26,500 $645,015/$631,510
Gary Kelley 2,000 80,240 9,800/24,200 $369,341/$620,864
-------------------------------------------------------------------------------------------------
(1) The dollar values in this column are calculated by multiplying (a) the
difference between the fair market value of the shares of Garmin Common
Shares underlying the options on December 24, 2004 (the last trading
day of the fiscal year) and the exercise price of the options by (b)
the number of options held at year-end.
Employment Agreements
Garmin does not have employment agreements with any of the Named Executive
Officers.
Other Compensatory Plans
Garmin and its subsidiaries maintain compensation plans for certain of
their officers and employees. Certain of those plans have vesting provisions
under which the plan participants do not have the right to receive all of the
plan benefits allocated to their accounts until certain conditions have been
satisfied. Described below are the portions of those plans in which the accounts
of the officers named in the summary compensation table become vested as a
result of their retirement from or termination of employment with the Company or
a change in control of the Company.
Garmin International, Inc. 401(k) and Pension Plan
Effective January 1, 1990, Garmin International, Inc. established a
retirement plan called a "money purchase pension plan" (the "Pension Plan").
Effective as of July 1, 2002, the Pension Plan was frozen and merged into a
401(k) plan. The Named Executive Officers, as employees of Garmin International,
Inc., were covered by the Pension Plan prior to its merger into the 401(k) plan.
18
Garmin International, Inc. sponsors a retirement plan which is sometimes
called a "401(k) plan" (the "401(k) Plan") because of the section of the
Internal Revenue Code which authorizes this type of plan. As noted above, the
Pension Plan was merged into the 401(k) Plan effective July 1, 2002. Every
employee of Garmin International, Inc. is eligible to participate in the 401(k)
Plan as of the first January 1 or July 1 after he or she reaches age 21 and
completes three months of service. Participants can elect to make pre-tax
contributions to the 401(k) Plan from their eligible compensation, up to the
limits imposed by law. Participants are fully vested in their pre-tax
contributions and earnings on those contributions. In addition, Garmin
International, Inc. makes a matching contribution for each participant equal to
75% of his or her pre-tax contributions up to 10% of the participant's eligible
compensation. Garmin International, Inc. may also make a profit sharing
contribution. Garmin International, Inc. has total discretion on whether to make
any profit sharing contributions to the 401(k) Plan, and on the amount of such
contribution, if any. If Garmin International, Inc. makes a profit sharing
contribution to the 401(k) Plan, the maximum amount which each participant is
entitled to receive is an amount equal to 3% of the participant's eligible
compensation plus an amount equal to 3% multiplied by the amount by which the
participant's eligible compensation exceeds 20% of the Taxable Wage Base. The
Taxable Wage Base is defined as the maximum amount of compensation subject to
social security tax on the first day of the current plan year. Participants
become vested in their matching contributions, and earnings on those
contributions, gradually over five years, and in their profit sharing
contributions, and earnings on those contributions, gradually over seven years.
Participants become fully vested automatically if they reach age 65, die or
become disabled while they are still working for Garmin International, Inc.
Participants are allowed to direct the investment of their accounts in a menu of
authorized investment alternatives. Participants may direct the investment of
their accounts up to 100% in Garmin Common Shares. Accounts are distributable
when the participant terminates employment, retires, dies, becomes disabled,
reaches age 59 1/2 or suffers a financial hardship. Participants may also be
permitted to request a loan from their 401(k) Plan accounts. The 401(k) Plan is
intended to be a tax-qualified plan under the Internal Revenue Code which means
that participants are generally not taxed on contributions to the 401(k) Plan or
earnings on those contributions until they are withdrawn from the 401(k) Plan,
and that contributions by Garmin International, Inc. are tax deductible when
made. The Named Executive Officers, as employees of Garmin International, Inc.,
are covered by this plan.
Equity Incentive Plan
Garmin's 2000 Equity Incentive Plan, which was approved by Garmin's
shareholders on October 24, 2000, provides for grants of non-qualified stock
options and incentive stock options. The 2000 Equity Incentive Plan also
provides for grants of restricted shares, bonus shares, deferred shares, stock
appreciation rights, performance units and performance shares. Employees of
Garmin or any majority owned subsidiary are eligible for awards. The
Compensation Committee selects the grantees and determines the terms of the
awards granted. Generally, the exercise price of an option and the strike price
of a stock appreciation right must be at least the fair market value of a share
as of the grant date. The plan provides that vesting of outstanding awards will
be accelerated if, within one year after a change in control of Garmin, Garmin
terminates the grantee's employment (other than for death, disability or cause)
or the grantee terminates the employment because of a diminution in compensation
or status or a required move of 50 miles.
PROPOSAL 2 - APPROVAL OF THE GARMIN LTD. 2005 EQUITY INCENTIVE PLAN
Garmin believes that equity compensation aligns the interests of management
and employees with the interests of other shareholders. Garmin currently
provides for equity incentive compensation through the 2000 Equity Incentive
Plan. As of March 31, 2005, 228,383 shares remained available for issuance under
the 2000 Equity Incentive Plan. Stock options for a total of 697,267 Garmin
shares were granted to employees in 2004. A new equity incentive plan (the "2005
Equity Incentive Plan") is being proposed for shareholder approval so that
Garmin can continue to grant equity compensation to employees. A copy of the
2005 Equity Incentive Plan is attached as Appendix B to this Proxy Statement.
19
The following general description of material features of the 2005 Equity
Incentive Plan is qualified in its entirety by reference to the provisions of
the 2005 Equity Incentive Plan set forth in Appendix B.
Changes From 2000 Equity Incentive Plan
Generally, with the exceptions noted immediately below, the 2005 Equity
Incentive Plan contains the same features, terms and conditions as the 2000
Equity Incentive Plan. Some of the material changes made to the 2005 Equity
Incentive Plan from the 2000 Equity Incentive Plan are as follows:
o The Company changed the definition of "Change of Control" such that the
shareholder approval alone of any merger, reorganization, consolidation or
similar transaction will not be sufficient to constitute a Change of
Control. The new definition requires the consummation of such a transaction
for there to be a Change of Control. As discussed below, the occurrence of
a Change of Control can accelerate the vesting and payout of awards granted
under the 2005 Equity Incentive Plan.
o The Company modified the 2005 Equity Incentive Plan's definition of
"Disabled" and "Disability" to comply with certain changes required by tax
legislation enacted in 2004 relating to nonqualified deferred compensation
arrangements.
o The 2005 Equity Incentive Plan does not permit Common Shares of the Company
that are withheld by the Company for the payment of taxes (income or FICA)
to be added back to the total number of shares authorized for issuance
under the Plan.
o The Company added a provision in the 2005 Equity Incentive Plan to
expressly permit the use of so-called "stock-for-stock" exercises as an
acceptable method of exercising stock options. This exercise method
essentially allows a grantee to exchange currently held shares as
consideration for exercising a stock option while continuing to defer
recognition of income, for tax purposes, on such exchanged shares.
o Stock Appreciation Rights granted under the 2005 Equity Compensation Plan
will now be required to have an exercise price per share no less than the
Fair Market Value of the underlying share of Garmin on the date the SAR is
granted.
General
The 2005 Equity Incentive Plan provides for grants of non-qualified stock
options and incentive stock options. The 2005 Equity Incentive Plan also
provides for grants of restricted shares, bonus shares, deferred shares, stock
appreciation rights, performance units and performance shares. The objectives of
the Plan are to strengthen key employees' commitment to the success of the
Company, to stimulate key employees' efforts on behalf of the Company and to
help the Company attract new employees with the education, skills and experience
we need and retain existing key employees.
Eligibility and Limits on Awards
Any employee of the Company or any majority owned subsidiary will be
eligible to receive awards under the 2005 Equity Incentive Plan if it is
approved by shareholders. Such eligible employees include officers of the
Company or any majority owned subsidiary. As of April 1, 2005, there were five
executive officers and approximately 2,600 employees other than executive
officers who are eligible to receive awards. No determination has been made as
to which of the Company's employees will receive grants under the 2005 Equity
Compensation Plan, and, therefore the benefits to be allocated to any individual
or to any group of employees are not presently determinable.
The 2005 Equity Incentive Plan places limits on the maximum amount of
awards that may be granted to any employee in any five (5) year period. Under
the 2005 Equity Incentive Plan, no employee may receive awards of stock options,
20
stock appreciation rights, restricted stock, bonus shares, performance units,
performance shares or deferred shares that cover in the aggregate more than one
million (1,000,000) shares in any five (5) year period.
Administration
The 2005 Equity Incentive Plan will be administered by the Board of
Directors or the Compensation Committee of the Board of Directors (the
"Committee"). The Board or Committee will select the eligible employees to whom
awards will be granted and will set the terms of such awards, including any
performance goals applicable to annual and long-term incentive awards. The Board
or Committee has the authority to permit or require the deferral of payment of
awards. The Board or Committee may delegate its authority under the 2005 Equity
Incentive Plan to officers of the Company, subject to guidelines prescribed by
the Board or Committee, but only with respect to employees who are not subject
to Section 16 of the Exchange Act or Section 162(m) of the Internal Revenue
Code.
Shares Reserved for Awards
The 2005 Equity Incentive Plan provides for up to 5,000,000 Common Shares
to be used for awards. This represents approximately 4.6% of the Common Shares
outstanding as of April 1, 2005. The shares may be newly issued shares and to
the extent that any award under the 2005 Equity Incentive Plan is exercised,
cashed out, terminates, expires or is forfeited without payment being made in
the form of Common Shares, the shares subject to such award that were not so
paid will again be available for distribution under the 2005 Equity Incentive
Plan. However, any shares withheld for the purpose of satisfying any tax
withholding obligation will be counted against the authorized limit and not be
available for distributions. If a stock appreciation right award or a similar
award based on the spread value of Common Shares is exercised, only the number
of Common Shares issued, if any, will be considered delivered for the purpose of
determining availability of shares for delivery under the 2005 Equity Incentive
Plan. Unless otherwise determined by the Committee, stock options may be
exercised by payment in cash or tendering Common Shares to the Company in full
or partial payment of the exercise price.
The number of Common Shares authorized for awards is subject to adjustment
for changes in capitalization, reorganizations, mergers, stock splits, and other
corporate transactions as the Board or the Compensation Committee determines to
require an equitable adjustment.. The 2005 Equity Incentive Plan will remain in
effect until all the shares available have been used to pay awards, subject to
the right of the Board to amend or terminate the 2005 Equity Incentive Plan at
any time.
General Terms of Awards
The Board or the Committee will select the grantees and set the term of
each award, which may not be more than ten years. The Board or the Compensation
Committee has the power to determine the terms of the awards granted, including
the number of shares subject to each award, the form of consideration payable
upon exercise, the period in which the award may be exercised after termination
of employment, and all other matters. The exercise price of an option and the
strike price of a stock appreciation right must be at least the fair market
value of a share as of the grant date, unless the award is replacing an award
granted by an entity that is acquired by Garmin Ltd. or a subsidiary.
The Board or the Committee will also set the vesting conditions of the
award, except that vesting will be accelerated if, within one year after a
change of control of Garmin Ltd., Garmin Ltd. terminates the grantee's
employment (other than for death, disability or cause) or the grantee terminates
employment for a "good reason" (i.e. because of a diminution in compensation or
status or a required move of over 50 miles.
Awards granted under the 2005 Equity Incentive Plan are not generally
transferable by the grantee except in the event of the employee's death or
unless otherwise required by law or provided in an award agreement. An award
agreement may provide for the transfer of an award in limited circumstances to
certain members of the grantee's family or a trust or trusts established for the
benefit of such a family member. Any such transfer, if permitted under the award
21
agreement, cannot be for consideration, other than nominal consideration. Other
terms and conditions of each award will be set forth in award agreements, which
can be amended by the Board or the Committee.
The number and type of awards that will be granted under the 2005 Equity
Incentive Plan is not determinable as the Board or Compensation Committee will
make these determinations in its sole discretion.
Performance Awards
Performance Unit and Performance Share awards may be granted under the 2005
Equity Incentive Plan. Such awards will be earned only if corporate, business
unit or individual performance objectives over performance cycles, established
by or under the direction of the Board or Committee, are met. The performance
objectives may vary from participant to participant, group to group and period
to period and may be based on internal or external requirements. Awards that are
intended to constitute "qualified performance-based compensation" (see
discussion below under the heading Federal Income Tax Consequences) will be
based on satisfaction of performance objectives for one or more of the
following: earnings per share, net income, return on equity, pro forma net
income, return on designated assets, return on revenues, Fair Market Value
(i.e., market price) per share, book value per share, and debt reduction. Awards
may be paid in the form of cash, Common Shares or any combination thereof, as
determined by the Board or Committee.
Restricted Stock
Restricted Common Shares may also be awarded. The restricted shares will
vest and become transferable upon the satisfaction of conditions set forth in
the respective restricted share award agreement. Restricted share awards may be
forfeited if, for example, the recipient's employment terminates before the
award vests.
Bonus Shares and Deferred Shares
The Board or Committee may grant Common Shares to participants from
time-to-time as a bonus. Such shares may be paid on a current basis or may be
deferred and paid in the future. The Board or the Committee may impose such
conditions or restrictions on any such deferred shares as it may deem advisable
including time-vesting restrictions and deferred payment features.
Stock Options
The 2005 Equity Incentive Plan will permit the granting to eligible
employees incentive stock options ("ISOs"), which qualify for special tax
treatment, and nonqualified stock options. The exercise price for any stock
option will not be less than the fair market value of a Common Share on the date
of grant. No stock option may be exercised more than ten years after the date of
grant.
Stock Appreciation Rights
Stock Appreciation Rights ("SARs") may be granted either
singly (freestanding SARs) or in combination with underlying stock options
(tandem SARs). SARs entitle the holder upon exercise to receive an amount in
Common Shares equal in value to the excess of the fair market value of the
shares covered by such right over the grant price. The grant price for SARs will
not be less than the fair market value of the Common Shares on the SARs' date of
grant. The payment upon a SAR exercise shall be solely in whole shares of
equivalent value. Fractional shares will be rounded down to the nearest whole
share with no cash consideration paid.
22
Change of Control Provisions
The 2005 Equity Incentive Plan provides that, if, within the one-year
period beginning on the date of a Change of Control (as defined in the 2005
Equity Incentive Plan) an employee separates from service with the Company or a
majority owned subsidiary other than due to the Company terminating the
employee's employment for cause or the employee resigning because of a
diminution in compensation or status or a required move of over 50 miles, then,
all stock options and SARs will become fully vested and immediately exercisable,
the restrictions applicable to outstanding restricted stock, deferred shares,
and other stock-based awards will lapse, and, unless otherwise determined by the
Board or Committee, all deferred shares will be settled, and outstanding
performance awards will be vested and paid out on a prorated basis, based on the
maximum award opportunity of such awards and the number of months elapsed
compared with the total number of months in the performance cycle. The Board or
Committee may also make certain adjustments and substitutions in connection with
a Change of Control or similar transactions or events as described under "Shares
Reserved for Awards."
Equity Compensation Plan Information
The following table gives information as of December 25, 2004 about the
Common Shares that may be issued under all of the Company's existing equity
compensation plans.
----------------------------------------------------------------------------------------
A B C
---------------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
Plan Category Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation
outstanding options, outstanding options, plans (excluding
warrants and rights warrants and rights securities reflected in
column A)
---------------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by 2,725,102 $32.12 933,268
shareholders (1)
---------------------------------------------------------------------------------------------------------------------
Equity compesation
plans not approved by -- -- --
shareholders
---------------------------------------------------------------------------------------------------------------------
Total 2,725,102 $32.12 933,268
---------------------------------------------------------------------------------------------------------------------
(1) Consists of the Garmin Ltd. 2000 Equity Incentive Plan,
the Garmin Ltd. 2000 Non-Employee Directors' Option Plan and the Garmin Ltd.
Employee Stock Purchase Plan.
Federal Income Tax Consequences
Based on current provisions of the Internal Revenue Code and the existing
regulations thereunder, the anticipated U.S. federal income tax consequences of
stock options and SARs granted under the 2005 Equity Incentive Plan are as
described below. The following discussion is not intended to be a complete
discussion of applicable law and is based on the U.S. federal income tax laws as
in effect on the date hereof:
Non-Qualified Stock Options
An employee receiving a non-qualified option does not recognize taxable
income on the date of grant of the non-qualified option, provided that the
non-qualified option does not have a readily ascertainable fair market value at
the time it is granted. In general, the employee must recognize ordinary income
at the time of exercise of the non-qualified option in the amount of the
23
difference between the fair market value of the Common Shares on the date of
exercise and the option price. The ordinary income recognized will constitute
compensation for which tax withholding generally will be required. The amount of
ordinary income recognized by an employee will be deductible by the Company in
the year that the employee recognizes the income if the Company complies with
the applicable withholding requirement.
Common Shares acquired upon the exercise of a non-qualified option will
have a tax basis equal to their fair market value on the exercise date or other
relevant date on which ordinary income is recognized, and the holding period for
the Common Shares generally will begin on the date of exercise or such other
relevant date. Upon subsequent disposition of the Common Shares, the employee
will recognize long-term capital gain or loss if the employee has held the
Common Shares for more than one year prior to disposition, or short-term capital
gain or loss if the employee has held the Common Shares for one year or less.
If an employee pays the exercise price, in whole or in part, with
previously acquired Common Shares, the employee will recognize ordinary income
in the amount by which the fair market value of the Common Shares received
exceeds the exercise price. The employee will not recognize gain or loss upon
delivering the previously acquired Common Shares to the Company. Common Shares
received by an employee, equal in number to the previously acquired common
shares exchanged therefore, will have the same basis and holding period for
long-term capital gain purposes as the previously acquired Common Shares. Common
Shares received by an employee in excess of the number of such previously
acquired Common Shares will have a basis equal to the fair market value of the
additional Common Shares as of the date ordinary income is recognized. The
holding period for the additional Common Shares will commence as of the date of
exercise or such other relevant date.
Incentive Stock Options
Incentive Stock Options ("ISOs") are defined by Section 422 of the Internal
Revenue Code.
An employee who is granted an ISO does not recognize taxable income either
on the date of grant or on the date of exercise. Upon the exercise of an ISO,
the difference between the fair market value of the Common Shares received and
the option price is, however, a tax preference item potentially subject to the
alternative minimum tax.
Upon disposition of Common Shares acquired from the exercise of an ISO,
long-term capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the employee disposes of the Common Shares within
two years of the date of grant or within one year of the date of the transfer of
the Common Shares to the employee (a "Disqualifying Disposition"), then the
employee will recognize ordinary income, as opposed to capital gain, at the time
of disposition. In general, the amount of ordinary income recognized will be
equal to the lesser of (a) the amount of gain realized on the disposition, or
(b) the difference between the fair market value of the Common Shares received
on the date of exercise and the exercise price. Any remaining gain or loss is
treated as a short-term or long-term capital gain or loss, depending on the
period of time the Common Shares have been held. The Company is not entitled to
a tax deduction upon either the exercise of an ISO or the disposition of Common
Shares acquired pursuant to the exercise of an ISO, except to the extent that
the employee recognizes ordinary income in a Disqualifying Disposition. For
alternative minimum taxable income purposes, on the later sale or other
disposition of the Common Shares, generally only the difference between the fair
market value of the Common Shares on the exercise date and the amount realized
on the sale or disposition is includable in alternative minimum taxable income.
If an employee pays the exercise price, in whole or in part, with
previously acquired Common Shares, the exchange should not affect the ISO tax
treatment of the exercise. Upon the exchange, and except as otherwise described
herein, no gain or loss is recognized by the employee upon delivering previously
acquired Common Shares to the Company as payment of the exercise price. The
Common Shares received by the employee, equal in number to the previously
acquired Common Shares exchanged therefore, will have the same basis and holding
24
period for long-term capital gain purposes as the previously acquired Common
Shares. The employee, however, will not be able to utilize the prior holding
period for the purpose of satisfying the ISO statutory holding period
requirements. Common Shares received by the employee in excess of the number of
previously acquired Common Shares will have a basis of zero and a holding period
which commences as of the date the Common Shares are transferred to the employee
upon exercise of the ISO. If the exercise of any ISO is effected using Common
Shares previously acquired through the exercise of an ISO, the exchange of the
previously acquired Common Shares will be considered a disposition of the Common
Shares for the purpose of determining whether a Disqualifying Disposition has
occurred.
Stock Appreciation Rights
To the extent that the requirements of the Internal Revenue Code are met,
there are no immediate tax consequences to an employee when a SAR is granted.
When an employee exercises the right to the appreciation in fair market value of
shares represented by a SAR, payments made in Common Shares are normally
includable in the employee's gross income for regular income tax purposes. The
Company will be entitled to deduct the same amount as a business expense in the
same year. The includable amount and corresponding deduction each equal the fair
market value of the Common Shares payable on the date of exercise.
Deductibility of Awards
Section 162(m) of the Internal Revenue Code places a $1,000,000 annual
limit on the compensation deductible by the Company or a majority owned
subsidiary paid to certain of its executives. The limit, however, does not apply
to "qualified performance-based compensation." The Company believes that awards
of stock options, SARs and certain other "performance-based compensation" awards
under the 2005 Equity Incentive Plan will qualify for the performance-based
compensation exception to the deductibility limit.
Deferred Compensation
Any deferrals made under the 2005 Equity Incentive Plan, including awards
granted under the plan that are considered to be deferred compensation, must
satisfy the requirements of Section 409A of the Internal Revenue Code to avoid
adverse tax consequences to participating employees. These requirements include
limitations on election timing, acceleration of payments, and distributions. The
Company intends to structure any deferrals and awards under the 2005 Equity
Incentive Plan to meet the applicable tax law requirements.
Other Tax Consequences
State tax consequences may in some cases differ from those described above.
Awards under the 2005 Equity Incentive Plan will in some instances be made to
employees who are subject to tax in jurisdictions other than the United States
and may result in tax consequences differing from those described above.
Other Information
If approved by shareholders, the 2005 Equity Incentive Plan will be
effective June 3, 2005, and will remain in effect, subject to the right of the
Board to amend or terminate the Plan (subject to certain limitations set forth
in the Plan), at any time until all shares subject to it shall have been
purchased or acquired according to the Plan's provisions. Any awards granted
before the Plan is terminated may extend beyond the expiration date.
The Board may amend the 2005 Equity Incentive Plan at any time, provided
that no such amendment will be made without stockholder approval if such
approval is required under applicable law, regulation, or stock exchange rule,
or if such amendment would: (i) decrease the grant or exercise price of any
stock option, SAR or other stock-based award to less than fair market value on
the date of grant (except as discussed above under "Shares Reserved for
Awards"), (ii) increase the number of Common Shares that may be distributed
under the 2005 Equity Incentive Plan or adversely affect in any material way any
Award previously granted under the Plan, without the written consent of the
grantee of such Award.
25
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE THE 2005 EQUITY INCENTIVE PLAN.
SHAREHOLDER PROPOSALS
To be properly brought before the Annual Meeting, a proposal must be either
(i) specified in the notice of the meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a shareholder.
If a holder of Garmin Common Shares wishes to present a proposal for
inclusion in Garmin's Proxy Statement for next year's annual general meeting of
shareholders, such proposal must be received by Garmin on or before December 30,
2005. Such proposal must be made in accordance with Rule 14a-8 promulgated by
the Securities and Exchange Commission and the interpretations thereof. Any such
proposal should be sent to the Secretary of Garmin, P.O. Box 30464 SMB, 5th
Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, Cayman
Islands.
In order for a shareholder proposal that is not included in Garmin's Proxy
Statement for next year's annual meeting of shareholders to be properly brought
before the meeting, such proposal must be delivered to the Secretary and
received at Garmin's executive offices no later than March 20, 2006 and such
proposal must also comply with the procedures outlined below. The determination
that any such proposal has been properly brought before such meeting is made by
the officer presiding over such meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Garmin's directors, executive officers and certain other officers, and persons,
legal or natural, who own more than 10 percent of Garmin's Common Shares
(collectively "Reporting Persons"), to file reports of their ownership of such
shares, and the changes therein, with the SEC, and Garmin (the "Section 16
Reports"). Based solely on a review of the Section 16 reports for 2004 and any
amendments thereto furnished to Garmin, all Section 16 Reports for fiscal year
2004 were timely filed by the Reporting Persons.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS FOR BROKER CUSTOMERS
Pursuant to the rules of the Securities and Exchange Commission, services
that deliver Garmin's communications to shareholders that hold their shares
through a bank, broker or other nominee holder of record may deliver to multiple
shareholders sharing the same address a single copy of Garmin's Annual Report
and Proxy Statement. Garmin will promptly deliver upon written or oral request a
separate copy of the Annual Report and/or Proxy Statement to any shareholder at
a shared address to which a single copy of the documents was delivered. Written
requests should be made to Garmin Ltd., c/o Garmin International, Inc., 1200
East 151st Street, Olathe, Kansas 66062, Attention: Debbie Pollard, and oral
requests may be made by calling Debbie Pollard at (913) 397-8200. Any
shareholder who wants to receive separate copies of the Proxy Statement or
Annual Report in the future, or any shareholder who is receiving multiple copies
and would like to receive only one copy per household, should contact the
shareholder's bank, broker or other nominee holder of record.
OTHER MATTERS
The Board of Directors knows of no other matters that are expected to be
presented for consideration at the Annual Meeting. However, if other matters
26
properly come before the meeting, it is intended that persons named in the
accompanying proxy will vote on them in accordance with their best judgment.
Garmin will furnish without charge upon written request a copy of Garmin's
Annual Report on Form 10-K. The Annual Report on Form 10-K includes a list of
all exhibits thereto. Garmin will furnish copies of such exhibits upon written
request therefor and payment of Garmin's reasonable expenses in furnishing such
exhibits. Each such request must set forth a good faith representation that, as
of the Record Date, the person making such request was a beneficial owner of
Common Shares entitled to vote at the Annual Meeting. Such written request
should be directed to the Secretary of Garmin, c/o Garmin International, Inc.,
1200 East 151st Street, Olathe, Kansas 66062. The Annual Report on Form 10-K is
available at www.garmin.com and is also available through the SEC's Internet
site at www.sec.gov.
By Order of the Board of Directors
/s/ Andrew R. Etkind
April 29, 2005 Andrew R. Etkind
General Counsel and Secretary
27
APPENDIX A
GARMIN LTD.
NOMINATING COMMITTEE CHARTER
(Amended and Restated as of December 6, 2004)
PURPOSE
The Nominating Committee is appointed by the Board of Directors (the
"Board") of Garmin Ltd. for the purpose of identifying persons qualified to
become Board members and recommending to the Board the nominees to be proposed
for election as Directors at each annual meeting of the shareholders.
COMMITTEE MEMBERS
The Nominating Committee shall be comprised of three or more members of the
Board who qualify as "independent directors" under the rules of the Nasdaq Stock
Market. One member of the Committee shall be appointed as Chairman.
COMMITTEE MEETINGS
The Committee will meet at least once a year, with authority to convene
additional meetings as circumstances require. The Committee may invite members
of management and others to attend its meetings.
DUTIES AND RESPONSIBILITIES
The Committee has the following duties:
1. Make recommendations to the Board of Directors
concerning all nominees for Board membership,
including the re-election of existing Board members.
2. Search for, recruit, screen, interview and select
candidates for new directors as necessary to fill
vacancies or the additional needs of the Board, and
consider management's and shareholders'
recommendations for director candidates;
3. Evaluate the qualifications and performance of
incumbent directors and determine whether to
recommend them for re-election to the Board;
4. Establish and periodically reevaluate criteria for
Board membership and selection of new directors
including independence standards;
A-1
5. Recommend to the Board removal of a director where
appropriate;
6. Periodically make recommendations to the Board with
respect to the size of the Board.
AUTHORITY
The Nominating Committee shall have the authority to retain, and approve
the fees and other retention terms of, director search and other advisors, as it
deems necessary for the fulfillment of its responsibilities.
A-2
APPENDIX B
GARMIN LTD.
2005 EQUITY INCENTIVE PLAN
B-1
Table of Contents
Page
Article 1. Establishment, Objectives and Duration............................B-4
1.1. Establishment of the Plan.......................................B-4
1.2. Objectives of the Plan..........................................B-4
1.3. Duration of the Plan............................................B-4
Article 2. Definitions.......................................................B-4
Article 3. Administration....................................................B-9
3.1. Board and Committee.............................................B-9
3.2. Powers of the Board.............................................B-9
Article 4. Shares Subject to the Plan.......................................B-10
4.1. Number of Shares Available.....................................B-10
4.2. Adjustments in Authorized Shares...............................B-11
4.3. Newly Issued Shares............................................B-12
Article 5. Eligibility and General Conditions of Awards.....................B-12
5.1. Eligibility....................................................B-12
5.2. Grant Date.....................................................B-12
5.3. Maximum Term...................................................B-12
5.4. Award Agreement................................................B-12
5.5. Restrictions on Share Transferability..........................B-12
5.6. Termination of Affiliation.....................................B-12
5.7. Nontransferability of Awards...................................B-14
Article 6. Stock Options....................................................B-15
6.1. Grant of Options...............................................B-15
6.2. Award Agreement................................................B-15
6.3. Option Price...................................................B-15
6.4. Grant of Incentive Stock Options...............................B-15
6.5. Exercise of Options............................................B-17
Article 7. Stock Appreciation Rights........................................B-17
7.1. Grant of SARs..................................................B-17
7.2. SAR Award Agreement............................................B-17
7.3. Exercise of SARs...............................................B-17
7.4. Expiration of SARs.............................................B-18
7.5. Payment of SAR Amount..........................................B-18
Article 8. Restricted Shares................................................B-18
8.1. Grant of Restricted Shares.....................................B-18
8.2. Award Agreement................................................B-18
8.3. Consideration..................................................B-18
8.4. Effect of Forfeiture...........................................B-18
8.5. Escrow; Legends................................................B-18
Article 9. Performance Units and Performance Shares.........................B-19
9.1. Grant of Performance Units and Performance Shares..............B-19
B-2
9.2. Value/Performance Goals........................................B-19
9.3. Payment of Performance Units and Performance Shares............B-19
9.4. Form and Timing of Payment of Performance Units and
Performance Shares.............................................B-19
Article 10. Bonus Shares and Deferred Shares................................B-20
10.1. Bonus Shares...................................................B-20
10.2. Deferred Shares................................................B-20
Article 11. Beneficiary Designation.........................................B-20
Article 12. Rights of Employees.............................................B-20
12.1. Employment.....................................................B-20
12.2. Participation..................................................B-20
Article 13. Amendment, Modification, and Termination........................B-20
13.1. Amendment, Modification, and Termination.......................B-20
13.2. Adjustments Upon Certain Unusual or Nonrecurring Events........B-20
13.3. Awards Previously Granted......................................B-20
Article 14. Withholding.....................................................B-21
14.1. Mandatory Tax Withholding......................................B-21
14.2. Notification under Code Section 83(b)..........................B-21
Article 15. Equity Incentive Plans of Foreign Subsidiaries..................B-21
Article 16. Additional Provisions...........................................B-21
16.1. Successors.....................................................B-21
16.2. Gender and Number..............................................B-21
16.3. Severability...................................................B-21
16.4. Requirements of Law............................................B-22
16.5. Securities Law Compliance......................................B-22
16.6. No Rights as a Shareholder.....................................B-22
16.7. Nature of Payments.............................................B-22
16.8. Governing Law..................................................B-22
B-3
GARMIN LTD.
2005 Equity Incentive Plan
Article 1. Establishment, Objectives and Duration
1.1 Establishment of the Plan. Garmin Ltd., a Cayman Islands company (the
"Company"), hereby establishes an incentive compensation plan to be known as the
Garmin Ltd. 2005 Equity Incentive Plan (the "Plan"). The Plan was adopted by the
Board of Directors of the Company (the "Board"), on March 1, 2005, and was
approved by the shareholders of the Company on ________________, 2005. The Plan
is effective as of __________________, 2005 (the "Effective Date").
1.2 Objectives of the Plan. The Plan is intended to allow employees of the
Company and its Subsidiaries to acquire or increase equity ownership in the
Company, or to be compensated under the Plan based on growth in the Company's
equity value, thereby strengthening their commitment to the success of the
Company and stimulating their efforts on behalf of the Company, and to assist
the Company and its Subsidiaries in attracting new employees and retaining
existing employees. The Plan is also intended to optimize the profitability and
growth of the Company through incentives which are consistent with the Company's
goals; to provide incentives for excellence in individual performance; and to
promote teamwork.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Board to amend or terminate
the Plan at any time pursuant to Article 13 hereof, until all Shares subject to
it shall have been purchased or acquired according to the Plan's provisions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
2.1 "Article" means an Article of the Plan.
2.2 "Award" means Options, Restricted Shares, Bonus Shares, Deferred
Shares, SARs, Performance Units or Performance Shares granted under the Plan.
2.3 "Award Agreement" means a written agreement by which an Award is
evidenced.
2.4 "Beneficial Owner" has the meaning specified in Rule 13d-3 of the SEC
under the Exchange Act.
2.5 "Board" has the meaning set forth in Section 1.1.
2.6 "Bonus Shares" means Shares that are awarded to a Grantee without cost
and without restrictions in recognition of past performance (whether determined
by reference to another employee benefit plan of the Company or otherwise) or as
an incentive to become an employee of the Company or a Subsidiary.
2.7 "Cause" means, unless otherwise defined in an Award Agreement,
(a) a Grantee's conviction of, plea of guilty to, or plea of nolo
contendere to a felony or other crime that involves fraud, dishonesty
or moral turpitude,
(b) any willful action or omission by a Grantee which would
constitute grounds for immediate dismissal under the employment
policies of the Company or the Subsidiary by which Grantee is
employed, including but not limited to intoxication with alcohol or
illegal drugs while on the premises of the Company or any Subsidiary,
or violation of sexual harassment laws or the internal sexual
harassment policy of the Company or the Subsidiary by which Grantee is
employed,
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(c) a Grantee's habitual neglect of duties, including but not
limited to repeated absences from work without reasonable excuse, or
(d) a Grantee's willful and intentional material misconduct in
the performance of his duties that results in financial detriment to
the Company or any Subsidiary;
provided, however, that for purposes of clauses (b), (c) and (d), Cause shall
not include any one or more of the following: bad judgment, negligence or any
act or omission believed by the Grantee in good faith to have been in or not
opposed to the interest of the Company (without intent of the Grantee to gain,
directly or indirectly, a profit to which the Grantee was not legally entitled).
A Grantee who agrees to resign from his affiliation with the Company or a
Subsidiary in lieu of being terminated for Cause may be deemed to have been
terminated for Cause for purposes of this Plan.
2.8 "Change of Control" means, unless otherwise defined in an Award
Agreement, any one or more of the following:
(a) any Person other than (i) a Subsidiary, (ii) any employee
benefit plan (or any related trust) of the Company or any of its
Subsidiaries or (iii) any Excluded Person, becomes the Beneficial
Owner of 35% or more of the common shares of the Company or of Voting
Securities representing 35% or more of the combined voting power of
the Company (such a person or group, a "35% Owner"), except that (i)
no Change of Control shall be deemed to have occurred solely by reason
of such beneficial ownership by a corporation with respect to which
both more than 60% of the common shares of such corporation and Voting
Securities representing more than 60% of the aggregate voting power of
such corporation are then owned, directly or indirectly, by the
persons who were the direct or indirect owners of the common shares
and Voting Securities of the Company immediately before such
acquisition in substantially the same proportions as their ownership,
immediately before such acquisition, of the common shares and Voting
Securities of the Company, as the case may be and (ii) such
corporation shall not be deemed a 35% Owner; or
(b) the Incumbent Directors (determined using the Effective Date
as the baseline date) cease for any reason to constitute at least a
majority of the directors of the Company then serving; or
(c) the consummation by the Company (whether directly involving
the Company or indirectly involving the Company through one or more
intermediaries) of a merger, reorganization, consolidation, or similar
transaction, or the sale or other disposition of all or substantially
all (at least 40%) of the consolidated assets of the Company or a plan
of liquidation of the Company (any of the foregoing transactions, a
"Reorganization Transaction") which is not an Exempt Reorganization
Transaction.
The definition of "Change of Control" may be amended at any time prior to the
occurrence of a Change of Control, and such amended definition shall be applied
to all Awards granted under the Plan whether or not outstanding at the time such
definition is amended, without requiring the consent of any Grantee.
Notwithstanding the occurrence of any of the foregoing events, (a) a Change of
Control shall be deemed not to have occurred with respect to any Section 16
Person if such Section 16 Person is, by agreement (written or otherwise), a
participant on such Section 16 Person's own behalf in a transaction which causes
the Change of Control to occur and (b) a Change of Control shall not occur with
respect to a Grantee if, in advance of such event, the Grantee agrees in writing
that such event shall not constitute a Change of Control.
2.9 "Change of Control Period" has the meaning set forth in Section 5.6(c).
2.10 "Change of Control Value" means the Fair Market Value of a Share on
the date of a Change of Control.
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2.11 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and regulations and rulings thereunder. References to a particular
section of the Code include references to successor provisions of the Code or
any successor statute.
2.12 "Company" has the meaning set forth in Section 1.1.
2.13 "Deferred Shares" means Shares that are awarded to a Grantee on a
deferred basis pursuant to Section 10.2
2.14 "Disabled" or "Disability" means an individual (i) is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than 3 months under a
Company-sponsored accident and health plan. Notwithstanding the foregoing, with
respect to an Incentive Stock Option, "Disability" means a permanent and total
disability, within the meaning of Code Section 22(e)(3), as determined by the
Board in good faith, upon receipt of medical advice from one or more
individuals, selected by the Board, who are qualified to give professional
medical advice.
2.15 "Effective Date" has the meaning set forth in Section 1.1.
2.16 "Eligible Person" means any employee (including any officer) of the
Company or any Subsidiary, including any such employee who is on an approved
leave of absence or has been subject to a disability which does not qualify as a
Disability.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of the Exchange Act include references to
successor provisions.
2.18 "Excluded Person" means any Person who, along with such Person's
Affiliates and Associates (as such terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act) is the Beneficial Owner of
15% or more of the Shares outstanding as of the Effective Date.
2.19 "Exempt Reorganization Transaction" means a Reorganization Transaction
which (i) results in the Persons who were the direct or indirect owners of the
outstanding common shares and Voting Securities of the Company immediately
before such Reorganization Transaction becoming, immediately after the
consummation of such Reorganization Transaction, the direct or indirect owners
of both more than 60% of the then-outstanding common shares of the Surviving
Corporation and Voting Securities representing more than 60% of the aggregate
voting power of the Surviving Corporation, in substantially the same respective
proportions as such Persons' ownership of the common shares and Voting
Securities of the Company immediately before such Reorganization Transaction, or
(ii) after such transaction, more than 50% of the members of the board of
directors of the Surviving Corporation were Incumbent Directors at the time of
the Board's approval of the agreement providing for the Reorganization
Transaction or other action of the Board approving the transaction (or whose
election or nomination was approved by a vote of at least two-thirds of the
members who were members of the Board at that time).
2.20 "Fair Market Value" means (A) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Board, and (B) with
respect to Shares, the average of the high and low trading prices on such date
on the NASDAQ National Market System (or, if no sale of Shares was reported for
such date, on the next preceding date on which a sale of Shares was reported),
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(i) if the Shares are not listed on the NASDAQ NMS, the average of the high and
low trading prices of the Shares on such date on the New York Stock Exchange
Composite Transactions Tape (or, if no sale of Shares was reported for such
date, on the next preceding date on which a sale of Shares was reported), (ii)
if the Shares are not listed on the NASDAQ NMS or the New York Stock Exchange,
the average of the high and low trading prices of the Shares on such other
national exchange on which the Shares are principally traded or as reported by
the NASDAQ Stock Market, or similar organization, or if no such quotations are
available, the average of the high bid and low asked quotations in the
over-the-counter market; in either case for such date (or if no such
transactions in Shares were reported for such date, on the next preceding date
on which a sale of Shares was reported; or (iii) in the event that there shall
be no public market for the Shares, the fair market value of the Shares as
determined in good faith by the Board.
2.21 "Freestanding SAR" means any SAR that is granted independently of any
Option.
2.22 "Good Reason" means any action by the Company or the Subsidiary
employing a Grantee which results in any of the following without the Grantee's
consent: (a) a material diminution or other material adverse change in the
Grantee's position, authority or duties, (b) requiring the Grantee to be based
at any office or location more than 50 miles from the location where he or she
was previously based; (c) a material diminution in the Grantee's compensation in
the aggregate, other than a diminution applicable to all similarly situated
employees. A Grantee shall not have Good Reason to terminate his or her position
unless, (1) within 60 days following the event or circumstance set forth above
in (a), (b) or (c), the Grantee notifies the Company of such event or
circumstance, (2) the Grantee gives the Company 30 days to correct the event or
circumstance, and (3) the Company does not correct, in all material respects,
such event or circumstance.
2.23 "Grant Date" has the meaning set forth in Section 5.2.
2.24 "Grantee" means an individual who has been granted an Award.
2.25 "Including" or "includes" mean "including, without limitation," or
"includes, without limitation", respectively.
2.26 "Incumbent Directors" means, as of any specified baseline date,
individuals then serving as members of the Board who were members of the Board
as of the date immediately preceding such baseline date; provided that any
subsequently-appointed or elected member of the Board whose election, or
nomination for election by shareholders of the Company or the Surviving
Corporation, as applicable, was approved by a vote or written consent of a
majority of the directors then comprising the Incumbent Directors shall also
thereafter be considered an Incumbent Director, unless the initial assumption of
office of such subsequently-elected or appointed director was in connection with
(i) an actual or threatened election contest, including a consent solicitation,
relating to the election or removal of one or more members of the Board, (ii) a
"tender offer" (as such term is used in Section 14(d) of the Exchange Act), or
(iii) a proposed Reorganization Transaction.
2.27 "Option" means an option granted under Article 6 of the Plan,
including an incentive stock option.
2.28 "Option Price" means the price at which a Share may be purchased by a
Grantee pursuant to an Option.
2.29 "Option Term" means the period beginning on the Grant Date of an
Option and ending on the expiration date of such Option, as specified in the
Award Agreement for such Option and as may, consistent with the provisions of
the Plan, be extended from time to time by the Board prior to the expiration
date of such Option then in effect.
2.30 "Performance Period" has the meaning set forth in Section 9.2.
2.31 "Performance Share" or "Performance Unit" has the meaning set forth in
Article 9.
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2.32 "Period of Restriction" means the period during which the transfer of
Restricted Shares 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 Board) or the Share are subject to a substantial risk of
forfeiture, as provided in Article 8.
2.33 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.34 "Plan" has the meaning set forth in Section 1.1.
2.35 "Plan Committee" has the meaning set forth in Article 3.
2.36 "Reorganization Transaction" has the meaning set forth in Section
2.8(c).
2.37 "Restricted Shares" means Shares that are subject to transfer
restrictions and are subject to forfeiture if conditions specified in the Award
Agreement applicable to such Shares are not satisfied.
2.38 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
Exchange Act, together with any successor rule, as in effect from time to time.
2.39 "SAR" means a stock appreciation right and includes both Tandem SARs
and Freestanding SARs.
2.40 "SAR Term" means the period beginning on the Grant Date of a SAR and
ending on the expiration date of such SAR, as specified in the Award Agreement
for such SAR and as may, consistent with the provisions of the Plan, be extended
from time to time by the Board prior to the expiration date of such SAR then in
effect.
2.41 "SEC" means the United States Securities and Exchange Commission, or
any successor thereto.
2.42 "Section" means, unless the context otherwise requires, a Section of
the Plan.
2.43 "Section 16 Person" means a person who is subject to obligations under
Section 16 of the Exchange Act with respect to transactions involving equity
securities of the Company.
2.44 "Share" means a common share, $0.01 par value, of the Company.
2.45 "Subsidiary" means with respect to any Person (a) any corporation of
which more than 50% of the Voting Securities are at the time, directly or
indirectly, owned by such Person, and (b) any partnership or limited liability
company in which such Person has a direct or indirect interest (whether in the
form of voting power or participation in profits or capital contribution) of
more than 50%. Solely with respect to a grant of an incentive stock option under
the requirements of Section 422 of the Code, "Subsidiary" means a "subsidiary
corporation" as defined in Section 424(f) of the Code.
2.46 "Substitute Option" has the meaning set forth in Section 6.3.
2.47 "Surviving Corporation" means the corporation resulting from a
Reorganization Transaction or, if Voting Securities representing at least 50% of
the aggregate voting power of such resulting corporation are directly or
indirectly owned by another corporation, such other corporation.
2.48 "Tandem SAR" means a SAR that is granted in connection with, or
related to, an Option, and which requires forfeiture of the right to purchase an
equal number of Shares under the related Option upon the exercise of such SAR;
or alternatively, which requires the cancellation of an equal amount of SARs
upon the purchase of the Shares subject to the Option.
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2.49 "Tax Withholding" has the meaning set forth in Section 14.1(a).
2.50 "Termination of Affiliation" occurs on the first day on which an
individual is for any reason no longer providing services to the Company or any
Subsidiary in the capacity of an employee, or with respect to an individual who
is an employee of a Subsidiary, the first day on which such Subsidiary ceases to
be a Subsidiary. A Termination of Affiliation shall have the same meaning as a
"separation from service" under Code Section 409A(2)(A)(i).
2.51 "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of directors,
but not including any other class of securities of such corporation that may
have voting power by reason of the occurrence of a contingency.
Article 3. Administration
3.1 Board and Committee. Subject to Article 13, and to Section 3.2, the
Plan shall be administered by the Board, or a committee of the Board appointed
by the Board to administer the Plan ("Plan Committee"). To the extent the Board
considers it desirable for transactions relating to Awards to be eligible to
qualify for an exemption under Rule 16b-3, the Plan Committee shall consist of
two or more directors of the Company, all of whom qualify as "non-employee
directors" within the meaning of Rule 16b-3. To the extent the Board considers
it desirable for compensation delivered pursuant to Awards to be eligible to
qualify for an exemption from the limit on tax deductibility of compensation
under Section 162(m) of the Code, the Plan Committee shall consist of two or
more directors of the Company, all of whom shall qualify as "outside directors"
within the meaning of Code Section 162(m). The number of members of the Plan
Committee shall from time to time be increased or decreased, and shall be
subject to such conditions, including, but not limited to having exclusive
authority to make certain grants of Awards or to perform such other acts, in
each case as the Board deems appropriate to permit transactions in Shares
pursuant to the Plan to satisfy such conditions of Rule 16b-3 or Code Section
162(m) as then in effect.
Any references herein to "Board" are, except as the context requires
otherwise, references to the Board or the Plan Committee, as applicable.
3.2 Powers of the Board. Subject to the express provisions of the Plan, the
Board has full and final authority and sole discretion as follows:
(a) taking into consideration the reasonable recommendations of
management, to determine when, to whom and in what types and amounts
Awards should be granted and the terms and conditions applicable to
each Award, including the Option Price, the Option Term, the benefit
payable under any SAR, Performance Unit or Performance Share and
whether or not specific Awards shall be granted in connection with
other specific Awards, and if so whether they shall be exercisable
cumulatively with, or alternatively to, such other specific Awards;
(b) to determine the amount, if any, that a Grantee shall pay for
Restricted Shares, whether and on what terms to permit or require the
payment of cash dividends thereon to be deferred, when Restricted Shares
(including Restricted Shares acquired upon the exercise of an Option) shall
be forfeited and whether such shares shall be held in escrow;
(c) to construe and interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
(d) to make, amend, and rescind rules relating to the Plan, including
rules with respect to the exercisability and nonforfeitability of Awards
upon the Termination of Affiliation of a Grantee;
(e) to etermine the terms and conditions of all Award Agreements
(which need not be identical) and, with the consent of the Grantee, to
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amend any such Award Agreement at any time, among other things, to
permit transfers of such Awards to the extent permitted by the Plan;
provided that the consent of the Grantee shall not be required for any
amendment which (A) does not adversely affect the rights of the
Grantee, or (B) is necessary or advisable (as determined by the Board)
to carry out the purpose of the Award as a result of any new or change
in existing applicable law;
(f) to cancel, with the consent of the Grantee, outstanding
Awards and to grant new Awards in substitution therefor;
(g) to accelerate the exercisability (including exercisability
within a period of less than six months after the Grant Date) of, and
to accelerate or waive any or all of the terms and conditions
applicable to, any Award or any group of Awards for any reason and at
any time, including in connection with a Termination of Affiliation;
(h) subject to Section 5.3, to extend the time during which any
Award or group of Awards may be exercised;
(i) to make such adjustments or modifications to Awards to
Grantees who are working outside the United States as are advisable to
fulfill the purposes of the Plan or to comply with applicable local
law, and to authorize foreign Subsidiaries to adopt plans as provided
in Article 15;
(j) to delegate to any member of the Board or committee of Board
members such of its powers as it deems appropriate, including the
power to subdelegate, except that only a member of the Board of
Directors of the Company (or a committee thereof) may grant Awards
from time to time to specified categories of Eligible Persons in
amounts and on terms to be specified by the Board; provided that no
such grants shall be made other than by the Board of Directors of the
Company or the Plan Committee to individuals who are then Section 16
Persons or other than by the Plan Committee to individuals who are
then or are deemed likely to become a "covered employee" within the
meaning of Code Section 162(m);
(k) to delegate to officers, employees or independent contractors
of the Company matters involving the routine administration of the
Plan and which are not specifically required by any provision of this
Plan of to be performed by the Board of Directors of the Company;
(l) to delegate its duties and responsibilities under the Plan
with respect to foreign Subsidiary plans, except its duties and
responsibilities with respect to Section 16 Persons, and (A) the acts
of such delegates shall be treated hereunder as acts of the Board and
(B) such delegates shall report to the Board regarding the delegated
duties and responsibilities;
(m) to impose such additional terms and conditions upon the
grant, exercise or retention of Awards as the Board may, before or
concurrently with the grant thereof, deem appropriate, including
limiting the percentage of Awards which may from time to time be
exercised by a Grantee; and
(n) to take any other action with respect to any matters relating
to the Plan for which it is responsible.
All determinations on any matter relating to the Plan or any
Award Agreement may be made in the sole and absolute discretion of the
Board, and all such determinations of the Board shall be final,
conclusive and binding on all Persons. No member of the Board shall be
liable for any action or determination made with respect to the Plan
or any Award.
Article 4. Shares Subject to the Plan
4.1 Number of Shares Available.
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(a) Plan Limit. Subject to adjustment as provided in Section 4.2,
the number of Shares hereby reserved for delivery under the Plan is
5,000,000. The number of Shares that may be delivered pursuant to the
exercise of Options or SARs is 5,000,000. The number of Shares over
which Performance Units may be granted is 1,000,000. The maximum
number of Shares that may be delivered as Restricted Shares is
1,000,000 and the maximum number of Bonus Shares that may be awarded
is 500,000. If any Shares subject to an Award granted hereunder are
forfeited or an Award or any portion thereof otherwise terminates or
is settled without the issuance of Shares, or in the case of SARs and
Performance Units, without the payment of cash, the Shares subject to
such Award, to the extent of any such forfeiture, termination or
settlement, shall again be available for grant under the Plan. The
Board may from time to time determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Plan.
(b) Individual Limit. No Grantee may be granted Options, SARs,
Restricted Shares, Bonus Shares or Deferred Shares, Performance Units
or Performance Shares in Shares, or in any combination thereof,
relating to an aggregate number of Shares under the Plan that exceeds
1,000,000 shares in any 5-year period. If a previously granted Option,
SAR, Performance Unit, or Performance Share is forfeited, canceled or
repriced, such forfeited, canceled or repriced Option, SAR,
Performance Unit, or Performance Share as the case may be, shall
continue to be counted against the maximum number of Shares, SARs,
Performance Units or Performance Shares that may be delivered to any
Grantee over the life of the Plan.
4.2 Adjustments in Authorized Shares.
(a) Adjustment Principle. In the event that the Board determines
that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, share
split, reverse share split, subdivision, consolidation or reduction of
capital, reorganization, merger, scheme of arrangement, split-up,
spin-off or combination involving the Company or repurchase or
exchange of Shares or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or
event affects the Shares such that any adjustment is determined by the
Board to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under
the Plan, then the Board shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property of the Company or any Person that is a
party to a Reorganization Transaction with the Company) with respect
to which Awards may be granted, (ii) the number and type of Shares (or
other securities or property of the Company or any Person that is a
party to a Reorganization Transaction with the Company) subject to
outstanding Awards, and (iii) the grant or exercise price with respect
to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award or the substitution of
other property for Shares subject to an outstanding Award; provided,
that the number of Shares subject to any Award denominated in Shares
shall always be a whole number.
(b) Example. By way of illustration, and not by way of
limitation, the following illustrates how the foregoing adjustment
principles would apply in the context of a stock split: Assume a
Grantee holds an Option to purchase 1,000 shares of Company stock at
an Option Price of $50 per share. Assume further that the Company
completes a two-for-one stock split such that every stockholder on the
requisite record date receives two shares of Company stock for every
one share held on the record date. Pursuant to the adjustment
principles set forth above in Section 4.2(a), the Grantee's Option
would be adjusted such that, after such adjustment, the Grantee would
hold an Option to purchase 2,000 shares of Company stock at an Option
Price of $25 per share. All other terms and conditions of the Option
would remain the same. Similar adjustment principles would apply to
SARs, Performance Shares, Performance Units, Bonus Shares and Deferred
Shares. This Section 4.2(b) is for illustrative purposes only, assumes
hypothetical facts, and shall not, under any event or circumstance, be
interpreted as the adjustment outcome with respect to specific factual
situations.
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4.3 Newly Issued Shares. Shares delivered in connection with Awards
may only be newly issued Shares.
Article 5. Eligibility and General Conditions of Awards
5.1 Eligibility. The Board may grant Awards to any Eligible Person,
whether or not he or she has previously received an Award.
5.2 Grant Date. The Grant Date of an Award shall be the date on which
the Board grants the Award or such later date as specified by the Board (i)
in the Board's resolutions or minutes addressing the Award grants or (ii)
in the Award Agreement.
5.3 Maximum Term. Subject to the following proviso, the Option Term or
other period during which an Award may be outstanding shall not extend more
than 10 years after the Grant Date, and shall be subject to earlier
termination as herein specified.
5.4 Award Agreement. To the extent not set forth in the Plan, the
terms and conditions of each Award (which need not be the same for each
grant or for each Grantee) shall be set forth in an Award Agreement.
5.5 Restrictions on Share Transferability. The Board may include in
the Award Agreement such restrictions on any Shares acquired pursuant to
the exercise or vesting of an Award as it may deem advisable, including
restrictions under applicable federal securities laws.
5.6 Termination of Affiliation. Except as otherwise provided in an
Award Agreement (including an Award Agreement as amended by the Board
pursuant to Section 3.2), and subject to the provisions of Section 13.1,
the extent to which the Grantee shall have the right to exercise, vest in,
or receive payment in respect of an Award following Termination of
Affiliation shall be determined in accordance with the following provisions
of this Section 5.6.
(a) For Cause. If a Grantee has a Termination of Affiliation for
Cause:
(i) the Grantee's Restricted Shares and Deferred Shares that
are forfeitable immediately before such Termination of
Affiliation shall automatically be forfeited on such date,
subject in the case of Restricted Shares to the provisions of
Section 8.4 regarding repayment of certain amounts to the
Grantee;
(ii) the Grantee's Deferred Shares that were vested
immediately before such Termination of Affiliation shall promptly
be settled by delivery to such Grantee of a number of
unrestricted Shares equal to the aggregate number of such vested
Deferred Shares, and
(iii) any unexercised Option or SAR, and any Performance
Share or Performance Unit with respect to which the Performance
Period has not ended immediately before such Termination of
Affiliation, shall terminate effective immediately upon such
Termination of Affiliation.
(b) On Account of Death or Disability. If a Grantee has a
Termination of Affiliation on account of death or Disability:
(i) the Grantee's Restricted Shares that were forfeitable
immediately before such Termination of Affiliation shall
thereupon become nonforfeitable;
(ii) the Grantee's Deferred Shares that were forfeitable
immediately before such Termination of Affiliation shall
thereupon become nonforfeitable and the Company shall, unless
otherwise provided in an Award Agreement, promptly settle all
Deferred Shares, whether or not forfeitable, by delivery to the
Grantee (or, after his or her death, to his or her personal
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representative or beneficiary designated in accordance with
Article 11) of a number of unrestricted Shares equal to the
aggregate number of the Grantee's Deferred Shares;
(iii) any unexercised Option or SAR, whether or not
exercisable immediately before such Termination of Affiliation,
shall be fully exercisable and may be exercised, in whole or in
part, at any time up to one year after such Termination of
Affiliation (but only during the Option Term or SAR Term,
respectively) by the Grantee or, after his or her death, by (A)
his or her personal representative or the person to whom the
Option or SAR, as applicable, is transferred by will or the
applicable laws of descent and distribution, or (B) the Grantee's
beneficiary designated in accordance with Article 11; and
(iv) the benefit payable with respect to any Performance
Share or Performance Unit with respect to which the Performance
Period has not ended immediately before such Termination of
Affiliation on account of death or Disability shall be equal to
the product of the Fair Market Value of a Share as of the date of
such Termination of Affiliation or the value of the Performance
Unit specified in the Award Agreement (determined as of the date
of such Termination of Affiliation), as applicable, multiplied
successively by each of the following:
(A) a fraction, the numerator of which is the number of
months (including as a whole month any partial month) that
have elapsed since the beginning of such Performance Period
until the date of such Termination of Affiliation and the
denominator of which is the number of months (including as a
whole month any partial month) in the Performance Period;
and
(B) a percentage determined by the Plan Committee that
would be earned under the terms of the applicable Award
Agreement assuming that the rate at which the performance
goals have been achieved as of the date of such Termination
of Affiliation would continue until the end of the
Performance Period, or, if the Board elects to compute the
benefit after the end of the Performance Period, the
Performance percentage, as determined by the Board, attained
during the Performance Period.
(c) Change of Control Period. If a Grantee has a Termination of
Affiliation during the period ("Change of Control Period") commencing on a
Change of Control and ending on the first anniversary of the Change of
Control, which Termination of Affiliation is initiated by the Company or a
Subsidiary other than for Cause, or initiated by the Grantee for Good
Reason, then
(i) the Grantee's Restricted Shares that were forfeitable shall
thereupon become nonforfeitable;
(ii) the Grantee's Deferred Shares that were forfeitable shall
thereupon become nonforfeitable and the Company shall immediately
settle all Deferred Shares, whether or not previously forfeitable, by
delivery to such Grantee of a number of unrestricted Shares equal to
the aggregate number of the Grantee's Deferred Shares;
(iii) any unexercised Option or SAR, whether or not exercisable
on the date of such Termination of Affiliation, shall thereupon be
fully exercisable and may be exercised, in whole or in part for ninety
(90) days following such Termination of Affiliation (but only during
the Option Term or SAR Term, respectively); and
(iv) the Company shall immediately pay to the Grantee, with
respect to any Performance Share or Performance Unit with respect to
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which the Performance Period has not ended as of the date of such
Termination of Affiliation, a cash payment equal to the product of (A)
in the case of a Performance Share, the Change of Control Value or (B)
in the case of a Performance Unit, the value of the Performance Unit
specified in the Award Agreement, as applicable, multiplied
successively by each of the following:
(A) a fraction, the numerator of which is the number of
whole and partial months that have elapsed between the beginning
of such Performance Period and the date of such Termination of
Affiliation and the denominator of which is the number of whole
and partial months in the Performance Period; and
(B) a percentage equal to a greater of (x) the target
percentage, if any, specified in the applicable Award Agreement
or (y) the maximum percentage, if any, that would be earned under
the terms of the applicable Award Agreement assuming that the
rate at which the performance goals have been achieved as of the
date of such Termination of Affiliation would continue until the
end of the Performance Period.
(d) Any Other Reason. If a Grantee has a Termination of Affiliation
for any reason other than for Cause, death or Disability, and other than
under the circumstances described in Section 5.6(c), then:
(i) the Grantee's Restricted Shares and Deferred Shares, to the
extent forfeitable immediately before such Termination of Affiliation,
shall thereupon automatically be forfeited, subject in the case of
Restricted Shares to the provisions of Section 8.4 regarding repayment
of certain amounts to the Grantee;
(ii) the Grantee's Deferred Shares that were not forfeitable
immediately before such Termination of Affiliation shall promptly be
settled by delivery to the Grantee of a number of unrestricted Shares
equal to the aggregate number of the Grantee's vested Deferred Shares;
(iii) any unexercised Option or SAR, to the extent exercisable
immediately before such Termination of Affiliation, shall remain
exercisable in whole or in part for ninety (90) days after such
Termination of Affiliation (but only during the Option Term or SAR
Term, respectively) by the Grantee or, after his or her death, by (A)
his or her personal representative or the person to whom the Option or
SAR, as applicable, is transferred by will or the applicable laws of
descent and distribution, or (B) the Grantee's beneficiary designated
in accordance with Article 11; and
(iv) any Performance Shares or Performance Units with respect to
which the Performance Period has not ended as of the date of such
Termination of Affiliation shall terminate immediately upon such
Termination of Affiliation.
5.7 Nontransferability of Awards.
(a) Except as provided in Section 5.7(c) below, each Award, and each
right under any Award, shall be exercisable only by the Grantee during the
Grantee's lifetime, or, if permissible under applicable law, by the
Grantee's guardian or legal representative.
(b) Except as provided in Section 5.7(c) below, no Award (prior to the
time, if applicable, Shares are issued in respect of such Award), and no
right under any Award, may be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Grantee otherwise than by will
or by the laws of descent and distribution and any such purported
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assignment, alienation, pledge, attachment, sale, transfer or encumbrance
shall be void and unenforceable against the Company or any Subsidiary;
provided, that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
(c) To the extent and in the manner permitted by the Board, and
subject to such terms and conditions as may be prescribed by the Board, a
Grantee may transfer an Award to (a) a child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law of the Grantee, (including adoptive
relationships), (b) any person sharing the Grantee's household (other than
a tenant or employee), (c) a trust in which persons described in (a) or (b)
have more than 50% of the beneficial interest, (d) a foundation in which
persons described in (a) or (b) or the Grantee own more than 50% of the
voting interests; provided such transfer is not for value. The following
shall not be considered transfers for value: (i) a transfer under a
domestic relations order in settlement of marital property rights; and (ii)
a transfer to an entity in which more than 50% of the voting interests are
owned by persons described in (a) or (b) above or the Grantee, in exchange
for an interest in that entity.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to any Eligible Person in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Board. Without limiting the generality of the foregoing, the Board may grant to
any Eligible Person, or permit any Eligible Person to elect to receive, an
Option in lieu of or in substitution for any other compensation (whether payable
currently or on a deferred basis, and whether payable under this Plan or
otherwise) which such Eligible Person may be eligible to receive from the
Company or a Subsidiary, which Option may have a value (as determined by the
Board under Black-Scholes or any other option valuation method) that is equal to
or greater than the amount of such other compensation.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the Option Term, the number of
shares to which the Option pertains, the time or times at which such Option
shall be exercisable and such other provisions as the Board shall determine.
6.3 Option Price. The Option Price of an Option under this Plan shall be
determined by the Board, and shall be no less than 100% of the Fair Market Value
of a Share on the Grant Date; provided, however, that any Option ("Substitute
Option") that is (x) granted to a Grantee in connection with the acquisition
("Acquisition"), however effected, by the Company of another corporation or
entity ("Acquired Entity") or the assets thereof, (y) associated with an option
to purchase shares of stock or other equity interest of the Acquired Entity or
an affiliate thereof ("Acquired Entity Option") held by such Grantee immediately
prior to such Acquisition, and (z) intended to preserve for the Grantee the
economic value of all or a portion of such Acquired Entity Option, shall be
granted such that such option substitution is completed in conformity with the
rules set forth in Section 424(a) of the Code.
6.4 Grant of Incentive Stock Options.
(a) At the time of the grant of any Option to an Eligible Person who
is an employee of the Company or a Subsidiary, the Board may designate that
such option shall be made subject to additional restrictions to permit it
to qualify as an "incentive stock option" under the requirements of Section
422 of the Code. Any option designated as an incentive stock option:
(i) shall not be granted to a person who owns shares (including
shares treated as owned under Section 424(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of
shares of the Company;
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(ii) shall be for a term of not more than 10 years from the Grant
Date, and shall be subject to earlier termination as provided herein
or in the applicable Award Agreement;
(iii) shall not have an aggregate Fair Market Value (determined
for each incentive stock option at its Grant Date) of Shares with
respect to which incentive stock options are exercisable for the first
time by such Grantee during any calendar year (under the Plan and any
other employee stock option plan of the Grantee's employer or any
parent or Subsidiary thereof ("Other Plans")), determined in
accordance with the provisions of Section 422 of the Code, which
exceeds $100,000 (the "$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of a Share
(determined on the Grant Date) with respect to the portion of such
grant which is exercisable for the first time during any calendar year
("Current Grant") and all incentive stock options previously granted
under the Plan and any Other Plans which are exercisable for the first
time during a calendar year ("Prior Grants") would exceed the $100,000
Limit, be exercisable as follows:
(A) the portion of the Current Grant which would, when added
to any Prior Grants, be exercisable with respect to Shares which
would have an aggregate Fair Market Value (determined as of the
respective Grant Date for such options) in excess of the $100,000
Limit shall, notwithstanding the terms of the Current Grant, be
exercisable for the first time by the Grantee in the first
subsequent calendar year or years in which it could be
exercisable for the first time by the Grantee when added to all
Prior Grants without exceeding the $100,000 Limit; and
(B) if, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the
preceding provisions of this Subsection (iv) during any calendar
year commencing with the calendar year in which it is first
exercisable through and including the last calendar year in which
it may by its terms be exercised, such portion of the Current
Grant shall not be an incentive stock option, but shall be
exercisable as a separate Option at such date or dates as are
provided in the Current Grant;
(v) shall be granted within 10 years from the earlier of the date
the Plan is adopted or the date the Plan is approved by the
shareholders of the Company;
(vi) shall require the Grantee to notify the Board of any
disposition of any Shares issued pursuant to the exercise of the
incentive stock option under the circumstances described in Section
421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition; and
(vii) shall by its terms not be assignable or transferable other
than by will or the laws of descent and distribution and may be
exercised, during the Grantee's lifetime, only by the Grantee;
provided, however, that the Grantee may, to the extent provided in the
Plan in any manner specified by the Board, designate in writing a
beneficiary to exercise such incentive stock option after the
Grantee's death.
Notwithstanding the foregoing, the Board may, without the consent of the
Grantee, at any time before the exercise of an option (whether or not an
incentive stock option), take any action necessary to prevent such option from
being treated as an incentive stock option.
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6.5 Exercise of Options. Options shall be exercised by the delivery of a
written notice of exercise to the Company or its designee, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares made by cash, personal check or wire
transfer or, subject to the approval of the Board pursuant to procedures
approved by the Board,
(a) through the sale of the Shares acquired on exercise of the Option
through a broker-dealer to whom the Grantee has submitted an irrevocable
notice of exercise and irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay for such
Shares, together with, if requested by the Company, the amount of federal,
state, local or foreign withholding taxes payable by Grantee by reason of
such exercise,
(b) through simultaneous sale through a broker of Shares acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board, or
(c) by delivery to the Company of certificates representing the number
of Shares then owned by the Grantee, the Fair Market Value of which equals
the purchase price of the Shares purchased in connection with the Option
exercise, properly endorsed for transfer to the Company; provided however,
that Shares used for this purpose must have been held by the Grantee for
such minimum period of time as may be established from time to time by the
Board; and provided further that the Fair Market Value of any Shares
delivered in payment of the purchase price upon exercise of the Options
shall be the Fair Market Value as of the exercise date, which shall be the
date of delivery of the certificates for the Stock used as payment of the
exercise price. For purposes of this Section 6.5(c), in lieu of actually
surrendering to the Company the stock certificates representing the number
of Shares then owned by the Grantee, the Board may, in its discretion
permit the Grantee to submit to the Company a statement affirming ownership
by the Grantee of such number of Shares and request that such Shares,
although not actually surrendered, be deemed to have been surrendered by
the Grantee as payment of the exercise price.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of this Plan, SARs
may be granted to any Eligible Person at any time and from time to time as shall
be determined by the Board in its sole discretion. The Board may grant
Freestanding SARs or Tandem SARs, or any combination thereof.
(a) Number of Shares. The Board shall have complete discretion to
determine the number of SARs granted to any Grantee, subject to the
limitations imposed in this Plan and by applicable law.
(b) Exercise Price and Other Terms. All SARs shall be granted with an
exercise price no less than the Fair Market Value of the underlying Shares
of Stock on the SARs' Grant Date. The Board, subject to the provisions of
this Plan, shall have complete discretion to determine the terms and
conditions of SARs granted under this Plan. The exercise price per Share of
Tandem SARs shall equal the exercise price per Share of the related Option.
7.2 SAR Award Agreement. Each SAR granted under the Plan shall be evidenced
by a written SAR Award Agreement which shall be entered into by the Company and
the Grantee to whom the SAR is granted and which shall specify the exercise
price per share, the SAR Term, the conditions of exercise, and such other terms
and conditions as the Board in its sole discretion shall determine.
7.3 Exercise of SARs. SARs shall be exercised by the delivery of a written
notice of exercise to the Company or its designee, setting forth the number of
Shares over which the SAR is to be exercised. Tandem SARs (a) may be exercised
with respect to all or part of the Shares subject to the related Option upon the
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surrender of the right to exercise the equivalent portion of the related Option;
(b) may be exercised only with respect to the Shares for which its related
Option is then exercisable; and (c) may be exercised only when the Fair Market
Value of the Shares subject to the Option exceeds the Option Price of the
Option. The value of the payment with respect to the Tandem SAR may be no more
than 100% of the difference between the Option Price of the underlying Option
and the Fair Market Value of the Shares subject to the underlying Option at the
time the Tandem SAR is exercised.
7.4 Expiration of SARs. A SAR granted under this Plan shall expire on the
date set forth in the SAR Award Agreement, which date shall be determined by the
Board in its sole discretion. Unless otherwise specifically provided for in the
SAR Award agreement, a Tandem SAR granted under this Plan shall be exercisable
at such time or times and only to the extent that the related Option is
exercisable. The Tandem SAR shall terminate and no longer be exercisable upon
the termination or exercise of the related Options, except that Tandem SARs
granted with respect to less than the full number of shares covered by a related
Option shall not be reduced until the exercise or termination of the related
Option exceeds the number of Shares not covered by the SARs.
7.5 Payment of SAR Amount. Upon exercise of a SAR, a Grantee shall be
entitled to receive payment from the Company in an amount determined by
multiplying (i) the positive difference between the Fair Market Value of a Share
on the date of exercise over the exercise price per Share by (ii) the number of
Shares with respect to which the SAR is exercised. The payment upon a SAR
exercise shall be solely in whole Shares of equivalent value. Fractional Shares
shall be rounded down to the nearest whole Share with no cash consideration
being paid upon exercise.
Article 8. Restricted Shares
8.1 Grant of Restricted Shares. Subject to the terms and provisions of the
Plan, the Board, at any time and from time to time, may grant Restricted Shares
to any Eligible Person in such amounts as the Board shall determine.
8.2 Award Agreement. Each grant of Restricted Shares shall be evidenced by
an Award Agreement, which shall specify the Period(s) of Restriction, the number
of Restricted Shares granted, and such other provisions as the Board shall
determine. The Board may impose such conditions or restrictions on any
Restricted Shares as it may deem advisable, including restrictions based upon
the achievement of specific performance goals (Company-wide, divisional,
Subsidiary or individual), time-based restrictions on vesting or restrictions
under applicable securities laws.
8.3 Consideration. The Board shall determine the amount, if any, that a
Grantee shall pay for Restricted Shares. Such payment shall be made in full by
the Grantee before the delivery of the shares and in any event no later than 10
business days after the Grant Date for such shares.
8.4 Effect of Forfeiture. If Restricted Shares are forfeited, and if the
Grantee was required to pay for such shares or acquired such Restricted Shares
upon the exercise of an Option, the Grantee shall be deemed to have resold such
Restricted Shares to the Company at a price equal to the lesser of (x) the
amount paid by the Grantee for such Restricted Shares, or (y) the Fair Market
Value of a Share on the date of such forfeiture. The Company shall pay to the
Grantee the required amount as soon as is administratively practical. Such
Restricted Shares shall cease to be outstanding, and shall no longer confer on
the Grantee thereof any rights as a shareholder of the Company, from and after
the date of the event causing the forfeiture, whether or not the Grantee accepts
the Company's tender of payment for such Restricted Shares.
8.5 Escrow; Legends. The Board may provide that the certificates for any
Restricted Shares (x) shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until such
Restricted Shares become nonforfeitable or are forfeited or (y) shall bear an
appropriate legend restricting the transfer of such Restricted Shares. If any
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Restricted Shares become nonforfeitable, the Company shall cause certificates
for such shares to be issued without such legend.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares. Subject to the terms
of the Plan, Performance Units or Performance Shares may be granted to any
Eligible Person in such amounts and upon such terms, and at any time and from
time to time, as the Board shall determine. Each grant of Performance Units or
Performance Shares shall be evidenced by an Award Agreement which shall specify
the terms and conditions applicable to the Performance Units or Performance
Shares, as the Board determines.
9.2 Value/Performance Goals. Each Performance Unit shall have an initial
value that is established by the Board at the time of grant, that is equal to
the Fair Market Value of a Share on the Grant Date. The Board shall set
performance goals which, depending on the extent to which they are met, will
determine the number or value of Performance Units or Performance Shares that
will be paid to the Grantee. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period." The Board shall have complete discretion to establish the performance
goals. Without limitation, the performance goals may provide for a targeted
level or levels of achievement using one or more of the following measures: (a)
earnings per share, (b) net income, (c) return on equity, (d) pro forma net
income, (e) return on designated assets, (f) return on revenues, (g) Fair Market
Value per share, (i) book value per share, (j) debt reduction, or (k) any
combination of the above, in the conjunctive or disjunctive, at the discretion
of the Board. Objective and measurable goals set by a "management by objectives"
process, and approved by the Board may also be considered. Such goals may relate
to the satisfaction of external or internal requirements.
9.3 Payment of Performance Units and Performance Shares. Subject to the
terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Units or Performance Shares shall be entitled to receive a
payment based on the number and value of Performance Units or Performance Shares
earned by the Grantee over the Performance Period, determined as a function of
the extent to which the corresponding performance goals have been achieved.
If a Grantee is promoted, demoted or transferred to a different business
unit of the Company during a Performance Period, then, to the extent the Board
determines appropriate, the Board may adjust, change or eliminate the
performance goals or the applicable Performance Period as it deems appropriate
in order to make them appropriate and comparable to the initial performance
goals or Performance Period.
9.4 Form and Timing of Payment of Performance Units and Performance Shares.
Payment of earned Performance Units or Performance Shares shall be made in a
lump sum following the close of the applicable Performance Period. The Board may
cause earned Performance Units or Performance Shares to be paid in cash or in
Shares (or in a combination thereof) which have an aggregate Fair Market Value
equal to the value of the earned Performance Units or Performance Shares at the
close of the applicable Performance Period. Such Shares may be granted subject
to any restrictions deemed appropriate by the Board. The form of payout of such
Awards shall be set forth in the Award Agreement pertaining to the grant of the
Award.
As determined by the Board, a Grantee may be entitled to receive any
dividends declared with respect to Shares which have been earned in connection
with grants of Performance Units or Performance Shares but not yet distributed
to the Grantee. In addition, a Grantee may, as determined by the Board, be
entitled to exercise his or her voting rights with respect to such Shares.
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Article 10. Bonus Shares and Deferred Shares
10.1 Bonus Shares. Subject to the terms of the Plan, the Board may grant
Bonus Shares to any Eligible Person, in such amount and upon such terms and at
any time and from time to time as shall be determined by the Board.
10.2 Deferred Shares. Subject to the terms and provisions of the Plan,
Deferred Shares may be granted to any Eligible Person in such amounts and upon
such terms, and at any time and from time to time, as shall be determined by the
Board. The Board may impose such conditions or restrictions on any Deferred
Shares as it may deem advisable, including time-vesting restrictions and
deferred payment features. The Board may cause the Company to establish a
grantor trust to hold Shares subject to Deferred Share Awards. Without limiting
the generality of the foregoing, the Board may grant to any Eligible Person, or
permit any Eligible Person to elect to receive, Deferred Shares in lieu of or in
substitution for any other compensation (whether payable currently or on a
deferred basis, and whether payable under this Plan or otherwise) which such
Eligible Person may be eligible to receive from the Company or a Subsidiary. Any
grant of Deferred Shares shall comply with Section 409A of the Code.
Article 11. Beneficiary Designation
Each Grantee under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of the Grantee's death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Grantee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Grantee in writing with
the Company during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
Article 12. Rights of Employees
12.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Grantee's employment at any time,
nor confer upon any Grantee the right to continue in the employ of the Company.
12.2 Participation. No employee shall have the right to be selected to
receive an Award, or, having been so selected, to be selected to receive a
future Award.
Article 13. Amendment, Modification, and Termination
13.1 Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board of Directors of the Company may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in part without
the approval of the Company's shareholders, except to the extent the Board of
Directors of the Company determines it is desirable to obtain approval of the
Company's shareholders, to retain eligibility for exemption from the limitations
of Code Section 162(m), to have available the ability for Options to qualify as
ISOs, to comply with the requirements for listing on any exchange where the
Company's Shares are listed, or for any other purpose the Board of Directors of
the Company deems appropriate.
13.2 Adjustments Upon Certain Unusual or Nonrecurring Events. The Board may
make adjustments in the terms and conditions of Awards in recognition of unusual
or nonrecurring events (including the events described in Section 4.2) affecting
the Company or the financial statements of the Company or of changes in
applicable laws, regulations, or accounting principles, whenever the Board
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
13.3 Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary (but subject to Section 2.7 and Section 13.2), no
termination, amendment or modification of the Plan shall adversely affect in any
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material way any Award previously granted under the Plan, without the written
consent of the Grantee of such Award.
Article 14. Withholding
14.1 Mandatory Tax Withholding.
(a) Whenever under the Plan, Shares are to be delivered upon exercise
or payment of an Award, or upon Restricted Shares becoming nonforfeitable,
or any other event with respect to rights and benefits hereunder, the
Company shall be entitled to require and may accommodate the Grantee's
request if so requested, (x) that the Grantee remit an amount in cash
sufficient to satisfy all federal, state, local and foreign tax withholding
requirements related thereto ("Tax Withholding"), (y) the withholding of
such Tax Withholding from compensation otherwise due to the Grantee or from
any Shares or other payment due to the Grantee under the Plan or (z) any
combination of the foregoing.
(b) Any Grantee who makes a disqualifying disposition of an incentive
stock option granted under the Plan or who makes an election under Section
83(b) of the Code shall remit to the Company an amount sufficient to
satisfy all resulting Tax Withholding; provided that, in lieu of or in
addition to the foregoing, the Company shall have the right to withhold
such Tax Withholding from compensation otherwise due to the Grantee or from
any Shares or other payment due to the Grantee under the Plan.
14.2 Notification under Code Section 83(b). If the Grantee, in
connection with the exercise of any Option, or the grant of Restricted
Shares, makes the election permitted under Section 83(b) of the Code to
include in such Grantee's gross income in the year of transfer the amounts
specified in Section 83(b) of the Code, then such Grantee shall notify the
Company of such election within 10 days of filing the notice of the
election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under Section 83(b) of
the Code. The Board may, in connection with the grant of an Award or at any
time thereafter prior to such an election being made, prohibit a Grantee
from making the election described above.
Article 15. Equity Incentive Plans of Foreign Subsidiaries
The Board may authorize any foreign Subsidiary to adopt a plan for granting
Awards ("Foreign Equity Incentive Plan"). All awards granted under such Foreign
Equity Incentive Plans shall be treated as grants under the Plan. Such Foreign
Equity Incentive Plans shall have such terms and provisions as the Board permits
not inconsistent with the provisions of the Plan and which may be more
restrictive than those contained in the Plan. Awards granted under such Foreign
Equity Incentive Plans shall be governed by the terms of the Plan except to the
extent that the provisions of the Foreign Equity Incentive Plans are more
restrictive than the terms of the Plan, in which case such terms of the Foreign
Equity Incentive Plans shall control.
Article 16. Additional Provisions
16.1 Successors. All obligations of the Company under the Plan with respect
to Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise of all or substantially all of the
business or assets of the Company.
16.2 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.
16.3 Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
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of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section or
part of a Section to the fullest extent possible while remaining lawful and
valid.
16.4 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or stock exchanges as may be
required. Notwithstanding any provision of the Plan or any Award, Grantees shall
not be entitled to exercise, or receive benefits under, any Award, and the
Company shall not be obligated to deliver any Shares or other benefits to a
Grantee, if such exercise or delivery would constitute a violation by the
Grantee or the Company of any applicable law or regulation.
16.5 Securities Law Compliance.
(a) If the Board deems it necessary to comply with any applicable
securities law, or the requirements of any stock exchange upon which Shares
may be listed, the Board may impose any restriction on Shares acquired
pursuant to Awards under the Plan as it may deem advisable. All
certificates for Shares delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Board may deem advisable under the rules,
regulations and other requirements of the SEC, any stock exchange upon
which Shares are then listed, any applicable securities law, and the Board
may cause a legend or legends to be placed on any such certificates to
refer to such restrictions. If so requested by the Company, the Grantee
shall represent to the Company in writing that he or she will not sell or
offer to sell any Shares unless a registration statement shall be in effect
with respect to such Shares under the Securities Act of 1933 or unless he
or she shall have furnished to the Company evidence satisfactory to the
Company that such registration is not required.
(b) If the Board determines that the exercise of, or delivery of
benefits pursuant to, any Award would violate any applicable provision of
securities laws or the listing requirements of any stock exchange upon
which any of the Company's equity securities are then listed, then the
Board may postpone any such exercise or delivery, as applicable, but the
Company shall use all reasonable efforts to cause such exercise or delivery
to comply with all such provisions at the earliest practicable date.
16.6 No Rights as a Shareholder. A Grantee shall not have any rights as a
shareholder with respect to the Shares (other than Restricted Shares) which may
be deliverable upon exercise or payment of such Award until such shares have
been delivered to him or her. Restricted Shares, whether held by a Grantee or in
escrow by the Secretary of the Company, shall confer on the Grantee all rights
of a shareholder of the Company, except as otherwise provided in the Plan or
Award Agreement. Unless otherwise determined by the Board at the time of a grant
of Restricted Shares, any cash dividends that become payable on Restricted
Shares shall be deferred and, if the Board so determines, reinvested in
additional Restricted Shares. Except as otherwise provided in an Award
Agreement, any share dividends and deferred cash dividends issued with respect
to Restricted Shares shall be subject to the same restrictions and other terms
as apply to the Restricted Shares with respect to which such dividends are
issued. The Board may provide for payment of interest on deferred cash
dividends.
16.7 Nature of Payments. Awards shall be special incentive payments to the
Grantee and shall not be taken into account in computing the amount of salary or
compensation of the Grantee for purposes of determining any pension, retirement,
death or other benefit under (a) any pension, retirement, profit-sharing, bonus,
insurance or other employee benefit plan of the Company or any Subsidiary or (b)
any agreement between (i) the Company or any Subsidiary and (ii) the Grantee,
except as such plan or agreement shall otherwise expressly provide.
16.8 Governing Law. The Plan and the rights of any Grantee receiving an
Award thereunder shall be construed and interpreted in accordance with and
governed by the laws of the State of Kansas without giving effect to the
principles of the conflict of laws to the contrary.
B-22
APPENDIX C
GRAPHIC AND IMAGE MATERIAL
IN
PROXY STATEMENT
In accordance with Rule 304 of Regulation S-T, the following graphic and
image material is included in the Garmin proxy statement.
Photographs of Each Director
The proxy statement includes photographs of each director. A photograph of
a director is placed in the proxy statement next to the discussion of the
director's principal occupations in the sections entitled "PROPOSAL 1- ELECTION
OF THREE DIRECTORS" and "THE BOARD OF DIRECTORS".
Performance Graph
The proxy statement also includes a stock performance graph, which is
supplemented by a table showing the dollar value of the points on the graph. The
table is set forth in this electronic format document in the section entitled
"Performance Graph". Both the graph and the table will be included in the paper
format definitive proxy mailed to Garmin's shareholders. In accordance with a
letter to EDGAR filers dated November 16, 1992 from Mauri L. Osheroff, Associate
Director of Regulatory Policy of the Division of Corporate Finance, no further
explanation of the graph is set forth in this appendix.
C-1
APPENDIX D
FORM OF PROXIES
--------------------------------------------------------------------------------
PROXY
--------------------------------------------------------------------------------
GARMIN LTD.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SHAREHOLDERS MEETING ON JUNE 3, 2005
The undersigned shareholder of Garmin Ltd., a Cayman Islands company,
hereby appoints Min H. Kao and Kevin Rauckman and each of them, with full power
of substitution, as true and lawful agents and proxies to represent the
undersigned and vote all common shares of Garmin Ltd. owned by the undersigned
in all matters coming before the 2005 Annual General Meeting of Shareholders (or
any adjournment thereof) to be held at the Ritz-Charles Conference Center, 9000
West 137th Street, Overland Park, Kansas 66221, on Friday, June 3, 2005 at 10:00
a.m. local time. The Board of Directors recommends a vote "FOR" the following
proposal, all as more specifically set forth in the Proxy Statement:
1. Election of Three Directors |_| FOR all the nominees listed below
(except as marked to the contrary below)
|_| WITHHOLD AUTHORITY to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
below. Failure to follow this procedure to withhold authority to
vote for any individual nominee will result in the granting of
authority to vote for the election of such nominee.)
Donald H. Eller - three year term expiring in 2008
Clifton A. Pemble - three year term expiring in 2008
Charles W. Peffer - one year term expiring in 2006
2. Approval of the Garmin Ltd. 2005 Equity Incentive Plan
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote with respect to any
other matters that may properly come before the Annual General Meeting or
any adjournment thereof, including matters incident to its conduct.
D-1
I/WE RESERVE THE RIGHT TO REVOKE THE PROXY AT ANY TIME BEFORE THE EXERCISE
THEREOF. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
SPECIFIED ABOVE BY THE SHAREHOLDER. TO THE EXTENT CONTRARY SPECIFICATIONS ARE
NOT GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTORS
NOMINATED AND "FOR" PROPOSAL 2.
Dated: __________________________, 2005
---------------------------------------
(Signature)
---------------------------------------
(Signature if held jointly)
Please sign exactly as your name appears on your share
certificate, indicating your official position or representative
capacity, if applicable. If shares are held jointly, each owner
should sign.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY BEFORE THE
DATE OF THE ANNUAL MEETING IN THE ENCLOSED ENVELOPE.
D-2
CONFIDENTIAL VOTING INSTRUCTIONS TO
T. ROWE PRICE TRUST COMPANY AS TRUSTEE
UNDER THE GARMIN INTERNATIONAL, INC.
401(k) AND PENSION PLAN
This voting instruction card is solicited by the Trustee. I hereby
direct that the voting rights pertaining to Common Shares of Garmin Ltd. held by
the Trustee and allocated to my account shall be exercised at the Annual General
Meeting of Shareholders to be held on June 3, 2005, or any adjournment thereof,
as specified hereon and in its discretion on all other matters that are properly
brought before the Annual General Meeting of Shareholders and matters incidental
to such meeting.
1. Election of Three Directors |_| FOR all the nominees listed below
(except as marked to the contrary below)
|_| WITHHOLD AUTHORITY to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Donald H. Eller - three year term expiring in 2008
Clifton A. Pemble - three year term expiring in 2008
Charles W. Peffer - one year term expiring in 2006
2. Approval of the Garmin Ltd. 2005 Equity Incentive Plan
|_| FOR |_| AGAINST |_| ABSTAIN
If the voting instruction card is not returned, the Trustee must vote such
shares in the same proportions as the shares for which voting instruction cards
were received from the plan participants.
D-3
CONFIDENTIAL VOTING INSTRUCTIONS TO
T. ROWE PRICE TRUST COMPANY AS TRUSTEE
UNDER THE GARMIN INTERNATIONAL, INC.
401(k) AND PENSION PLAN
Dated: __________________________, 2005
---------------------------------------
(Signature)
Please sign exactly as your name appears.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS VOTING INSTRUCTION
CARD BEFORE THE DATE OF THE ANNUAL MEETING IN THE ENCLOSED
ENVELOPE. DO NOT RETURN THIS CARD TO GARMIN LTD. AS YOUR VOTE IS
CONFIDENTIAL.
D-4