Gen Digital Inc 10-Q for FY2023 Q2
Gen Digital Inc. (GEN)
10-Q
2022-11-09
For: 2022-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Gen Digital Inc filed this 10-Q on November 9, 2022, covering the quarter ended September 30, 2022 (FY2023 Q2).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $748M
- up 8.1% from $692M a year earlier
- Net income
- $69M
- down 79.3% from net income of $333M a year earlier
- Diluted EPS
- $0.12
- down 78.6% from $0.56 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period from to
Commission File Number 000-17781
(Exact name of the registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer Identification no.) | ||||||||||||||||
(Address of principal executive offices) | (Zip code) | ||||||||||||||||
Registrant’s telephone number, including area code:
(650 ) 527-8000
Former name or former address, if changed since last report:
________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | |||||||||
par value $0.01 per share | |||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
þ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||||||||
Emerging growth company | ||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||||||||||||||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The number of shares of Gen common stock, $0.01 par value per share, outstanding as of November 4, 2022 was 651,359,881 shares.
GEN DIGITAL INC.
FORM 10-Q
Quarterly Period Ended September 30, 2022
TABLE OF CONTENTS
| Page | ||||||||
“Gen,” “we,” “us,” “our,” and “the Company” refer to Gen Digital Inc. and all of its subsidiaries. Gen, the Gen Logo, the Checkmark Logo, Norton, LifeLock, the LockMan Logo, Avast, Piriform and AVG are trademarks or registered trademarks of Gen Digital Inc. or its affiliates in the United States (U.S.) and other countries. Other names may be trademarks of their respective owners.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
GEN DIGITAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except par value per share amounts)
| September 30, 2022 | April 1, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease assets | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Current portion of long-term debt | |||||||||||
| Contract liabilities | |||||||||||
| Current operating lease liabilities | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term contract liabilities | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Long-term income taxes payable | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 18) | |||||||||||
| Stockholders’ equity (deficit): | |||||||||||
Common stock and additional paid-in capital, $ | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Retained earnings (accumulated deficit) | ( | ( | |||||||||
| Total stockholders’ equity (deficit) | ( | ||||||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | |||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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GEN DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share amounts)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | ||||||||||||||||||||
| Net revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Restructuring and other costs | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income (loss) | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense), net | |||||||||||||||||||||||
| Income (loss) before income taxes | |||||||||||||||||||||||
| Income tax expense (benefit) | |||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) per share - basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) per share - diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted-average shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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GEN DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | ||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||||||||||
| Foreign currency translation gain (loss) | ( | ( | ( | ||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
GEN DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited, in millions, except share amounts)
Three months ended September 30, 2022 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance as of July 1, 2022 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | — | — | — | ||||||||||||||||||||||||||
| Common stock issued under employee stock incentive plans | — | — | |||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | — | — | ( | ||||||||||||||||||||||||
Cash dividends declared ($ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Extinguishment of convertible debt | — | ( | — | — | ( | ||||||||||||||||||||||||
| Merger consideration | — | — | |||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
Six months ended September 30, 2022 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance as of April 1, 2022 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | — | — | ( | — | ( | ||||||||||||||||||||||||
| Common stock issued under employee stock incentive plans | — | — | |||||||||||||||||||||||||||
| Shares withheld for taxes related to vesting of restricted stock units | ( | ( | — | — | ( | ||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | — | — | ( | ||||||||||||||||||||||||
Cash dividends declared ($ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Extinguishment of convertible debt | — | ( | — | — | ( | ||||||||||||||||||||||||
| — | ( | — | ( | ||||||||||||||||||||||||||
| Merger consideration | — | — | |||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
(1) Effective on April 2, 2022, the Company adopted ASU 2020-06 ( Debt with Conversion and Other Options, ASC 470-20) using a modified retrospective method. See Note 2 for further information about this recently adopted guidance.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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GEN DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited, in millions, except share amounts)
Three months ended October 1, 2021 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance as of July 2, 2021 | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | — | — | ( | — | ( | ||||||||||||||||||||||||
| Common stock issued under employee stock incentive plans | — | — | |||||||||||||||||||||||||||
Cash dividends declared ($ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Balance as of October 1, 2021 | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
Six months ended October 1, 2021 | Common Stock and Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance as of April 2, 2021 | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | — | — | ( | — | ( | ||||||||||||||||||||||||
| Common stock issued under employee stock incentive plans | — | — | |||||||||||||||||||||||||||
| Shares withheld for taxes related to vesting of restricted stock units | ( | ( | — | — | ( | ||||||||||||||||||||||||
Cash dividends declared ($ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Extinguishment of convertible debt | — | ( | — | — | ( | ||||||||||||||||||||||||
| Balance as of October 1, 2021 | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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GEN DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
| Six Months Ended | |||||||||||
| September 30, 2022 | October 1, 2021 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments: | |||||||||||
| Amortization and depreciation | |||||||||||
| Impairments and write-offs of current and long-lived assets | ( | ||||||||||
| Stock-based compensation expense | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Loss (gain) on extinguishment of debt | |||||||||||
| Gain on sale of property | ( | ||||||||||
| Non-cash operating lease expense | |||||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts receivable, net | |||||||||||
| Accounts payable | ( | ||||||||||
| Accrued compensation and benefits | ( | ||||||||||
| Contract liabilities | ( | ( | |||||||||
| Income taxes payable | ( | ( | |||||||||
| Other assets | ( | ||||||||||
| Other liabilities | ( | ( | |||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Payments for acquisitions, net of cash acquired | ( | ( | |||||||||
| Proceeds from the maturities and sales of short-term investments | |||||||||||
| Proceeds from the sale of property | |||||||||||
| Other | ( | ||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Repayments of debt | ( | ( | |||||||||
| Proceeds from issuance of debt, net of issuance costs | |||||||||||
| Net proceeds from sales of common stock under employee stock incentive plans | |||||||||||
| Tax payments related to vesting of restricted stock units | ( | ( | |||||||||
| Dividends and dividend equivalents paid | ( | ( | |||||||||
| Repurchases of common stock | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate fluctuations on cash and cash equivalents | ( | ( | |||||||||
| Change in cash and cash equivalents | ( | ||||||||||
| Beginning cash and cash equivalents | |||||||||||
| Ending cash and cash equivalents | $ | $ | |||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
8
GEN DIGITAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of Business and Significant Accounting Policies
Business
On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Merger). On September 12, 2022, we completed the Merger with Avast, and its results of operations have been included in our Condensed Consolidated Statements of Operations beginning September 12, 2022. See Note 4 for further information about this business combination.
In connection with the Merger, effective November 7, 2022, we changed our corporate name from NortonLifeLock Inc. to Gen Digital Inc. (Gen).
Gen is a global, leading provider of consumer Cyber Safety solutions. Our portfolio provides protection across three Cyber Security categories: security, identity protection and online privacy. We help customers protect their computer and mobile devices from online threats, safeguard their identity and personal information and strengthen online privacy capabilities and functionalities.
Basis of presentation
Fiscal calendar
Use of estimates
Significant accounting policies
With the exception of those discussed in Note 2, there have been no material changes to our significant accounting policies as of and for the three and six months ended September 30, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022.
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Note 2. Recent Accounting Standards
Recently adopted authoritative guidance
Debt with Conversion and Other Options. In August 2020, the FASB issued Accounting Standards Update 2020-06 (ASU 2020-06) which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes from GAAP the separation models for convertible debt with embedded conversion features. As a result, entities will no longer separately present embedded conversion features in equity. A convertible debt instrument will be accounted for wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. In addition, the debt discount, which is equal to the carry value of the embedded conversion feature upon issuance, will no longer be amortized as interest expense over the life of the instrument. The new guidance also requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and include the effect of share settlement for instruments that may be settled in cash or shares. See Note 16 for further information related to the diluted earnings per share calculation.
We adopted this standard as of April 2, 2022, the first day of fiscal 2023, using a modified retrospective method of transition, under which, financial results and earnings per share amounts reported in prior periods were not adjusted or restated in the Condensed Consolidated Financial Statements. As such, the new guidance was applied to the convertible debt instruments outstanding as of the beginning of this fiscal year, with the cumulative effect of adoption recognized through an adjustment to the opening balance of retained earnings. We increased the carrying amount of the New 2.0 % Convertible Notes (as defined in Note 10) by approximately $1 million and reduced additional paid-in capital by approximately $7 million, net of tax. The net effect of these adjustments was recorded as an increase to retained earnings as of April 2, 2022.
Reference Rate Reform. In March 2020, the FASB issued new guidance providing temporary optional expedients and exceptions to ease the financial reporting burden of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). The standard was effective upon issuance and may generally be applied through December 31, 2022, to any new or amended contracts, hedging relationships and other transactions that reference LIBOR. As of September 30, 2022, we have fully transitioned to SOFR and no longer use LIBOR on any debt or contractual arrangements that are outstanding. Any future contracts, hedging relationships and other transactions will be SOFR denominated.
Note 3. Assets Held for Sale
Assets held for sale
During fiscal 2020, we reclassified certain land and buildings previously reported as property and equipment to assets held for sale when the properties were approved for immediate sale in their present condition and the sale was expected to be completed within one year. However, the commercial real estate market continues to be adversely affected by the COVID-19 pandemic, which delayed the expected timing of such sales.
During the three months ended September 30, 2022, we determined certain land and buildings in Mountain View, California, which were previously reported as assets held for sale as of April 1, 2022, no longer qualify as held for sale classification. As a result, we reclassified the aggregate $26 million carrying value from assets held for sale to property and equipment, net, in our Condensed Consolidated Balance Sheets and recorded an immaterial catch-up depreciation adjustment, which is included in our Condensed Consolidated Statements of Operations.
We continue to actively market the remaining property for sale. We have taken into consideration the current real estate values and demand and continue to execute plans to sell this property. As of September 30, 2022, this property remains classified as assets held for sale. During the three and six months ended September 30, 2022, there were no
Note 4. Business Combinations
Merger with Avast
On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued share capital of Avast plc, a public company incorporated in England and Wales (Avast and such transaction, the Merger). The Merger was implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006 (the Scheme). Under the terms of the Merger, Avast shareholders were entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either: (i) $7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option); or (ii) $2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option). Each Avast Director who held Avast shares elected for the Majority Stock Option in respect to their entire beneficial holdings of Avast shares.
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The Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast, and regulators including the Federal Trade Commission under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) and in Europe, the German Federal Cartel Office, the Spanish National Markets and Competition Commission and the U.K. Competition and Markets Authority.
Closing of Merger with Avast
On September 12, 2022, we completed the Merger with Avast, and as a result, we have changed our corporate name to Gen Digital Inc. and have become dual headquartered in Tempe, Arizona and Prague, Czech Republic. Avast is a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protect and enhance users’ online experiences. Combining Avast’s strength in privacy and our strength in identity will create a broad and complementary consumer product portfolio beyond core security and towards adjacent trust-based solutions. The Merger will provide greater geographic diversification and access to a larger user base and will accelerate the transformation of global consumer cyber safety.
Upon completion of the Merger, we acquired all of the outstanding common stock of Avast. Based on the election of the Avast shareholders, we paid cash consideration of approximately $6,913 million and issued 94,201,233 shares of our common stock to Avast shareholders. As a result, immediately following the closing of the Merger, Avast shareholders owned approximately 14 % of our outstanding common stock. The fair value of our common stock provided in exchange for all outstanding ordinary shares of Avast was approximately $2,141 million.
Consideration transferred
The total consideration for the Merger with Avast was approximately $8,691 million, net of cash acquired, and consisted of the following:
| (In millions) | September 12, 2022 | ||||
Cash and equity consideration for outstanding Avast common shares (1) | $ | ||||
Repayment of outstanding Avast debt (2) | |||||
| Total consideration | |||||
| Cash acquired | |||||
| Net consideration transferred | $ | ||||
(1) Represents the total value of cash paid and our common stock issued to Avast shareholders pursuant to the Majority Cash/Stock Option in the Scheme.
Fair value of assets acquired and liabilities assumed
We accounted for the Merger as a business combination. The identifiable assets acquired and liabilities assumed of Avast were recorded at their estimated fair values as of the acquisition date and consolidated with those of our company. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed, especially with respect to intangible assets. Third-party valuation specialists were also utilized for certain estimates.
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Our preliminary allocation of the aggregate purchase price, based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date, is as follows:
| (In millions) | September 12, 2022 | ||||
| Assets: | |||||
| Accounts receivable | $ | ||||
| Other current assets | |||||
| Property and equipment | |||||
| Operating lease assets | |||||
| Intangible assets | |||||
| Goodwill | |||||
| Other long-term assets | |||||
| Total assets acquired | |||||
| Liabilities: | |||||
| Current liabilities | |||||
| Contract liabilities | |||||
| Operating lease liabilities | |||||
| Long-term deferred tax liabilities | |||||
| Other long-term obligations | |||||
| Total liabilities assumed | |||||
| Total purchase price | $ | ||||
The allocation of the purchase price is based upon a preliminary valuation, and as additional information becomes available, our estimates and assumptions may be subject to refinement within the measurement period, which may be up to one year from the acquisition date. Adjustments to the purchase price may require adjustments to goodwill prospectively. The primary areas of preliminary purchase price allocation that are not yet finalized include intangible assets and certain tax and litigation matters.
The preliminary goodwill of $7,267 million represents the excess of the consideration transferred over the fair values of the assets acquired and liabilities assumed. It is attributable to the expected synergies of the Merger, including future cost savings from planned integration of infrastructure, facilities, personnel and systems, and other benefits that are anticipated to be generated by combining both companies. Goodwill is allocated to our single reportable segment. Substantially all of the goodwill recognized is expected to be deductible for U.S. tax purposes. See Note 6 for further information on goodwill.
Preliminary identified intangible assets and their respective useful lives, as of September 12, 2022, are as follows:
| (In millions, except for useful lives) | Fair Value | Weighted-Average Estimated Useful Life (Years) | |||||||||
Customer relationships (1) | $ | ||||||||||
Developed technology (2) | |||||||||||
Finite-lived trade names (2) | |||||||||||
| Total identified intangible assets | $ | ||||||||||
(1) Customer relationships were valued using the multi-period excess earnings method, which is a form of the income approach that considers customer retention rate.
(2) Developed technology and finite-lived trade names were valued using the relief-from-royalty method, which is a form of the income approach that considers technology migration and probability of use, respectively.
Financing
In connection with the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close. The proceeds were or will be used (i) to finance the cash consideration payable for the Merger, (ii) to repay in full and terminate all commitments under Avast’s credit facility, (iii) to pay expenses relating to the Merger, (iv) to add cash to the balance sheet and (v) for general corporate purposes and on-going business activities. See Note 10 for further information about these debt instruments and the related debt covenants.
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In connection with the financing provided for Term B Facility, we incurred customary ticking fees with respect to the undrawn commitments that began accruing on the 61st day post-syndication. The ticking fees were payable at the per annum rate of (i) 50 % of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans for 61-90 days from January 28, 2022, the syndication date, and (ii) 100 % of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans on and after 91 days from the syndication date. Ticking fees were payable on the closing date of the transaction. During the three and six months ended September 30, 2022, we paid $31
Impact on operating results
Our results of operations for the three and six months ended September 30, 2022 include $48 1 58 million and $21 million for the three months ended September 30, 2022 and October 1, 2021, respectively, and $66 million and $21 million for the six months ended September 30, 2022 and October 1, 2021, respectively. These costs were primarily associated with legal and professional services and other regulatory closing fees, which were expensed as incurred and included in general and administrative expenses in our Condensed Consolidated Statements of Operations.
On the closing date of the Merger, we also incurred $145 million of debt issuance costs associated with the senior credit facilities, of which $132 million was capitalized and recorded as a reduction of outstanding debt balances and $10 million was capitalized and included in Other long-term assets in our Condensed Consolidated Balance Sheets. The remaining $3 million was capitalized but immediately extinguished in conjunction with the termination of the Bridge Loan.
Unaudited pro forma information
The following unaudited pro forma financial information represents the combined historical results for the three and six months ended September 30, 2022 and October 1, 2021, as if the Merger had been completed on April 3, 2021, the first day of fiscal 2022. The results presented below include adjustments to conform Avast financial information, prepared in accordance with International Financial Reporting Standards (IFRS), to U.S. GAAP as well as the impacts of material, nonrecurring pro forma adjustments, including amortization of acquired intangible assets, interest on debt issued to finance the Merger, and acquisition-related transaction costs, and the income tax effect of the other pro forma adjustments. The unaudited pro forma results do not include any anticipated synergies or other expected benefits of the Merger. The following table summarizes the unaudited pro forma financial information:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Net revenues | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) | $ | ( | $ | $ | $ | ||||||||||||||||||
The unaudited pro forma financial information is provided for informational purposes only and are not indicative of future operations or results that would have been achieved had the Merger been completed as of the beginning of fiscal 2022.
Fiscal 2022 acquisition
On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $39 million, net of $1 million cash acquired. The purchase price was primarily allocated to intangible assets and goodwill. Our estimates and assumptions were subject to refinement within the measurement period, which is up to one year from the acquisition date. Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill. The measurement period ended on September 14, 2022.
Note 5. Revenues
Contract liabilities
During the three and six months ended September 30, 2022, we recognized $502 million and $875 million from the contract liabilities balances as of July 1, 2022 and April 1, 2022, respectively. During the three and six months ended October 1, 2021, we recognized $506 million and $858 million from the contract liabilities balances as of July 2, 2021 and April 2, 2021, respectively.
Remaining performance obligations
Remaining performance obligations represent contract revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of September 30, 2022, we had $1,204 million of remaining performance obligations, excluding customer deposit liabilities of $480 million, of which we expect to recognize approximately 93 % as revenue over the next 12 months.
See Note 17 for tabular disclosures of disaggregated revenue by solution and geographic region.
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Note 6. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill were as follows:
(In millions) | |||||
| Balance as of April 1, 2022 | $ | ||||
| Merger with Avast | |||||
Translation adjustments | ( | ||||
| Balance as of September 30, 2022 | $ | ||||
Intangible assets, net
| September 30, 2022 | April 1, 2022 | ||||||||||||||||||||||||||||||||||
| (In millions) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Developed technology | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| Total finite-lived intangible assets | ( | ( | |||||||||||||||||||||||||||||||||
| Indefinite-lived trade names | — | — | |||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
As a result of our Merger with Avast, we recorded $2,383 million of acquired intangible assets during the three months ended September 30, 2022. See Note 4 for further information about this business combination.
| Three Months Ended | Six Months Ended | Condensed Consolidated Statements of Operations Classification | |||||||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||||||||
| Customer relationships and other | $ | $ | $ | $ | Operating expenses | ||||||||||||||||||||||||
| Developed technology | Cost of revenues | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
| (In millions) | |||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | $ | ||||
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Note 7. Supplementary Information
Cash and cash equivalents:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Cash | $ | $ | |||||||||
| Cash equivalents | |||||||||||
| Total cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Accounts receivable | $ | $ | |||||||||
| Allowance for doubtful accounts | ( | ( | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
Other current assets:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Prepaid expenses | $ | $ | |||||||||
| Income tax receivable and prepaid income taxes | |||||||||||
| Other tax receivable | |||||||||||
| Other | |||||||||||
| Total other current assets | $ | $ | |||||||||
Property and equipment, net:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Land | $ | $ | |||||||||
| Computer hardware and software | |||||||||||
| Office furniture and equipment | |||||||||||
| Buildings | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Total property and equipment, gross | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
During the three months ended September 30, 2022, we reclassified $26 million of buildings and leasehold improvements, which were previously reported as held for sale as of April 1, 2022, to property and equipment, net. Adjustments associated with catch-up depreciation were immaterial. Refer to Note 3 for further information about our assets held for sale.
Other long-term assets:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Non-marketable equity investments | $ | $ | |||||||||
| Long-term income tax receivable and prepaid income taxes | |||||||||||
| Deferred income tax assets | |||||||||||
| Long-term prepaid royalty | |||||||||||
| Other | |||||||||||
| Total other long-term assets | $ | $ | |||||||||
Short-term contract liabilities:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Deferred revenue | $ | $ | |||||||||
| Customer deposit liabilities | |||||||||||
| Total short-term contract liabilities | $ | $ | |||||||||
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Other current liabilities:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Income taxes payable | $ | $ | |||||||||
| Other taxes payable | |||||||||||
| Accrued legal fees | |||||||||||
| Accrued royalties | |||||||||||
| Accrued interest | |||||||||||
| Other | |||||||||||
| Total other current liabilities | $ | $ | |||||||||
Long-term income taxes payable:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Deemed repatriation tax payable | $ | $ | |||||||||
| Other long-term income taxes | |||||||||||
| Uncertain tax positions (including interest and penalties) | |||||||||||
| Total long-term income taxes payable | $ | $ | |||||||||
Other income (expense), net:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
| Foreign exchange gain (loss) | |||||||||||||||||||||||
| Gain (loss) on early extinguishment of debt | ( | ( | ( | ||||||||||||||||||||
| Gain on sale of properties | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Other income (expense), net | $ | $ | $ | $ | |||||||||||||||||||
Supplemental cash flow information:
| Six Months Ended | |||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | |||||||||
| Income taxes paid, net of refunds | $ | $ | |||||||||
| Interest expense paid | $ | $ | |||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||
| Non-cash operating activities: | |||||||||||
| Operating lease assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
| Reduction of operating lease assets as a result of lease terminations and modifications | $ | $ | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| Extinguishment of debt with borrowings from same creditors | $ | $ | |||||||||
| Non-cash consideration for the Merger with Avast | $ | $ | |||||||||
Note 8. Financial Instruments and Fair Value Measurements
For financial instruments measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability.
The three levels of inputs that may be used to measure fair value are:
•Level 1: Quoted prices in active markets for identical assets or liabilities.
•Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in our valuations, such as discounted cash flows, are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.
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•Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes.
Assets measured and recorded at fair value on a recurring basis
The following table summarizes our financial instruments measured at fair value on a recurring basis:
| September 30, 2022 | April 1, 2022 | ||||||||||||||||||||||||||||||||||
| (In millions) | Fair Value | Level 1 | Level 2 | Fair Value | Level 1 | Level 2 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Financial instruments not recorded at fair value on a recurring basis include our non-marketable equity investments and long-term debt.
Non-marketable equity investments
As of September 30, 2022 and April 1, 2022, the carrying value of our non-marketable equity investments was $182 million and $178 million, respectively.
Current and long-term debt
As of September 30, 2022 and April 1, 2022, the total fair value of our fixed rate debt was $2,496 million and $2,021 million, respectively. The fair value of our variable rate debt approximated its carrying value. The fair values of all our debt obligations were based on Level 2 inputs.
Note 9. Leases
We lease certain of our facilities, equipment and data center co-locations under operating leases that expire on various dates through fiscal 2028. Our leases generally have terms that range from 1 year to 8 years for our facilities, 1 year to 3 years for equipment and 1 year to 5 years for data center co-locations. Some of our leases contain renewal options, escalation clauses, rent concessions and leasehold improvement incentives.
The following summarizes our lease costs:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease costs | |||||||||||||||||||||||
| Variable lease costs | |||||||||||||||||||||||
| Total lease costs | $ | $ | $ | $ | |||||||||||||||||||
Other information related to our operating leases was as follows:
| Three Months Ended | |||||||||||
| September 30, 2022 | October 1, 2021 | ||||||||||
| Weighted-average remaining lease term | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
See Note 7 for cash flow information related to our operating leases.
| (In millions) | |||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: Imputed interest | ( | ||||
| Present value of lease liabilities | $ | ||||
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Note 10. Debt
The following table summarizes components of our debt:
(In millions, except percentages) | September 30, 2022 | April 1, 2022 | Effective Interest Rate | ||||||||||||||
| $ | $ | % | |||||||||||||||
New | % | ||||||||||||||||
| % | |||||||||||||||||
| Initial Term Loan due May 7, 2026 | LIBOR plus (3) | ||||||||||||||||
| Delayed Term loan due May 7, 2026 | LIBOR plus (3) | ||||||||||||||||
| Term A Facility due September 12, 2027 | SOFR + % (1) | ||||||||||||||||
| % | |||||||||||||||||
| Term B Facility due September 12, 2029 | SOFR + % (2) | ||||||||||||||||
| % | |||||||||||||||||
| % | |||||||||||||||||
| % | |||||||||||||||||
Total principal amount | |||||||||||||||||
Less: unamortized discount and issuance costs | ( | ( | |||||||||||||||
| Total debt | |||||||||||||||||
| Less: current portion | ( | ( | |||||||||||||||
| Total long-term debt | $ | $ | |||||||||||||||
(1) Term A Facility due 2027 bears interest at a rate equal to Term SOFR plus a credit spread adjustment (CSA) plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement.
(2) Term B Facility due 2029 bears interest at a rate equal to Term SOFR plus CSA plus 2.00 %.
(3) The term loans bear interest at a rate equal to LIBOR plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement.
The interest rates for the outstanding term loans are as follows:
| September 30, 2022 | April 1, 2022 | ||||||||||
| Term A Facility due September 12, 2027 | % | % | |||||||||
| Term B Facility due September 12, 2029 | % | % | |||||||||
| Initial Term Loan due May 7, 2026 | % | % | |||||||||
| Delayed Term Loan due May 7, 2026 | % | % | |||||||||
As of September 30, 2022, the future contractual maturities of debt by fiscal year are as follows:
| (In millions) | |||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total future maturities of debt | $ | ||||
Credit facility
We have a credit agreement with financial institutions, which provides a revolving line of credit of $1 billion, a 5-year term loan of $500 million (the Initial Term Loan) and a delayed draw 5-year term loan commitment of $750 million (the Delayed Draw Term Loan). An amendment to the agreement (the First Amendment) also provides for an incremental increase under the Initial Term Loan of $525 million. All term loans and revolver credit facilities mature in May 2026, and the credit facilities remain senior secured.
The principal amount of the Initial Term Loan and the additional borrowings under the First Amendment must be repaid in quarterly installments on the last business day of each calendar quarter in an amount equal to 1.25 % of the aggregate principal amount as of the date of the First Amendment. The principal amount of the Delayed Draw Term Loan must be repaid in quarterly installments on the last business day of each calendar quarter in an amount equal to 1.25 % of aggregate principal amount as of the borrowing date of the Delayed Draw Term Loan. We may voluntarily repay outstanding principal balances without penalty.
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Interest on borrowings under the credit agreement can be based on a base rate or the LIBOR at our election. Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the credit agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus a margin ranging from 0.125 % to 0.75 %, and in the case of LIBOR loans, LIBOR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %. The unused revolving line of credit is subject to a commitment fee ranging from 0.125 % to 0.30 % per annum.
On September 12, 2022, we fully repaid the outstanding principal and accrued interest under the Initial Term Loan and Delay Draw Term Loan, which had an aggregate principal amount outstanding of $1,703 million. In addition, we paid $3 million of accrued and unpaid interest through the redemption date. The repayments resulted in a loss on extinguishment of $2 million. We also terminated our undrawn revolving line of credit of $1,000 million, resulting in a loss on extinguishment of $4 million.
Senior credit facilities
Upon the close of the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close, resulting in a loss on extinguishment of $3 million. The Credit Agreement provides that we have the right at any time, subject to customary conditions, to request incremental revolving commitments and incremental term loans up to an unlimited amount, subject to certain customary conditions precedent and other provisions. The lenders under these facilities will not be under any obligation to provide any such incremental loans or commitments. We drew down the aggregate principal amounts of the Term A Facility and Term B Facility to finance the cash consideration payable for the transaction and to fully repay the outstanding principal and accrued interest of the existing credit facilities. The Credit Agreement replaced the existing credit facilities upon the close of the transaction. The Revolving Facility and Term A Facility will mature in September 2027, and the Term Facility B will mature in September 2029; the senior credit facilities remain senior secured.
The principal amounts of Term Facility A must be repaid in quarterly installments on the last business day of each calendar quarter equal to 1.25 % of the aggregate principal amount as of the date of the Credit Agreement. The principal amounts of Term Facility B must be repaid in quarterly installments on the last business day of each calendar quarter equal to 0.25 % of the aggregate principal amount as of the date of the Credit Agreement. Quarterly installment payments commence on March 31, 2023. We may voluntarily repay outstanding principal balances under the Revolving Facility and Term A Facility without penalty. Prior to the six month anniversary of the Closing Date, any voluntary prepayment of outstanding principal balances under the Term B Facility is subject to a 1.00 % premium; after such time, voluntary prepayment is permitted without penalty. As of September 30, 2022, there were no borrowings outstanding under our Revolving Facility.
Interest on borrowings under the Credit Agreement can be based on a base rate or the SOFR at our election. Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the Credit Agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus CSA plus a margin ranging from 0.125 % to 0.75 %, and in the case of the SOFR loans, SOFR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %.
Debt covenant compliance
The Credit Agreement contains customary representations and warranties, affirmative and negative covenants. Each of the Revolving Facility and Term A Facility will be subject to a covenant that we maintain a consolidated leverage ratio less than or equal to (i) 6.0 to 1.0 from the Closing Date through the last day of the fourth full fiscal quarter following the Closing Date, (ii) 5.75 to 1.0 following the last day of the fourth fiscal quarter after the Closing Date through the last day of the eighth full fiscal quarter following the Closing Date and (iii) 5.25 to 1.0 for each fiscal quarter thereafter; provided that such maximum consolidated leverage ratio will increase to 5.75 to 1.0 for the four fiscal quarters ending immediately should we acquire property, business or assets in an aggregate amount greater than $250 million.
In addition, the Credit Agreement contains customary events of default under which our payment obligations may be accelerated, including, among others, non-payment of principal, interest or other amounts when due, inaccuracy of representations and warranties, violation of certain covenants, payment and acceleration cross defaults with certain other indebtedness, certain undischarged judgments, bankruptcy, insolvency or inability to pay debts, change of control, the occurrence of certain events related to the Employee Retirement Income Security Act of 1974 (ERISA), and the Company experiencing a change of control. As of September 30, 2022, we were in compliance with all debt covenants.
Senior notes
On June 1, 2022, we fully repaid the principal and accrued interest under the 3.95 % Senior Notes due June 2022, which had an aggregate principal amount outstanding of $400 million. In addition, we paid $7 million of accrued and unpaid interest through the redemption date.
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On September 19, 2022, we issued two series of senior notes, consisting of 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030, for an aggregate principal of $1,500 million. They are senior unsecured obligations that rank equally in right of payment with all of our existing and future senior, unsecured, unsubordinated obligations and may be redeemed at any time, subject to the make-whole provisions contained in the applicable indenture relating to such series of notes. Interest on these series of notes is payable semi-annually in arrears on March 31 and September 30 for both the 6.75 % Senior Notes and 7.125 % Senior Notes, commencing on March 31, 2023. We may redeem some or all of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 at any time. The First Call Dates of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 are September 30, 2024 and September 30, 2025, respectively.
New 2.0 % Convertible Notes
As described in Note 2, on April 2, 2022, we adopted using the modified retrospective method. Prior to the adoption of this guidance, we accounted for our convertible debt instruments under the cash conversion model, requiring the convertible notes to be separated into an equity and liability component. We recognized $56 million in equity, net of tax, which consisted of $9 million in debt discount, representing the difference between the fair value of the liability component and par value, and $47 million in substantial premium due to the fiscal year 2020 amendment, which was accounted for as a debt extinguishment and resulted in the recognition of the New 2.0 % Convertible Notes.
Upon adoption of ASU 2020-06, the cash conversion model is now eliminated. We de-recognized the remaining unamortized debt discount of $1 million on the New 2.0 % Convertible Notes and therefore will no longer recognize the related amortization as interest expense. Additionally, we recorded a cumulative adjustment to retained earnings of $6 million, net of tax, for the debt discount amortization incurred from issuance through April 2, 2022. The remaining $47 million of substantial premium will remain in equity, as the new guidance did not eliminate the substantial premium model for convertible instruments. Under this new guidance, the New 2.0 % Convertible Notes included in our Condensed Consolidated Balance Sheet reflect the par value of the liability
On August 15, 2022, we settled the $525 million principal and conversion rights of our New 2.0 % Convertible Notes in cash. The aggregate settlement amount of $630 million was based on $20.41 per underlying share into which the New 2.0 % Convertible Notes were convertible. In addition, we paid $5 million of accrued and unpaid interest through the date of settlement. The repayments resulted in an adjustment to stockholders’ equity of $100 million.
Note 11. Derivatives
Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flow associated with changes in foreign currency exchange rates and interest rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate and interest rate movements. We do not use our derivative instruments for speculative trading purposes. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, we are exposed to credit risk; however, we mitigate this risk by entering into hedging instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts.
Foreign currency exchange forward contracts
We conduct business in numerous currencies throughout our worldwide operations and our entities hold monetary assets or liabilities, earn revenues or incur costs in currencies other than the entity’s functional currency. As a result, we are exposed to foreign exchange gains or losses, which impact our operating results. As part of our foreign currency risk mitigation strategy, we have entered into monthly foreign exchange forward contracts to hedge foreign currency balance sheet exposure. These forward contracts are not designated as hedging instruments. We do not hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates.
As of September 30, 2022 and April 1, 2022, the fair value of these contracts was immaterial. The related gain (loss) recognized in Other income (expense), net in our Condensed Consolidated Statements of Operations was as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Foreign exchange forward contracts gain (loss) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Foreign exchange forward contracts purchased | $ | $ | |||||||||
| Foreign exchange forward contracts sold | $ | $ | |||||||||
Note 12. Restructuring and Other Costs
20
September 2022 Plan
In connection with the Merger, our Board of Directors approved a restructuring plan (the September 2022 Plan) to realize cost savings and operational synergies, which became effective upon the close of the Merger on September 12, 2022. Actions under this plan include the reduction of our workforce, contract terminations, facilities closures, and the sale of underutilized facilities. We expect that we will incur total costs up to $280 million, with $180 million and $100 million estimated to be incurred within the first and second full years, respectively, following the completion of the Merger. These actions are expected to be completed by fiscal 2024. As of September 30, 2022, we have incurred costs of $6 million related to the September 2022 Plan.
December 2020 Plan
In December 2020, our Board of Directors approved a restructuring plan (the December 2020 Plan) to consolidate facilities and reduce operating costs in connection with our acquisition of Avira. These actions were completed in fiscal 2022. Any remaining costs or adjustments are immaterial. We incurred total costs of $24 million under the December 2020 Plan.
Restructuring and other costs summary
During the three and six months ended September 30, 2022, we incurred total restructuring costs of $9 million and $11 million, respectively. During the three and six months ended October 1, 2021, we incurred total restructuring costs of $5 million and $12 million, respectively.
Note 13. Income Taxes
The following table summarizes our effective tax rate for the periods presented:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In millions, except percentages) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Income tax expense (benefit) | $ | $ | $ | $ | |||||||||||||||||||
| Effective tax rate | % | % | % | % | |||||||||||||||||||
Our effective tax rate for the three and six months ended September 30, 2022 differs from the federal statutory income tax rate primarily due to state taxes and the U.S. taxation on foreign earnings, and certain items this quarter including the tax impacts of internal restructuring, deductibility of transaction costs from the Merger, and the limitations of foreign taxes due to the increase of interest expense.
Our effective tax rate for the three and six months ended October 1, 2021 differs from the federal statutory income tax rate primarily due to state taxes and U.S. taxation on foreign earnings.
We are a multinational company dual headquartered in the U.S. and Czech Republic, subject to tax in multiple U.S. and international tax jurisdictions. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Our results can also be impacted by the costs incurred and the potential deductibility of the expenses. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
In connection with the Merger, we established $345 million of net deferred tax liabilities primarily related to the excess of book basis over the tax basis of acquired identified intangible assets. The net deferred tax liabilities are based upon certain assumptions underlying our preliminary purchase price allocation. Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes may be required.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months.
We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.
Note 14. Stockholders' Equity
Dividends
On November 8, 2022, we announced that our Board of Directors declared a cash dividend of $0.125 per share of common stock to be paid in December 2022. All shares of common stock issued and outstanding and all restricted stock units (RSUs) and performance-based restricted stock units (PRUs) as of the record date will be entitled to the dividend and dividend equivalent rights (DERs), respectively, which will be paid out if and when the underlying shares are released. However, the 4 million unvested RSUs assumed in connection with the Merger will not be entitled to DERs. See Note 15 for further information about these equity awards. Any future dividends and DERs will be subject to the approval of our Board of Directors.
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Stock repurchase program
Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market and through accelerated stock repurchase transactions. As of September 30, 2022, we had $1,370 million remaining under the authorization to be completed in future periods with no expiration date. No shares were repurchased in the prior fiscal year during the six months ended October 1, 2021.
The following table summarizes activity related to this program during the six months ended September 30, 2022:
| Six Months Ended | |||||||||||
(In millions, except per share amounts) | September 30, 2022 | ||||||||||
| Number of shares repurchased | |||||||||||
| Average price per share | $ | ||||||||||
| Aggregate purchase price | $ | ||||||||||
Subsequent to September 30, 2022, we executed repurchases of 14 million shares of our common stock for an aggregate amount of $308 million. As a result, we have $1,062 million remaining under our existing share repurchase program.
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss), net of taxes, consisted of foreign currency translation adjustments:
| (In millions) | Foreign Currency Translation Gain (Loss) | |||||||||||||
| Balance as of April 1, 2022 | $ | ( | ||||||||||||
| Other comprehensive income (loss), net of taxes | ( | |||||||||||||
| Balance as of September 30, 2022 | $ | ( | ||||||||||||
Note 15. Stock-Based Compensation
Avast equity awards
In connection with the Merger, we assumed the outstanding equity awards under two of Avast’s equity incentive plans (the Avast Holding B.V. 2014 Share Option Plan and the Rules of the Avast plc Long Term Incentive Plan (collectively, the Avast Plans)), which consisted of 4 million unvested RSUs. The assumed RSUs generally retain the terms and conditions under which they were originally granted. We intend to grant all additional shares that remain available for issuance under the Avast Plans. Upon vesting, these assumed RSUs and any additional shares granted will settle into shares of our common stock. See Note 4 for further information about this business combination.
The following table sets forth the stock-based compensation expense recognized for our equity incentive plans:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Cost of revenues | $ | $ | $ | $ | |||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| Income tax benefit for stock-based compensation expense | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
As of September 30, 2022, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $297 million, which will be recognized over an estimated weighted-average amortization period of 2.2 years.
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| Six Months Ended | ||||||||||||||
| (In millions, except per grant data) | September 30, 2022 | October 1, 2021 | ||||||||||||
| Restricted stock units (RSUs): | ||||||||||||||
Weighted-average fair value per award granted | $ | $ | ||||||||||||
| Awards granted | ||||||||||||||
| Total fair value of awards released | $ | $ | ||||||||||||
| Outstanding and unvested | ||||||||||||||
| Performance-based restricted stock units (PRUs): | ||||||||||||||
| Weighted-average fair value per award granted | $ | $ | ||||||||||||
| Awards granted | ||||||||||||||
| Total fair value of awards released | $ | $ | ||||||||||||
| Outstanding and unvested at target payout | ||||||||||||||
Dividend equivalent rights (DERs)
Our RSUs and PRUs, except the 4 million unvested RSUs assumed under the Avast Plans, contain DERs that entitles the recipient of an award to receive cash dividend payments if and when the underlying shares are released. The amount of DERs equals the amount of cumulated dividends on the issued number of common stock that would have been payable since the date the associated award was granted. As of September 30, 2022 and April 1, 2022, current dividends payable related to DER was $4 million and $11 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $2 million and $2 million, respectively, recorded as part of Other long-term liabilities.
Note 16. Net Income Per Share
Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share also includes the incremental effect of dilutive potentially issuable common shares outstanding. Dilutive potentially issuable common shares include the dilutive effect of the shares underlying our employee equity awards and convertible debt until its extinguishment on August 15, 2022.
The components of basic and diluted net income (loss) per share are as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In millions, except per share amounts) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) per share - basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) per share - diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding - basic | |||||||||||||||||||||||
| Dilutive potentially issuable shares: | |||||||||||||||||||||||
Convertible debt | |||||||||||||||||||||||
| Employee equity awards | |||||||||||||||||||||||
| Weighted-average shares outstanding - diluted | |||||||||||||||||||||||
| Anti-dilutive shares excluded from diluted net income per share calculation: | |||||||||||||||||||||||
| Employee equity awards | |||||||||||||||||||||||
Total | |||||||||||||||||||||||
Upon adoption of ASU 2020-06 under the modified retrospective method, we are required to apply the if-converted method to our calculation of diluted earnings per share. For the three and six months ended September 30, 2022, we adjust for the dilutive effect of the maximum number of potential shares to be issued upon settlement of our outstanding convertible debt instruments. Prior period earnings per share amounts are not restated under the modified retrospective method. For the three and six months ended October 1, 2021, the dilutive effect of our debt instruments is calculated using the treasury stock method, under which our convertible debt instruments generally had a dilutive impact on net income per share when our average stock price for the period exceeds the conversion prices for the convertible debt instruments. The initial adoption of had a $0.01 impact on dilutive earnings per share, with the dilutive shares underlying the convertible debt increasing by 18 million shares.
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Note 17. Segment and Geographic Information
We operate as one reportable segment. Our Chief Operating Decision Maker reviews financial information presented on a consolidated basis to evaluate company performance and to allocate and prioritize resources.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Consumer security revenues | $ | $ | $ | $ | |||||||||||||||||||
| Identity and information protection revenues | |||||||||||||||||||||||
| Total Cyber Safety revenues | |||||||||||||||||||||||
| Legacy revenues | |||||||||||||||||||||||
Total net revenues (1) | $ | $ | $ | $ | |||||||||||||||||||
From time to time, changes in our product hierarchy cause changes to the product categories above. When changes occur, we recast historical amounts to match the current product hierarchy. The changes have been reflected for all periods presented above. Consumer security includes revenues from our Norton 360 Security offerings, Norton Security, Avast Security offerings, Norton Secure VPN, Avira Security and other consumer security and device performance solutions through our direct, partners and small business channels. Identity and information protection includes revenues from our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other information protection and privacy solutions. Legacy includes revenues from products or solutions that are no longer in operations in exited markets, have been discontinued or identified to be discontinued, or remain in maintenance mode as a result of integration and product portfolio decisions.
Geographic information
Net revenues by geography are based on the billing addresses of our customers. The following table represents net revenues by geographic area for the periods presented:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Americas | $ | $ | $ | $ | |||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| APJ | |||||||||||||||||||||||
Total net revenues (1) | $ | $ | $ | $ | |||||||||||||||||||
Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan.
(1) During the three months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $31 million, consisting of $18 million from EMEA and $13 million from APJ. During the six months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $58 million, consisting of $34 million from EMEA and $24 million from APJ.
Revenues from customers inside the U.S. were $493 million and $972 million during the three and six months ended September 30, 2022, respectively, and $460 million and $916 million during the three and six months ended October 1, 2021, respectively. No other individual country accounted for more than 10% of revenues.
The table below represents cash, cash equivalents and short-term investments held in the U.S. and internationally in various foreign subsidiaries.
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| U.S. | $ | $ | |||||||||
| International | |||||||||||
| Total cash, cash equivalents and short-term investments | $ | $ | |||||||||
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The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic area, based on the physical location of the asset, at the end of each period presented.
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| U.S. | $ | $ | |||||||||
| Ireland | |||||||||||
| Czech Republic | |||||||||||
| Germany | |||||||||||
Other countries (1) | |||||||||||
| Total property and equipment, net | $ | $ | |||||||||
(1) No other individual country represented more than 10% of the respective totals.
Our operating lease assets by geographic area, based on the physical location of the asset, at the end of each period presented, are as follows:
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| U.S. | $ | $ | |||||||||
| Czech Republic | |||||||||||
Other countries (1) | |||||||||||
| Total operating lease assets | $ | $ | |||||||||
(1) No other individual country represented more than 10% of the respective totals.
Significant customers
No customer accounted for 10% or more of our net revenues during the six months ended September 30, 2022 and October 1, 2021. Customers which are distributors that accounted for over 10% of our total accounts receivable were as follows:
| September 30, 2022 | April 1, 2022 | ||||||||||
| Customer A | % | % | |||||||||
| Customer B | % | % | |||||||||
Note 18. Commitments and Contingencies
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees, and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements, and we have not accrued any material liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.
In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or Broadcom and/or their related subsidiaries. As a condition to consenting to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC, Broadcom, or their related subsidiaries’ breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general, it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses, and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.
We provide limited product warranties, and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Such indemnification provisions may not be subject to maximum loss clauses. Historically,
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payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.
Litigation contingencies
Trustees of the University of Columbia in the City of New York v. NortonLifeLock
As previously disclosed in our public filings, on May 2, 2022, a jury returned its verdict in a patent infringement case filed in 2013 by the Trustees of Columbia University in the City of New York (Columbia) in the U.S. District Court for the Eastern District of Virginia. Columbia originally brought suit alleging infringement of six patents owned by the university. We won a favorable claim construction order on all six patents, and the claim construction was upheld by the Federal Circuit in 2016 on all but U.S. Patent Nos. 8,601,322 and 8,074,115. We also sought inter partes review by the Patent Trial and Appeal Board of the claims of the ‘322 and ‘115 Patents and all but two claims of the ‘322 Patent and three claims of the ‘115 Patent were invalidated. The remaining claims of the ‘322 and ‘115 Patents were the only claims that remained in suit at trial.
The jury found that our Norton Security products and Symantec Endpoint Protection products (the latter of which were sold by us to Broadcom as part of an Asset Purchase Agreement dated November 4, 2019) willfully infringe the ‘322 and ‘115 Patents through the use of SONAR/BASH behavioral protection technology. The jury awarded damages in the amount of $185 million. Columbia did not seek injunctive relief against us. We intend to cease use of the technology found by the jury to infringe. The jury also found that we did not fraudulently conceal its prosecution of U.S. Patent No. 8,549,643 but did find that two Columbia professors were coinventors of this patent. No damages were awarded related to this patent.
A formal judgment has not yet been entered in the case. Post-verdict motions have been filed, and we intend to file an appeal challenging the verdict.
At this time, our current estimate of the low end of the range of probable estimated losses from this matter is approximately $233 million, reflecting the jury award and prejudgment interest, which we have accrued. The jury’s verdict may be enhanced and, should it be upheld on appeal, could ultimately result in the payment of somewhere between one and three times the jury’s verdict, plus interest and attorneys’ fees. There is a reasonable possibility that a loss may be incurred in excess of our accrual for this matter; however, such loss cannot be reasonably estimated.
Securities Class Action and Derivative Litigation
Securities class action lawsuits, which have since been consolidated, were filed in May 2018 against us and certain of our former officers, in the U.S. District Court for the Northern District of California. The lead plaintiff’s consolidated amended complaint alleged that, during a purported class period of May 11, 2017 to August 2, 2018, defendants made false and misleading statements in violation of Sections 10(b) and 20(a), and that certain individuals violated Section 20A, of the Securities Exchange Act of 1934, as amended (the Exchange Act). Defendants filed motions to dismiss, which the Court granted in an order dated June 14, 2019. Pursuant to that order, plaintiff filed a motion seeking leave to amend and a proposed first amended complaint on July 11, 2019. The Court granted the motion in part on October 2, 2019, and the first amended complaint was filed on October 11, 2019. The Court’s order dismissed certain claims against certain of our former officers. Defendants filed answers on November 7, 2019. On April 20, 2021, to resolve an alleged conflict of interest raised with respect to the lead plaintiff and its counsel, the Court ordered a second Class Notice disclosing the circumstances of the alleged conflict and providing a further period for class members to opt out, which closed on July 2, 2021. The initial class opt out period closed on August 25, 2020.
On May 24, 2021, the parties reached a proposed settlement and release of all claims in the class action, for $70 million, and on June 8, 2021, the parties executed a Stipulation and Agreement of Settlement, subject to Court approval and exclusive of any claims that may be brought by shareholders who opted out of the class action. Of the $70 million, $67.1 million was covered under the applicable insurance policy with the remainder to be paid by us. The Court approved the settlement on February 12, 2022.
On November 22, 2021, investment funds managed by Orbis Investment Management Ltd. which previously opted out of the securities class action, filed suit under the Exchange Act of 1934, the Arizona Securities Act, the Arizona Consumer Fraud Act and certain common law causes of action to recover alleged damages for losses incurred by the funds for their purchases or acquisitions of our common stock during the class period. In the fourth quarter of fiscal 2022, we made an immaterial settlement offer in this matter, for which we have accrued. Our Motion to Dismiss is now pending.
Purported shareholder derivative lawsuits have been filed against us and certain of our former officers and current and former directors in the U.S. District Courts for the District of Delaware and the Northern District of California, Delaware Chancery Court, and Delaware Superior Court, arising generally out of the same facts and circumstances as alleged in the securities class action and alleging claims for breach of fiduciary duty and related claims; these lawsuits include an action brought derivatively on behalf of our 2008 Employee Stock Purchase Plan. No specific amount of damages has been alleged in these lawsuits. We have also received demands from purported stockholders to inspect corporate books and records under Delaware law. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of the derivative lawsuits or estimate the range of any potential loss.
We will continue to incur legal fees in connection with these pending cases and demands, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense. If any of the lawsuits are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations, and cash flows.
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GSA
During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s (DOJ) Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (GSA) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices.
As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $222 million from the period beginning January 2007 and ending September 2012. We fully cooperated with the government throughout its investigation, and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct government sales under the GSA Schedule contract was approximately $145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government also indicated they would pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule contracts, which could significantly increase our potential damages exposure.
In 2012, a sealed civil lawsuit was filed against us related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the DOJ filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the DOJ and the relator on behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts. On June 6, 2019, we filed a motion seeking summary judgment on all claims asserted by all plaintiffs, and the plaintiffs filed a motion for partial summary judgment on elements of liability on their claims. On October 21, 2019, the DOJ moved for a Prejudgment Writ of Sequestration for us to set aside $1,090 million to pay a judgment, should the United States prevail in this litigation, under the Federal Debt Collection Procedures Act. The Writ was sought in response to our announcement of our plans to distribute the after-tax proceeds of the sale of the Symantec enterprise business to Broadcom to our shareholders via a special dividend. The Court denied the Writ on December 12, 2019, on the basis of the government’s failure to establish the “probable validity” of the debt, the amount sought to be sequestered, and our available cash, cash equivalents and short-term investments. The Court permitted the DOJ limited discovery of facts relevant to our financial state and financial projections and the option to renew its motion if appropriate and supported by the analysis of its own financial expert. That discovery period has now closed. On March 30, 2020, the Court issued an Order granting in part and denying in part our motion for summary judgment and granting in part and denying in part the United States’ motion for partial summary judgment. On September 30, 2020, we filed a Motion for Reconsideration of certain rulings in the Court’s March 30 Summary Judgment Order. A second Motion for Reconsideration of certain rulings in the Summary Judgement Order based on significant change in the law was filed on July 23, 2021. Both Motions for Reconsideration were denied. Court ordered mediations in July 2020 and February 2021 were not successful.
On March 23, 2021, Plaintiffs withdrew their demand for a jury trial and we consented to proceed with a bench trial, which concluded on March 24, 2022. The Court has not yet issued its judgment and post-trial motions are pending.
On May 13, 2021, we reached a settlement in principle with the State of Florida to resolve all claims it asserted in the litigation for $0.5 million, plus the relator’s statutory attorney’s fees with respect to the State of Florida’s claims. On February 28, 2022, we reached a settlement in principle with the State of New York and the relator to resolve all of the New York claims asserted in the litigation for $5 million.
At this time, our current estimate of the low end of the range of probable estimated losses from this matter is $50 million, inclusive of the settlement with the states of Florida and New York, which we have accrued. It is possible that the litigation could lead to claims or findings of violations of the False Claims Act and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties. There is a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter; however, such loss cannot be reasonably estimated.
Jumpshot Matters
At the end of 2019, Avast came under media scrutiny for provision of Avast customer data to its data analytics subsidiary Jumpshot Inc. Jumpshot was a subsidiary of Avast with its own management team and technical experts. Avast announced the decision to terminate its provision of data to, and wind down, Jumpshot on January 30, 2020. As Avast has previously disclosed, it has been in communication with certain regulators and authorities prior to completion of the Merger, and we will continue cooperating fully in respect of all regulatory enquiries.
On December 23, 2019, the United States Federal Trade Commission (FTC) issued a Civil Investigative Demand (CID) to Avast seeking documents and information related to its privacy practices, including Jumpshot's past use of consumer information that was provided to it by Avast. Avast responded cooperatively to the CID and related follow-up requests from the FTC. On October 29, 2021, staff at the FTC sent Avast a draft complaint and proposed settlement order. We have been engaged in ongoing negotiations with the FTC staff regarding the scope and terms of the proposed settlement. Any negotiated settlement with the FTC, or absent settlement, any litigation or other legal proceeding between us and the FTC could result in material monetary remedies and/or compliance requirements that impose significant and material cost and resource burdens on us, and may impact our ability to use data in the future. There can be no assurance that we will be successful in negotiating a favorable
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settlement or in litigation. Any remedies or compliance requirements could adversely affect our ability to operate our business or have a materially adverse impact on our financial results. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this investigation or estimate the range of any potential loss. On February 27, 2020, the Czech Office for Personal Data Protection (the Czech DPA) initiated offense proceedings concerning Avast`s practices with respect to Jumpshot, which remain ongoing and we continue to evaluate our options including an appeal of any findings and assessments.
In addition, we received a letter and notification before action from Stichting CUIC – Privacy Foundation for Collective Redress, a Dutch foundation (the Foundation). The Foundation has asserted it represents the interests of Avast customers in the Netherlands whose data was provided to Jumpshot and that by doing so Avast violated the requirements of the GDPR and other provisions in Dutch and European Union privacy and consumer law entitling those customers to damages and other compensation, all of which we dispute. No specific amount of damages has been alleged and to date, no action has been filed. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this notification before action or estimate the range of any potential loss.
The outcome of the regulatory proceedings, government enforcement actions and litigation is difficult to predict, and the cost to defend, settle or otherwise resolve these matters may be significant. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of large or indeterminate amounts or seek to impose sanctions, including significant monetary penalties, as well as equitable relief. The monetary and other impact of these litigations, proceedings or actions may remain unknown for substantial periods of time. Further, an unfavorable resolution of litigations, proceedings or actions could have a material adverse effect on our business, financial condition, and results of operations and cash flows. The amount of time that will be required to resolve these matters is unpredictable, and these matters may divert management’s attention from the day-to-day operations of our business. Any future investigations or additional lawsuits may also adversely affect our business, financial condition, results of operations and cash flows.
Other
We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements and factors that may affect future results
The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act. Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” and similar expressions. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the consummation of or anticipated impacts of acquisitions (including the recent Merger with Avast and related financing), divestitures, restructurings, stock repurchases, and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our solutions; anticipated tax rates, benefits and expenses; the impact of the COVID-19 pandemic on our operations and financial performance; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including economic recessions, inflationary pressures and those other factors that we discuss in Part II Item 1A, of this Quarterly Report on Form 10-Q. We encourage you to read that section carefully.
OVERVIEW
Gen is a global, leading provider of consumer Cyber Safety solutions, empowering over 500 million users in more than 150 countries. Our portfolio provides protection across three Cyber Security categories: security, identity protection and online privacy. We help customers protect their computer and mobile devices from online threats, safeguard their identity and personal information and strengthen online privacy capabilities and functionalities.
Merger with Avast
On September 12, 2022, we completed the Merger with Avast with the issuance of 94,201,233 shares of our common stock to Avast shareholders and cash consideration of $6,913 million, which includes repayment of Avast’s outstanding debt. As a result, we have changed our corporate name to Gen Digital Inc. and have become dual headquartered in Tempe, Arizona and Prague, Czech Republic. Avast is a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protect and enhance users’ online experiences. Combining Avast’s strength in privacy and our strength in identity will create a broad and complementary consumer product portfolio beyond core security and towards adjacent trust-based solutions. This Merger will provide greater geographic diversification and access to a larger user base and will accelerate the transformation of global consumer cyber safety. All financial information related to Avast that is discussed below in key financial metrics, results of operations and liquidity and capital resources is inclusive as of the Closing Date.
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Fiscal calendar
We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three and six months ended September 30, 2022 and October 1, 2021 each consisted of 13 and 26 weeks, respectively. Our 2023 fiscal year consists of 52 weeks and ends on March 31, 2023.
Key financial metrics
The following tables provide our key financial metrics for the periods presented:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions, except for per share amounts) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Net revenues | $ | 748 | $ | 692 | $ | 1,455 | $ | 1,378 | |||||||||||||||
| Operating income (loss) | $ | 241 | $ | 287 | $ | 502 | $ | 574 | |||||||||||||||
| Net income (loss) | $ | 69 | $ | 333 | $ | 269 | $ | 514 | |||||||||||||||
| Net income (loss) per share - diluted | $ | 0.12 | $ | 0.56 | $ | 0.45 | $ | 0.87 | |||||||||||||||
| Net cash provided by (used in) operating activities | $ | (88) | $ | 60 | $ | 127 | $ | 318 | |||||||||||||||
| As Of | |||||||||||
| (In millions) | September 30, 2022 | April 1, 2022 | |||||||||
| Cash, cash equivalents and short-term investments | $ | 1,095 | $ | 1,891 | |||||||
| Contract liabilities | $ | 1,684 | $ | 1,306 | |||||||
Below are our financial highlights for the second quarter of fiscal 2023, compared to the corresponding period in the prior year:
•Net revenues increased $56 million, due to revenue attributable to Avast and higher sales in our identity and information protection products.
•Operating income decreased $46 million, primarily due to the increase in transaction and integration costs related to the Merger. We anticipate an initial increase in our operating costs, which we expect to decrease as we realize synergies as a combined company.
•Net income decreased $264 million and Net income per share - diluted decreased 0.44, primarily due to the increases in operating costs, non-operating other expense and income tax expense.
Below are our financial highlights for the first six months of fiscal 2023, compared to the corresponding period in the prior year:
•Net revenues increased $77 million, due to revenue attributable to Avast and higher sales in our identity and information protection products.
•Operating income decreased $72 million, primarily due to the increase in transaction and integration costs related to the Merger. We anticipate an initial increase in our operating costs, which we expect to decrease as we realize synergies as a combined company.
•Net income decreased $245 million and Net income per share - diluted decreased $0.42, primarily due to the increases in operating costs, non-operating other expense and income tax expense.
•Cash, cash equivalents and short-term investments decreased by $796 million compared to April 1, 2022, primarily due to the completion of the Merger and repurchases of our common stock, offset by proceeds from the issuance of the senior credit facilities and the two senior unsecured notes.
•Contract liabilities increased $378 million compared to April 1, 2022, primarily due to contract liabilities assumed as part of the Merger, partially offset by seasonally lower billings than recognized revenue during the period.
The Merger has altered the size and scope of our operations, impacting our assets, liabilities, obligations, capital requirements and performance measures. We expect the key financial metrics and results of operations of the combined company to be materially different than the trends experienced during the three and six months ended September 30, 2022. As a combined company, we expect to achieve synergies, rapidly launch a broad and innovative product portfolio, expand into new and diversified sales channels and enhance customer experience and retention. Refer to Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information about this business combination.
COVID-19 UPDATE
The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors
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on our employees, customers, partners and third-party service providers. For more information on the risks associated with the COVID-19 pandemic, please see “Risk Factors” in Part II, Item 1A below.
RUSSIA-UKRAINE CONFLICT
Due to the ongoing conflict between Russia and Ukraine and the related sanctions and other penalties imposed on Russia and Belarus by the United States, the European Union, the United Kingdom and other countries, we suspended our business operations in Russia commencing in the fourth quarter of fiscal 2022. We do not have operations or employees in Ukraine. The suspension of our business operations in Russia has not had a material impact on our business, financial condition, or results of operations as our operations in Russia and our sales to customers in Russia and Belarus do not constitute a material portion of our business. Further, unless and until the U.S. government lifts its sanctions on Russia and Belarus, which are restricting the export of a broad range of U.S. technologies to those countries, we will continue to be unable to ship such technologies or provide support to anyone in Russia or Belarus. We are actively monitoring the Russia-Ukraine conflict and the potential impact it could have on our business, employees and our ability to sell our products and services to our customers. See Part II, Item 1A, Risk Factors for further discussion of the possible impact of the Russia-Ukraine Conflict on our business, operations and financial condition.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows.
Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022. There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three and six months ended September 30, 2022.
RESULTS OF OPERATIONS
The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | ||||||||||||||||||||
| Net revenues | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Cost of revenues | 16 | 14 | 15 | 15 | |||||||||||||||||||
| Gross profit | 84 | 86 | 85 | 85 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 22 | 22 | 22 | 22 | |||||||||||||||||||
| Research and development | 10 | 10 | 9 | 10 | |||||||||||||||||||
| General and administrative | 15 | 9 | 15 | 8 | |||||||||||||||||||
| Amortization of intangible assets | 4 | 3 | 3 | 3 | |||||||||||||||||||
| Restructuring and other costs | 1 | 1 | 1 | 1 | |||||||||||||||||||
| Total operating expenses | 52 | 44 | 50 | 44 | |||||||||||||||||||
| Operating income (loss) | 32 | 41 | 35 | 42 | |||||||||||||||||||
| Interest expense | (6) | (4) | (5) | (5) | |||||||||||||||||||
| Other income (expense), net | — | 26 | — | 13 | |||||||||||||||||||
| Income (loss) before income taxes | 26 | 63 | 29 | 50 | |||||||||||||||||||
| Income tax expense (benefit) | 17 | 14 | 11 | 12 | |||||||||||||||||||
| Net income (loss) | 9 | % | 48 | % | 18 | % | 37 | % | |||||||||||||||
Note: Percentages may not add due to rounding.
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Net revenues
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| (In millions, except for percentages) | September 30, 2022 | October 1, 2021 | Change in % | September 30, 2022 | October 1, 2021 | Change in % | |||||||||||||||||||||||||||||
| Net revenues | $ | 748 | $ | 692 | 8 | % | $ | 1,455 | $ | 1,378 | 6 | % | |||||||||||||||||||||||
Three Months Ended September 30, 2022 Compared with Three Months Ended October 1, 2021
Net revenues increased $56 million, primarily due to $48 million of revenue attributable to Avast and an increase in sales of our identity and information protection products. Net revenues were impacted by $31 million of foreign exchange headwinds, primarily in our consumer security solutions.
Six Months Ended September 30, 2022 Compared with Six Months Ended October 1, 2021
Net revenues increased $77 million, primarily due to $48 million of revenue attributable to Avast and an increase in sales of our identity and information protection products. Net revenues were impacted by $58 million of foreign exchange headwinds, primarily in our consumer security solutions.
Performance Metrics
We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies.
The following table summarizes supplemental key performance metrics:
Three Months Ended (2) | |||||||||||
| (In millions, except for per user amounts) | September 30, 2022 (3) | October 1, 2021 | |||||||||
Direct customer revenues (1) | $ | 660 | $ | 619 | |||||||
| Partner revenues | $ | 74 | $ | 64 | |||||||
| Total Cyber Safety revenues | $ | 734 | $ | 683 | |||||||
| Legacy revenues | $ | 14 | $ | 12 | |||||||
Direct customer count (at quarter end) | 38.6 | 24.0 | |||||||||
| Direct average revenue per user (ARPU) | $ | 6.98 | $ | 8.63 | |||||||
(1) Direct customer revenues during the three months ended October 1, 2021 excludes a $3 million reduction of revenue, from contract liability purchase accounting adjustments. We believe that eliminating the impact of these adjustments improves the comparability of revenues between periods. In addition, although the adjustment amounts will never be recognized in our GAAP financial statements, we do not expect the acquisitions to affect the future renewal rates of revenues excluded by the adjustments.
(2) From time to time, changes in our product hierarchy cause changes to the revenue channels above. When changes occur, we recast historical amounts to match the current revenue channels. Direct revenues currently includes Mobile App Store customers, and legacy revenues includes revenues from products or solutions that are no longer in operations in exited markets, have been discontinued or identified to be discontinued, or remain in maintenance mode as a result of integration and product portfolio decisions. As such, the changes to historical revenue amounts and the other performance metrics, including direct customer count and ARPU, are reflected for all periods presented above.
(3) The performance metrics for the three months ended September 30, 2022 include the revenues earned and customers acquired through our Merger with Avast. ARPU is based on average customer count and assumes full quarter of revenue for both companies.
We define direct customer revenues as revenues from sales of our consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with the Company at the end of the reported period. We exclude users on free trials and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscription directly with us, or sign up for a paid membership through our web store or third party app stores.
Average direct customer count presents the average of the total number of direct customers at the beginning and end of the fiscal quarter.
ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base.
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Net revenues by geographical region
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | ||||||||||||||||||||
| Americas | 71 | % | 70 | % | 71 | % | 70 | % | |||||||||||||||
| EMEA | 18 | % | 18 | % | 18 | % | 18 | % | |||||||||||||||
| APJ | 11 | % | 12 | % | 11 | % | 12 | % | |||||||||||||||
The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan.
Percentage of revenue by geographic region in the three and six months ended September 30, 2022 remained consistent with the corresponding period in the prior year.
Cost of revenues
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| (In millions, except for percentages) | September 30, 2022 | October 1, 2021 | Change in % | September 30, 2022 | October 1, 2021 | Change in % | |||||||||||||||||||||||||||||
| Cost of revenues | $ | 119 | $ | 100 | 19 | % | $ | 221 | $ | 202 | 9 | % | |||||||||||||||||||||||
Three Months Ended September 30, 2022 Compared with Three Months Ended October 1, 2021
Our cost of revenues increased $19 million, primarily due to higher revenue share costs and payment processing fees associated with year-over-year business growth and costs incurred by Avast subsequent to the completion of the Merger.
Six Months Ended September 30, 2022 Compared with Six Months Ended October 1, 2021
Our cost of revenues increased $19 million, primarily due to higher revenue share costs and payment processing fees associated with year-over-year business growth and costs incurred by Avast subsequent to the completion of the Merger.
Operating expenses
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| (In millions, except for percentages) | September 30, 2022 | October 1, 2021 | Change in % | September 30, 2022 | October 1, 2021 | Change in % | |||||||||||||||||||||||||||||
| Sales and marketing | $ | 167 | $ | 150 | 11 | % | $ | 323 | $ | 306 | 6 | % | |||||||||||||||||||||||
| Research and development | 73 | 66 | 11 | % | 134 | 134 | 0 | % | |||||||||||||||||||||||||||
| General and administrative | 110 | 63 | 75 | % | 214 | 108 | 98 | % | |||||||||||||||||||||||||||
| Amortization of intangible assets | 29 | 21 | 38 | % | 50 | 42 | 19 | % | |||||||||||||||||||||||||||
| Restructuring and other costs | 9 | 5 | 80 | % | 11 | 12 | (8) | % | |||||||||||||||||||||||||||
| Total operating expenses | $ | 388 | $ | 305 | 27 | % | $ | 732 | $ | 602 | 22 | % | |||||||||||||||||||||||
Three Months Ended September 30, 2022 Compared with Three Months Ended October 1, 2021
Sales and marketing expense increased $17 million, primarily due an increase in stock-based compensation charges and the additional expenses incurred by Avast subsequent to the completion of the Merger.
General and administrative expense increased $47 million, primarily due to transaction and integration costs incurred in connection with the Merger, which consisted of legal and professional services and other regulatory closing fees.
Research and development, amortization of intangible assets and restructuring and other costs remained relatively flat.
Six Months Ended September 30, 2022 Compared with Six Months Ended October 1, 2021
Sales and marketing expense increased $17 million, primarily due an increase in stock-based compensation charges and the additional expenses incurred by Avast subsequent to the completion of the Merger.
General and administrative expense increased $106 million, primarily due to transaction and integration costs incurred in connection with the Merger and a $54 million legal accrual, of which $47 million was prejudgment interest, relating to an ongoing patent infringement lawsuit and the corresponding legal fees.
Research and development, amortization of intangible assets and restructuring and other costs remained relatively flat.
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Non-operating income (expense), net
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Interest expense | $ | (48) | $ | (31) | $ | (79) | $ | (63) | |||||||||||||||
| Interest income | 3 | — | 5 | — | |||||||||||||||||||
| Foreign exchange gain (loss) | 2 | 1 | 1 | 2 | |||||||||||||||||||
| Gain (loss) on early extinguishment of debt | (9) | — | (9) | (5) | |||||||||||||||||||
| Gain on sale of properties | — | 175 | — | 175 | |||||||||||||||||||
| Other | 6 | 1 | 4 | 2 | |||||||||||||||||||
| Total non-operating income (expense), net | $ | (46) | $ | 146 | $ | (78) | $ | 111 | |||||||||||||||
Three Months Ended September 30, 2022 Compared with Three Months Ended October 1, 2021
Non-operating income (expense), net, increased by $192 million in expense, primarily due to the $175 million gain on sale of certain land and buildings in Mountain View, California during the second quarter of fiscal 2022 and an increase in interest expense during the second quarter of fiscal 2023 associated with our new senior credit facilities and two unsecured senior notes.
Six Months Ended September 30, 2022 Compared with Six Months Ended October 1, 2021
Non-operating income (expense), net, increased by $189 million in expense, primarily due to the absence of the $175 million gain on sale of certain land and buildings in Mountain View, California during the second quarter of fiscal 2022 and an increase in interest expense during the second quarter of fiscal 2023 associated with our new senior credit facilities and two unsecured senior notes.
Provision for income taxes
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In millions, except for percentages) | September 30, 2022 | October 1, 2021 | September 30, 2022 | October 1, 2021 | |||||||||||||||||||
| Income (loss) before income taxes | $ | 195 | $ | 433 | $ | 424 | $ | 685 | |||||||||||||||
| Income tax expense (benefit) | $ | 126 | $ | 100 | $ | 155 | $ | 171 | |||||||||||||||
| Effective tax rate | 65 | % | 23 | % | 37 | % | 25 | % | |||||||||||||||
Our effective tax rate for income for the three and six months ended September 30, 2022 differs from the federal statutory income tax rate primarily due to state taxes and the U.S. taxation on foreign earnings, and certain discrete items this quarter including the tax impacts of internal restructuring, deductibility of transaction costs from the Merger, and the limitations of foreign taxes due to the increase of interest expense.
Our effective tax rate for the three and six months ended October 1, 2021 differs from the federal statutory income tax rate primarily due to state taxes and U.S. taxation on foreign earnings.
We are a multinational company dual headquartered in the U.S. and Czech Republic, subject to tax in multiple U.S. and international tax jurisdictions. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Our results can also be impacted by the costs incurred and the potential deductibility of the expenses. Any change in our mix of earnings is dependent upon many factors and therefore, is difficult to predict.
In connection with the Merger, we established $345 million of net deferred tax liabilities primarily related to the excess of book basis over the tax basis of acquired identified intangible assets. The net deferred tax liabilities are based upon certain assumptions underlying our preliminary purchase price allocation. Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes may be required.
The timing of the resolution of income tax examinations is highly uncertain and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months.
We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.
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LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS
Liquidity and Capital Resources
We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs.
Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers. Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock.
Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations and amounts available under our Revolving Facility, will be sufficient to meet our working capital needs, support on-going business activities and finance the expected synergy costs related to the Merger through at least the next 12 months and to meet our known long-term contractual obligations. We are currently not aware of any trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months. However, our future liquidity and capital requirements may vary materially from those as of September 30, 2022 depending on several factors, including, but not limited to, economic conditions; political climate; the expansion of sales and marketing activities; the costs to acquire or invest in businesses; and the risks and uncertainties discussed in “Risk Factors” in Part II, Item 1A below.
Cash flows
The following summarizes our cash flow activities:
| Six Months Ended | |||||||||||
| (In millions) | September 30, 2022 | October 1, 2021 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 127 | $ | 318 | |||||||
| Investing activities | $ | (6,546) | $ | 313 | |||||||
| Financing activities | $ | 5,649 | $ | (33) | |||||||
See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information.
Cash from operating activities
Our cash flows provided by operating activities decreased by $191 million, primarily due to an increase of cash payments during the first six months of fiscal 2023, including payments of federal income taxes, debt interest, and transaction costs and other regulatory closing fees in connection with the Merger, all of which was partially offset by collections of receivables.
Cash from investing activities
Our cash flows used in investing activities increased by $6,859 million, primarily due to the $6,550 million total cash consideration paid for the Avast Merger, net of $363 million cash acquired and $2,141 million non-cash consideration transferred, as well as the absence of $355 million in proceeds from the sale of certain Mountain View, California properties during the first six months of fiscal 2022.
Cash from financing activities
Our cash flows provided by financing activities increased $5,682 million, primarily due to proceeds from the issuance of debt, partially offset by repayment of debt and the continuation of our stock repurchase program. The first six months of fiscal 2023 reflects $8,954 million of aggregate proceeds: $3,910 million from Term Facility A, $3,690 million from Term Facility B, $900 million from the 6.75% Senior Notes and $600 million from the 7.125% Senior Notes, net of $146 million of debt issuance costs. This was partially offset by the $400 million repayment of our 3.95% Senior Notes, $1,010 million repayment of our Initial Draw Term Loan, $703 million repayment of our Delayed Draw Term Loan and the settlement of the $525 million principal and $100 million equity rights associated with our New 2.0% Convertible Notes. In contrast, the first three months of fiscal 2022 reflects $512 million of proceeds from the issuance of our Initial Term Loan, partially offset by the $364 million settlement of our New 2.5% Convertible Notes.
Cash and cash equivalents
As of September 30, 2022, we had cash, cash equivalents and short-term investments of $1,095 million, of which $451 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however, these distributions may be subject to applicable state or foreign taxes.
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Debt
On June 1, 2022, we fully repaid the principal and accrued interest under the 3.95% Senior Notes due June 2022, which had an aggregate principal amount outstanding of $400 million. In addition, we paid $7 million of accrued and unpaid interest through the redemption date.
On August 15, 2022, we settled the $525 million principal and conversion rights of our New 2.0% Convertible Notes in cash. The aggregate settlement amount of $630 million was based on $20.41 per underlying share into which the New 2.0% Convertible Notes were convertible. In addition, we paid $5 million of accrued and unpaid interest through the date of settlement.
On September 12, 2022, upon close of the Merger with Avast, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close. We drew down the aggregate principal amounts of the Term A Facility and Term B Facility to finance the cash consideration payable for the transaction and to fully repay the outstanding principal of $1,703 million and accrued and unpaid interest of $3 million under the Initial Term Loan and Delay Draw Term Loan from the existing credit facilities. The Credit Agreement replaced the existing credit facilities upon the close of the transaction. During three and six months ended September 30, 2022, we paid an aggregate $145 million in debt issuance costs associated with the senior credit facilities.
On September 19, 2022, we issued two series of senior notes, consisting of 6.75% Senior Notes due 2027 and 7.125% Senior Notes due 2030, for an aggregate principal of $1,500 million. They are senior unsecured obligations that rank equally in right of payment with all of our existing and future senior, unsecured, unsubordinated obligations and may be redeemed at any time, subject to the make-whole provisions contained in the applicable indenture relating to such series of notes. Interest on these series of notes is payable semi-annually in arrears on March 31 and September 30 for both the 6.75% Senior Notes and 7.125% Senior Notes, commencing on March 31, 2023. During three and six months ended September 30, 2022, we paid an aggregate $14 million in debt issuance costs associated with the two senior notes.
In connection with the financing provided for Term B Facility, we incurred customary ticking fees with respect to the undrawn commitments that began accruing on the 61st day post-syndication. The ticking fees were accrued at the per annum rate of (i) 50% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans for 61-90 days from January 28, 2022, the syndication date, and (ii) 100% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans on and after 91 days from the syndication date. Ticking fees were payable on the closing date of the transaction. During three and six months ended September 30, 2022, we paid $31 million in ticking fees.
Share repurchases
During the three months ended September 30, 2022, we executed repurchases of 17 million shares of our common stock under our existing share repurchase program for an aggregate amount of $404 million.
Merger with Avast
On September 12, 2022, we completed the Merger with Avast for a total cash consideration of approximately $6,550 million, net $363 million of cash acquired and $2,141 million non-cash consideration transferred. The cash consideration included repayment of outstanding Avast debt totaling $942 million. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for further information about this business combination.
Material Cash Requirements
Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers.
Debt instruments
As of September 30, 2022, our total outstanding principal amount of indebtedness is summarized as follows. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our debt.
| (In millions) | September 30, 2022 | ||||
| Term Loans | $ | 7,600 | |||
| Senior Notes | 2,600 | ||||
| Mortgage Loans | 7 | ||||
| Total debt | $ | 10,207 | |||
Our Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios. As of September 30, 2022, we were in compliance with all debt covenants. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding financial ratios and debt covenant compliance.
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Dividends
On November 8, 2022, we announced a cash dividend of $0.125 per share of common stock to be paid in December 2022. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.
Share repurchase program
Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and through accelerated stock repurchase transactions. As of September 30, 2022, the remaining balance of our stock repurchase authorization was $1,370 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and other investment opportunities.
Subsequent to September 30, 2022, we executed repurchases of $14 million shares of our common stock for an aggregate amount of $308 million. As a result, we have $1,062 million remaining under our existing share repurchase program.
Restructuring
In connection with the Merger, our Board of Directors approved a restructuring plan (the September 2022 Plan) to realize cost savings and operational synergies, which became effective upon the close of the Merger on September 12, 2022. We have incurred or expect to incur cash expenditures for severance and termination benefits, contract terminations, facilities closures, and the sale of underutilized facilities. As of September 30, 2022, we expect that we will incur total costs up to $280 million, with $180 million and $100 million estimated to be incurred within the first and second full years, respectively, following the completion of the Merger. These actions are expected to be completed by fiscal 2024.
Contractual obligations
The following is a schedule of our significant contractual obligations and commitments as of September 30, 2022, including those associated with our Merger with Avast. The expected timing and amount of short-term and long-term payments of the obligations in the following table is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for certain obligations.
| Short-Term Payments | Long-Term Payments | Total | |||||||||||||||
| (In millions) | |||||||||||||||||
| Contractual obligations: | |||||||||||||||||
Debt (principal payments) (1) | $ | 175 | $ | 10,032 | $ | 10,207 | |||||||||||
Interest payments on debt (2) | 588 | 2,573 | 3,161 | ||||||||||||||
Purchase obligations (3) | 316 | 122 | 438 | ||||||||||||||
Deemed repatriation taxes (4) | 128 | 309 | 437 | ||||||||||||||
Operating leases (5) | 26 | 43 | 69 | ||||||||||||||
| Total | $ | 1,233 | $ | 13,079 | $ | 14,312 | |||||||||||
(1)As of September 30, 2022, our total outstanding principal amount of indebtedness is comprised of $7,600 million in Term Loans, $2,600 million in Senior Notes and $7 million in Mortgage Loans. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information about our debt and debt covenants.
The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including a covenant that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns). As of September 30, 2022, we were in compliance with all debt covenants.
(2)Interest payments calculated based on the contractual terms of the related debt instruments. Interest on variable rate debt was calculated using the interest rate in effect as of September 30, 2022. See Note 10 of the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on the Term Loans and Senior Notes.
(3)Agreements for purchases of goods or services, with terms that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These amounts include agreements to purchase goods or services that have cancellation provisions requiring little or no payment. The amounts under such contracts are included because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
(4)Transition tax payments on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act, which may be paid through July 2025.
(5)Payments for various non-cancelable operating lease agreements that expire on various dates through fiscal 2028. The amounts in the table above exclude expected sublease income. See Note 9 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on leases.
Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of September 30, 2022, we are unable to make reasonably reliable estimates of the period of cash settlement
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with the respective taxing authorities. Therefore, $595 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks related to fluctuations in foreign currency exchange and interest rates. We may use derivative financial instruments to reduce the volatility of earnings and cash flow that may result from adverse economic conditions and events or changes in foreign currency exchange and interest rates.
Interest rate risk
As of September 30, 2022, we had $2,600 million in aggregate principal amount of fixed-rate Senior Notes outstanding, with a carrying amount and a fair value of $2,496 million, based on Level 2 inputs. The fair value of these notes fluctuates when interest rates change. Since these notes bear interest at fixed rates, financial statement risk associated with changes in interest rates is limited to future refinancing of current debt obligations. If these notes were refinanced at higher interest rates prior to maturity, our total interest payments could increase by a material amount; however, this risk is mitigated by our strong cash position and expected future cash generated from operations, which will be sufficient to satisfy this increase in obligation.
As of September 30, 2022, we also had $7,600 million outstanding debt with variable interest rates based on the Secured Overnight Financing Rate (SOFR). A hypothetical 1% change in SOFR would have resulted in a $76 million increase in interest expense on an annualized basis.
In addition, we have a $1,500 million revolving credit facility that if drawn bears interest at a variable rate based on SOFR and would be subject to the same risks associated with adverse changes in SOFR.
Foreign currency exchange rate risk
We conduct business in numerous currencies through our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues or incur costs in currencies other than the entity’s functional currency, primarily in Euro, Japanese Yen, British Pound, Australian Dollar and Canadian Dollar. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services provided. Our cash flow, results of operations and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities. As a result, we are exposed to foreign exchange gains or losses which impacts our operating results.
Growth in our international operations will incrementally increase our exposure to foreign currency fluctuations as well as volatile market conditions, including the weakening of foreign currencies relative to USD, which has and may in the future negatively affect our revenue expressed in USD.
We manage these exposures and reduce the potential effects of currency fluctuations on our results of operations through monthly foreign exchange forward contracts on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. The gains and losses on these foreign exchange contracts are recorded in Other income (expense), net in the Consolidated Statements of Operations.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. As our international operations grow, we will continue to reassess our approach to managing risks related to fluctuations in foreign currency.
Additional information related to our debt and derivative instruments is included in Note 10 and Note 11, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our management (with the participation of our Chief Executive Officer and Chief Financial Officer) has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
(b) Changes in Internal Control over Financial Reporting
During the second quarter of fiscal 2023, except for the Merger with Avast discussed below, there were no changes in our internal controls over financial reporting or in other factors, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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On September 12, 2022, we completed the Merger with Avast and are currently integrating Avast into our operations and internal control processes. Pursuant to the Securities and Exchange Commission's guidance that an assessment of a recently acquired business may be omitted from the scope of the evaluation for a period up to one year following the Merger, the scope of our assessment of our internal controls over financial reporting is ongoing. We are currently assessing the control environment related to our Merger with Avast and have designed and implemented new controls as needed.
(c) Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 18 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q, which information is incorporated herein by reference.
Item 1A. Risk Factors
A description of the risk factors associated with our business is set forth below. The list is not exhaustive, and you should carefully consider these risks and uncertainties before investing in our common stock.
RISKS RELATED TO OUR BUSINESS STRATEGY AND INDUSTRY
If we are unable to develop new and enhanced solutions, or if we are unable to continually improve the performance, features, and reliability of our existing solutions, our business and operating results could be adversely affected.
Our future success depends on our ability to effectively respond to evolving threats to consumers, as well as competitive technological developments and industry changes, by developing or introducing new and enhanced solutions on a timely basis.
We have in the past incurred, and will continue to incur, significant research and development expenses as we focus on organic growth through internal innovation. We believe that we also must continue to dedicate a significant amount of resources to our research and development efforts to decrease our reliance on third parties. If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected. Additionally, we must continually address the challenges of dynamic and accelerating market trends and competitive developments. Customers may require features and capabilities that our current solutions do not have. Our failure to develop new solutions and improve our existing solutions to satisfy customer preferences and effectively compete with other market offerings in a timely and cost-effective manner may harm our ability to retain our customers and attract new customers. A loss of customers would adversely impact our business and operating results.
The development and introduction of new solutions involve a significant commitment of time and resources and are subject to a number of risks and challenges including but not limited to:
•Lengthy development cycles;
•Evolving industry and regulatory standards and technological developments by our competitors and customers;
•Rapidly changing customer preferences;
•Evolving platforms, operating systems, and hardware products, such as mobile devices;
•Product and service interoperability challenges with customer’s technology and third-party vendors;
•The integration of products and solutions from acquired companies;
•Entering into new or unproven market segments; and
•Executing new product and service strategies.
In addition, third parties, including operating systems and internet browser companies, may take steps to further limit the interoperability of our solutions with their own products and services, in some cases to promote their own offerings. This could delay the development of our solutions or our solutions may be unable to operate effectively. This could also result in decreased demand for our solutions, decreased revenue, and harm to our reputation, and adversely affect our business, financial condition, results of operations, and cash flows.
If we are not successful in managing these risks and challenges, or if our new or improved solutions are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.
We operate in a highly competitive and dynamic environment, and if we are unable to compete effectively, we could experience a loss in market share and a reduction in revenue.
We operate in intensely competitive and dynamic markets that experience frequent and rapid technological developments, changes in industry and regulatory standards, changes in customer requirements and preferences, and frequent new product introductions and improvements. If we are unable to anticipate or react to these continually evolving conditions, we could experience a loss of market share and a reduction in our revenues, which could materially and adversely affect our business and financial results. To compete successfully, we must maintain an innovative research and development effort to develop new solutions and enhance our existing solutions, effectively adapt to changes in the technology or product rights held by our competitors as well as the ways our information is accessed, used and stored by our customers, and appropriately respond to competitive strategies.
We face competition from a broad range of companies, including software vendors focusing on Cyber Safety solutions, operating system providers such as Apple, Google and Microsoft, and ‘pure play’ companies that currently specialize in one or a few particular segments of the market and many of which are expanding their product portfolios into different segments. Many of these competitors offer solutions or are currently developing solutions that directly compete with our offerings. We also face growing competition from other technology companies, as well as from companies in the identity threat protection space such as credit bureaus. Further, many of our competitors are increasingly developing and incorporating into their products data protection software and other competing Cyber Safety products such as antivirus protection or VPN, often free of charge, that compete with
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our offerings. Our competitive position could be adversely affected by the functionality incorporated into these products rendering our existing solutions obsolete. In addition, the introduction of new products or services by competitors, and/or market acceptance of products or services based on emerging or alternative technologies, could make it easier for other products or services to compete with our solutions.
We anticipate facing additional competition as new participants continue to enter the Cyber Safety market and as our current competitors seek to increase their market share and expand their existing offerings. Some of our competitors have greater financial, technical, marketing, or other resources than we do, including in new Cyber Safety and digital life segments, and consequently, may have the ability to influence customers to purchase their products instead of ours, including through investing more in internal innovation than we can and through benefiting from unique access to customer engagement points. Further consolidation among our competitors and within our industry or, in addition to other changes in the competitive environment, such as greater vertical integration from key computing and operating system suppliers could result in larger competitors that compete more frequently with us.
In addition to competing with these vendors directly for sales to end-users of our solutions, we compete with them for the opportunity to have our solutions bundled with the offerings of our strategic partners, such as computer hardware original equipment manufacturers (OEMs) and internet service providers (ISPs) and operating systems. Our competitors could gain market share from us if any of these strategic partners replace our solutions with those of our competitors or with their own solutions; similarly, they could gain market share from us if these partners more actively promote our competitors’ solutions or their own solutions than our solutions. In addition, software vendors who have bundled our solutions with theirs may choose to bundle their solutions with their own or other vendors’ solutions or may limit our access to standard interfaces and inhibit our ability to develop solutions for their platform. In the future, further product development by these vendors could cause our solutions to become redundant, which could significantly impact our sales and operating results.
Our acquisitions and divestitures create special risks and challenges that could adversely affect our financial results.
As part of our business strategy, we may acquire or divest businesses or assets. For example, in 2019, we completed the sale of certain of our enterprise security assets to Broadcom Inc. (the Broadcom sale), in January 2021, we completed the acquisition of Avira, and in September 2022, we completed the Merger with Avast. These activities can involve a number of risks and challenges, including:
•Complexity, time and costs associated with managing these transactions, including the integration of acquired and the winding down of divested business operations, workforce, products, IT systems and technologies;
•Challenges in retaining customers of acquired businesses, or providing the same level of service to existing customers with reduced resources;
•Diversion of management time and attention;
•Loss or termination of employees, including costs associated with the termination or replacement of those employees;
•Assumption of liabilities of the acquired and divested business or assets, including pending or future litigation, investigations or claims related to the acquired business or assets;
•Addition of acquisition-related debt;
•Difficulty in entering into or expanding in new markets or geographies;
•Increased or unexpected costs and working capital requirements;
•Dilution of stock ownership of existing stockholders;
•Unanticipated delays or failure to meet contractual obligations;
•Substantial accounting charges for acquisition-related costs, asset impairments, amortization of intangible assets and higher levels of stock-based compensation expense; and
•Difficulty in realizing potential benefits, including cost savings and operational efficiencies, synergies and growth prospects from integrating acquired businesses.
Moreover, to be successful, large complex acquisitions depend on large-scale product, technology, and sales force integrations that are difficult to complete on a timely basis or at all and may be more susceptible to the special risks and challenges described above. Any of the foregoing, and other factors, could harm our ability to achieve anticipated levels of profitability or other financial benefits from our acquired or divested businesses, product lines or assets or to realize other anticipated benefits of divestitures or acquisitions.
Our revenue and operating results depend significantly on our ability to retain our existing customers, convert existing non-paying customers to paying customers and add new customers.
We generally sell our solutions to our customers on a monthly or annual subscription basis. Customers may choose not to renew their membership with us at any time. Renewing customers may require additional incentives to renew, may not renew for the same contract period, or may change their subscriptions. We therefore may be unable to retain our existing customers on the same or on more profitable terms, if at all. In addition, we may not be able to accurately predict or anticipate future trends in customer retention or effectively respond to such trends.
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Our customer retention rates may decline or fluctuate due to a variety of factors, including the following:
•Our customers’ levels of satisfaction or dissatisfaction with our solutions and the value they place on our solutions;
•The quality, breadth, and prices of our solutions;
•Our general reputation and events impacting that reputation;
•The services and related pricing offered by our competitors; including increasing availability and efficacy of free solutions;
•Disruption by new services or changes in law or regulations that impact the need for efficacy of our products and services;
•Changes in auto-renewal regulations;
•Our customers’ dissatisfaction with our efforts to market additional products and services;
•Our customer service and responsiveness to the needs of our customers;
•Changes in our target customers’ spending levels as a result of general economic conditions, inflationary pressures or other factors; and
•The quality and efficacy of our third party partners who assist us in renewing customers’ subscriptions.
Declining customer retention rates could cause our revenue to grow more slowly than expected or decline, and our operating results, gross margins and business will be harmed.
We may need to change our pricing models to compete successfully.
The intense competition we face, in addition to general and economic business conditions, can put pressure on us to change our pricing practices. If our competitors offer deep discounts on certain solutions or provide offerings, or offer free introductory products that compete with ours, we may need to lower prices or offer similar free introductory products in order to compete successfully. Similarly, if external factors, such as economic conditions or market trends, require us to raise our prices, our ability to acquire new customers and retain existing customers may be diminished. Any such changes may reduce revenue and margins and could adversely affect our financial results.
Additionally, our business may be affected by changes in the macroeconomic environment. Our solutions are discretionary purchases, and customers may reduce or eliminate their discretionary spending on our solutions during a difficult macroeconomic environment. Although we did not experience a material increase in cancellations by customers or a material reduction in our retention rate in fiscal 2022 or in the first two quarters of fiscal 2023, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession or a worsening of current conditions as a result of the COVID-19 pandemic. In addition, during a recession, consumers may experience a decline in their credit or disposable income, which may result in less demand for our solutions. As a result, we may have to lower our prices or make other changes to our pricing model to address these dynamics, any of which could adversely affect our business and financial results.
In addition, in January 2021, we acquired Germany-based Avira and in September 2022, we completed our Merger with Avast. Many of Avira’s and Avast’s users are freemium subscribers, meaning they do not pay for its basic services. Much of our anticipated growth in connection with the Avira acquisition and the Avast Merger is attributable to attracting and converting Avira’s and Avast’s freemium users to a paid subscription option. Numerous factors, however, may impede our ability to attract free users, convert these users into paying customers and retain them.
If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.
A portion of our revenues is derived from sales through indirect channels, including, but not limited to, distributors that sell our products to end-users and other resellers, and OEM partners that incorporate our products into, or bundle our products with, their products. These channels involve a number of risks, including:
•Our resellers, distributors and OEMs are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers;
•Our reseller and distributor agreements are generally nonexclusive and may be terminated at any time without cause and our OEM partners may terminate or renegotiate their arrangements with us and new terms may be less favorable due to competitive conditions in our markets and other factors;
•Our resellers, distributors and OEMs may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions;
•Our resellers and distributors frequently market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of these competing solutions due to pricing, promotions, and other terms offered by our competitors;
•Any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us;
•The continued consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and
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•Sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of sales, or cause our partners to suffer financial difficulty which could delay payments to us, affecting our operating results.
If we fail to manage our sales and distribution channels successfully, these channels may conflict with one another or otherwise fail to perform as we anticipate, which could reduce our sales and increase our expenses as well as weaken our competitive position.
Changes in industry structure and market conditions could lead to charges related to discontinuance of certain of our products or businesses and asset impairments.
In response to changes in industry structure and market conditions, we may be required to strategically reallocate our resources and consider restructuring, disposing of, or otherwise exiting certain businesses. Any decision to limit investment in or dispose of or otherwise exit businesses may result in the recording of special charges, such as technology-related write-offs, workforce reduction costs, charges relating to consolidation of excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions. Although in certain instances our vendor agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers.
Further, our estimates relating to the liabilities for excess facilities are affected by changes in real estate market conditions. Additionally, we are required to evaluate goodwill impairment on an annual basis and between annual evaluations in certain circumstances, and future goodwill impairment evaluations may result in a charge to earnings.
RISKS RELATED TO OUR OPERATIONS
Our international operations involve risks that could increase our expenses, adversely affect our operating results and require increased time and attention of our management.
Following the Merger with Avast, we derive a significant portion of our revenues from customers located outside of the U.S., and we have substantial operations outside of the U.S., including engineering, finance, sales and customer support. Our international operations are subject to risks in addition to those faced by our domestic operations, including:
•Difficulties in staffing, managing, and coordinating the activities of our geographically dispersed and culturally diverse operations;
•Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced;
•Requirements of foreign laws and other governmental controls, including tariffs, trade barriers and labor restrictions, and related laws that reduce the flexibility of our business operations;
•Fluctuations in currency exchange rates, economic instability, and inflationary conditions could make our solutions more expensive or could increase our costs of doing business in certain countries;
•Potential changes in trade relations arising from policy initiatives or other political factors;
•Regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications;
•Local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations;
•Central bank and other restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash in international subsidiaries into cash available for use in the U.S.;
•Limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations;
•Difficulties in staffing, managing, and operating our international operations;
•Costs and delays associated with developing software and providing support in multiple languages;
•Political, social or economic unrest, war, or terrorism, or regional natural disasters, particularly in areas in which we have facilities; and
•Multiple and possibly overlapping tax regimes.
The expansion of our existing international operations and entry into additional international markets has required and will continue to require significant management attention and financial resources. These increased costs may increase our cost of acquiring international customers, which may delay our ability to achieve profitability or reduce our profitability in the future. We may also face pressure to lower our prices in order to compete in emerging markets, which could adversely affect revenue derived from our international operations.
Our business has not been materially impacted to date by the ongoing military conflict between Russia and Ukraine; however, it is not possible to predict the broader consequences of this conflict or other conflicts that may arise in the future, which could include geopolitical instability and uncertainty; adverse impacts on global and regional economic conditions and financial
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markets, including significant volatility in credit, capital, and currency markets; reduced economic activity; changes in laws and regulations affecting our business, including further sanctions or counter-sanctions which may be enacted; and increased cybersecurity threats and concerns. The ultimate extent to which the Russia-Ukraine conflict or other future conflicts may negatively impact our business, financial condition and results of operations will depend on future developments, which are highly uncertain, difficult to predict and subject to change.
Our future success depends on our ability to attract and retain personnel in a competitive marketplace.
Our future success depends upon our ability to recruit and retain key management, technical (including cyber security experts), sales, marketing, e-commerce, finance, and other personnel. As a result of our Merger with Avast, we have expanded our leadership team to lead the combined company. Our officers and other key personnel are “at will” employees and we generally do not have employment or non-compete agreements with our employees. Competition for people with the specific skills that we require is significant. While we continue to monitor the competitive environment, it is possible that the COVID-19 pandemic may affect the productivity of our employees and our ability to attract and retain key talent. As a result of the pandemic, in March 2020, we transitioned to a remote working environment for the substantial majority of our employees. While our employees have transitioned effectively to working from home, over time such remote operations may decrease the cohesiveness of our employees and our ability to maintain our culture, both of which are integral to our success. Additionally, a remote working environment may impede our ability to undertake new business projects, to foster a creative environment, to hire new employees and to retain existing employees.
In order to attract and retain personnel in a competitive marketplace, we must provide competitive pay packages, including cash and equity-based compensation. Additionally, changes in immigration laws could impair our ability to attract and retain highly qualified employees. If we fail to attract, retain and motivate new or existing personnel, our business, results of operations and future growth prospects could suffer. The volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees. In addition, we may not have an adequate number of shares reserved under our equity compensation plans, forcing us to reduce awards of equity-based compensation, which could impair our efforts to attract, retain and motivate necessary personnel. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.
Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. From time to time, key personnel leave our company and the frequency and number of such departures have widely varied and have, in the past, resulted in significant changes to our executive leadership team. The loss of any key employee could result in significant disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of company initiatives, our internal control over financial reporting, and our results of operations. In addition, hiring, training, and successfully integrating replacement personnel can be time consuming and expensive, may cause additional disruptions to our operations, and may be unsuccessful, which could negatively impact future financial results.
Our solutions, systems, websites and the data on these sources may be subject to intentional disruption that could materially harm to our reputation and future sales.
Despite our precautions and significant ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our solutions, we expect to be an ongoing target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a leading cyber security company. Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate proprietary information or cause interruptions of our products and services. Such attempts are increasing in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations.
While we engage in a number of measures aimed to protect against security breaches and to minimize the impact if a data breach were to occur, our information technology systems and infrastructure may be vulnerable to damage, compromise, disruption, and shutdown due to attacks or breaches by hackers or other circumstances, such as error or malfeasance by employees or third-party service providers or technology malfunction. The occurrence of any of these events, as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our systems could be accessed, publicly disclosed, lost, stolen, or damaged. Any such circumstance could adversely affect our ability to attract and maintain customers as well as strategic partners, cause us to suffer negative publicity or damage to our brand, and subject us to legal claims and liabilities or regulatory penalties. In addition, unauthorized parties might alter information in our databases, which would adversely affect both the reliability of that information and our ability to market and perform our services as well as undermine our ability to remain compliant with relevant laws and regulations. Techniques used to obtain unauthorized access or to sabotage systems change frequently, are constantly evolving and generally are difficult to recognize and react to effectively. We may be unable to anticipate these techniques or to implement adequate preventive or reactive measures. Several recent, highly publicized data security breaches, including a large-scale attack on SolarWinds customers by a foreign nation state actor and a significant uptick in ransomware/extortion attacks at other companies have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our strategic partners or enterprise customers. In December 2021, a critical remote code execution (RCE) vulnerability was identified in the Apache Software Foundation’s Log4j software library (Log4j), which if exploited could result in unauthorized access to our systems and data, and
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acquisition of the same. We are taking, and have taken, steps to remediate all known Log4j vulnerabilities within our environment, deployed compensating controls, and implemented additional changes to protect against an exploit of those vulnerabilities. A threat actor could exploit a Log4j vulnerability or newly discovered vulnerabilities before we complete our remediation work or identify a vulnerability that we did not effectively remediate. If that happens, there could be unauthorized access to, or acquisition of, data we maintain, and damage to our systems. We could also face legal action from individuals, business partners, and regulators in connection with exploitation of those vulnerabilities, which would result in increased costs and fees incurred in our defense against those proceedings.
We collect, use, disclose, store or otherwise process personal information, which subjects us to privacy and data security laws and contractual commitments.
We collect, use, process, store, transmit or disclose (collectively, process) an increasingly large amount of confidential information, including personally identifiable information, credit card information and other critical data from employees and customers, in connection with the operation of our business, particularly in relation to our identity and information protection offerings.
The personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions, fines, litigation, or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Additionally, changes to applicable privacy or data security laws could impact how we process personal information and therefore limit the effectiveness of our solutions or our ability to develop new solutions. For example, the European Union General Data Protection Regulation imposes more stringent data protection requirements and provides for greater penalties for noncompliance of up to the greater of €20 million or four percent of our worldwide annual revenues.
Data protection legislation is also becoming increasingly common in the U.S. at both the federal and state level. For example, the California Consumer Privacy Act of 2018 (the CCPA) requires, among other things, covered companies to provide new disclosures to California consumers regarding the use of personal information, gives California residents expanded rights to access their personal information that has been collected and allows such consumers new abilities to opt-out of certain sales of personal information. Further, the new California Privacy Rights Act (the CPRA) significantly modifies the CCPA. These modifications may result in additional uncertainty and require us to incur additional costs and expenses in our effort to comply. Additionally, the Federal Trade Commission (the FTC) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. The burdens imposed by the CCPA, CPRA and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies, adapt our goods and services and incur substantial expenditures in order to comply.
Global privacy and data protection legislation, enforcement, and policy activity are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. We may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored only within that country. If any country in which we have customers were to adopt a data localization law, we could be required to expand our data storage facilities there or build new ones in order to comply. The expenditure this would require, as well as costs of compliance generally, could harm our financial condition.
Additionally, third parties with whom we work, such as vendors or developers, may violate applicable laws or our policies and such violations can place personal information of our customers at risk. In addition, our customers may also accidentally disclose their passwords or store them on a device that is lost or stolen, creating the perception that our systems are not secure against third-party access. This could have an adverse effect on our reputation and business. In addition, such third parties could expose us to compromised data or technology, or be the target of cyberattack and other data breaches which could impact our systems or our customers’ records. Further, we could be the target of a cyberattack or other action that impacts our systems and results in a data breach of our customers’ records. This could have an adverse effect on our reputation and business.
Our inability to successfully recover from a disaster or other business continuity event could impair our ability to deliver our products and services and harm our business.
We are heavily reliant on our technology and infrastructure to provide our products and services to our customers. For example, we host many of our products using third-party data center facilities, and while we require them to maintain formal service level agreements around availability, we do not control the operation of these facilities. These facilities are vulnerable to damage, interruption, or performance problems from earthquakes, hurricanes, floods, fires, power loss, telecommunications failures, pandemics and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. The occurrence of a natural disaster, an act of terrorism, a pandemic, and similar events could result in a decision to close the facilities without adequate notice or other unanticipated problems, which in turn, could result in lengthy interruptions in the delivery of our products and services, which could negatively impact our sales and operating results.
Furthermore, our business administration, human resources, compliance efforts, and finance services depend on the proper functioning of our computer, telecommunication, and other related systems and operations. A disruption or failure of these systems or operations because of a disaster, cyber-attack or other business continuity event, such as the COVID-19 pandemic, could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers. In addition, we could have difficulty producing accurate financial statements on a timely basis, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results, all of which could adversely affect the trading value of our stock. Although we endeavor to ensure there is redundancy in these systems and that
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they are regularly backed-up, there are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner. If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.
We are dependent upon Broadcom for certain engineering and threat response services, which are critical to our products and business.
Our endpoint security solution has historically relied upon certain threat analytics software engines and other software (the Engine-Related Services) that have been developed and provided by engineering teams that have transferred to Broadcom as part of the Broadcom sale. The technology, including source code, at issue is shared, and pursuant to the terms of the Broadcom sale, we retain rights to use, modify, enhance and create derivative works from such technology. Broadcom has committed to provide these Engine-Related Services substantially to the same extent and in substantially the same manner, as has been historically provided under a license agreement with a limited term.
As a result, we are dependent on Broadcom for services and technology that are critical to our Norton business, and if Broadcom fails to deliver these Engine-Related Services it would result in significant business disruption, and our business and operating results and financial condition could be materially and adversely affected. Furthermore, if our current sources become unavailable, and if we are unable to develop or obtain alternatives to integrate or deploy them in time, our ability to compete effectively could be impacted and have a material adverse effect on our business. Additionally, in connection with the Broadcom sale, we lost other capabilities, including certain threat intelligence data which were historically provided by our former Enterprise Security business, the lack of which could have a negative impact on our business and products.
If we fail to offer high-quality customer support, our customer satisfaction may suffer and have a negative impact on our business and reputation.
Many of our customers rely on our customer support services to resolve issues, including technical support, billing and subscription issues, that may arise. If demand increases, or our resources decrease, we may be unable to offer the level of support our customers expect. Any failure by us to maintain the expected level of support could reduce customer satisfaction and negatively impact our customer retention and our business.
Our solutions are complex and operate in a wide variety of environments, systems and configurations, which could result in failures of our solutions to function as designed.
Because we offer very complex solutions, errors, defects, disruptions, or other performance problems with our solutions may and have occurred. For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, fraud, or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Interruptions in our solutions, could impact our revenues or cause customers to cease doing business with us. Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose customer data or experience material adverse interruptions to our operations or delivery of solutions to our clients in a disaster recovery scenario.
Negative publicity regarding our brand, solutions and business could harm our competitive position.
Our brand recognition and reputation as a trusted service provider are critical aspects of our business and key to retaining existing customers and attracting new customers. Our business could be harmed due to errors, defects, disruptions or other performance problems with our solutions causing our customers and potential customers to believe our solutions are unreliable. Furthermore, negative publicity, whether or not justified, including intentional brand misappropriation, relating to events or activities attributed to us, our employees, our strategic partners, our affiliates, or others associated with any of these parties, may tarnish our reputation and reduce the value of our brands. In addition, the rapid rise and use of social media has the potential to harm our brand and reputation. We may be unable to timely respond to and resolve negative and inaccurate social media posts regarding our company, solutions and business in an appropriate manner. Damage to our reputation and loss of brand equity may reduce demand for our solutions and have an adverse effect on our business, operating results, and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brands may be costly and time consuming, and such efforts may not ultimately be successful.
LEGAL AND COMPLIANCE RISKS
Our solutions are highly regulated, which could impede our ability to market and provide our solutions or adversely affect our business, financial position, and results of operations.
Our solutions are subject to a high degree of regulation, including a wide variety of federal, state, and local laws and regulations, such as the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act (the FTC Act), and comparable state laws that are patterned after the FTC Act. We have previously entered into consent decrees and similar arrangements with the FTC and the attorney generals of 35 states as well as a settlement with the FTC relating to allegations that certain of LifeLock’s advertising, marketing and security practices constituted deceptive acts or practices in violation of the FTC Act, which impose additional restrictions on our business, including prohibitions against making any misrepresentation of “the means, methods, procedures, effects, effectiveness, coverage, or scope of” our solutions. We signed an Undertaking, effective June 14, 2021, with the United Kingdom’s Competition and Markets Authority (CMA) requiring our NortonLifeLock Ireland Limited and NortonLifeLock UK entities to make certain changes to our policies and practices related to automatically renewing subscriptions in the United Kingdom as part of the CMA’s investigation into auto-renewal practices in the
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antivirus sector it launched in December 2018. Any of the laws and regulations that apply to our business are subject to revision or new or changed interpretations, and we cannot predict the impact of such changes on our business.
Additionally, the nature of our identity and information protection products subjects us to the broad regulatory, supervisory, and enforcement powers of the Consumer Financial Protection Bureau which may exercise authority with respect to our services, or the marketing and servicing of those services, through the oversight of our financial institution or credit reporting agency customers and suppliers, or by otherwise exercising its supervisory, regulatory, or enforcement authority over consumer financial products and services.
If we do not protect our proprietary information and prevent third parties from making unauthorized use of our products and technology, our financial results could be harmed.
Much of our software and underlying technology is proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and procedures and through copyright, patent, trademark, and trade secret laws. However, these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy all or portions of our products or otherwise obtain, use, distribute, and sell our proprietary information without authorization.
Third parties may also develop similar or superior technology independently by designing around our patents. Our consumer agreements do not require a signature and therefore may be unenforceable under the laws of some jurisdictions. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to the unauthorized use of our products in those countries. The unauthorized copying or use of our products or proprietary information could result in reduced sales of our products. Any legal action to protect proprietary information that we may bring or be engaged in with a strategic partner or vendor could adversely affect our ability to access software, operating system, and hardware platforms of such partner or vendor, or cause such partner or vendor to choose not to offer our products to their customers. In addition, any legal action to protect proprietary information that we may bring or be engaged in, could be costly, may distract management from day-to-day operations, and may lead to additional claims against us, which could adversely affect our operating results.
From time to time we are a party to lawsuits and investigations, which typically require significant management time and attention and result in significant legal expenses.
We are frequently involved in litigation and other proceedings, including, but not limited to, patent litigation, class actions, and governmental claims or investigations, some of which may be material initially or become material over time. The expense of initiating and defending, and in some cases settling, such matters may be costly and divert management’s attention from the day-to-day operations of our business, which could have a materially adverse effect on our business, results of operations, and cash flows. In addition, such matters may thru the course of litigation or other proceedings incur an unfavorable change which could alter the profile of the matter and create potential material risk to the company. Any unfavorable outcome in a matter could result in significant fines, settlements, monetary damages, or injunctive relief that could negatively and materially impact our ability to conduct our business, results of operations, and cash flows. Additionally, in the event we did not previously accrue for such litigation or proceeding in our financial statements, we may be required to record retrospective accruals that adversely affect our results of operations and financial condition.
Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.
From time to time, third parties may claim that we have infringed their intellectual property rights, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the segments in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are not successful in defending such claims, we could be required to stop selling, delay shipments of, or redesign our solutions, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our partners. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on commercially reasonable terms or at all. We have made and expect to continue making significant expenditures to investigate, defend, and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.
In addition, we license and use software from third parties in our business. These third-party software licenses may not continue to be available to us on acceptable terms or at all and may expose us to additional liability. This liability, or our inability to use any of this third-party software, could result in delivery delays or other disruptions in our business that could materially and adversely affect our operating results.
Some of our products contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Certain of our products are distributed with software licensed by its authors or other third parties under so-called “open source” licenses. Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. By the
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terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source, but we cannot be sure that all open source is submitted for approval prior to use in our products. In addition, many of the risks associated with usage of open source may not or cannot be eliminated and could, if not properly addressed, negatively affect our business.
RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS
There are risks associated with our outstanding and future indebtedness that could adversely affect our financial condition.
As of September 30, 2022, we had an aggregate of $10,207 million of outstanding indebtedness that will mature in calendar years 2022 through 2030, and $1,000 million available for borrowing under our revolving credit facility. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our outstanding debt. Our ability to meet expenses, remain in compliance with the covenants under our debt instruments, pay interest and repay principal for our substantial level of indebtedness depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by financial, business, economic and other factors. We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt, including the notes, and meet our other obligations. Our level of indebtedness could have other important consequences, including the following:
•We must use a substantial portion of our cash flow from operations to pay interest and principal on the term loans and revolving credit facility, our existing senior notes, and other indebtedness, which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions;
•We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes;
•We have significant exposure to fluctuations in interest rates because borrowings under our senior secured credit facilities bear interest at variable rates;
•Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions;
•We may be more vulnerable to an economic downturn or recession and adverse developments in our business;
•We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation; and
•Changes by any rating agency to our outlook or credit rating could negatively affect the value of our debt and/or our common stock, adversely affect our access to debt markets, and increase the interest we pay on outstanding or future debt.
There can be no assurance that we will be able to manage any of these risks successfully. In addition, we conduct a significant portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment, or otherwise, which may not always be possible. In the event that we do not receive distributions from our subsidiaries, we may be unable to make the required principal and interest payments on our indebtedness.
Our term loan and revolving credit facility agreement impose operating and financial restrictions on us.
Our term loan and revolving credit facility agreement contain covenants that limit our ability and the ability of our restricted subsidiaries to:
•Incur additional debt;
•Create liens on certain assets to secure debt;
•Enter into certain sale and leaseback transactions;
•Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; and
•Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
All of these covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business opportunities, react to market conditions, or otherwise restrict activities or business plans. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured in the future, proceed against any collateral securing that indebtedness.
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GENERAL RISKS
The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. At the onset of the pandemic, to protect the health and well-being of our employees, partners and third-party service providers, we facilitated a work-from-home requirement for most employees and established site-specific COVID-19 prevention protocols. We continue to monitor the situation and over the past several months have adjusted our policies and protocols to reflect changes to public health regulations and guidance. Our offices are now open to employees on a voluntary basis. To date, we have not seen any meaningful negative impact on our customer success efforts, sales and marketing efforts, or employee productivity. Nevertheless, as more employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation.
While the COVID-19 pandemic has negatively impacted many sectors of the U.S. and global economies, the consumer Cyber Safety market experienced increased demand as the pandemic greatly accelerated the digital lives of people around the world. However, with the extended duration of the pandemic and the easing of prevention protocols and restrictions, we are seeing decreasing demand and increased competition. In addition, should the negative macroeconomic impacts of the COVID-19 pandemic persist or worsen, we may experience continued slowdowns in our business activity and an increase in cancellations by customers or a material reduction in our retention rate in the future, especially in the event of a prolonged recession. A prolonged recession could adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures, as well impact the value of our common stock, ability to refinance our debt and our access to capital.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors on our employees, customers and the overall demand for our products, partners and third-party service providers. If we are not able to respond to and manage the impact of such events effectively and if the macroeconomic conditions of the general economy or the industries in which we operate do not improve, or deteriorate further, our business, operating results, financial condition and cash flows could be adversely affected.
Government efforts to combat inflation, along with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs.
Inflation has risen on a global basis, the United States has been experiencing historically high levels of inflation, and government entities have taken various actions to combat inflation, such as raising interest rate benchmarks. Government entities may continue their efforts, or implement additional efforts, to combat inflation, which could include among other things continuing to raise interest rate benchmarks or maintaining interest rate benchmarks at elevated levels. Such government efforts, along with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs and have material adverse effect on our business, financial condition and results of operations.
Fluctuations in our quarterly financial results have affected the trading price of our outstanding securities in the past and could affect the trading price of our outstanding securities in the future.
Our quarterly financial results have fluctuated in the past and are likely to vary in the future due to a number of factors, many of which are outside of our control. If our quarterly financial results or our predictions of future financial results fail to meet our expectations or the expectations of securities analysts and investors, the trading price of our outstanding securities could be negatively affected. Volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions. Factors associated with our industry, the operation of our business, and the markets for our solutions may cause our quarterly financial results to fluctuate, including but not limited to:
•Fluctuations in demand for our solutions;
•Disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, outbreaks of disease, such as the COVID-19 pandemic, or earthquakes, floods, or other natural disasters;
•Entry of new competition into our markets;
•Our ability to achieve targeted operating income and margins and revenues;
•Competitive pricing pressure or free offerings that compete with one or more of our solutions;
•Our ability to timely complete the release of new or enhanced versions of our solutions;
•The amount and timing of commencement and termination of major marketing campaigns;
•The number, severity, and timing of threat outbreaks and cyber security incidents;
•Loss of customers or strategic partners;
•Changes in the mix or type of solutions and subscriptions sold and changes in consumer retention rates;
•The rate of adoption of new technologies and new releases of operating systems, and new business processes;
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•Consumer confidence and spending changes;
•The impact of litigation, regulatory inquiries, or investigations;
•The impact of acquisitions and divestitures and our ability to achieve expected synergies or attendant cost savings;
•Fluctuations in foreign currency exchange rates and interest rates;
•The publication of unfavorable or inaccurate research reports about our business by cybersecurity industry analysts;
•The success of our corporate responsibility initiatives;
•Changes in tax laws, rules, and regulations; and
•Changes in consumer protection laws and regulations.
Any of the foregoing factors could cause the trading price of our outstanding securities to fluctuate significantly.
Changes to our effective tax rate could increase our income tax expense and reduce (increase) our net income (loss), cash flows and working capital.
Our effective tax rate could be adversely affected by several factors, many of which are outside of our control, including:
•Changes to the U.S. federal income tax laws, including the potential for federal tax law changes put forward by Congress and the Biden administration including potentially increased corporate tax rates, new minimum taxes and other changes to the way that our US tax liability has been calculated following the 2017 Tax Cuts and Jobs Act. Certain of these proposals could have significant retroactive adjustments adding cash tax payments/liabilities if adopted;
•Changes to other tax laws, regulations, and interpretations in multiple jurisdictions in which we operate, including actions resulting from the Organisation for Economic Co-operation and Development's (OECD) base erosion and profit shifting project including recent proposals for a global minimum tax rate, proposed actions by international bodies such as digital services taxation, as well as the requirements of certain tax rulings. In October 2021, the OECD/G20 inclusive framework on Base Erosion and Profit Shifting (the Inclusive Framework) published a statement updating and finalizing the key components of a two-pillar plan on global tax reform which has now been agreed upon by the majority of OECD members. Pillar One allows countries to reallocate a portion of residual profits earned by multinational enterprises (MNE), with an annual global turnover exceeding €20 billion and a profit margin over 10%, to other market jurisdictions. Pillar Two requires MNEs with an annual global turnover exceeding €750 million to pay a global minimum tax of 15%. Additional guidance is expected to be published in 2022. We will continue to monitor the implementation of the Inclusive Framework agreement by the countries in which we operate. We are unable to predict if and how these legislative changes will be enacted into law, and it is possible that they could have a material effect on our corporate tax liability and our global effective tax rate;
•Changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
•The tax effects of significant infrequently occurring events that may cause fluctuations between reporting periods;
•Tax assessments, or any related tax interest or penalties, that could significantly affect our income tax expense for the period in which the settlements take place; and
•Taxes arising in connection to changes in our workforce, corporate entity structure or operations as they relate to tax incentives and tax rates.
From time to time, we receive notices that a tax authority in a particular jurisdiction believes that we owe a greater amount of tax than we have reported to such authority. We are regularly engaged in discussions and sometimes disputes with these tax authorities. If the ultimate determination of our taxes owed in any of these jurisdictions is for an amount in excess of the tax provision we have recorded or reserved for, our operating results, cash flows, and financial condition could be adversely affected.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchase of equity securities
Under our stock repurchase program, shares may be repurchased on the open market and through accelerated stock repurchase transactions. As of September 30, 2022, we have $1,370 million remaining authorized to be completed in future periods with no expiration date. Stock repurchases during the three months ended September 30, 2022 were as follows:
| (In millions, except per share data) | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| July 2, 2022 to July 29, 2022 | — | $ | — | — | $ | — | |||||||||||||||||
| July 30, 2022 to August 26, 2022 | — | $ | — | — | $ | — | |||||||||||||||||
| August 27, 2022 to September 30, 2022 | 5 | $ | 21.68 | 5 | $ | 1,370 | |||||||||||||||||
| Total number of shares repurchased | 5 | 5 | |||||||||||||||||||||
(1) The number of shares purchased is reported on trade date.
Item 6. Exhibits
Exhibit Number | Incorporated by Reference | Filed/Furnished with this 10-Q | ||||||||||||||||||||||||||||||||||||
| Exhibit Description | Form | File Number | Exhibit | File Date | ||||||||||||||||||||||||||||||||||
| 2.01 | 8-K | 000-17781 | 2.01 | 7/18/2022 | ||||||||||||||||||||||||||||||||||
| 3.01 | X | |||||||||||||||||||||||||||||||||||||
| 3.02 | 8-K | 000-17781 | 3.02 | 11/7/2022 | ||||||||||||||||||||||||||||||||||
| 4.01 | 8-K | 000-17781 | 4.01 | 9/19/2022 | ||||||||||||||||||||||||||||||||||
| 4.02 | 8-K | 000-17781 | 4.02 | 9/19/2022 | ||||||||||||||||||||||||||||||||||
| 10.01 | 8-K | 000-17781 | 10.01 | 9/12/2022 | ||||||||||||||||||||||||||||||||||
| 10.02* | S-8 | 000-17781 | 99.01 | 9/12/2022 | ||||||||||||||||||||||||||||||||||
| 10.03* | X | |||||||||||||||||||||||||||||||||||||
| 10.04* | X | |||||||||||||||||||||||||||||||||||||
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Exhibit Number | Incorporated by Reference | Filed/Furnished with this 10-Q | ||||||||||||||||||||||||||||||||||||
| Exhibit Description | Form | File Number | Exhibit | File Date | ||||||||||||||||||||||||||||||||||
| 10.05* | X | |||||||||||||||||||||||||||||||||||||
| 10.06* | X | |||||||||||||||||||||||||||||||||||||
| 31.01 | X | |||||||||||||||||||||||||||||||||||||
| 31.02 | X | |||||||||||||||||||||||||||||||||||||
| 32.01† | X | |||||||||||||||||||||||||||||||||||||
| 32.02† | X | |||||||||||||||||||||||||||||||||||||
| 101 | The following financial information from Gen Digital Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Deficit), (vi) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
| * | Indicates a management contract or compensatory plan or arrangement. | ||||
† | This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. | ||||
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GEN DIGITAL INC. | ||||||||
| (Registrant) | ||||||||
| By: | /s/ Vincent Pilette | |||||||
Vincent Pilette Chief Executive Officer | ||||||||
| By: | /s/ Natalie Derse | |||||||
Natalie Derse Chief Financial Officer | ||||||||
November 9, 2022
52
Exhibit 3.01
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SYMANTEC CORPORATION
(A DELAWARE CORPORATION)
ARTICLE 1
The name of the corporation is Symantec Corporation.
ARTICLE 2
The address of the registered office of the corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, in the County of Newcastle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE 3
The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
ARTICLE 4
4.1.CLASSES OF STOCK. This corporation is authorized to issue two classes of stock to be designated "Common Stock" and "Preferred Stock." Each share of Common Stock and each share of Preferred Stock shall have a par value of $0.01. The total number of shares which the corporation is authorized to issue is one billion six hundred and one million (1,601,000,000). One billion six hundred million (1,600,000,000) shares shall be Common Stock and one million (1,000,000) shares shall be Preferred Stock.
4.2.RIGHTS, PRIVILEGES AND RESTRICTIONS. The rights, privileges and restrictions of the Common Stock shall be set forth in this Article 4.
4.3.PREFERRED STOCK SERIES DETERMINATION. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized to provide for the issuance of such shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding).
4.4.VOTING RIGHTS. Except as otherwise required by law or this Restated Certificate of Incorporation, each holder of record of Common Stock shall have one vote in respect of each share of stock held by the holder of the books of the corporation. Any vacancy in the Board of Directors occurring because of the death, resignation or removal of a director elected by the holders of Common Stock shall be filled by the vote or written consent of the holders of such Common Stock or, in the absence of action by such holders, such vacancy shall be filled by action of the remaining directors. A director elected by the holders of Common Stock may be removed from the Board of Directors with or without cause by the vote or consent of the holders of such Common Stock, as provided by the Delaware General Corporation Law. For the purpose hereof, "control" (including the correlative meanings, the terms "controlled by" and "under common control of") as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person through the ownership of voting securities, by contract or otherwise.
4.5.LIQUIDATION. In the event of any liquidation, dissolution or winding up of the corporation, the holders of Common Stock shall be entitled to receive, pro rata, all of the remaining assets of the corporation available for distribution to its stockholders.
4.6.DIVIDENDS. The holders of shares of Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the corporation which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock.
ARTICLE 5
The stockholders of the corporation holding a majority of the corporation's outstanding voting stock shall have the power to adopt, amend or repeal Bylaws. The Board of Directors of the corporation shall also have the power to
Exhibit 3.01
adopt, amend or repeal Bylaws of the corporation, except as such power may be expressly limited by Bylaws adopted by the stockholders.
ARTICLE 6
Election of the Directors need not be by written ballot unless the Bylaws of the corporation shall so provide.
ARTICLE 7
A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.
Any repeal or modification of the foregoing provisions of this Article 7 shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification.
Exhibit 3.01
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SYMANTEC CORPORATION
Symantec Corporation, a Delaware corporation, does hereby certify that the following amendments to the corporation’s Restated Certificate of Incorporation have been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law, with the approval of such amendments by the corporation’s stockholders:
Article 4.1 of the Restated Certificate of Incorporation is amended to read in its entirety as follows:
Classes of Stock. The Corporation is authorized to issue three classes of stock to be designated “Common Stock,” “Preferred Stock” and “Special Voting Stock.” Each share of Common Stock and each share of Preferred Stock shall have a par value of $0.01. Each share of Special Voting Stock shall have a par value of $1.00. The total number of shares which the Corporation is authorized to issue is three billion one million and one (3,001,000,001). Three billion (3,000,000,000) shares shall be Common Stock, one million (1,000,000) shares shall be Preferred Stock and one (1) share shall be Special Voting Stock.
Article 4.2 of the Restated Certificate of Incorporation is amended to read in its entirety as follows:
Rights, Privileges and Restrictions. The rights, privileges and restrictions of the Common Stock and the Special Voting Stock shall be set forth in this Article 4.
Article 4.4 of the Restated Certificate of Incorporation is amended to read in its entirety as follows:
Voting Rights.
4.4.1General. Except as otherwise required by law or this Amended and Restated Certificate of Incorporation, (i) each holder of record of Common Stock shall have one vote in respect of each share of stock held by the holder of the books of the Corporation and (ii) the holder of record of the share of Special Voting Stock shall have a number of votes equal to the number of Exchangeable Non-Voting Shares (“Exchangeable Shares”) of Telebackup Exchangeco Inc., an Alberta corporation, outstanding as of the applicable record date (excluding Exchangeable Shares which are owned by the Corporation, any of its subsidiaries or any person directly or indirectly controlled by or under common control of the Corporation), in each case for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. For the purposes hereof, “control” (including the correlative meanings, the terms “controlled by” and “under common control of”) as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person through the ownership of voting securities, by contract or otherwise.
4.4.2Common Stock and Special Voting Stock Identical in Voting. In respect of all matters concerning the voting of shares, the Common Stock and the Special Voting Stock shall vote as a single class and such voting rights shall be identical in all respects.
4.4.3Vacancies on the Board of Directors. Any vacancy in the Board of Directors occurring because of the death, resignation or removal of a director elected by the holders of Common Stock and Special Voting Stock shall be filled by the vote or written consent of the holders of such Common Stock and Special Voting Stock or, in the absence of action by such holders, such vacancy shall be filled by action of the remaining directors. A director elected by the holders of Common Stock and Special Voting Stock may be removed from the Board of Directors with or without cause by the vote or consent of the holders of such Common Stock and Special Voting Stock, as provided by the Delaware General Corporation Law.
Article 4.5 of the Restated Certificate of Incorporation is amended to read in its entirety as follows:
Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, the holders of Common Stock shall be entitled to receive, pro rata, all of the remaining assets of the Corporation available for distribution to its stockholders and the holders of the Special Voting Stock shall not be entitled to receive any such assets.
Article 4.6 of the Restated Certificate of Incorporation is amended to read in its entirety as follows:
Exhibit 3.01
Dividends. The holders of shares of Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock and the holders of Special Voting Stock shall not be entitled to receive any such dividends.
Article 4.7 reading in its entirety as follows is hereby added to the Restated Certificate of Incorporation:
Special Voting Stock.
4.7.1Exercise of Voting Rights. The holder of the share of Special Voting Stock is entitled to exercise the voting rights attendant thereto in such manner as such holder desires.
4.7.2Cancellation of Shares. At such time as the Special Voting Stock has no votes attached to it because there are no Exchangeable Shares of Telebackup Exchangeco Inc. outstanding which are not owned by the Corporation, any of its subsidiaries or any person directly or indirectly controlled by or under common control of the Corporation, and there are no shares of stock, debt, options or other agreements of Telebackup Exchangeco Inc. which could give rise to the issuance of any Exchangeable Shares of Telebackup Exchangeco Inc. to any person (other than the Corporation, any of its subsidiaries or any person directly or indirectly controlled by or under common control of the Corporation), the Special Voting Stock shall be automatically canceled.
IN WITNESS WHEREOF, said corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 1st day of July, 2005 and the foregoing facts stated herein are true and correct.
SYMANTEC CORPORATION
By: /s/ Arthur F. Courville
Arthur F. Courville
Senior Vice President, General Counsel
and Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
Exhibit 3.01
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
SYMANTEC CORPORATION
Symantec Corporation, a Delaware corporation (the “Company”), does hereby certify that:
FIRST: This Certificate of Amendment (this “Certificate of Amendment”) amends the provisions of the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”).
SECOND: The terms and provisions of this Certificate of Amendment have been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
THIRD: Article 2 of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
“The address of the registered office of the corporation in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington 19808, in the County of New Castle. The name of its registered agent at such address is the Corporation Service Company.”
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed by its duly authorized officer this 31st day of July 2009.
SYMANTEC CORPORATION
By: /s/ Scott C. Taylor
Name: Scott C. Taylor
Title: Executive Vice President,
General Counsel and Secretary
Exhibit 3.01
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
SYMANTEC CORPORATION
Symantec Corporation, a Delaware corporation (the “Company”) does hereby certify that:
FIRST: This Certificate of Amendment (this “Certificate of Amendment”) amends the provisions of the Company’s Amended and Restated Certificate of Incorporation, as amended to date (the “Certificate of Incorporation”).
SECOND: The terms and provisions of this Certificate of Amendment have been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
THIRD: Article 1 of the Certificate of Incorporation is hereby amended to read in its entirety as follows:
“The name of the corporation is NortonLifeLock Inc.”
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed by its duly authorized officer this 4th day of November, 2019.
SYMANTEC CORPORATION
By: /s/ Scott C. Taylor
Name: Scott C. Taylor
Title: Executive Vice President,
General Counsel and Secretary
General Counsel and Secretary
Exhibit 3.01
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NORTONLIFELOCK INC.
NortonLifeLock Inc., a Delaware corporation (the “Company”), does hereby certify that:
FIRST: This Certificate of Amendment (this “Certificate of Amendment”) amends the provisions of the Company’s Amended and Restated Certificate of Incorporation, as amended to date (the “Certificate of Incorporation”).
SECOND: The terms and provisions of this Certificate of Amendment have been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
THIRD: Article 1 of the Certificate of Incorporation is hereby amended to read in its entirety as follows: “The name of the Corporation is Gen Digital Inc.”
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed by its duly authorized officer this 7th day of November, 2022.
NORTONLIFELOCK INC.
By: /s/ Bryan Ko
Name: Bryan Ko
Title: General Counsel and Secretary
AVAST LIMITED
LONG TERM INCENTIVE PLAN
RSU AWARD AGREEMENT
RECITALS
A.The Board has adopted the Avast Limited Long Term Incentive Plan (as amended from time to time, the “Plan”) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company and the members of the Group Company.
B.The Participant is to render valuable services to the Company and/or any member of the Group Company, and this RSU Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the the Company’s issuance of rights in respect of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Restricted Stock Units (each, an “RSU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Restricted Stock Units. The Company hereby awards to the Participant RSUs under the Plan. Each RSU represents the right to receive one Share on the vesting date of that RSU, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the RSUs and the Shares, the dates on which those Vested Shares shall be issued to the Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
2.Grant Acceptance; Acknowledgement. The Company and the Participant agree that the RSUs are granted under and governed by the Grant Notice (as defined below), this Agreement and the provisions of the Plan. The Participant: (a) acknowledges receipt of a copy of the Plan prospectus, (b) represents that the Participant has carefully read and is familiar with the provisions thereof, and (c) hereby accepts the RSUs subject to all of the terms and conditions of this Agreement set forth herein, in the Plan and in the Grant Notice. If the Participant does not wish to receive the RSUs and/or does not consent and agree to the terms and conditions on which the RSUs are offered, as set forth in this Agreement (including any appendices hereto) and the Plan, then the Participant must reject this Award via the website of the Company’s designated broker, no later than thirty (30) days following the Award Date (as defined below) set forth in the Grant Notice. If the Participant rejects this Award, this Award will immediately be forfeited and cancelled for no consideration. The Participant’s failure to reject this Award within this thirty (30) day period will constitute the Participant’s acceptance of this Award and all terms and conditions of this Award, as set forth in this Agreement and the Plan.
1 | ||
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The Award Date shall mean the date the RSUs are granted to the Participant pursuant to this Agreement (the “Award Date”) and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing Participant with notice of the issuance of an RSU award pursuant to the Plan and terms of this Agreement (the “Grant Notice”). | ||||
Vesting Schedule: | The RSUs shall Vest pursuant to the schedule set forth in the Grant Notice (the “Vesting Schedule”). The RSUs allocated to each applicable vesting date shall Vest on that date only if the Participant’s services have not been terminated as of such date, and no additional RSUs shall Vest following the Participant’s date of a Termination of Service (as defined below) (the “Termination Date”). If the Participant’s Termination of Service is by reason of death or Disability, the award shall Vest in full as of immediately prior to such Termination Date. The Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event that the Participant’s service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. | ||||
Issuance Schedule: | The Shares in which the Participant Vests in accordance with the foregoing Vesting Schedule shall be issuable as set forth in Section 7. However, the actual number of Shares to be issued will be subject to the provisions of Section 8 pursuant to which the applicable withholding taxes are to be collected. | ||||
3.Limited Transferability. This Award, and any interest therein, shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by the Participant, other than by will or by the laws of descent and distribution, unless otherwise determined by the Committee or its delegate(s) in accordance with the terms of the Plan on a case-by-case basis.
4.Cessation of Service. Subject to the provisions of the Vesting Schedule set forth above, if the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or a member of the Group Company is terminated for any or no reason (whether or not in breach of local labor laws) (a “Termination of Service”) any unvested RSUs will be immediately thereafter cancelled and forfeited for no consideration, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited RSUs and the Participant’s right to receive Shares pursuant to the RSUs and Vest in such RSUs under the Plan will terminate effective as of the Participant’s Termination Date; in no event will the Participant’s service be extended by any notice period mandated under local law (e.g., active service would not include a period of “garden leave” or similar period pursuant to local law). For purposes of this Award, a transfer of employment between the Company and any member of the Group Company shall not constitute a Termination of Service. The Committee shall have the sole discretion to determine when the Participant is no longer actively providing service for purposes of the Plan and the Participant’s Termination Date.
5.Corporate Transaction.
a.In the event of a Change of Control, any or all outstanding RSUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as
2 | ||
was provided to stockholders (after taking into account the existing provisions of the RSUs), in each case in accordance with Section 13 of the Plan.
b.In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Section 5(a) above) pursuant to a Change of Control, this Award will expire on such transaction at such time and on such conditions as the Board shall determine in accordance with the Plan.
c.Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these RSUs from Section 409A of the Code or (ii) comply with Section 409A of the Code.
d.This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
6.Adjustment in Shares. The Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the shares of Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 14 of the Plan.
7.Issuance of Shares of the Company’s Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the RSU (including the date (if any) on which vesting of any portion of this RSU accelerates), the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying Shares that so vested, subject, however, to the provisions of Section 8 pursuant to which the applicable Tax-Related Items (as defined below) are to be collected. In no event shall the date of settlement (meaning the date that Shares are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. The value of Shares shall not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock subject to the RSUs
3 | ||
that are subject to Section 409A of the Code that otherwise would have been settled during the first six (6) months following the Participant’s separation from service will instead be settled on the earliest of (i) the seventh (7th) month following the Participant’s separation from service or (ii) the date of the Participant’s death following the Participant’s separation from service, unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c. In no event shall fractional Shares be issued.
d. Except as set forth in clause (e) below, the holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the RSUs until the Participant becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax-Related Items (as defined below).
e. As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of RSUs (with such total number adjusted pursuant to Section 6 of this Agreement, and Section 4.1 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 7(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original RSUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 7(e) with respect to any RSUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 7 or terminated pursuant to Section 4.
8. Tax-Related Items. Regardless of any action the Company or the Participant’s actual employer within the Group Company (the “Employer”) takes with respect to any or all income tax, social insurance, fringe benefit tax, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the vesting or settlement of the RSUs, accrual or payment of Dividend Equivalent Rights, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (b) do not commit to structure the terms of the Award or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant acknowledges that if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the settlement of the Participant’s RSUs, the Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer. In this regard, the Participant authorizes the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by the Participant from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer. With the Company’s consent, these arrangements may also include, if permissible under local law, (a) withholding Shares that otherwise would be issued to the Participant when the Participant’s RSUs are settled, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amount, (b) having the Company withhold from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf and the Participant hereby authorizes such sales by this authorization), (c) the Participant’s payment of a cash amount, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if the Participant is a Section 16 officer of the Company under the Exchange Act (a “Section 16 Officer”), then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax- Related Items withholding event. Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates in the Participant’s
4 | ||
jurisdiction. If Tax- Related Items are withheld in excess of the Participant’s actual tax liability, the Participant may seek a refund of any over-withheld amount in cash from the local tax authority and will have no entitlement to the equivalent in the shares of Common Stock. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the Vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.
The “fair market value” of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. The Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s purchase of Shares that cannot be satisfied by the means previously described. Finally, the Participant acknowledges that the Company has no obligation to deliver Shares to the Participant until the Participant has satisfied the obligations in connection with the Tax-Related Items as described in this Section 8.
Unless determined otherwise by the Committee in advance of a Tax-Related Items withholding event, the method of withholding for this RSU will be (a) above.
9. Compliance with Laws and Regulations.
a.The issuance of Shares pursuant to the RSU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the shares of Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained.
10. Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Agreement and the Plan).
11. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing
5 | ||
and addressed to the Participant at the address on file with the Company. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
12.Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the RSU.
13.Governing Law and Venue. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
14.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the RSU is granted, the number of Shares which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of Shares issuable under the Plan is obtained in accordance with the provisions of the Plan.
15.Employment at Will. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employment or service of the Company or the Employer for any period of specific duration, or be interpreted as forming or amending an employment or service contract with the Company or the Employer, or interfere with or otherwise restrict in any way the rights of the Company or the Employer or of the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company or the Employer at any time for any reason, with or without cause.
16.Limitations Applicable to Section 16 Officers. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is a Section 16 Officer, the Plan, this Agreement and the RSUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent applicable laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
17.Entire Agreement. The Plan and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company or any member of the Group Company in effect as of the date a determination is to be made under this Agreement.
18.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
6 | ||
19.Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, RSUs granted under the Plan or future RSUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
20.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between countries, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
21.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
22.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
23.Award Subject to Company Clawback or Recoupment. The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of the Participant’s employment or other service with the Company or the Employer that is applicable to executive officers, employees, directors or other service providers of the Company or the Employer, and in addition to any other remedies available under such policy and applicable law may require the cancelation of the Participant’s RSUs (whether Vested or unvested) and the recoupment of any gains realized with respect to the Participant’s RSUs.
7 | ||
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If the Participant does not agree with the terms of this Agreement and the Plan, the Participant must reject the RSUs via the e*trade website no later than thirty (30) days following the Award Date; non-rejection of the RSUs will constitute the Participant’s Acceptance of the RSUs on the terms on which they are offered, as set forth in this Agreement (including the appendices hereto) and the Plan.
8 | ||
APPENDIX A
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
Capitalized terms not defined herein shall have the meanings ascribed to them in the Agreement or the Plan.
1.Nature of the Grant. In accepting the RSUs, the Participant acknowledges, understands and agrees that:
(a.) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
(b.) the grant of RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c.) all decisions with respect to future grants of RSUs, if any, will be at the sole discretion of the Company;
(d.) the Participant’s participation in the Plan is voluntary;
(e.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
(g.) unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a Subsidiary or Affiliate;
(h.) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i.) if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of RSUs may increase or decrease;
(j.) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the Participant’s Termination (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any Parent, Subsidiaries or Affiliates or the Employer;
(k.) neither the Company, the Employer nor any Parent, Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement;
(l.) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
(m.) the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
AVAST LIMITED
LONG TERM INCENTIVE PLAN
PERFORMANCE STOCK UNIT AWARD AGREEMENT
RECITALS
A.The Board has adopted the Avast Limited Long Term Incentive Plan (as amended from time to time, the “Plan”) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company and the members of the Group Company.
B.The Participant is to render valuable services to the Company and/or any member of the Group Company, and this Performance Stock Unit Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Performance Stock Units (each a performance based restricted stock unit, a “CAGR PRU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them in herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Performance Stock Units. The Company hereby awards to the Participant CAGR PRUs under the Plan. Each CAGR PRU represents the right to receive one share of Common Stock on vesting based on achievement of the performance objectives set forth in Appendix A attached hereto, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the CAGR PRUs, the dates on which those Vested Shares shall be issued to the Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The “Award Date” shall mean the date the CAGR PRUs are granted to the Participant pursuant to this Agreement and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of a CAGR PRU award pursuant to the Plan and terms of this Agreement (the “Notice of Grant”). | ||||
Vesting Schedule: | The CAGR PRUs shall vest pursuant to the schedule set forth on Appendix A hereto. Subject to the provisions of Appendix A hereto, the CAGR PRUs shall Vest on each applicable vesting date only if the Participant’s services have not been terminated as of such date, and no additional Shares shall Vest following the Participant’s date of a Termination of Service (as defined below) (the “Termination Date”). | ||||
Issuance Schedule: | The Shares in which the Participant Vests shall be issuable as set forth in Section 6. However, the actual number of Vested Shares to be issued will be subject to the provisions of Section 7 (pursuant to which the applicable withholding taxes are to be collected) and Appendix A. | ||||
2.Limited Transferability. This Award, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with this Agreement and the Plan.
3.Cessation of Service. Subject to the provisions of Appendix A hereto, should the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or a member of the Group Company be terminated for any or no reason (whether or not in breach of local labor laws) (a “Termination of Service”), any unvested CAGR PRUs will be immediately thereafter cancelled, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited CAGR PRUs and the Participant’s right to receive CAGR PRUs and Vest under the Plan in respect thereof, if any, will terminate effective as of the Participant’s Termination Date. For purposes of service, transfer of employment between the Company and any member of the Group Company shall not constitute Termination of Service. The Committee shall have the sole discretion to determine when the Participant is no longer actively providing service for purposes of the Plan and the Participant’s Termination Date.
4.Corporate Transaction. Subject to the provisions of Appendix A hereto:
a.In the event of a Change in Control (which for purposes of this Agreement, shall be defined under the NortonLife Lock Inc. Executive Retention Plan, as amended, the “Executive Retention Plan”), any or all outstanding CAGR PRUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as was provided to stockholders (after taking into account the existing provisions of the CAGR PRUs), in each case in accordance with Section 13 of the Plan.
b.In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Section 4(a) above) pursuant to a Change in Control, this Award will expire on such transaction at such time and on such conditions as the Board shall determine in accordance with the Plan.
c.Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these CAGR PRUs from Section 409A of the Code or (ii) comply with Section 409A of the Code.
d.This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
5.Adjustment in Shares. The Participant acknowledges that the CAGR PRUs and the Shares subject to the CAGR PRUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the shares of Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 14 of the Plan.
6.Issuance of Shares of Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the CAGR PRU (including the date (if any) on which vesting of any portion of this CAGR PRU accelerates), the Company shall issue to, or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying shares of Common Stock that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. In no event shall the date of settlement (meaning the date that shares of Common Stock are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. The value of Shares will not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock that otherwise would have been settled during the first six (6) months following the Participant’s separation from
service will instead be settled during the seventh (7th) month following the Participant’s separation from service or (ii) the date of the Participant’s death following the Participant’s separation from service, unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.The holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the CAGR PRUs until the Award holder becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax Obligations (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of CAGR PRUs (with such total number adjusted pursuant to Section 5 of this Agreement, and Section 4.1 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original CAGR PRUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. For purposes of clarity, if the CAGR PRUs (or any portion thereof) are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited CAGR PRUs. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any CAGR PRUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 3.
7.Tax Obligations. The Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any member of the Group Company (the “Tax Obligations”) that arise in connection with this Award. The satisfaction of the Tax Obligations shall occur at the time the Participant receives a distribution of shares of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any member of the Group Company in accordance with applicable law. The Participant hereby authorizes the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by any of the following methods: (a) in the event the CAGR PRU is to be settled in part in cash rather than settled in full in Shares, withholding from the cash to be distributed to the Participant in settlement of this Award, (b) permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or any member of the Group Company, and (c) withholding Shares that are otherwise to be issued and delivered to the Participant under this Award in satisfaction of the Tax Obligations up to the maximum statutory amount. In addition, to the extent this Award is not settled in cash, the Company is authorized to satisfy any Tax Obligations by withholding for the Tax Obligations from wages and other cash compensation payable to the Participant or by causing the Participant to tender a cash payment to the Company if the Committee determines in good faith at the time the Tax Obligations arise that withholding pursuant to the foregoing alternatives (b) and (c) above are not in the best interest of the Company or the Participant. In the event the Tax Obligations arise prior to the delivery to the Participant of shares of Common Stock or it is determined after the delivery of Shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any member of the Group Company, the Participant shall indemnify and hold the Company and any member of the Group Company harmless from any failure by the Company and/or any member of the Group Company to withhold the proper amount. The Company may refuse to deliver the Shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax Obligations as described in this Section 7.
The value of the Shares to be applied as a credit against the Tax Obligations will be determined based on the “fair market value” of these Shares, determined as of the effective date when the Tax
Obligations otherwise would have been withheld in cash. The Participant shall pay to the Company any amount of Tax Obligations that the Company may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s purchase of Shares that cannot be satisfied by the means previously described. Finally, the Participant acknowledges that the Company has no obligation to deliver Shares to the Participant until the Participant has satisfied the obligations in connection with the Tax Obligations as described in this Section 7.
The Participant acknowledges that there may be adverse tax consequences upon the receipt or vesting of the CAGR PRUs or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or any member of the Group Company or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
8.Compliance with Laws and Regulations.
a.The issuance of shares of Common Stock pursuant to the CAGR PRU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto, and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Agreement and the Plan).
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated below the Participant’s signature line on this Agreement (as may be updated from time to time by written notice from the Participant). All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
11.Construction. This Agreement and the Notice of Grant evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the CAGR PRU.
12.Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to, and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the CAGR PRU is granted, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.Employment At-Will. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employment of the Company or any member of the Group Company for any period of specific duration, or be interpreted as forming or amending an employment or service contract with the Company or any member of the Group Company or interfere with or otherwise restrict in any way the rights of the Company (or any member of the Group Company retaining the Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Limitations Applicable to Section 16 Officers. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is a a Section 16 officer of the Company under the Exchange Act (a “Section 16 Officer”), the Plan, this Agreement and the CAGR PRUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent applicable laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
16.Entire Agreement. The Plan and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company or any member of the Group Company in effect as of the date a determination is to be made under this Agreement.
17.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
18.Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, CAGR PRUs granted under the Plan or future CAGR PRUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
19.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between countries, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
20.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
21.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
, 202[●].
NORTONLIFELOCK INC.
By:
Title:
Address:
PARTICIPANT
Signature:
Address:
APPENDIX A PERFORMANCE SCHEDULE
The number of CAGR PRUs that will be earned shall be based on the metrics set forth below. Terms not otherwise defined in this Appendix A shall have the meaning ascribed to them in the Plan.
1.Grant of CAGR Performance Stock Units.
Subject to the terms and conditions of the Agreement, the Notice of Grant and the Plan, the Company hereby grants to the Participant a number of CAGR PRUs set forth in the Notice of Grant (the “CAGR PRU Grant”), subject to vesting terms as set forth below.
2.Performance Metrics.
This Agreement covers the Rule of 10 CAGR component of the FY23 CAGR PRUs granted to the Participant. The Participant can earn the CAGR PRUs based on the Company’s performance over the two
(2) year period set forth in the Notice of Grant hereafter referred to as the “Performance Period”, which Performance Period begins on April 1, 2023 and ends on April 4, 2025, as follows:
(b)Two (2) Year CAGR. Following the last day of the Company’s fiscal year ending April 4, 2025 (“FY25”) the Company shall determine the percentage achievement level from 0% to 200% based upon the Company’s Rule of 10 CAGR growth for the two (2) year period ending April 4, 2025 (“Two-Year CAGR Performance”). For the avoidance of doubt, the CAGR Performance Period shall begin on April 1, 2023 and end on April 4, 2025. Two-Year CAGR Performance between the Minimum Level and Threshold Level, between the Threshold Level and the Target Level, and between the Target Level and the Maximum Level will be determined based on a linear interpolation between the applicable performance levels.
Performance Levels | Two-Year CAGR Performance | CAGR Performance Percentage | ||||||
| Minimum | 8% | 0% | ||||||
| Threshold | 9% | 50% | ||||||
| Target | 9.5% | 100% | ||||||
| Maximum | 10.5% | 200% | ||||||
(c)Final Achievement. At the end of the Performance Period, the number of PRUs earned shall be calculated using the Two-Year CAGR Performance. Nothing in this Section or elsewhere in the Agreement shall be read as allowing the Participant to earn more than 200% of the CAGR PRU Grant during the Performance Period.
Notwithstanding anything to the contrary in this Appendix A, the Committee may, in its sole discretion, adjust the CAGR Performance goal(s) to account for strategic transactions to the extent the Committee determines to be reasonable or appropriate.
3.Committee Certification and Vesting of CAGR PRUs.
As soon as practicable following the completion of FY25, the Committee shall determine and certify in writing the Performance Level that has been attained for the CAGR Performance goal, the CAGR Performance Percentage (as provided in the table above) and the number of CAGR PRUs that are eligible to vest based on the CAGR Performance Percentage. Notwithstanding the foregoing, if pursuant to Section 5, the CAGR PRUs cease to be subject to the Performance Levels, certification by the Committee shall no longer be required for the CAGR PRUs to become vested pursuant to Section 5. The Committee’s determination of the number of earned and vested CAGR PRUs shall be binding on the Participant.
The earned CAGR PRUs will vest on the day following the last day of the Performance Period, subject to
(a)Committee certification as set forth above and (b) the Participant’s continued employment through the day following the last day of the Performance Period, except as provided in Sections 5 and 6 below.
4.Timing of Settlement.
Subject to Section 5 and 6 below, the following settlement provisions shall apply.
The CAGR PRUs, to the extent Vested, shall be settled as soon as reasonably practicable following the end of the Performance Period.
5.Change in Control.
In the event of a Change in Control, where the Participant’s CAGR PRUs are assumed or substituted consistent with Section 4(a) of the Agreement, the Participant’s CAGR PRUs will, to the extent applicable, be subject to the acceleration provisions of Section 1 of the Executive Retention Plan (as well as all other provisions of such plan, including Section 3 thereof), provided that if a qualifying termination under the Executive Retention Plan occurs prior to or during FY23, the applicable CAGR Performance Percentage shall in all cases be 100%, notwithstanding any other higher performance then-predicted or expected. For the avoidance of the doubt, the foregoing acceleration provisions assume a qualifying termination following such Change in Control as set forth in Section 1 of the Executive Retention Plan.
In the event of a Change in Control, where the successor corporation fails to assume the Participant’s CAGR PRUs or substitute an equivalent award such that Section 4(b) of the Agreement applies and the Award expires, the CAGR PRUs will accelerate and become immediately payable with a Rule of 10 CAGR Performance Percentage of 100%, notwithstanding any other higher performance then-predicted or expected.
6.Death, Disability and Involuntary Termination.
If the Participant’s employment with the Company (or any majority or greater owned subsidiary) terminates for any reason other than death or Disability prior to the end of FY23, the CAGR PRUs shall be immediately cancelled without consideration.
If the Company (or any majority or greater owned subsidiary) terminates a Participant’s services other than for Cause during the Performance Period but after the end of FY23, and provided that the Participant returns and makes effective a general release of claims in favor of the Company (and any majority or greater owned subsidiary) within sixty (60) days following such Termination Date, then the number of CAGR PRUs will accelerate and become immediately payable based on the granted CAGR PRUs at target level multiplied by the Proration Factor.
If, at any point while the award is outstanding, the Participant’s employment with the Company terminates by reason of death or Disability, the award shall Vest in full as of immediately prior to such termination.
7.Forfeiture and Clawback Provision
All benefits hereunder shall be subject to the provisions of any recoupment or clawback policy adopted by the Board or required by law, including but not limited to, any requirement to recoup or require forfeiture of any gains realized as a result of a financial restatement by the Company due to fraud or intentional misconduct to the extent such amounts would not have been granted, vested, paid or otherwise received had the financial results been calculated based on the Company’s financial statements as restated (the “Covered Amounts”).
In addition, the Board or Committee shall, in such circumstances as it deems appropriate, recoup or require forfeiture of any Covered Amounts in the event of (a) the Participant’s act or omission resulting in a violation of the Company’s Code of Conduct, Code of Ethics for Chief Executive Officer and Senior Financial Officers or other Company policy, provided that such act or omission occurs following the effective date of the applicable Code or policy, or any amendment to such Code or policy; (b) the adjustment of quarterly or annual financial statements (whether audited or unaudited) for any of the Company’s fiscal years during the Performance Period to correct one or more errors that have a material impact on the Company’s Rule of 10 CAGR; or (c) a recommendation by the Board or Audit Committee of the Company as the result of any ongoing internal investigation.
The Covered Amounts subject to recoupment or forfeiture pursuant to the foregoing shall include the amounts received by the Participant pursuant to this Award under this Agreement, including (a) any
proceeds, gains or other economic benefit actually or constructively received by the Participant upon the receipt or settlement of any Award granted hereunder, or upon the receipt or resale of any Shares underlying the Award and (b) any unvested or unsettled Award (i) in the case of any adjustment or restatement of the Company’s financial statements (including a correction of the Company’s Rule of 10 CAGR), during the three-year period preceding the date on which the Company determined, or if later first disclosed, that it is or will be preparing an adjustment or restatement; or (ii) in the case of any fraud, misconduct, act or omission by the Participant, during the three-year period preceding the date of such fraud, misconduct, act or omission, as determined by the Board or a committee thereof.
8.Section 409A of the Code
Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with Section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. Any amount payable under this Agreement that constitutes deferred compensation subject to Section 409A of the Code shall be paid at the time provided under this Agreement or such other time as permitted under Section 409A of the Code. No interest will be payable with respect to any amount paid within a time period permitted by, or delayed because of, Section 409A of the Code. All payments to be made upon a Termination of Service under this Agreement that are deferred compensation may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event may a Participant directly or indirectly, designate the calendar year of payment.
Notwithstanding the foregoing, in no event whatsoever shall the Company be liable for any additional tax, interest, income inclusion or other penalty that may be imposed on a Participant by Code Section 409A or for damages for failing to comply with Code Section 409A unless such failure is a result of the Company’s breach of this Plan or this Agreement.
9.Definitions
(a).Cause shall mean the dismissal or discharge of a Participant from employment for one or more of the following reasons or actions: (i) failure to perform, to the reasonable satisfaction of the Company, the Participant’s duties and/or responsibilities, as assigned or delegated by the Company; (ii) commission of a felony or crime of moral turpitude, including but not limited to embezzlement or fraud; (iii) material breach of the terms of the Participant’s employment agreement, confidentiality and intellectual property agreement or any other agreement by and between the Participant and the Company; (iv) commission of any act of dishonesty, misconduct or fraud in any way impacting the Company, its clients, or its affiliates; (v) any misconduct which brings the Company into disrepute, including conduct that injures or impairs the Company's business prospects, reputation or standing in the community; or (vi) violation of Company policies, including, without limitation, any violation of the Company’s Code of Conduct and Global Workforce Inclusion Policies; provided, however, that the Company shall allow the Participant a reasonable opportunity (but not in excess of ten (10) calendar days) to cure, to the reasonable satisfaction of the Company, any act or omission applicable to part (i), (iii), or (vi) above, if curable in the Company’s determination; provided, further, that it is understood that willful or grossly negligent acts or omissions will not be curable.
(b).Change in Control shall have the meaning ascribed to it in the Executive Retention Plan; provided, however, that, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would vest or become payable by reason of a Change in Control, such amount shall vest or become payable only if the event constituting a Change in Control would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
(c).Proration Factor shall mean a quotient, the numerator of which is the number of calendar months rounded up to the next whole month) the Participant was in the employ of the Company (or any majority or greater owned subsidiary) during the period commencing with the start of the three-year Performance Period and ending with his or her Termination Date, and the denominator of which is thirty-six (36) months.
(d).Rule of 10 CAGR shall be computed as the average of the Rule of 10 Growth for each fiscal year during the Performance Period.
(e).Rule of 10 Growth shall be computed for each fiscal year during the Performance Period as the sum of: (i) the Company’s year over year Bookings Growth for the applicable fiscal year; and (ii) the amount (in percentage points) by which the Company’s Operating Margin exceeds 50% (not less than zero (0)) for the applicable fiscal year.
(f).Bookings Growth shall be computed for each fiscal year during the Performance Period as the percentage of growth in bookings in the applicable fiscal year from the prior fiscal year (in constant currency and not less than zero (0)). In addition, a one and one half (1.5) weighted factor will apply to bookings growth in excess of 5%. For example, if growth in bookings for a fiscal year is 8%, then the Bookings Growth for that fiscal year would be computed as 9.5% (i.e. 5% + 1.5 x 3%). Finally, a 0.5% deduction will apply to bookings growth below 4%. For example, if growth in bookings for a fiscal year is 3.5%, then the Bookings Growth for that fiscal year would be computes as 3% (3.5% -0.5% deduction).
(g).Operating Margin shall be computed for each fiscal year during the Performance Period according to the Company’s standard methodology for the applicable fiscal year.
APPENDIX B
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
1.Nature of the Grant. In accepting this Agreement, the Participant acknowledges, understands and agrees that:
a.the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
b.the grant of CAGR PRUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of CAGR PRUs, or benefits in lieu of CAGR PRUs even if CAGR PRUs have been awarded in the past;
c.all decisions with respect to future grants of CAGR PRUs, if any, will be at the sole discretion of the Company;
d.the Participant’s participation in the Plan is voluntary;
e.the CAGR PRUs and the Shares subject to the CAGR PRUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
f.the Participant’s participation in the Plan will not create or amend a right to further employment with the Company or, if different, the Participant’s actual employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate the Participant’s service at any time with or without cause;
g.CAGR PRUs are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or to the Employer, and CAGR PRUs are outside the scope of the Participant’s employment contract, if any;
h.CAGR PRUs and the Shares subject to the CAGR PRUs, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
i.unless otherwise agreed with the Company, the CAGR PRUs and the Shares subject to the CAGR PRUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a member of the Group Company;
j.in the event that Participant is not an employee of the Company, the grant of CAGR PRUs will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant of CAGR PRUs will not be interpreted to form an employment contract with the Company or any member of the Group Company (including the Employer);
k.the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
l.if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of CAGR PRUs may increase or decrease;
m.no claim or entitlement to compensation or damages shall arise from forfeiture of the CAGR PRUs resulting from the Participant’s Termination of Service (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any member of the Group Company (including the Employer);
n.neither the Company, or any member of the Group Company (including the Employer) shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the CAGR PRUs or of any amounts due to the Participant pursuant to the settlement of the CAGR PRUs or the subsequent sale of any Shares acquired upon settlement;
o.the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
p.the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., CAGR PRUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party (other than on a “need to know” basis) and (b) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
AVAST LIMITED
LONG TERM INCENTIVE PLAN
PERFORMANCE STOCK UNIT AWARD AGREEMENT
RECITALS
A.The Board has adopted the Avast Limited Long Term Incentive Plan (as amended from time to time, the “Plan”) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company and the members of the Group Company.
B.The Participant is to render valuable services to the Company and/or any member of the Group Company, and this Performance Stock Unit Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Performance Stock Units (each a performance based restricted stock unit, a “TSR PRU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Performance Stock Units. The Company hereby awards to the Participant TSR PRUs under the Plan. Each TSR PRU represents the right to receive one share of Common Stock on vesting based on achievement of the performance objectives set forth in Appendix A attached hereto, subject to the provisions of this Agreement. The number of Shares subject to this Award, the applicable vesting schedule for the TSR PRUs, the dates on which those Vested Shares shall be issued to the Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The “Award Date” shall mean the date the TSR PRUs are granted to the Participant pursuant to this Agreement and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of a TSR PRU award pursuant to the Plan and terms of this Agreement (the “Notice of Grant”). | ||||
Vesting Schedule: | The TSR PRUs shall Vest pursuant to the schedule set forth on Appendix A hereto. Subject to the provisions of Appendix A hereto, the TSR PRUs shall Vest on each applicable vesting date only if the Participant’s services have not been terminated as of such date, and no additional Shares shall Vest following the Participant’s date of a Termination of Service (as defined below) (the “Termination Date”). | ||||
Issuance Schedule: | The Shares in which the Participant Vests shall be issuable as set forth in Section 6. However, the actual number of Shares to be issued will be subject to the provisions of Section 7 (pursuant to which the applicable withholding taxes are to be collected) and Appendix A. | ||||
2.Limited Transferability. This Award, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with this Agreement and the Plan.
3.Cessation of Service. Subject to the provisions of Appendix A hereto, should the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or member of the Group Company be terminated for any or no reason (whether or not in breach of local labor laws) (a “Termination of Service”), any unvested TSR PRUs will be immediately thereafter cancelled and forfeited for no consideration, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited TSR PRUs and the Participant’s right to receive TSR PRUs and Vest under the Plan in respect thereof, if any, will terminate effective as of the Participant’s Termination Date. For purposes of service, transfer of employment between the Company and any member of the Group Company shall not constitute a Termination of Service. The Committee shall have the exclusive discretion to determine when a Termination of Service has occurred for purposes of the Plan and the Participant’s Termination Date.
4.Corporate Transaction. Subject to the provisions of Appendix A hereto:
a.In the event of a Change in Control (which for purposes of this Agreement, shall be defined under the NortonLife Lock Inc. Executive Retention Plan, as amended, the “Executive Retention Plan”), any or all outstanding TSR PRUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as was provided to stockholders (after taking into account the existing provisions of the TSR PRUs), in each case in accordance with Section 13 of the Plan.
b.In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Section 4(a) above) pursuant to a Change in Control, this Award will expire on such transaction at such time and on such conditions as the Board shall determine in accordance with the Plan.
c.Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these TSR PRUs from Section 409A of the Code or (ii) comply with Section 409A of the Code.
d.This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
5.Adjustment in Shares. The Participant acknowledges that the TSR PSUs and the Shares subject to the TSR PSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the shares of Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 14 of the Plan.
6.Issuance of Shares of Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the TSR PRU (including the date (if any) on which vesting of any portion of this TSR PRU accelerates), the Company shall issue to, or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying shares of Common Stock that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. In no event shall the date of settlement (meaning the date that shares of Common Stock are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. The value of Shares shall not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock that otherwise would have been settled during the first six (6) months following the Participant’s separation from
service will instead be settled during the seventh (7th) month following the Participant’s separation from service or (ii) the date of the Participant’s death following the Participant’s separation from service, unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.The holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the TSR PRUs until the Award holder becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax Obligations (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of TSR PRUs (with such total number adjusted pursuant to Section 5 of this Agreement, and Section 4.1 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original TSR PRUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. For purposes of clarity, if the TSR PRUs (or any portion thereof) are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited TSR PRUs. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any TSRPRUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 3.
7.Tax Obligations. The Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any member of the Group Company (the “Tax Obligations”) that arise in connection with this Award. The satisfaction of the Tax Obligations shall occur at the time the Participant receives a distribution of shares of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any member of the Group Company in accordance with applicable law. The Participant hereby authorizes the Company, at its sole discretion, subject to any limitations under applicable law, to satisfy any such Tax Obligations by any of the following methods: (a) in the event the TSR PRU is to be settled in part in cash rather than settled in full in Shares, withholding from the cash to be distributed to the Participant in settlement of this Award, (b) permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or any member of the Group Company, and (c) withholding Shares that are otherwise to be issued and delivered to the Participant under this Award in satisfaction of the Tax Obligations up to the maximum statutory amount. In addition, to the extent this Award is not settled in cash, the Company is authorized to satisfy any Tax Obligations by withholding for the Tax Obligations from wages and other cash compensation payable to the Participant or by causing the Participant to tender a cash payment to the Company if the Committee determines in good faith at the time the Tax Obligations arise that withholding pursuant to the foregoing alternatives (b) and (c) above are not in the best interest of the Company or the Participant. In the event the Tax Obligations arise prior to the delivery to the Participant of shares of Common Stock or it is determined after the delivery of Shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any member of the Group Company, the Participant shall indemnify and hold the Company and the members of the Group Company harmless from any failure by the Company and/or any members of the Group Company to withhold the proper amount. The Company may refuse to deliver the Shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax Obligations as described in this Section 7.
The value of the Shares to be applied as a credit against the Tax Obligations will be determined based on the “fair market value” of these Shares, determined as of the effective date when the Tax
Obligations otherwise would have been withheld in cash. The Participant shall pay to the Company any amount of Tax Obligations that the Company may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s purchase of Shares that cannot be satisfied by the means previously described. Finally, the Participant acknowledges that the Company has no obligation to deliver Shares to the Participant until the Participant has satisfied the obligations in connection with the Tax Obligations as described in this Section 7.
The Participant acknowledges that there may be adverse tax consequences upon the receipt or vesting of the TSR PRUs or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or any member of the Group Company or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
8.Compliance with Laws and Regulations.
a.The issuance of shares of Common Stock pursuant to the TSR PRU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto, and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the shares of Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Agreement and the Plan).
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated below the Participant’s signature line on this Agreement (as may be updated from time to time by written notice from the Participant). All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
11.Construction. This Agreement and the Notice of Grant evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the TSR PRU.
12.Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to, and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the TSR PRU is granted, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.Employment At-Will. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employment of the Company or any member of the Group Company for any period of specific duration, or be interpreted as forming or amending an employment or service contract with the Company or any member of the Group Company or interfere with or otherwise restrict in any way the rights of the Company (or any member of the Group Company retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Limitations Applicable to Section 16 Officers. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is a a Section 16 officer of the Company under the Exchange Act (a “Section 16 Officer”), the Plan, this Agreement and the TSR PRUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent applicable laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
16.Entire Agreement. The Plan and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company or any member of the Group Company in effect as of the date a determination is to be made under this Agreement.
17.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
18.Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, TSR PRUs granted under the Plan or future TSR PRUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
19.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between countries, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
20.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
21.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
, 202[●].
NORTONLIFELOCK INC.
By:
Title:
Address:
PARTICIPANT
Signature:
Address:
APPENDIX A
PERFORMANCE SCHEDULE
The number of TSR PRUs that will be earned shall be based on the metrics set forth below. Terms not otherwise defined in this Appendix A shall have the meaning ascribed to them in the Plan.
1.Grant of TSR Performance Stock Units.
Subject to the terms and conditions of the Agreement, the Notice of Grant and the Plan, the Company hereby grants to the Participant a number of TSR PRUs set forth in the Notice of Grant (the “TSR PRU Grant”), subject to vesting terms as set forth below.
2.Performance Metrics.
The Participant can earn the TSR PRUs based on the Company’s performance over the three (3) year period set forth in the Notice of Grant hereafter referred to as the “Performance Period”, which Performance Period begins on April 2, 2022 (“FY23”) and ends April 4, 2025 (“FY25”). This Agreement covers the relative TSR component of the FY23 PRUs granted to the Participant.
Total Shareholder Return (TSR). The number of TSR PRUs that may be earned following the last day of FY25 will range from 0% to 200% of the total TSR PRU Grant, and shall be determined based upon the Company’s three (3) year TSR performance for FY25 as measured against the three (3) year TSR performance of the companies comprising the Nasdaq composite over the same period (with the companies in the Nasdaq composite being comprised of those companies that make up the Nasdaq composite at the end of FY25 and with TSR measurements being made at the end of FY25), all as determined by the Committee and set forth in the following chart (“TSR Performance”). Three (3) year Company TSR Performance versus three (3) year Nasdaq composite performance will be calculated as the sixty (60) trading day average of the Company’s stock price at the beginning and end of such three (3) year period. For the avoidance of doubt, the TSR Performance period shall begin on April 2, 2022 and end on April 4, 2025. TSR Performance between the Threshold Level and Maximum Level will be determined based on a linear interpolation between the applicable performance levels.
Performance Levels | TSR Performance | TSR Performance Percentage | ||||||
Below Threshold Level | Below 25th percentile | 0% | ||||||
Threshold Level | 25th percentile | 50% | ||||||
Target Level | 50th percentile | 100% | ||||||
Maximum Level | 75th percentile | 200% | ||||||
Nothing in this Section or elsewhere in the Agreement shall be read as allowing the Participant to earn more than 200% of the TSR PRU Grant during the Performance Period.
Notwithstanding anything to the contrary in this Appendix A, the Committee may, in its sole discretion, adjust the TSR Performance goal(s) to account for strategic transactions to the extent the Committee determines to be reasonable or appropriate.
3.Committee Certification and Vesting of TSR PRUs.
As soon as practicable following the completion of the Performance Period, the Committee shall determine and certify in writing the TSR Performance that has been attained, the TSR Performance Percentage (as provided in the table above) and the number of TSR PRUs that will be eligible to vest based on the TSR Performance Percentage. Notwithstanding the foregoing, if pursuant to Section 5, the TSR PRUs cease to be subject to the Performance Levels, certification by the Committee shall no longer be required for the TSR PRUs to become vested pursuant to Section 5. The Committee’s determination of the number of earned and vested TSR PRUs shall be binding on the Participant.
The earned TSR PRUs will vest on the day following the last day of the Performance Period, subject to (a) Committee certification as set forth above and (b) the Participant’s continued service with the Company or any member of the Group Company through the day following the last day of the Performance Period, except as provided in Sections 5 and 6 below.
4.Timing of Settlement.
Subject to Section 5 and 6 below, the following settlement provisions shall apply.
The TSR PRUs, to the extent Vested, shall be settled as soon as reasonably practicable following the end of the Performance Period.
5.Change in Control.
In the event of a Change in Control, where the Participant’s TSR PRUs are assumed or substituted consistent with Section 4(a) of the Agreement, the Participant’s TSR PRUs will, to the extent applicable, be subject to the acceleration provisions of Section 1 of the Executive Retention Plan (as well as all other provisions of such plan, including Section 3 thereof), provided that if a qualifying termination under the Executive Retention Plan occurs prior to or during FY23, the applicable TSR Performance Percentage shall in all cases be one hundred percent (100%), notwithstanding any other higher performance then-predicted or expected. For the avoidance of the doubt, the foregoing acceleration provisions assume a qualifying termination following such Change in Control as set forth in Section 1 of the Executive Retention Plan.
In the event of a Change in Control, where the successor corporation fails to assume the Participant’s TSR PRUs or substitute an equivalent award such that Section 4(b) of the Agreement applies and the Award expires, the TSR PRUs will accelerate and become immediately payable with a TSR Performance Percentage of one hundred percent (100%), notwithstanding any other higher performance then-predicted or expected.
6.Death, Disability and Involuntary Termination.
If the Participant’s employment with the Company (or any majority or greater owned subsidiary) terminates for any reason other than death or Disability prior to the end of FY23, the TSR PRUs shall be immediately cancelled without consideration.
If the Company (or any majority or greater owned subsidiary) terminates a Participant’s services other than for Cause during the Performance Period but after the end of FY23, and provided that the Participant returns and makes effective a general release of claims in favor of the Company (and any majority or greater owned subsidiary) within sixty (60) days following such Termination Date, then the number of TSR PRUs will accelerate and become immediately payable based on the granted TSR PRUs at target level multiplied by the Proration Factor.
If, at any point while the award is outstanding, the Participant’s employment with the Company terminates by reason of death or Disability, the award shall Vest in full as of immediately prior to such termination.
7.Forfeiture and Clawback Provision
All benefits hereunder shall be subject to the provisions of any recoupment or clawback policy adopted by the Board or required by law, including but not limited to, any requirement to recoup or require forfeiture of any gains realized as a result of a financial restatement by the Company due to fraud or intentional misconduct to the extent such amounts would not have been granted, vested, paid or otherwise received had the financial results been calculated based on the Company’s financial statements as restated (the “Covered Amounts”).
In addition, the Board or Committee shall, in such circumstances as it deems appropriate, recoup or require forfeiture of any Covered Amounts in the event of (a) the Participant’s act or omission resulting in a violation of the Company’s Code of Conduct, Code of Ethics for Chief Executive Officer and Senior Financial Officers or other Company policy, provided that such act or omission occurs following the effective date of the applicable Code or policy, or any amendment to such Code or policy; (b) the adjustment of quarterly or annual financial statements (whether audited or unaudited) for any of the Company’s fiscal years during the Performance Period to correct one or more errors that are material to such financial statements; or (c) a recommendation by the Company’s Board or Audit Committee as the result of any ongoing internal investigation.
The Covered Amounts subject to recoupment or forfeiture pursuant to the foregoing shall include the amounts received by the Participant pursuant to this Award under this Agreement, including (a) any proceeds, gains or other economic benefit actually or constructively received by the Participant upon the receipt or settlement of any Award granted hereunder, or upon the receipt or resale of any Shares underlying the Award and (b) any unvested or unsettled Award (i) in the case of any adjustment or restatement of the Company’s financial statements , during the three-year period preceding the date on which the Company determined, or if later first disclosed, that it is or will be preparing an adjustment or restatement; or (ii) in the case of any fraud, misconduct, act or omission by the Participant, during the three-year period preceding the date of such fraud, misconduct, act or omission, as determined by the Board or a committee thereof.
8.Section 409A of the Code
Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with Section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. Any amount payable under this Agreement that constitutes deferred compensation subject to Section 409A of the Code shall be paid at the time provided under this Agreement or such other time as permitted under Section 409A of the Code. No interest will be payable with respect to any amount paid within a time period permitted by, or delayed because of, Section 409A of the Code. All payments to be made upon a Termination of Service under this Agreement that are deferred compensation may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event may a Participant directly or indirectly, designate the calendar year of payment.
Notwithstanding the foregoing, in no event whatsoever shall the Company be liable for any additional tax, interest, income inclusion or other penalty that may be imposed on a Participant by Code Section 409A or for damages for failing to comply with Code Section 409A unless such failure is a result of the Company’s breach of this Plan or this Agreement.
9.Definitions
(a).Cause shall mean the dismissal or discharge of a Participant from employment for one or more of the following reasons or actions: (i) failure to perform, to the reasonable satisfaction of the
Company, the Participant’s duties and/or responsibilities, as assigned or delegated by the Company; (ii) commission of a felony or crime of moral turpitude, including but not limited to embezzlement or fraud; (iii) material breach of the terms of the Participant’s employment agreement, confidentiality and intellectual property agreement or any other agreement by and between the Participant and the Company; (iv) commission of any act of dishonesty, misconduct or fraud in any way impacting the Company, its clients, or its affiliates; (v) any misconduct which brings the Company into disrepute, including conduct that injures or impairs the Company's business prospects, reputation or standing in the community; or (vi) violation of Company policies, including, without limitation, any violation of the Company’s Code of Conduct and Global Workforce Inclusion Policies; provided, however, that the Company shall allow the Participant a reasonable opportunity (but not in excess of ten (10) calendar days) to cure, to the reasonable satisfaction of the Company, any act or omission applicable to part (i), (iii), or (vi) above, if curable in the Company’s determination; provided, further, that it is understood that willful or grossly negligent acts or omissions will not be curable.
(b).Change in Control shall have the meaning ascribed to it in the Executive Retention Plan; provided, however, that, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would vest or become payable by reason of a Change in Control, such amount shall vest or become payable only if the event constituting a Change in Control would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
(c).Proration Factor shall mean a quotient, the numerator of which is the number of calendar months rounded up to the next whole month) the Participant was in the employ of the Company (or any majority or greater owned subsidiary) during the period commencing with the start of the three-year Performance Period and ending with his or her Termination Date, and the denominator of which is thirty-six (36) months.
(d).TSR shall mean the number, expressed as a percentage, equal to (i) the change in stock price over the applicable period (measured using a sixty (60) trading day average stock price at the beginning including the value of dividends issued over the same period and end of the applicable period) plus the value of dividends issued in the respective period, divided by (ii) the sixty (60) trading day average stock price at the beginning of the applicable period including the value of dividends issued over the same period.
(e).TSR Target Grant shall mean the number of shares of Common Stock associated with the TSR PRU grant as determined by the Committee, assuming a TSR Performance Percentage of one hundred percent (100%).
APPENDIX B
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
1.Nature of the Grant. In accepting this Agreement, the Participant acknowledges, understands and agrees that:
a.the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
b.the grant of TSR PRUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of TSR PRUs, or benefits in lieu of TSR PRUs even if TSR PRUs have been awarded in the past;
c.all decisions with respect to future grants of TSR PRUs, if any, will be at the sole discretion of the Company;
d.the Participant’s participation in the Plan is voluntary;
e.the TSR PRUs and the Shares subject to the TSR PRUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
f.the Participant’s participation in the Plan will not create or amend a right to further employment with the Company or, if different, the Participant’s actual employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate the Participant’s service at any time with or without cause;
g.TSR PRUs are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or to the Employer, and TSR PRUs are outside the scope of the Participant’s employment contract, if any;
h.TSR PRUs and the Shares subject to the TSR PRUS, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
i.unless otherwise agreed with the Company, the TSR PRUs and the Shares subject to the TSR PRUS, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a member of the Group Company;
j.in the event that Participant is not an employee of the Company, the grant of TSR PRUs will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant of TSR PRUs will not be interpreted to form an employment contract with the Company or any member of the Group Company (including the Employer);
k.the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
l.if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of TSR PRUs may increase or decrease;
m.no claim or entitlement to compensation or damages shall arise from forfeiture of the TSR PRUs resulting from the Participant’s Termination of Service (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any member of the Group Company (including the Employer);
n.neither the Company or any member of the Group Company (including the Employer) shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the TSR PRUs or of any amounts due to the Participant pursuant to the settlement of the TSR PRUs or the subsequent sale of any Shares acquired upon settlement;
o.the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
p.the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., TSR PRUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party (other than on a “need to know” basis) and (b) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his orher ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
AVAST LIMITED
LONG TERM INCENTIVE PLAN
PERFORMANCE STOCK UNIT AWARD AGREEMENT
RECITALS
A.The Board has adopted the Avast Limited Long Term Incentive Plan (as amended from time to time, the “Plan”) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company and the members of the Group Company.
B.The Participant is to render valuable services to the Company and/or any member of the Group Company, and this Performance Stock Unit Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Performance Stock Units (each a performance based restricted stock unit, a “VCP PRU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Performance Stock Units. The Company hereby awards to the Participant VCP PRUs under the Plan. Each VCP PRU represents the right to receive one share of Common Stock on vesting based on achievement of the performance objectives set forth in Appendix A, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the VCP PRUs, the dates on which those Vested Shares shall be issued to Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The Award Date shall mean the date the VCP PRUs are granted to the Participant pursuant to this Agreement (the “Award Date”) and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of a VCP PRU award pursuant to the Plan and terms of this Agreement (the “Notice of Grant”). | ||||
Vesting Schedule: | The VCP PRUs shall Vest pursuant to the schedule set forth on Appendix A hereto. Subject to the provisions of Appendix A hereto, the VCP PRUs shall Vest on each applicable vesting date only if the Participant’s services have not been terminated as of such date, and no additional Shares shall Vest following the Participant’s date of a Termination of Service (as defined below) (the “Termination Date”). | ||||
Issuance Schedule: | The Shares in which the Participant Vests shall be issuable as set forth in Section 6. However, the actual number of Shares to be issued will be subject to the provisions of Section 7 (pursuant to which the applicable withholding taxes are to be collected) and Appendix A. | ||||
2.Limited Transferability. This Award, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with this Agreement and the Plan.
3.Cessation of Service. Subject to the provisions of Appendix A hereto, should the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or a member of the Group Company be terminated for any or no reason (whether or not in breach of local labor laws) (a “Termination of Service”), any unvested VCP PRUs will be immediately thereafter cancelled, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited VCP PRUs and the Participant’s right to receive VCP PRUs and Vest under the Plan in respect thereof, if any, will terminate effective as of the Participant’s Termination Date. For purposes of service, transfer of employment between the Company and any member of the Group Company shall not constitute Termination of Service. The Committee shall have the sole discretion to determine when the Participant is no longer actively providing service for purposes of the Plan and the Participant’s Termination Date.
4.Corporate Transaction. Subject to the provisions of Appendix A hereto:
a.In the event of a Change in Control (which for purposes of this Agreement, shall be defined under the NortonLife Lock Inc. Executive Retention Plan, as amended, the “Executive Retention Plan”), any or all outstanding VCP PRUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as was provided to stockholders (after taking into account the existing provisions of the VCP PRUs), in each case in accordance with Section 13 of the Plan.
b.In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Section 4(a) above) pursuant to a Change in Control, this Award will expire on such transaction at such time and on such conditions as the Board shall determine in accordance with the Plan.
c.Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these VCP PRUs from Section 409A of the Code or (ii) comply with Section 409A of the Code.
d.This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
5.Adjustment in Shares. The Participant acknowledges that the VCP PSUs and the Shares subject to the VCP PRUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 14 of the Plan.
6.Issuance of Shares of Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the VCP PRUs (including the date (if any) on which vesting of any portion of the VCP PRUs accelerate), the Company shall issue to, or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying shares of Common Stock that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. In no event shall the date of settlement (meaning the date that shares of Common Stock are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. The value of Shares will not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock that otherwise would have been settled during the first six (6) months following the Participant’s separation from service will instead be settled during the seventh (7th) month following the Participant’s separation from service, or (ii) the date of the Participant’s death following the Participant’s separation from service unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.The holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the VCP PRUs until the Award holder becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax Obligations (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of VCP PRUs (with such total number adjusted pursuant to Section 5 of this Agreement, and Section 4.1 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original VCP PRUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. For purposes of clarity, if the VCP PRUs (or any portion thereof) are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited VCP PRUs. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any VCP PRUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 3.
7.Tax Obligations. The Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any member of the Group Company (the “Tax Obligations”) that arise in connection with this Award. The satisfaction of the Tax Obligations shall occur at the time the Participant receives a distribution of shares of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any member of the Group Company in accordance with applicable law. The Participant hereby authorizes the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by any of the following methods: (a) in the event the VCP PRUs are to be settled in part in cash rather than settled in full in Shares, withholding from the cash to be distributed to the Participant in settlement of this Award, (b) permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or the member of the Group Company, and (c) withholding Shares that are otherwise to be issued and delivered to the Participant under this Award in satisfaction of the Tax Obligations up to the maximum statutory amount. In addition, to the extent this Award is not settled in cash, the Company is authorized to satisfy any Tax Obligations by withholding for the Tax Obligations from wages and other cash compensation payable to the Participant or by causing the Participant to tender a cash payment to the Company if the Committee determines in good faith at the time the Tax Obligations arise that withholding pursuant to the foregoing alternatives (b) and (c) above are not in the best interest of the Company or the Participant. In the event the Tax Obligations arise prior to the delivery to the Participant of Common Stock or it is determined after the delivery of Shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any member of the Group Company, the Participant shall indemnify and hold the Company and the members of the Group Company harmless from any failure by the Company and/or any member of the Group Company to withhold the proper amount. The Company may refuse to deliver the Shares if
the Participant fails to comply with the Participant’s obligations in connection with the Tax Obligations as described in this Section 7.
The value of the Shares to be applied as a credit against the Tax Obligations will be determined based on the “fair market value” of these Shares, determined as of the effective date when the Tax Obligations otherwise would have been withheld in cash. The Participant shall pay to the Company any amount of Tax Obligations that the Company may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s purchase of Shares that cannot be satisfied by the means previously described. Finally, the Participant acknowledges that the Company has no obligation to deliver Shares to the Participant until the Participant has satisfied the obligations in connection with the Tax Obligations as described in this Section 7.
The Participant acknowledges that there may be adverse tax consequences upon the receipt or vesting of the VCP PRUs or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or any member of the Group Company or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
8.Compliance with Laws and Regulations.
a.The issuance of shares of Common Stock pursuant to the VCP PRUs shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto, and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Agreement and the Plan).
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated below the Participant’s signature line on this Agreement (as may be updated from time to time by written notice from the Participant). All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
11.Construction. This Agreement and the Notice of Grant evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the VCP PRUs.
12.Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to, and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the VCP PRUs are granted, the number of shares of Common Stock which may without stockholder approval be issued
under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.Employment At-Will. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employment of the Company or any member of the Group Company for any period of specific duration, or be interpreted as forming or amending an employment or service contract with the Company or any member of the Group Company or interfere with or otherwise restrict in any way the rights of the Company (or any member of the Group Company retaining the Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Limitations Applicable to Section 16 Officers. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is a a Section 16 officer of the Company under the Exchange Act (a “Section 16 Officer”), the Plan, this Agreement and the VCP PRUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent applicable laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
16.Entire Agreement. The Plan and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company or any member of the Group Company in effect as of the date a determination is to be made under this Agreement.
17.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
18.Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, VCP PRUs granted under the Plan or future VCP PRUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
19.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between countries, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
20.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
21.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
, 202[●].
NORTONLIFELOCK INC.
By:
Title:
Address:
PARTICIPANT
Signature:
Address:
APPENDIX A
PERFORMANCE SCHEDULE
PERFORMANCE SCHEDULE
The number of VCP PRUs that will be earned shall be based on the metrics set forth below. Terms not otherwise defined in this Appendix A shall have the meaning ascribed to them in the Plan.
1.Grant of VCP Performance Stock Units.
Subject to the terms and conditions of the Agreement, the Notice of Grant and the Plan, the Company hereby grants to the Participant a number of VCP PRUs set forth in the Notice of Grant (the “VCP PRU Grant”), subject to vesting terms as set forth below.
2.Performance Metrics.
The Participant can earn the VCP PRUs based on the Company’s performance at any time over the “Performance Period”, which Performance Period begins on December 1, 2021 and ends April 3, 2026 (“FY26”).
Share Price Appreciation with Relative Total Shareholder Return (rTSR) Gates. Subject to applicable rTSR Gates of 25th % rTSR threshold for vesting between 50-100% of the VCP Target Grant, and 50th % rTSR for vesting in excess of 100% of the VCP Target Grant, the number of VCP PRUs that may be earned during the Performance Period will range from 0% to 200% of the total VCP Target Grant, and shall be determined by the Committee as set forth in Section 3, based upon the Company’s share price appreciation (which shall be determined by reference to the average closing price over any consecutive ninety (90) calendar day period during the Performance Period), as measured against the share price targets set forth in the following chart (“Share Price Targets”). The rTSR gates shall be determined by the Committee as set forth in Section 3, based upon the Company’s TSR performance as measured against the TSR performance of the companies comprising the Nasdaq composite from the date of grant through the same ninety (90) calendar day period during which the Share Price Targets were achieved during the Performance Period, as set forth in the following chart (“rTSR Gates”). For the avoidance of doubt, subject to applicable rTSR Gates, the Share Price Targets can be achieved at any time during the Performance Period, and the highest achievement during the Performance Period shall be utilized to determine the number of VCP PRUs earned upon the vesting date of the last day of FY26. Performance between the Threshold Level and Target Level and between the Target Level and the Maximum Level will be determined based on a linear interpolation between the applicable performance levels.
Performance Levels | rTSR Gates | Share Price Targets | VCP Performance % | ||||||||
Below Threshold Level | Below 25th % rTSR | Below $35/per share | 0% | ||||||||
Threshold Level | 25th % rTSR | $35/per share | 50% | ||||||||
Target Level | 25th % rTSR | $40/per share | 100% | ||||||||
Maximum Level | 50th %rTSR | $50/per share | 200% | ||||||||
Nothing in this Section or elsewhere in this Agreement shall be read as allowing the Participant to earn more than 200% of the VCP Target Grant during the Performance Period.
Notwithstanding anything to the contrary in this Appendix A, the Committee may, in its sole discretion, adjust the VCP performance goal(s) to account for strategic transactions to the extent the Committee determines to be reasonable or appropriate.
3.Committee Certification and Vesting of VCP PRUs.
As soon as practicable following the completion of the Performance Period, the Committee shall determine and certify in writing the VCP performance goals have been attained, the VCP Performance Percentage (as provided in the table above) and the number of VCP PRUs that will be eligible to vest based on the VCP Performance Percentage. Notwithstanding the foregoing, if pursuant to Section 5, the
VCP PRUs cease to be subject to the Performance Levels, certification by the Committee shall no longer be required for the VCP PRUs to become vested pursuant to Section 5. The Committee’s determination of the number of earned and vested VCP PRUs shall be binding on the Participant.
The earned VCP PRUs will vest on the day following the last day of the Performance Period, subject to (a) Committee certification as set forth above and (b) the Participant’s continued employment through the day following the last day of the Performance Period, except as provided in Sections 5 and 6 below.
4.Timing of Settlement.
Subject to Section 5 and 6 below, the following settlement provisions shall apply.
The VCP PRUs, to the extent Vested, shall be settled as soon as reasonably practicable following the end of the Performance Period.
5.Change in Control.
In the event of a Change in Control, where the Participant’s VCP PRUs are assumed or substituted consistent with Section 4(a) of the Agreement, the Participant’s VCP PRUs will, to the extent applicable, be subject to the acceleration provisions of Section 1 of the Executive Retention Plan, (as well as all other provisions of such plan, including Section 3 thereof), provided that if a qualifying termination under the Executive Retention Plan occurs prior to or during FY23, the applicable VCP Performance Percentage shall in all cases be 100%, notwithstanding any other higher performance then-predicted or expected. For the avoidance of the doubt, the foregoing acceleration provisions assume a qualifying termination following such Change in Control as set forth in Section 1 of the Executive Retention Plan.
In the event of a Change in Control, where the successor corporation fails to assume the Participant’s VCP PRUs or substitute an equivalent award such that Section 4(b) of the Notice of Grant applies and the Award expires, the VCP PRUs will accelerate and become immediately payable at the higher of (a) VCP Performance Percentage of 100% (i.e., target) or (b) the then highest achieved performance percentage based on the Performance Metrics (as set forth in Section 2 above) as of that date.
6.Death, Disability and Involuntary Termination.
If the Participant’s employment with the Company (or any majority or greater owned subsidiary) terminates for any reason other than death or Disability prior to the end of FY23, the VCP PRUs shall be immediately cancelled without consideration.
If the Company (or any majority or greater owned subsidiary) terminates a Participant’s services other than for Cause during the Performance Period but after the end of FY23, and provided that the Participant returns and makes effective a general release of claims in favor of the Company (and any majority or greater owned subsidiary) within sixty (60) days following such Termination Date, then the number of VCP PRUs that will accelerate and become immediately payable will be determined using the higher of (a) a VCP Performance Percentage of 100% (i.e., target) or (b) the then highest achieved performance percentage based on the Performance Metrics (as set forth in Section 2 above) as of that date, multiplied by the Proration Factor.
If, at any point while the award is outstanding, the Participant’s employment with the Company terminates by reason of death or Disability, the award shall Vest in full as of immediately prior to such termination.
7.Forfeiture and Clawback Provision
All benefits hereunder shall be subject to the provisions of any recoupment or clawback policy adopted by the Board or required by law, including but not limited to, any requirement to recoup or require forfeiture of any gains realized as a result of a financial restatement by the Company due to fraud or intentional misconduct to the extent such amounts would not have been granted, vested, paid or otherwise received had the financial results been calculated based on the Company’s financial statements as restated (the “Covered Amounts”).
In addition, the Board or Committee shall, in such circumstances as it deems appropriate, recoup or require forfeiture of any Covered Amounts in the event of (a) the Participant’s act or omission resulting in a violation of the Company’s Code of Conduct, Code of Ethics for Chief Executive Officer and Senior
Financial Officers or other Company policy, provided that such act or omission occurs following the effective date of the applicable Code or policy, or any amendment to such Code or policy; (b) the adjustment of quarterly or annual financial statements (whether audited or unaudited) for any of the Company’s fiscal years during the Performance Period to correct one or more errors that are material to such financial statements; or (c) a recommendation by the Board or Company Audit Committee as the result of any ongoing internal investigation.
The Covered Amounts subject to recoupment or forfeiture pursuant to the foregoing shall include the amounts received by the Participant pursuant to this Award under this Agreement, including (a) any proceeds, gains or other economic benefit actually or constructively received by the Participant upon the receipt or settlement of any Award granted hereunder, or upon the receipt or resale of any Shares underlying the Award and (b) any unvested or unsettled Award (i) in the case of any adjustment or restatement of the Company’s financial statements , during the three-year period preceding the date on which the Company determined, or if later first disclosed, that it is or will be preparing an adjustment or restatement; or (ii) in the case of any fraud, misconduct, act or omission by the Participant, during the three-year period preceding the date of such fraud, misconduct, act or omission, as determined by the Board or a committee thereof.
8.Section 409A of the Code
Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with Section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. Any amount payable under this Agreement that constitutes deferred compensation subject to Section 409A of the Code shall be paid at the time provided under this Agreement or such other time as permitted under Section 409A of the Code. No interest will be payable with respect to any amount paid within a time period permitted by, or delayed because of, Section 409A of the Code. All payments to be made upon a Termination of Service under this Agreement that are deferred compensation may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event may Participant directly or indirectly, designate the calendar year of payment and in the event of a qualifying termination of employment, if the release period crosses two calendar years, any severance payments, which are deferred compensation, shall be paid in the calendar year following the year in which the termination occurs.
Notwithstanding the foregoing, in no event whatsoever shall the Company be liable for any additional tax, interest, income inclusion or other penalty that may be imposed on a Participant by Code Section 409A or for damages for failing to comply with Code Section 409A unless such failure is a result of the Company’s breach of this Plan or this Agreement.
9.Definitions
(a).Cause shall mean the dismissal or discharge of a Participant from employment for one or more of the following reasons or actions: (i) failure to perform, to the reasonable satisfaction of the Company, the Participant’s duties and/or responsibilities, as assigned or delegated by the Company; (ii) commission of a felony or crime of moral turpitude, including but not limited to embezzlement or fraud; (iii) material breach of the terms of the Participant’s employment agreement, confidentiality and intellectual property agreement or any other agreement by and between the Participant and the Company; (iv) commission of any act of dishonesty, misconduct or fraud in any way impacting the Company, its clients, or its affiliates; (v) any misconduct which brings the Company into disrepute, including conduct that injures or impairs the Company's business prospects, reputation or standing in the community; or (vi) violation of Company policies, including, without limitation, any violation of the Company’s Code of Conduct and Global Workforce Inclusion Policies; provided, however, that the Company shall allow the Participant a reasonable opportunity (but not in excess of ten (10) calendar days) to cure, to the reasonable satisfaction of the Company, any act or omission applicable to part (i), (iii), or (vi) above, if curable in the Company’s
determination; provided, further, that it is understood that willful or grossly negligent acts or omissions will not be curable.
(b).Change in Control shall have the meaning ascribed to it in the Executive Retention Plan; provided, however, that, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would vest or become payable by reason of a Change in Control, such amount shall vest or become payable only if the event constituting a Change in Control would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
(c).Proration Factor shall mean a quotient, the numerator of which is the number of calendar months rounded up to the next whole month) the Participant was in the employ of the Company (or any majority or greater owned subsidiary) during the period commencing with the start of the four-year Performance Period and ending with his or her termination date, and the denominator of which is fifty- two (52) months.
(d).rTSR shall mean the number, expressed as a percentage, equal to (i) the change in stock price over the applicable period (measured using a ninety (90) calendar day average stock price at the beginning (including the value of dividends issued over the same period) and end of the applicable period) plus the value of dividends issued in the respective period, divided by (ii) the ninety (90) calendar day average stock price at the beginning of the applicable period including the value of dividends issued over the same period.
(e).VCP Target Grant shall mean the number of shares of Common Stock associated with the VCP PRU grant as determined by the Committee, assuming a VCP Performance Percentage of 100%.
APPENDIX B
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
1.Nature of the Grant. In accepting this Agreement, the Participant acknowledges, understands and agrees that:
a.the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
b.the grant of VCP PRUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of VCP PRUs, or benefits in lieu of VCP PRUs even if VCP PRUs have been awarded in the past;
c.all decisions with respect to future grants of VCP PRUs, if any, will be at the sole discretion of the Company;
d.the Participant’s participation in the Plan is voluntary;
e.the VCP PRUs and the Shares subject to the VCP PRUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
f.the Participant’s participation in the Plan will not create or amend a right to further employment with the Company or, if different, the Participant’s actual employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate the Participant’s service at any time with or without cause;
g.VCP PRUs are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or to the Employer, and VCP PRUs are outside the scope of the Participant’s employment contract, if any;
h.VCP PRUs and the Shares subject to the VCP PRUS, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
i.unless otherwise agreed with the Company, the VCP PRUs and the Shares subject to the VCP PRUS, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a member of a Group Company;
j.in the event that Participant is not an employee of the Company, the grant of VCP PRUs will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant of VCP PRUs will not be interpreted to form an employment contract with the Company or any member of the Group Company (including the Employer);
k.the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
l.if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of VCP PRUs may increase or decrease;
m.no claim or entitlement to compensation or damages shall arise from forfeiture of the VCP PRUs resulting from the Participant’s Termination of Service (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any member of the Group Company (including the Employer);
n.neither the Company nor any member of the Group Company shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the VCP PRUs or of any amounts due to the Participant pursuant to the settlement of the VCP PRUs or the subsequent sale of any Shares acquired upon settlement;
o.the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
p.the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., VCP PRUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party (other than on a “need to know” basis) and (b) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
AVAST LIMITED
LONG TERM INCENTIVE PLAN
PERFORMANCE STOCK UNIT AWARD AGREEMENT
RECITALS
A.The Board has adopted the Avast Limited Long Term Incentive Plan (as amended from time to time, the “Plan”) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company and the members of the Group Company.
B.The Participant is to render valuable services to the Company and/or any member of the Group Company, and this Performance Stock Unit Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Performance Stock Units (each a performance based restricted stock unit, a “VCP PRU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Performance Stock Units. The Company hereby awards to the Participant VCP PRUs under the Plan. Each VCP PRU represents the right to receive one share of Common Stock on vesting based on achievement of the performance objectives set forth in Appendix A, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the VCP PRUs, the dates on which those Vested Shares shall be issued to Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The Award Date shall mean the date the VCP PRUs are granted to the Participant pursuant to this Agreement (the “Award Date”) and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of a VCP PRU award pursuant to the Plan and terms of this Agreement (the “Notice of Grant”). | ||||
Vesting Schedule: | The VCP PRUs shall Vest pursuant to the schedule set forth on Appendix A hereto. Subject to the provisions of Appendix A hereto, the VCP PRUs shall Vest on each applicable vesting date only if the Participant’s services have not been terminated as of such date, and no additional Shares shall Vest following the Participant’s date of a Termination of Service (as defined below) (the “Termination Date”). | ||||
Issuance Schedule: | The Shares in which the Participant Vests shall be issuable as set forth in Section 6. However, the actual number of vested Shares to be issued will be subject to the provisions of Section 7 (pursuant to which the applicable withholding taxes are to be collected) and Appendix A. | ||||
2.Limited Transferability. This Award, and any interest therein, shall not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with this Agreement and the Plan.
3.Cessation of Service. Subject to the provisions of Appendix A hereto, should the Participant’s service as an employee, director, consultant, independent contractor or advisor to the Company or a member of the Group Company be terminated for any or no reason (whether or not in breach of local labor laws) (a “Termination of Service”), any unvested VCP PRUs will be immediately thereafter cancelled, the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited VCP PRUs and the Participant’s right to receive VCP PRUs and Vest under the Plan in respect thereof, if any, will terminate effective as of the Participant’s Termination Date. For purposes of service, transfer of employment between the Company and any member of the Group Company shall not constitute Termination of Service. The Committee shall have the sole discretion to determine when the Participant is no longer actively providing service for purposes of the Plan and the Participant’s Termination Date.
4.Corporate Transaction. Subject to the provisions of Appendix A hereto:
a.In the event of a Change in Control (which for purposes of this Agreement, shall be defined under the NortonLife Lock Inc. Executive Retention Plan, as amended, the “Executive Retention Plan”), any or all outstanding VCP PRUs subject to this Agreement may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the Participant, or the successor corporation may substitute an equivalent award or provide substantially similar consideration to the Participant as was provided to stockholders (after taking into account the existing provisions of the VCP PRUs), in each case in accordance with Section 13 of the Plan.
b.In the event such successor corporation (if any) fails to assume this Award or substitute an equivalent award (as provided in Section 4(a) above) pursuant to a Change in Control, this Award will expire on such transaction at such time and on such conditions as the Board shall determine in accordance with the Plan.
c.Any action taken pursuant to clauses (a) or (b) above must either (i) preserve the exemption of these VCP PRUs from Section 409A of the Code or (ii) comply with Section 409A of the Code.
d.This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
5.Adjustment in Shares. The Participant acknowledges that the VCP PSUs and the Shares subject to the VCP PRUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 14 of the Plan.
6.Issuance of Shares of Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the VCP PRUs (including the date (if any) on which vesting of any portion of the VCP PRUs accelerate), the Company shall issue to, or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying shares of Common Stock that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. In no event shall the date of settlement (meaning the date that shares of Common Stock are issued) be later than two and one half (2½) months after the later of (i) the end of the Company’s fiscal year in which the applicable vesting date occurs or (ii) the end of the calendar year in which the applicable vesting date occurs. The value of Shares will not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock that otherwise would have been settled during the first six (6) months following the Participant’s separation from service will instead be settled during the seventh (7th) month following the Participant’s separation from service, or (ii) the date of the Participant’s death following the Participant’s separation from service unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.The holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the VCP PRUs until the Award holder becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax Obligations (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of VCP PRUs (with such total number adjusted pursuant to Section 5 of this Agreement, and Section 4.1 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original VCP PRUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. For purposes of clarity, if the VCP PRUs (or any portion thereof) are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited VCP PRUs. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any VCP PRUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 3.
7.Tax Obligations. The Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any member of the Group Company (the “Tax Obligations”) that arise in connection with this Award. The satisfaction of the Tax Obligations shall occur at the time the Participant receives a distribution of shares of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any member of the Group Company in accordance with applicable law. The Participant hereby authorizes the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by any of the following methods: (a) in the event the VCP PRUs are to be settled in part in cash rather than settled in full in Shares, withholding from the cash to be distributed to the Participant in settlement of this Award, (b) permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or the member of the Group Company, and (c) withholding Shares that are otherwise to be issued and delivered to the Participant under this Award in satisfaction of the Tax Obligations up to the maximum statutory amount. In addition, to the extent this Award is not settled in cash, the Company is authorized to satisfy any Tax Obligations by withholding for the Tax Obligations from wages and other cash compensation payable to the Participant or by causing the Participant to tender a cash payment to the Company if the Committee determines in good faith at the time the Tax Obligations arise that withholding pursuant to the foregoing alternatives (b) and (c) above are not in the best interest of the Company or the Participant. In the event the Tax Obligations arise prior to the delivery to the Participant of Common Stock or it is determined after the delivery of Shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any member of the Group Company, the Participant shall indemnify and hold the Company and the members of the Group Company harmless from any failure by the Company and/or any member of the Group Company to withhold the proper amount. The Company may refuse to deliver the Shares if
the Participant fails to comply with the Participant’s obligations in connection with the Tax Obligations as described in this Section 7.
The value of the Shares to be applied as a credit against the Tax Obligations will be determined based on the “fair market value” of these Shares, determined as of the effective date when the Tax Obligations otherwise would have been withheld in cash. The Participant shall pay to the Company any amount of Tax Obligations that the Company may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s purchase of Shares that cannot be satisfied by the means previously described. Finally, the Participant acknowledges that the Company has no obligation to deliver Shares to the Participant until the Participant has satisfied the obligations in connection with the Tax Obligations as described in this Section 7.
The Participant acknowledges that there may be adverse tax consequences upon the receipt or vesting of the VCP PRUs or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or any member of the Group Company or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
8.Compliance with Laws and Regulations.
a.The issuance of shares of Common Stock pursuant to the VCP PRUs shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto, and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Agreement and the Plan).
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address indicated below the Participant’s signature line on this Agreement (as may be updated from time to time by written notice from the Participant). All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
11.Construction. This Agreement and the Notice of Grant evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the VCP PRUs.
12.Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that state’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to, and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the VCP PRUs are granted, the number of shares of Common Stock which may without stockholder approval be issued
under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.Employment At-Will. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employment of the Company or any member of the Group Company for any period of specific duration, or be interpreted as forming or amending an employment or service contract with the Company or any member of the Group Company or interfere with or otherwise restrict in any way the rights of the Company (or any member of the Group Company retaining the Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Limitations Applicable to Section 16 Officers. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is a a Section 16 officer of the Company under the Exchange Act (a “Section 16 Officer”), the Plan, this Agreement and the VCP PRUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent applicable laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
16.Entire Agreement. The Plan and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company or any member of the Group Company in effect as of the date a determination is to be made under this Agreement.
17.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
18.Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, VCP PRUs granted under the Plan or future VCP PRUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
19.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between countries, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
20.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
21.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
, 202[●].
NORTONLIFELOCK INC.
By:
Title:
Address:
PARTICIPANT
Signature:
Address:
APPENDIX A
PERFORMANCE SCHEDULE
The number of VCP PRUs that will be earned shall be based on the metrics set forth below. Terms not otherwise defined in this Appendix A shall have the meaning ascribed to them in the Plan.
1.Grant of VCP Performance Stock Units.
Subject to the terms and conditions of the Agreement, the Notice of Grant and the Plan, the Company hereby grants to the Participant a number of VCP PRUs set forth in the Notice of Grant (the “VCP PRU Grant”), subject to vesting terms as set forth below.
2.Performance Metrics.
The Participant can earn the VCP PRUs based on the Company’s performance at any time over the “Performance Period”, which Performance Period begins on December 1, 2021 and ends April 3, 2026 (“FY26”).
Share Price Appreciation with Relative Total Shareholder Return (rTSR) Gates. Subject to applicable rTSR Gates of 25th % rTSR threshold for vesting between 50-100% of the VCP Target Grant, and 50th % rTSR for vesting in excess of 100% of the VCP Target Grant, the number of VCP PRUs that may be earned during the Performance Period will range from 0% to 300% of the total VCP Target Grant, and shall be determined by the Committee as set forth in Section 3, based upon the Company’s share price appreciation (which shall be determined by reference to the average closing price over any consecutive ninety (90) calendar day period during the Performance Period), as measured against the share price targets set forth in the following chart (“Share Price Targets”). The rTSR gates shall be determined by the Committee as set forth in Section 3, based upon the Company’s TSR performance as measured against the TSR performance of the companies comprising the Nasdaq composite from the date of grant through the same ninety (90) calendar day period during which the Share Price Targets were achieved during the Performance Period, as set forth in the following chart (“rTSR Gates”). For the avoidance of doubt, subject to applicable rTSR Gates, the Share Price Targets can be achieved at any time during the Performance Period, and the highest achievement during the Performance Period shall be utilized to determine the number of VCP PRUs earned upon the vesting date of the last day of FY26. Performance between the Threshold Level and Target Level and between the Target Level and the Maximum Level will be determined based on a linear interpolation between the applicable performance levels.
Performance Levels | rTSR Gates | Share Price Targets | VCP Performance % | ||||||||
Below Threshold Level | Below 25th % rTSR | Below $35/per share | 0% | ||||||||
Threshold Level | 25th % rTSR | $35/per share | 50% | ||||||||
Target Level | 25th % rTSR | $40/per share | 100% | ||||||||
Accelerated Level | 50th %rTSR | $50/per share | 200% | ||||||||
Maximum Level | 50th %rTSR | $60/per share | 300% | ||||||||
Nothing in this Section or elsewhere in this Agreement shall be read as allowing the Participant to earn more than 300% of the VCP Target Grant during the Performance Period.
Notwithstanding anything to the contrary in this Appendix A, the Committee may, in its sole discretion, adjust the VCP performance goal(s) to account for strategic transactions to the extent the Committee determines to be reasonable or appropriate.
3.Committee Certification and Vesting of VCP PRUs.
As soon as practicable following the completion of the Performance Period, the Committee shall determine and certify in writing the VCP performance goals have been attained, the VCP Performance Percentage (as provided in the table above) and the number of VCP PRUs that will be eligible to vest
based on the VCP Performance Percentage. Notwithstanding the foregoing, if pursuant to Section 5, the VCP PRUs cease to be subject to the Performance Levels, certification by the Committee shall no longer be required for the VCP PRUs to become vested pursuant to Section 5. The Committee’s determination of the number of earned and vested VCP PRUs shall be binding on the Participant.
The earned VCP PRUs will vest on the day following the last day of the Performance Period, subject to (a) Committee certification as set forth above and (b) the Participant’s continued employment through the day following the last day of the Performance Period, except as provided in Sections 5 and 6 below.
4.Timing of Settlement.
Subject to Section 5 and 6 below, the following settlement provisions shall apply.
The VCP PRUs, to the extent Vested, shall be settled as soon as reasonably practicable following the end of the Performance Period.
5.Change in Control.
In the event of a Change in Control, where the Participant’s VCP PRUs are assumed or substituted consistent with Section 4(a) of the Agreement, the Participant’s VCP PRUs will, to the extent applicable, be subject to the acceleration provisions of Section 1 of the Executive Retention Plan, (as well as all other provisions of such plan, including Section 3 thereof), provided that if a qualifying termination under the Executive Retention Plan occurs prior to or during FY23, the applicable VCP Performance Percentage shall in all cases be 100%, notwithstanding any other higher performance then-predicted or expected. For the avoidance of the doubt, the foregoing acceleration provisions assume a qualifying termination following such Change in Control as set forth in Section 1 of the Executive Retention Plan.
In the event of a Change in Control, where the successor corporation fails to assume the Participant’s VCP PRUs or substitute an equivalent award such that Section 4(b) of the Notice of Grant applies and the Award expires, the VCP PRUs will accelerate and become immediately payable at the higher of (a) VCP Performance Percentage of 100% (i.e., target) or (b) the then highest achieved performance percentage based on the Performance Metrics (as set forth in Section 2 above) as of that date.
6.Death, Disability and Involuntary Termination.
If the Participant’s employment with the Company (or any majority or greater owned subsidiary) terminates for any reason other than death or Disability prior to the end of FY23, the VCP PRUs shall be immediately cancelled without consideration.
If the Company (or any majority or greater owned subsidiary) terminates a Participant’s services other than for Cause during the Performance Period but after the end of FY23, and provided that the Participant returns and makes effective a general release of claims in favor of the Company (and any majority or greater owned subsidiary) within sixty (60) days following such Termination Date, then the number of VCP PRUs that will accelerate and become immediately payable will be determined using the higher of (a) a VCP Performance Percentage of 100% (i.e., target) or (b) the then highest achieved performance percentage based on the Performance Metrics (as set forth in Section 2 above) as of that date, multiplied by the Proration Factor.
If, at any point while the award is outstanding, the Participant’s employment with the Company terminates by reason of death or Disability, the award shall Vest in full as of immediately prior to such termination.
7.Forfeiture and Clawback Provision
All benefits hereunder shall be subject to the provisions of any recoupment or clawback policy adopted by the Board or required by law, including but not limited to, any requirement to recoup or require forfeiture of any gains realized as a result of a financial restatement by the Company due to fraud or intentional misconduct to the extent such amounts would not have been granted, vested, paid or otherwise received had the financial results been calculated based on the Company’s financial statements as restated (the “Covered Amounts”).
In addition, the Board or Committee shall, in such circumstances as it deems appropriate, recoup or require forfeiture of any Covered Amounts in the event of (a) the Participant’s act or omission resulting in
a violation of the Company’s Code of Conduct, Code of Ethics for Chief Executive Officer and Senior Financial Officers or other Company policy, provided that such act or omission occurs following the effective date of the applicable Code or policy, or any amendment to such Code or policy; (b) the adjustment of quarterly or annual financial statements (whether audited or unaudited) for any of the Company’s fiscal years during the Performance Period to correct one or more errors that are material to such financial statements; or (c) a recommendation by the Board or Company Audit Committee as the result of any ongoing internal investigation.
The Covered Amounts subject to recoupment or forfeiture pursuant to the foregoing shall include the amounts received by the Participant pursuant to this Award under this Agreement, including (a) any proceeds, gains or other economic benefit actually or constructively received by the Participant upon the receipt or settlement of any Award granted hereunder, or upon the receipt or resale of any Shares underlying the Award and (b) any unvested or unsettled Award (i) in the case of any adjustment or restatement of the Company’s financial statements , during the three-year period preceding the date on which the Company determined, or if later first disclosed, that it is or will be preparing an adjustment or restatement; or (ii) in the case of any fraud, misconduct, act or omission by the Participant, during the three-year period preceding the date of such fraud, misconduct, act or omission, as determined by the Board or a committee thereof.
8.Section 409A of the Code
Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of Section 409A of the Code, to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with Section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with Section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. Any amount payable under this Agreement that constitutes deferred compensation subject to Section 409A of the Code shall be paid at the time provided under this Agreement or such other time as permitted under Section 409A of the Code. No interest will be payable with respect to any amount paid within a time period permitted by, or delayed because of, Section 409A of the Code. All payments to be made upon a Termination of Service under this Agreement that are deferred compensation may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event may Participant directly or indirectly, designate the calendar year of payment and in the event of a qualifying termination of employment, if the release period crosses two calendar years, any severance payments, which are deferred compensation, shall be paid in the calendar year following the year in which the termination occurs.
Notwithstanding the foregoing, in no event whatsoever shall the Company be liable for any additional tax, interest, income inclusion or other penalty that may be imposed on a Participant by Code Section 409A or for damages for failing to comply with Code Section 409A unless such failure is a result of the Company’s breach of this Plan or this Agreement.
9.Definitions
(a).Cause shall mean the dismissal or discharge of a Participant from employment for one or more of the following reasons or actions: (i) failure to perform, to the reasonable satisfaction of the Company, the Participant’s duties and/or responsibilities, as assigned or delegated by the Company; (ii) commission of a felony or crime of moral turpitude, including but not limited to embezzlement or fraud; (iii) material breach of the terms of the Participant’s employment agreement, confidentiality and intellectual property agreement or any other agreement by and between the Participant and the Company; (iv) commission of any act of dishonesty, misconduct or fraud in any way impacting the Company, its clients, or its affiliates; (v) any misconduct which brings the Company into disrepute, including conduct that injures or impairs the Company's business prospects, reputation or standing in the community; or (vi) violation of Company policies, including, without limitation, any violation of the Company’s Code of Conduct and Global Workforce Inclusion Policies; provided, however, that the Company shall allow the Participant a reasonable opportunity (but not in excess of ten (10) calendar days) to cure, to the reasonable satisfaction of the Company, any act or omission applicable to part (i), (iii), or (vi) above, if curable in the Company’s
determination; provided, further, that it is understood that willful or grossly negligent acts or omissions will not be curable.
(b).Change in Control shall have the meaning ascribed to it in the Executive Retention Plan; provided, however, that, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would vest or become payable by reason of a Change in Control, such amount shall vest or become payable only if the event constituting a Change in Control would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
(c).Proration Factor shall mean a quotient, the numerator of which is the number of calendar months rounded up to the next whole month) the Participant was in the employ of the Company (or any majority or greater owned subsidiary) during the period commencing with the start of the four-year Performance Period and ending with his or her termination date, and the denominator of which is fifty- two (52) months.
(d).rTSR shall mean the number, expressed as a percentage, equal to (i) the change in stock price over the applicable period (measured using a ninety (90) calendar day average stock price at the beginning (including the value of dividends issued over the same period) and end of the applicable period) plus the value of dividends issued in the respective period, divided by (ii) the ninety (90) calendar day average stock price at the beginning of the applicable period including the value of dividends issued over the same period.
(e).VCP Target Grant shall mean the number of shares of Common Stock associated with the VCP PRU grant as determined by the Committee, assuming a VCP Performance Percentage of 100%.
APPENDIX B
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
1.Nature of the Grant. In accepting this Agreement, the Participant acknowledges, understands and agrees that:
a.the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
b.the grant of VCP PRUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of VCP PRUs, or benefits in lieu of VCP PRUs even if VCP PRUs have been awarded in the past;
c.all decisions with respect to future grants of VCP PRUs, if any, will be at the sole discretion of the Company;
d.the Participant’s participation in the Plan is voluntary;
e.the VCP PRUs and the Shares subject to the VCP PRUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
f.the Participant’s participation in the Plan will not create or amend a right to further employment with the Company or, if different, the Participant’s actual employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate the Participant’s service at any time with or without cause;
g.VCP PRUs are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or to the Employer, and VCP PRUs are outside the scope of the Participant’s employment contract, if any;
h.VCP PRUs and the Shares subject to the VCP PRUS, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
i.unless otherwise agreed with the Company, the VCP PRUs and the Shares subject to the VCP PRUS, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a member of a Group Company;
j.in the event that Participant is not an employee of the Company, the grant of VCP PRUs will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant of VCP PRUs will not be interpreted to form an employment contract with the Company or any member of the Group Company (including the Employer);
k.the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
l.if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of VCP PRUs may increase or decrease;
m.no claim or entitlement to compensation or damages shall arise from forfeiture of the VCP PRUs resulting from the Participant’s Termination of Service (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any member of the Group Company (including the Employer);
n.neither the Company nor any member of the Group Company shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the VCP PRUs or of any amounts due to the Participant pursuant to the settlement of the VCP PRUs or the subsequent sale of any Shares acquired upon settlement;
o.the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
p.the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., VCP PRUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party (other than on a “need to know” basis) and (b) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
Exhibit 10.04
NORTONLIFELOCK INC.
2013 EQUITY INCENTIVE PLAN RESTRICTED STOCK UNIT GRANT NOTICE (NON-EMPLOYEE DIRECTORS)
Pursuant to the terms and conditions of the 2013 Equity Incentive Plan (as amended from time to time, the “Plan”), NortonLifeLock Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“Participant”) the number of restricted stock units (the “RSUs”) set forth below. This award of RSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Award Agreement (the “Agreement”), which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
Participant: Number of RSUs:
Award Date:
Vesting Schedule: Subject to the Agreement, the Plan and other terms and conditions set forth herein, the RSUs shall vest according to the following schedule, so long as the Participant has not been Terminated prior to the applicable vesting date:
Vesting Date | Portion of RSUs That Vest | ||||
December 1, 202[●] | 25% | ||||
March 1, 202[●] | 50% | ||||
June 1, 202[●] | 75% | ||||
September 1, 202[●] | 100% | ||||
Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Grant Notice or the Agreement. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
Notwithstanding any provision of this Grant Notice or the Agreement, if Participant has not rejected this Grant Notice (as provided in the Agreement) within thirty (30) days following the Grant Date set forth above, Participant will be deemed to have accepted this Award, subject to all of the terms and conditions of this Grant Notice, the Agreement and the Plan.
Exhibit 10.04
NORTONLIFELOCK INC.
2013 EQUITY INCENTIVE PLAN
RSU AWARD AGREEMENT
RECITALS
A.The Board has adopted the 2013 Equity Incentive Plan (as amended from time to time (the “Plan”)) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of NortonLifeLock Inc. (the “Company”) and its Subsidiaries and Affiliates (for the avoidance of doubt, all references to the Company under the Plan shall mean NortonLifeLock Inc.).
B.The Participant is to render valuable services to the Company and/or its Subsidiaries and Affiliates, and this RSU Award Agreement (including any additional terms set forth on any appendices attached hereto, this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of the shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Restricted Stock Units (each, an “RSU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Restricted Stock Units. The Company hereby awards to the Participant RSUs under the Plan. Each RSU represents the right to receive one Share on the vesting date of that RSU, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the RSUs and the Shares, the dates on which those vested Shares shall be issued to the Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
2.Grant Acceptance; Acknowledgement. The Company and the Participant agree that the RSUs are granted under and governed by the Grant Notice (as defined below), this Agreement and the provisions of the Plan. The Participant: (a) acknowledges receipt of a copy of the Plan prospectus, (b) represents that the Participant has carefully read and is familiar with the provisions thereof, and (c) hereby accepts the RSUs subject to all of the terms and conditions of this Agreement set forth herein, in the Plan and in the Grant Notice. If the Participant does not wish to receive the RSUs and/or does not consent and agree to the terms and conditions on which the RSUs are offered, as set forth in this Agreement (including any appendices hereto) and the Plan, then the Participant must reject this Award via the website of the Company’s designated broker, no later than thirty (30) days following the Award Date (as defined below) set forth in the Grant Notice. If the Participant rejects this Award, this Award will immediately be forfeited and cancelled for no consideration. The Participant’s failure to reject this Award within this thirty (30) day period will constitute the Participant’s acceptance of this Award and all terms and conditions of this Award, as set forth in this Agreement and the Plan.
Exhibit 10.04
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The Award Date shall mean the date the RSUs are granted to the Participant pursuant to this Agreement (the “Award Date”) and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of an RSU award pursuant to the Plan and terms of this Agreement (the “Grant Notice”). | ||||
Vesting Schedule: | The RSUs shall vest pursuant to the schedule set forth in the Grant Notice (the “Vesting Schedule”). The RSUs allocated to each applicable vesting date shall vest on that date only if the Participant’s service has not Terminated as of such date, and no additional RSUs shall vest following the Participant’s Termination. Provided however, if Participant’s service has Terminated prior to a vesting date as set forth in the Grant Notice, a pro-rated amount of the RSUs will vest based on a fraction, the numerator of which is the number of days the Participant provided services to the Company prior to the following vesting date and the denominator of which is the total number of days between the prior vesting date and the following vesting date (including the date of the prior vesting date). Notwithstanding anything in the Grant Notice, the RSUs will vest in their entirety upon a Change in Control (as defined under the NortonLifeLock Inc. Executive Retention Plan (as amended from time to time)), so long as the Participant continuously provides services to the Company or any Affiliate or Subsidiary from the Award Date through the consummation of such Change in Control. If the Participant is Terminated by reason of death or Disability, the award shall vest in full as of immediately prior to such Termination. The Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event that the Participant’s service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. | ||||
Issuance Schedule: | The Shares in which the Participant vests in accordance with the foregoing Vesting Schedule shall be issuable as set forth in Section 6. However, the actual number of Shares to be issued will be subject to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. | ||||
3.Limited Transferability. This Award, and any interest therein, shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by the Participant, other than by will or by the laws of descent and distribution unless otherwise determined by the Committee or its delegate(s) in accordance with the terms of the Plan on a case-by-case basis.
2 | ||
Exhibit 10.04
4.Cessation of Service. If the Participant’s service as an Eligible Individual to the Company or a Parent, Subsidiary or an Affiliate of the Company is Terminated for any reason (whether or not in breach of local labor laws) prior to vesting in one or more Shares subject to this Award, then, unless otherwise provided in the Vesting Schedule set forth above, the RSUs covering such unvested Shares will be immediately thereafter cancelled and forfeited for no consideration and the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited RSUs as of the Participant’s Termination Date.
5.Adjustment in Shares. The Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the Company’s shares of Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 2.2 of the Plan.
6.Issuance of Shares of the Company’s Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the RSU (including the date (if any) on which vesting of any portion of this RSU accelerates), the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying Shares that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable Tax-Related Items (as defined below) are to be collected. In no event shall the date of settlement (meaning the date that Shares are issued) be later than thirty
(30) days after vesting. The value of Shares shall not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock subject to the RSUs that are subject to Section 409A of the Code that otherwise would have been settled during the first six (6) months following the Participant’s separation from service will instead be settled on the earliest of (i) the seventh (7th) month following the Participant’s separation from service or (ii) the date of Participant’s death following the Participant’s separation from service, unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.Except as set forth in clause (e) below, the holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the RSUs until the Participant becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax-Related Items (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the
3 | ||
Exhibit 10.04
total number of RSUs (with such total number adjusted pursuant to Section 5 of this Agreement and Section 2.2 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original RSUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any RSUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 4.
7.Tax-Related Items. Regardless of any action the Company takes with respect to any or all income tax, social insurance, fringe benefit tax, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the vesting or settlement of the RSUs, accrual or payment of Dividend Equivalent Rights, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (b) do not commit to structure the terms of the Award or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant acknowledges that if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
To the extent that the receipt, vesting or settlement of this Award results in compensation income or wages to the Participant for federal, state, local and/or foreign tax purposes, the Participant shall make arrangements satisfactory to the Company regarding the payment of, any income tax, social insurance contribution or other applicable taxes that are required in respect of this Award which arrangements include the delivery of cash or cash equivalents, Shares (including previously owned Shares (which is not subject to any pledge or other security interest), net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to this Award), other property, or any other legal consideration the Committee deems appropriate.
8.Compliance with Laws and Regulations.
a.The issuance of Shares pursuant to the RSU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the shares of Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Award Agreement and the Plan).
4 | ||
Exhibit 10.04
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address on file with the Company. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
11.Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the RSU.
12.Governing Law and Venue. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the RSU is granted, the number of Shares which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of Shares issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.No Right to Continued Service. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the service of the Company (or any Parent or other Subsidiary retaining the Participant) for any period of specific duration, or be interpreted as forming or amending a service contract with the Company (or any Parent or other Subsidiary retaining the Participant), or interfere with or otherwise restrict in any way the rights of the Company or of the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
16.Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, RSUs granted under the Plan or future RSUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
17.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between the countries included in Appendix B, the country-specific terms for the new country will apply
5 | ||
Exhibit 10.04
to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
18.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
19.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
20.Award Subject to Company Clawback or Recoupment. The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of the Participant’s service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law may require the cancelation of the Participant’s RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to the Participant’s RSUs.
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Exhibit 10.04
***
If the Participant does not agree with the terms of this Agreement and the Plan, the Participant must reject the RSUs via the e*trade website no later than thirty (30) days following the Award Date; non-rejection of the RSUs will constitute the Participant’s Acceptance of the RSUs on the terms on which they are offered, as set forth in this Agreement (including the appendices hereto) and the Plan.
7 | ||
Exhibit 10.04
APPENDIX A
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
Capitalized terms not defined herein shall have the meanings ascribed to them in the Agreement or the Plan.
1.Nature of the Grant. In accepting the RSUs, the Participant acknowledges, understands and agrees that:
(a.) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
(b.) the grant of RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c.) all decisions with respect to future grants of RSUs, if any, will be at the sole discretion of the Company;
(d.) the Participant’s participation in the Plan is voluntary;
(e.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
(g.) unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a Subsidiary or Affiliate;
(h.) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i.) if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of RSUs may increase or decrease;
(j.) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the Participant’s Termination (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any Parent, Subsidiaries or Affiliates or the Employer;
Exhibit 10.04
(k.) neither the Company, the Employer nor any Parent, Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement;
(l.) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
(m.) the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
Exhibit 10.04
NORTONLIFELOCK INC.
2013 EQUITY INCENTIVE PLAN RESTRICTED STOCK UNIT GRANT NOTICE (NON-EMPLOYEE DIRECTORS)
Pursuant to the terms and conditions of the 2013 Equity Incentive Plan (as amended from time to time, the “Plan”), NortonLifeLock Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“Participant”) the number of restricted stock units (the “RSUs”) set forth below. This award of RSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Award Agreement (the “Agreement”), which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
Participant:
Number of RSUs:
Award Date:
Vesting Schedule: Subject to the Agreement, the Plan and other terms and
conditions set forth herein, 100% of the RSUs shall become vested on the first (1st) anniversary of the Vesting Commencement Date (the “First Anniversary”), so long as Participant has not been terminated prior to the vesting date.
Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Grant Notice or the Agreement. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
Notwithstanding any provision of this Grant Notice or the Agreement, if Participant has not rejected this Grant Notice (as provided in the Agreement) within thirty (30) days following the Grant Date set forth above, Participant will be deemed to have accepted this Award, subject to all of the terms and conditions of this Grant Notice, the Agreement and the Plan.
Exhibit 10.04
NORTONLIFELOCK INC.
2013 EQUITY INCENTIVE PLAN
RSU AWARD AGREEMENT
RECITALS
A.The Board has adopted the 2013 Equity Incentive Plan (as amended from time to time (the “Plan”)) for the purpose of providing incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of NortonLifeLock Inc. (the “Company”) and its Subsidiaries and Affiliates (for the avoidance of doubt, all references to the Company under the Plan shall mean NortonLifeLock Inc.).
B.The Participant is to render valuable services to the Company and/or its Subsidiaries and Affiliates, and this RSU Award Agreement (including any additional terms set forth on any appendices attached hereto this “Agreement”) is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s issuance of rights in respect of the shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) in the form of Restricted Stock Units (each, an “RSU”).
C.All capitalized terms in this Agreement shall have the meaning assigned to them herein. All undefined terms shall have the meaning assigned to them in the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1.Grant of Restricted Stock Units. The Company hereby awards to the Participant RSUs under the Plan. Each RSU represents the right to receive one Share on the vesting date of that RSU, subject to the provisions of this Agreement and the Plan. The number of Shares subject to this Award, the applicable vesting schedule for the RSUs and the Shares, the dates on which those vested Shares shall be issued to the Participant and the remaining terms and conditions governing this Award shall be as set forth in this Agreement.
2.Grant Acceptance; Acknowledgement. The Company and the Participant agree that the RSUs are granted under and governed by the Grant Notice (as defined below), this Agreement and the provisions of the Plan. The Participant: (a) acknowledges receipt of a copy of the Plan prospectus, (b) represents that the Participant has carefully read and is familiar with the provisions thereof, and (c) hereby accepts the RSUs subject to all of the terms and conditions of this Agreement set forth herein, in the Plan and in the Grant Notice. If the Participant does not wish to receive the RSUs and/or does not consent and agree to the terms and conditions on which the RSUs are offered, as set forth in this Agreement (including any appendices hereto) and the Plan, then the Participant must reject this Award via the website of the Company’s designated broker, no later than thirty (30) days following the Award Date (as defined below) set forth in the Grant Notice. If the Participant rejects this Award, this Award will immediately be forfeited and cancelled for no consideration. The Participant’s failure to reject this Award within this thirty (30) day period will constitute the Participant’s acceptance of this Award and all terms and conditions of this Award, as set forth in this Agreement and the Plan.
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Exhibit 10.04
AWARD SUMMARY
Award Date and Number of Shares Subject to Award: | The Award Date shall mean the date the RSUs are granted to the Participant pursuant to this Agreement (the “Award Date”) and shall be the date indicated in the notice as provided by the Stock Administration Department of the Company, or such other applicable department of the Company, providing the Participant with notice of the issuance of an RSU award pursuant to the Plan and terms of this Agreement (the “Grant Notice”). | ||||
Vesting Schedule: | The RSUs shall vest pursuant to the schedule set forth in the Grant Notice (the “Vesting Schedule”). The RSUs allocated to each applicable vesting date shall vest on that date only if the Participant’s service has not Terminated as of such date, and no additional RSUs shall vest following the Participant’s Termination. Notwithstanding anything in the Grant Notice, the RSUs will vest in their entirety upon a Change in Control (as defined under the NortonLifeLock Inc. Executive Retention Plan (as amended from time to time)), so long as the Participant continuously provides services to the Company or any Affiliate or Subsidiary from the Award Date through the consummation of such Change in Control. If the Participant is Terminated by reason of death or Disability, the award shall vest in full as of immediately prior to such Termination. The Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event that the Participant’s service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. | ||||
Issuance Schedule: | The Shares in which the Participant vests in accordance with the foregoing Vesting Schedule shall be issuable as set forth in Section 6. However, the actual number of Shares to be issued will be subject to the provisions of Section 7 pursuant to which the applicable withholding taxes are to be collected. | ||||
3.Limited Transferability. This Award, and any interest therein, shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by the Participant, other than by will or by the laws of descent and distribution unless otherwise determined by the Committee or its delegate(s) in accordance with the terms of the Plan on a case-by-case basis.
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Exhibit 10.04
4.Cessation of Service. If the Participant’s service as an Eligible Individual to the Company or a Parent, Subsidiary or an Affiliate of the Company is Terminated for any reason (whether or not in breach of local labor laws) prior to vesting in one or more Shares subject to this Award, then, unless otherwise provided in the Vesting Schedule set forth above, the RSUs covering such unvested Shares will be immediately thereafter cancelled and forfeited for no consideration and the Participant shall cease to have any right or entitlement to receive any Shares under those cancelled and forfeited RSUs as of the Participant’s Termination Date.
5.Adjustment in Shares. The Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan. Should any change be made to the Company’s shares of Common Stock by reason of any stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration or if there is a change in the corporate structure, then appropriate adjustments shall be made to the total number and/or class of securities and any Dividend Equivalent Rights (as defined below) issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder in accordance with Section 2.2 of the Plan.
6.Issuance of Shares of the Company’s Common Stock.
a.As soon as practicable following the applicable vesting date of any portion of the RSU (including the date (if any) on which vesting of any portion of this RSU accelerates), the Company shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the applicable number of underlying Shares that so vested, subject, however, to the provisions of Section 7 pursuant to which the applicable Tax-Related Items (as defined below) are to be collected. In no event shall the date of settlement (meaning the date that Shares are issued) be later than thirty
(30) days after vesting. The value of Shares shall not bear any interest owing to the passage of time.
b.If the Company determines that the Participant is a “specified employee,” as defined in the regulations under Section 409A of the Code, at the time of the Participant’s “separation from service,” as defined in those regulations, then any shares of Common Stock subject to the RSUs that are subject to Section 409A of the Code that otherwise would have been settled during the first six (6) months following the Participant’s separation from service will instead be settled on the earliest of (i) the seventh (7th) month following the Participant’s separation from service or (ii) the date of Participant’s death following the Participant’s separation from service, unless the settlement of those shares of Common Stock are exempt from Section 409A of the Code.
c.In no event shall fractional Shares be issued.
d.Except as set forth in clause (e) below, the holder of this Award shall not have any stockholder rights, including voting rights, with respect to the Shares subject to the RSUs until the Participant becomes the record holder of those Shares following their actual issuance and after the satisfaction of the Tax-Related Items (as defined below).
e.As of any date that the Company pays an ordinary cash dividend on its shares of Common Stock, the Company shall credit the Participant with a dollar amount equal to (i) the per share cash dividend paid by the Company on its shares of Common Stock on such date, multiplied by (ii) the total number of RSUs (with such total number adjusted pursuant to Section 5 of this Agreement and Section 2.2 of the Plan) subject to this Award that are outstanding immediately prior to the record date for that dividend (a “Dividend Equivalent Right”). Any Dividend Equivalent Rights credited pursuant to the foregoing provisions of this Section 6(e) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original RSUs to which they relate; provided, however, that the amount of any vested Dividend Equivalent Rights shall be paid in cash. No crediting of Dividend Equivalent Rights shall be made pursuant to this Section 6(e) with respect to any RSUs which, immediately prior to the record date for that dividend, have either been paid pursuant to this Section 6 or terminated pursuant to Section 4.
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Exhibit 10.04
7.Tax-Related Items. Regardless of any action the Company takes with respect to any or all income tax, social insurance, fringe benefit tax, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the vesting or settlement of the RSUs, accrual or payment of Dividend Equivalent Rights, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (b) do not commit to structure the terms of the Award or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant acknowledges that if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
To the extent that the receipt, vesting or settlement of this Award results in compensation income or wages to the Participant for federal, state, local and/or foreign tax purposes, the Participant shall make arrangements satisfactory to the Company regarding the payment of, any income tax, social insurance contribution or other applicable taxes that are required in respect of this Award which arrangements include the delivery of cash or cash equivalents, Shares (including previously owned Shares (which is not subject to any pledge or other security interest), net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to this Award), other property, or any other legal consideration the Committee deems appropriate.
8.Compliance with Laws and Regulations.
a.The issuance of Shares pursuant to the RSU shall be subject to compliance by the Company and the Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or an established market, if applicable) on which the shares of Common Stock may be listed for trading at the time of such issuance.
b.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance of any shares of Common Stock hereby shall relieve the Company of any liability with respect to the non-issuance of the shares of Common Stock as to which such approval shall not have been obtained.
9.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Participant, the Participant’s assigns, the legal representatives, heirs and legatees of the Participant’s estate and any beneficiaries designated by the Participant (subject to the restrictions on transfer as set forth in this Award Agreement and the Plan).
10.Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices with attention to the General Counsel. Any notice required to be given or delivered to the Participant shall be in writing and addressed to the Participant at the address on file with the Company. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.
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Exhibit 10.04
11.Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall apply. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the RSU.
12.Governing Law and Venue. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Delaware and agree that such litigation shall be conducted only in the courts of Delaware, or the federal courts for the United States District Court for the District of Delaware, and no other courts, where this grant is made and/or to be performed.
13.Excess Shares. If the Shares covered by this Agreement exceed, as of the date the RSU is granted, the number of Shares which may without stockholder approval be issued under the Plan, then the Award shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of Shares issuable under the Plan is obtained in accordance with the provisions of the Plan.
14.No Right to Continued Service. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the service of the Company (or any Parent or other Subsidiary retaining the Participant) for any period of specific duration, or be interpreted as forming or amending a service contract with the Company (or any Parent or other Subsidiary retaining the Participant), or interfere with or otherwise restrict in any way the rights of the Company or of the Participant, which rights are hereby expressly reserved by each, to terminate the Participant’s service with the Company at any time for any reason, with or without cause.
15.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
16.Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, RSUs granted under the Plan or future RSUs that may be granted under the Plan (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
17.Appendices. Notwithstanding any provisions in this Agreement, this Award shall be subject to the terms and conditions set forth in any appendices to this Agreement. Moreover, if the Participant relocates between the countries included in Appendix B, the country-specific terms for the new country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Any appendices constitute part of this Agreement.
18.Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.
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Exhibit 10.04
19.Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
20.Award Subject to Company Clawback or Recoupment. The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of the Participant’s service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law may require the cancelation of the Participant’s RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to the Participant’s RSUs.
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Exhibit 10.04
***
If the Participant does not agree with the terms of this Agreement and the Plan, the Participant must reject the RSUs via the e*trade website no later than thirty (30) days following the Award Date; non-rejection of the RSUs will constitute the Participant’s Acceptance of the RSUs on the terms on which they are offered, as set forth in this Agreement (including the appendices hereto) and the Plan.
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Exhibit 10.04
APPENDIX A
ADDITIONAL PROVISIONS FOR PARTICIPANTS LOCATED OUTSIDE OF THE UNITED STATES
Capitalized terms not defined herein shall have the meanings ascribed to them in the Agreement or the Plan.
1.Nature of the Grant. In accepting the RSUs, the Participant acknowledges, understands and agrees that:
(a.) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Agreement;
(b.) the grant of RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c.) all decisions with respect to future grants of RSUs, if any, will be at the sole discretion of the Company;
(d.) the Participant’s participation in the Plan is voluntary;
(e.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f.) the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar mandatory payments;
(g.) unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a Subsidiary or Affiliate;
(h.) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i.) if the Participant receives Shares upon vesting, the value of such Shares acquired on vesting of RSUs may increase or decrease;
(j.) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the Participant’s Termination (regardless of the reason for such termination and whether or not the termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of this Award to which the Participant is otherwise not entitled, the Participant agrees not to institute any claim against the Company, or any Parent, Subsidiaries or Affiliates or the Employer;
Exhibit 10.04
(k.) neither the Company, the Employer nor any Parent, Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement;
(l.) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan; and
(m.) the Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
2.Language. The Participant acknowledges and agrees that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to enable him or her to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
3.Insider Trading Restrictions/Market Abuse Laws. The Participant acknowledges that, depending on the Participant’s country, the broker’s country or the country in which the Shares are listed, the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell, attempt to sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares during such times as the Participant is considered to have “inside information” regarding the Company, as defined by the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities, where third parties include fellow employees. The insider trading and/or market abuse laws may be different from any Company Insider Trading Policy. The Participant is responsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter.
4.Foreign Asset/Account and Exchange Control Reporting. The Participant’s country may have certain exchange controls and foreign asset and/or account reporting requirements which may affect his or her ability to purchase or hold Shares under the Plan or receive cash from his or her participation in the Plan (including from any dividends received or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Further, the Participant may be required to repatriate Shares or proceeds acquired as a result of participating in the Plan to his or her country through a designated bank/broker and/or within a certain time. The Participant acknowledges and agrees that it is his or her responsibility to be compliant with such regulations and understands that the Participant should speak with his or her personal legal advisor for any details regarding any foreign asset/account reporting or exchange control reporting requirements in the Participant’s country arising out of his or her participation in the Plan.
Exhibit 10.05
EMPLOYMENT CONTRACT
between
AVAST Software s.r.o.
and
Ondřej Vlček
Exhibit 10.05
THIS EMPLOYMENT CONTRACT (hereinafter the "Contract") was concluded
on 12 September 2022 (the “Effective Date”) between:
AVAST Software s.r.o.
a limited liability company incorporated and existing under the laws of the Czech Republic, with its registered office at Pikrtova 1737/la, 140 00, Czech Republic, Company ID No: 02176475, Tax Id. CZ02176475, registered in the Commercial Register of the Municipal Court in Prague, Section C, file 216540, acting through Rebecca Grattan, Chief Human Resources Officer (hereinafter the "Company")
and
Ondřej Vlček
Born on 14 July, 1977, residing at Resslova 1775 / 1 12000 Praha 2, the Czech
Republic (hereinafter the "Executive")
in compliance with the relevant provisions of Act No. 262/2006 Coll., Labour Code, as amended (hereinafter the "Labour Code"), and in compliance with the other applicable statutory regulations:
Article I
Introductory provisions
1.1For the purposes of this Contract, the following words shall have the following
meanings:
"Group" means the Company, any subsidiary of the Company, its Parent Company or any other company which is a direct or indirect holding company of the Company, and any
subsidiary of the Parent Company or any such holding company, and "Group Company" shall be construed accordingly.
"Parent Company" means NortonLifeLock Inc. with an address of 60 East Rico Salado Parkway, Ste. 1000, Tempe, AZ 85281, United States of America.
"Relevant Period" means the period of 12 months ending on the date of Termination or, if the Executive spends a period on Garden leave immediately before the Termination, such earlier date on which Garden Leave commences.
"Restricted Business" means the business which the Company or any Group Company operates and with which the Executive was materially concerned during the Relevant Period.
"Restricted Period" means the period 12 months following Termination under any circumstances immediately prior to Termination less any Garden Leave period.
Exhibit 10.05
"Termination" means the date of termination of the employment of the Executive (howsoever arising).
1.2The Executive will work for the Company as President of Technology & Product of the NortonLifeLock Group which consists of the Company, its parent companies, and their direct and indirect subsidiaries (the "NortonLifeLock Group").
1.3The Executive undertakes to perform his duties with due care (s péčí řádného hospodáře) and loyalty, and to use his professional skills and experience in performing his duties.
1.4The Executive shall devote all of his working time and best efforts to the business and affairs of the Company and of the Group and to the diligent and faithful performance of the duties and responsibilities duly assigned to him. Notwithstanding the foregoing, the Executive may devote a reasonable amount of his time to civic, community, or charitable activities and, with the prior written approval of the Company, to serve as a director of other corporations and to other types of business or public activities not expressly mentioned in this Article, provided that such activities are not competitive with the business of the Company or any Group Company. The Executive shall perform any such service described in this article in a manner that does not conflict with the discharge of the Executive's duties to the Company.
1.5The Executive shall at all times during his employment comply with Policies, Bylaws, the articles of association and/or other constitutional documents of the Company and the Parent Company, as well as the Company's rules, regulations, policies and procedures from time to time.
1.6Prague shall be the regular place of employment for the purposes of travel allowances. The Company may send the Executive on domestic and foreign business trips.
1.7This Contract shall come into effect on the date of the last signature below.
1.8The employment relationship is concluded for an indefinite term. The Executive's weekly working hours are equal to 40 hours divided evenly into the individual days of the week. The Executive hereby agrees to overtime work performance exceeding 150 hours a year.
1.9The Executive’s Contract on the Performance of Office of the Executive between the Executive and the Company, effective as of 1 May 2018, as amended (“Performance Office Contract”), is hereby terminated as a result of the acquisition of Avast plc, the former parent company of the company, by NortonLifeLock Inc. on 12 September 2022. Executive hereby confirms that by accepting the terms of this agreement no payments are owed to Executive under Clauses 9.3, 9.4, 9.5, and 9.6 of the Performance of Office Contract.
Exhibit 10.05
Article II
Remuneration, Target Bonus and Other Compensation
2.1The Executive is entitled to a monthly base remuneration for his employment, which
is set down in the Annex No. 1 to this Contract ("Base Remuneration").
2.2The Executive and the Company have agreed the amount of the Base Remuneration with regards to potential overtime work in the maximum extent allowed by the law per calendar year (Section 114 of the Labour Code).
2.3The Base Remuneration shall be paid monthly, one month in arrears, by a bank transfer to the Executive's bank account whose details the Executive communicates to the Company in writing.
2.4From the Effective Date, the Executive will be eligible to participate in an incentive program in accordance with the terms and conditions set down in the Annex No. 1.
Article III Intellectual property rights
4.1By signing this Contract, the Executive provides the Company with the explicit, time- and territory-unrestricted authorization for any work created within the relationship established herewith, including those bearing the characteristics of works in accordance with Act No. 12112000 Coll., Copyright Act, as amended (hereinafter the "Copyright Act"), (hereinafter the "Works"), primarily, to use and proliferate the Works, including partial performances, as well as parts of such Works in compliance with relevant regulations. In connection with this authorization, the Executive acknowledges that all Works created during the performance of his duties stipulated herein shall be "Executive's works" according to Section 58 of the Copyright Act. All Works, documents, or any charts and drawings (or their incomplete or unfinished parts) of all kinds that the Executive creates within the relationship with the Company, wherever in the world he creates them, shall become the Company's property on the day the Executive creates them.
4.2The Company shall be authorized to use and disseminate the Works in the manner to fully correspond to the Company's business strategy. The Executive hereby gives his explicit consent to the assignment of all Company's rights to the Works to a third person of the Company's own choice. The Company shall be authorized to modify the Works created by the Executive according to its needs; any such possible modifications or changes shall not be subject to any additional approval from the Executive or any other persons.
4.3By signing this Contract, the Executive agrees with the Company publishing the Works, modifying, processing, including translating them, merging them with another work to create a summary work, as well as presenting the Works to the public under the Company's name, and to the Company's handling the Works in any other manner. By signing this Contract, the Executive provides the Company
Exhibit 10.05
with the consent to complete his unfinished Works in case that his relationship to the Company terminates earlier than he could complete the Work, as well as in case that there shall be reasonable concern that the Executive could not complete the Works properly and timely in accordance with the Company's needs. The Executive shall be obliged to report to the Company that any Works have been or could be created. The reward to the Executive for creating and using any Works has already been included in the stipulated Base Remuneration; therefore, the Executive shall not be entitled to any additional reward for creating or using his Works by the Company even if the Base Remuneration paid to the Executive is in obvious discrepancy in relation to the profit ensuing from the execution of rights to the Works, and the importance of such Works for gaining such a profit. The rights and obligations according to this Article shall remain unaffected by the termination of the Executive's relationship with the Company.
4.4The Executive and the Company acknowledge that all the inventions created by the Executive to fulfill a task within the scope of his employment shall belong to the Company under conditions stipulated in Section 9 et seq. of Act No. 527/1990 Coll., on inventions and innovations, as amended. This shall similarly apply to industrial designs in terms of Section 13 et seq. of Act No. 207/2000 Coll., on protection of industrial designs, as amended.
4.5Notwithstanding the above, the Executive shall take all steps necessary to achieve a result as similar to the one set out in this Article 4 as possible in any jurisdiction other than the Czech Republic if and to the extent the Company or any Group Company requires him to do so.
Article IV
Confidentiality
5.1Confidential information means intellectual property, any and all information and physical material not generally known or available outside the Company or the Group and intellectual property, information and physical material entrusted to the Company or any Group Company in confidence by any other party (hereinafter the "Confidential Information"). Confidential Information includes, without limitation, in respect of each Group Company: (i) intellectual property; (ii) technical data, trade secrets, know-how, research, product/service ideas or plans, software codes (both object and source code) and designs, developments, inventions, notebooks, processes, formulas, techniques, mask works, engineering designs and drawings, hardware configuration information; (iii) lists of, or information relating to: employees and consultants of the Group (including, but not limited to, the names, contact information, job functions, job titles, compensation and expertise of such employees and consultants), suppliers and customers of the Group; and(iv) price lists, pricing methodologies, cost data, market share data, marketing plans, trademarks, domain names, marketing ideas, licenses, contract information, business plans, financial forecasts, historical financial data, budgets or other business information disclosed to the Executive by the Company or any Group Company either directly or indirectly, whether in writing, electronically, orally or by observation, and (v) any other information to which the Company or any Group Company attaches an equivalent level of confidentiality.
Exhibit 10.05
5.2The Executive is obliged to hold in strictest confidence, and not to use, except for the benefit of the Company (or any Group Company) to the extent necessary to perform his obligations in accordance with this Contract, and not to disclose to any person, firm, corporation or other entity, without written authorization from the Company in each instance, any Confidential Information that the Executive obtains, accesses or creates during the term of his employment, whether or not during working hours, until such Confidential Information becomes publicly and widely known and made generally available other than through a wrongful act of the Executive or of others who were under confidentiality obligations as to the matter(s) involved. The Executive is obliged not to make copies of such Confidential Information except as authorized by the Company.
5.3The Executive acknowledges that a violation of the nondisclosure obligation pertaining to Confidential Information may represent a serious violation of his duties hereunder and could be a reason for termination of his employment.
5.4The Executive undertakes to maintain the nondisclosure obligation in connection to Confidential Information, during his employment and following its termination (howsoever arising).
Article V
Other provisions concerning employment by the Executive
6.1The Executive is obliged to perform his duties in compliance with the generally binding statutory regulations and the Company's internal regulations, including its Code of Conduct, in person, diligently and with professional care to the best of his ability and knowledge. The Executive will be expected to review and understand, and is required to comply with, the Parent Company’s Code of Conduct and other corporate policies and guidelines. A copy of the Code can be found on the Ethics & Governance section of our public website (https://www.nortonlifelock.com/us/en/legal/code-conduct/). Within the first few weeks of the Effective Date, the Executive will receive an email assigning the Executive various ethics and compliance related online training courses. Completion of the assigned courses is required for all employees.
6.2The Executive undertakes that he will not take any steps on his part that could harm the interests of the Company or any Group Company, and that he will take care to protect the Company's and the Group's good reputation and justified interests.
6.3The Executive undertakes that throughout his employment:
(a)he will refrain from conduct that is competitive with the business of the Company or any Group Company, could lead to a conflict between his personal interests and those of the Company or any Group Company, and/or otherwise interfere with the discharge of the Executive's duties under this Contract,
Exhibit 10.05
(b)subject to Articles 6.3(a) and 6.3(c), he will inform the Company in writing immediately:
(i)of his participation in the managing or controlling bodies of legal entities that conduct business activities, unless he is appointed to such a body by the Company;
(ii)of his execution of gainful employment, occupation or consulting activity; apart from scientific, pedagogic, journalistic, literary, expert or artistic activities;
(iii)of his participation in the business of a different legal entity as a partner;
(c)he will not perform any other gainful employment, occupation or consulting activity, except for scientific, pedagogic, journalistic, literary, expert or artistic activities, other than with prior written consent from the Company.
6.4The Executive acknowledges that a violation of the obligations set out in Article 6.3 above may represent a serious violation of his duties hereunder and could be a reason for termination of employment.
6.5During the term of his employment and for the Restricted Period, the Executive agrees and acknowledges that the Executive will not either directly or indirectly solicit, induce, attempt to hire, recruit, encourage or take away any employee of the Company or any Group Company ("Employee") or cause an Employee to leave his or her employment or engagement either with the Company or with any Group Company (whether or not such person would breach their contract of employment or engagement by reason of leaving the service of the business in which they work). It shall not be considered a violation of this Article for the Executive to merely be a director of, or employed by, an entity that hires or recruits an Employee, if the Executive has not participated in such hiring, recruiting or other activity that is otherwise prohibited under this Article 6.5.
6.6During the term of his employment and for the Restricted Period, the Executive
agrees and acknowledges that the Executive will not, directly or indirectly:
(a)solicit or attempt to solicit or otherwise entice away, on behalf of any person involved in a business of a competitive nature to the Company's or the Group's business, any person that is, or was within the Relevant Period, a client, customer, supplier or business relation of the Company or Group Company, or who the Company solicited to be a client, customer or supplier during the Relevant Period, and with whom the Executive was materially concerned or had personal dealings in the Relevant Period; or
(b)in competition with the business of the Company or the Group, interfere in any way with the relationship between the Company or any Group Company and any person that is, or was within the Relevant Period, a client, lender, investor, customer, supplier, or other business relation of the Company or any Group Company and with whom the Executive was materially concerned or had personal dealings in the Relevant Period (or
assist any other person in engaging in any such activities).
For the purposes of this Article, business of a competitive nature to the Company's or Group's activities means the development, distribution, licensing and sale of software or provision of services in the fields of security and anti-virus; virtual private network; password manager; family safety; computer
Exhibit 10.05
performance enhancement; ad tech; data analytics; and browser, and other activities that would be directly or indirectly competitive with the Company's or the Group's activities.
6.7 During the term of his employment and for the Restricted Period, neither the Company nor the Executive shall directly or indirectly, take any action, or encourage others to take any action, to disparage or criticize the other party (including, where the other party is the Company, any Group Company or its or their employees, officers, directors, products, services, customers or owners). Nothing contained in this Article 6.7 shall preclude either party from enforcing his or its rights under this Contract or truthfully testifying in response to legal process or a governmental inquiry.
Article VI
Processing of personal information about the Executive
7.1The Executive undertakes to report to the executive of the relevant department of the Company, without undue delay, all information and changes in information concerning the Executive's personal relations and other facts that are required to execute the rights and obligations of the contracting parties in connection with his employment.
7.2The Company may process the Executive's personal data, and shall do so in accordance with, and for the purposes set out in: (i) such Group Privacy Notice as may be implemented from 'time to time; (ii) this Contract; and (iii) applicable law. Details of the sources from which the Executive's personal data may be collected, the categories of data affected, the recipients to whom those data may be disclosed, the Company's data protection compliance measures, the Executive's rights with respect to the processing of such personal data, and relevant contact details for data protection questions and concerns, are provided in that Notice.
7.3The Executive shall:
(a)abide by the provisions of all applicable laws regarding the processing of personal data;
(b)abide by the provisions of all Company policies and procedures regarding the processing of personal data, from the date on which such policies and procedures are provided to the Executive; and
(c)at all times maintain the security and confidentiality of all personal data
processed in the course of the Executive's duties.
Exhibit 10.05
7.4The Executive consents to the Company processing his personal information, which the Executive has provided to the Company in connection this Contract, or which he provides during his employment or which arises from carrying out his employment, for the purposes and to the extent set out above. The Executive also acknowledges that the Company can process his personal information, especially if required to protect the rights and justly protected interests of the Company or to fulfill the Company's legal obligations. The Executive has been informed of his rights in relation to the data protection rules, m particular his right to withdraw his consent as per this provision
7.5With his signature, the Executive confirms that the personal information that he provided to the Company before signing this Contract is accurate and complete.
7.6The Executives confirms that the Company has explained to him the rights he has
in connection with the protection of his data.
Article VII
Non-competition obligation
8.1The Executive undertakes that he will not, for the Restricted Period, perform any gainful activities in connection with the development, distribution, sale and licensing of software or provision of services in the fields of security and anti-virus; virtual private network; password manager; family safety; computer performance enhancement; ad tech; data analytics; and browser, or engage directly or indirectly in any other activities, in competition with the Restricted Business. Executive and the Company agree that the limitations herein shall apply specifically to the following competitors: McAfee, Aura, BitDefender, Malwarebytes, Experian, Transunion, Equifax, Nord Security, F-Secure and Crosspoint Capital. The non- competition obligation does not apply to scientific, pedagogic, journalistic, literary, expert or artistic activities that the Executive was entitled to conduct his employment. The non-competition obligation under this Article applies to the territory of the Czech Republic, the UK, the US and territories of such other countries in which the Company or any Group Company undertakes its business and with which countries the Executive was concerned during the Relevant Period.
8.2The Company undertakes to provide the Executive with financial compensation for compliance with the non-competition obligation in accordance with Article 8.1 in the amount of 50% of the Executive’s average monthly income (calculated as the amount of his/her average gross monthly income achieved in the last calendar quarter prior to terminating his/her employment) multiplied by nine (the “Non- Compete Payment”). The Non-Compete Payment shall be payable in the form of continuing payments for a period of nine months starting on the Company’s first regular pay date following the date of Termination. Should the Executive breach his/her obligation specified in Article 8.1, the Executive shall be obliged to pay to the Company the contractual penalty in the amount equal to the financial compensation set out in Article 8.2 hereinabove from which the financial compensation for the period of the Executive’s compliance with his/her obligation specified in Article 8.1 hereinabove will be deducted. The Executive shall be obliged to pay the aforesaid amount to the Company within one month following the delivery of the Company’s request for payment.”
8.3For the period of duration of the Executive's employment, the Company may at its discretion (but it is not obliged to do so) in writing waive the non-competition obligation and in circumstances where it does so, it shall not be obliged to pay the Executive the Non Compete Payment.
Exhibit 10.05
Article VII Termination
9.1The Executive's employment may be terminated:
(a)by the Company by giving not less than three months' prior written notice to the Executive;
(b)by resignation of the Executive giving the Company not less than three months' prior written notice; or
(c)as provided elsewhere in this Contract.
9.2Company may terminate the employment of the Executive at any time, with immediate effect, without notice or payment in lieu of notice, if the Executive:
(a)commits any act of gross misconduct or commits any material breach of his obligations under this Contract or repeats or continues (after written warning) any other serious breach of his obligations to the Company, the Parent Company or any Group Company (whether under this Contract or otherwise);
(b)commits an act of fraud, whether relating to the Company, any Group Company, any of its or their employees or otherwise;
(c)breaches any of the requirements, rules or regulations as amended from time to time of the UK Listing Authority, the London Stock Exchange plc, the FCA, MAR and any directly applicable regulation made under MAR or any regulatory authorities relevant to the Company, the Parent Company or any Group Company or any code of practice, policy or procedures manual issued by the Company or the Parent Company (as amended from time to time) relating to dealing in the securities of the Company, the Parent Company or any Group Company, including the Dealing Code;
(d)is convicted of, or pleads nolo contendere to a felony or an equivalent to either of the foregoing in any jurisdiction;
(e)willfully and continually fails to substantially perform his duties and obligations, other than any such failure resulting from the Executive's incapacity due to physical or mental illness; or
(f)commits an act of misconduct that is materially injurious to the Company, any Group Company, its employees, officers or clients, whether monetarily or otherwise.
9.3If: (i) the Company serves notice to terminate pursuant to Article 9.1(a) and none of the circumstances set out in Article 9.2 above apply; or (ii) the Executive serves notice to terminate pursuant to Article 9.1(b), then the Company may, at its discretion, bring forward the date of Termination with immediate effect or with effect from any other date preceding the lapse of the notice period; in such case, the Company shall make the Executive a payment in lieu of the notice period (or, if applicable, remainder of the notice period) equal to the Base Remuneration (as at the date of Termination) which the Executive would have been entitled to receive during the notice period (or, if applicable, remainder of the notice period) referred to in Article 9.1 ("Payment in Lieu of Notice"). Such payment can be made by way of continuing-monthly payments for the duration of the notice period or by lump sum, at the discretion of the Company. Any payment under this
Exhibit 10.05
Article 9.3 will be subject to income tax and social security contributions in the normal way.
9.4During any notice period the Company shall be under no obligation to vest in or assign to the Executive any powers or duties or to provide the Executive with any tasks and may require him to perform different duties or part of his usual duties and may exclude him from any premises of any Group Company ("Garden Leave"). During such period of Garden Leave the Executive shall:
(a)remain engaged by the Company and be bound by the terms of this Contract and obligations imposed by law (including, but not limited to, his implied duties of good faith and fidelity);
(b)continue to receive the Base Remuneration and contractual benefits in the usual way;
(c)not, without the prior written consent of the Company, attend his place
of work or any other premises of the Company or any Group Company;
(d)not, without the prior written consent of the Company, contact or deal with (or attempt to contact or deal with) (other than on a purely social basis) any officer, employee, consultant, client, customer, supplier, agent, distributor, shareholder, adviser or other business contact of the Company or any Group Company;
(e)if required by the Company, resign from any offices he holds with the Company or any Group Company; and
(f)continue to be available for work for the Company and be contactable at all reasonable times.
9.5To the extent permitted by the local law of the Czech Republic, the Executive will be subject to Parent Company’s Corporation Executive Severance Plan and Executive Retention Plan (the “Plans”) . Any severance pay received under the Plans or any other Parent Company executive severance or change in control plan the Executive may participate in will be reduced by any salary compensation provided during the notice period the Executive is entitled to pursuant to Section 9.1, 9.3 and Section 9.4 and any statutory severance pay under Czech law. For avoidance of any doubt, any US-specific sections (for instance, section on “Insurance Benefits” of the Plan) are not applicable to the Executive.
9.6Upon the termination of the Executive's employment, the Executive will deliver to the Company (and will not keep in his possession, recreate or deliver to anyone else) any and all Confidential Information, devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, materials, flow charts, equipment, other documents or property, or reproductions of any of the aforementioned items developed by the Executive during his employment or otherwise belonging to the Company or any Group Company.
9.7For the avoidance of doubt, any other agreements Executive has with the Company with respect to termination, severance pay, acceleration of equity, Payment in Lieu of Notice, Garden Leave, or other additional payments to be made in case of termination, including a constructive termination, are null and void and of no effect, including Article IX (Termination) of the Performance of Office Contract. Any terms and conditions under Schedule 2 of he Amended and Restated Co-operation Agreement, dated 15 July 2022, are not applicable to Executive.
Exhibit 10.05
Article IX
Final provisions
10.1The rights and obligations of the contracting parties, which are not explicitly regulated by this Contract, are governed by the generally binding statutory regulations of the Czech Republic, notably the Labour Code, and Company's internal regulations.
10.2This Contract is executed in two counterparts, of which each contracting party receives one.
10.3Annex No. 1 (Remuneration, Benefits and Bonus) is an integral part of this Contract.
10.4The contracting parties declare that this Contract is an expression of their true and free will, free of errors, and that they have been acquainted with its contents and agree to them without objections, in testimony whereof they affix their signature.
Exhibit 10.05
ANNEX N0. 1 REMUNERATION, STOCK AND BONUS
(a)Base Remuneration. As of 1 October, 2022, the Company agrees to increase the Executive’s Base Remuneration to 17,313,870 CZK gross per year for the work to be rendered by the Executive pursuant to this Agreement, which shall be paid monthly in accordance with the Company’s regular payroll practices.
(b)Incentive Program. As of 1 October, 2022, the Executive shall be eligible to participate in the Executive Annual Incentive Plan, an incentive program that rewards for the achievement of the Parent Company’s financial/strategic objectives as well as Executive’s individual performance. Under the current program, the Executive’s annual incentive target will be 100% of the Base Remuneration, prorated based on the effective date of Executive’s NortonLifeLock Executive Annual Incentive Plan participation. Depending on the Parent Company’s performance and Executive’s individual performance, the Executive’s actual incentive award may be higher or lower. To receive the award, the Executive must satisfy the requirements of the Executive Annual Incentive Plan, a copy of which is available upon request.
In Prague, on 5 October 2022
AVAST Software s.r.o.
/s/ Rebecca Grattan
Rebecca Grattan
In Prague, on 5 October 2022
/s/ Ondřej Vlček
Ondřej Vlček
Exhibit 10.06NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This Non-Competition and Non-Solicitation Agreement (the “Agreement”) is being executed, and is effective as of the date of the last signature below, between XXX (“Employee”) and NortonLifeLock Inc., a Delaware corporation, and its direct and indirect affiliates and subsidiaries (collectively, the “Company”) (together, “the Parties”).
INTRODUCTION
WHEREAS, Employee will be employed by the Company as its XXX;
WHEREAS, the Company anticipates that it will complete its anticipated merger with Avast PLC, materially increasing the size and scale of the operations and revenue of the Company;
WHEREAS, Employee has signed a Confidentiality and Intellectual Property Agreement with the Company (the “Confidentiality Agreement”), which Confidentiality Agreement is incorporated herein and which shall remain in full force and effect notwithstanding this Agreement, except to the extent that its terms conflict with those herein, in which case the terms herein shall govern;
WHEREAS, Employee’s employment with the Company is at will;
WHEREAS, Employee acknowledges that during the course of Employee’s employment with the Company as its XXX, and in connection with the performance of any and all duties with the Company, Employee has access to and relationships with customers and vendors, and receives substantial amounts of protectable business and confidential, proprietary, and trade secret information regarding the Company, customers, vendors, products and others, including without limitation source code, existing revenue and revenue projections, existing costs and cost projections, business plans, product plans and/or marketing strategies; and,
WHEREAS, Employee acknowledges that the Company has a substantial and reasonable interest in protecting the confidential, proprietary, and trade secret status of said information.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises made herein and the Employee’s continued employment with the post-merger Company, Employee agrees as follows:
1. Noncompetition. Employee agrees that during the course of Employee’s employment and for a period of twelve (12) months immediately following the termination of employment with the Company, or if twelve months is too long a period of time to be enforceable then for a period of nine (9) months, or if nine (9) months is too long a period of time to be enforceable then for a period of six (6) months, Employee will not, without the prior written consent of the Company:
(i) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for,
(ii) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of, or
(iii) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate Employee with,
any business whose business, products or operations are in any respect a Covered Business. This restriction does not apply to passive investments, such as may be acquired through mutual funds, retirement accounts, and general stock purchases through publicly traded companies. For the purposes
NortonLifeLock Inc. | 60 E Rio Salado Pkwy STE 1000, Tempe, AZ 85281 | NortonLifeLock.com
of this Agreement, “Covered Business” shall mean any business in which the Company is engaged, including without limitation businesses competing with the Company in the areas of cyber security, cyber safety and identity protection, or in which the Company has plans to be engaged as known by Employee, or any service that the Company provides or has plans to provide as known by the Employee. The employment restriction above shall cover Employee’s activities in every part of the Territory. “Territory” shall mean
(i) all counties in the State of California;
(ii) all states of the United States of America in which the Company provided goods or services, had customers, or otherwise conducted business at any time during the one-year period prior to the date of the termination of Employee’s relationship with the Company; and/or,
(iii) any other countries from which the Company maintains non-trivial operations or facilities, provided goods or services, had customers, or otherwise conducted business at any time during the one-year period prior to the date of the termination of Employee’s relationship with the Company.
Without limiting the Territory, and to the extent the Territory is deemed to be overly broad, Employee and the Company agree that the limitations herein shall apply specifically to the following competitors: McAfee, Aura, BitDefender, Malwarebytes, Experian, Transunion, Equifax, Nord Security, F-Secure and Crosspoint Capital. Should Employee obtain other employment during Employee’s employment with the Company or within twelve (12) months immediately following the termination of the relationship with the Company, Employee agrees to provide written notification to the Company as to the name and address of the new employer, the position to be held, and a general description of the duties and responsibilities, within three (3) days after signing an employment agreement with a new business or within seven (7) days of starting employment, whichever time period would provide the earliest reporting to the Company.
2. Nonsolicitation. Employee agrees that during employment with the Company and for a period of twelve (12) months immediately following the termination of the relationship with the Company, or if twelve (12) months is too long a period of time to be enforceable then for a period of nine (9) month, or if nine (9) months is too long a period to be enforceable then for a period of six (6) months, Employee shall not solicit, or cause to be solicited, directly or indirectly, any Customer for the purposes of conducting business that is competitive to that of the Company or for the purpose of disadvantaging the Company’s business. For the purposes of this Agreement, “Customer” shall mean all persons or entities known by the Employee to have Employee used or inquired of the services of the Company during the one-year period preceding the termination of Employee’s employment with the Company and with whom Employee had contact during that period.
3. Term and Severability of Covenants. If Employee breaches any provision set forth herein, the term of such provision shall be extended by the period of the duration of such breach. If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any covenants herein (or any part thereof), then such unenforceable covenant (or such word(s), clause(s) or part(s) of such covenant) shall be eliminated from this Agreement, to the extent necessary to permit the remaining separate covenants (or such word(s), clause(s), or part(s)portions thereof) to be enforced. Specifically, without limiting the scope of the severability provisions herein, in the event that the provisions of Sections 1 and 2 above are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then any such unenforceable provisions shall be struck to allow the maximum time, geographic or scope limitations to remain and be enforceable, as the case may be, then permitted by such law.
4. Non-Disparagement/Non-Interference. Employee shall not, at any time during employment or for one year thereafter, directly or indirectly, disparage the Company, including making any disparaging statements about the Company (including its board of directors, executives, and employees), as well as the Company’s business, products, intellectual property, financial standing, or future business prospects. Employee further agrees to refrain from any interference with the contracts and relationships of any of the Company. Notwithstanding the foregoing, nothing in this Section 4 shall preclude Employee from making truthful and accurate statements or disclosures that are required by
applicable laws or legal process, including with respect to any statements made relating to a claim of sexual harassment.
5. Independence of Obligations. The covenants and obligations of Employee set forth in this Agreement shall be construed as independent of any other agreement or arrangement between Employee, on the one hand, and the Company, on the other.
6. Employee Acknowledgements. by signing below, Employee acknowledges that Employee’s agreement as set forth herein is necessary to preserve and protect the Company’s confidential, proprietary, and trade secret information and legitimate and protectable business interests, as well as to preserve and protect the value and goodwill of the Company during employment and following the date of termination. Employee also acknowledges that the limitations of time, geography and scope of activity agreed to in this Agreement are reasonable because, among other things: (A) the Company is engaged in a highly competitive industry; (B) Employee has had unique access to the Company’s confidential, proprietary, and trade secret information, including but not limited Company customers, vendors, know-how, as well as the plans and strategy (and, in particular, the competitive strategy) of the Company; (C) Employee believes Employee would be able to obtain suitable and satisfactory employment without violation of this Agreement; and (D) Employee believes that this Agreement provides no more protection than is reasonably necessary to protect the Company’s legitimate and protectable business interests and in the protection of its goodwill, confidential, proprietary, and trade secret information. Employee further acknowledges that Employee has received reasonable notice of the restrictions provided for in this Agreement, and understands and agrees that Employee’s continued employment with the Company shall constitute adequate consideration for, and acceptance of, the terms of this Agreement.
Employee further acknowledges Employee’s understanding that nothing in this Agreement limits or prohibits Employee from filing and/or pursuing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (“Government Agencies”), including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. In addition, Employee understands that nothing in this Agreement, including its definition of Company Confidential Information, (i) limits Employees’ rights to discuss or disclose the terms, wages, and working conditions of their employment, nor (ii) prevents Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that Employee has reason to believe is unlawful. Notwithstanding the preceding, Employee agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any Company trade secrets, proprietary information, or confidential information that does not involve unlawful acts in the workplace or the activity otherwise protected herein. Employee further understands that Employee is not permitted to disclose the Company’s attorney-client privileged communications or attorney work product. In addition, Employee hereby acknowledges that the Company has provided notice in compliance with the Defend Trade Secrets Act of 2016 regarding immunity from liability for limited disclosures of trade secrets.
7. Specific Performance, Liquidated Damages and Other Remedies.
(a) The parties to this Agreement agree that, in the event of any breach or threatened breach by Employee of any covenant, obligation or other agreement set forth in this Agreement, (i) the Company shall be entitled, without any proof of actual damages (and in addition to any other remedy that may be available to it), to a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other agreement and a restraining order an injunction preventing or restraining such breach or threatened breach, and (ii) the Company shall not be required to provide or post any bond or other security or collateral in connection with any such decree, order or injunction or in connection with any related action or legal proceeding.
(b) The parties to this Agreement further agree that, in the event of any breach by the Employee of any covenant, obligation, or other agreement set forth in this Agreement that
the Company shall be entitled to an award of liquidated damages equal to the value of any shares (as of the date of vesting) of Employee’s Restricted Stock Units (“RSU”) or Performance Restricted Stock Units (“PRU”) that have vested, in accordance with the terms of the RSU and PRU Award Agreement, in the two fiscal years preceding the breach. The parties agree that the Company’s actual money damages upon Employee’s breach will be difficult to compute, and further agree that the liquidated damages provided herein reasonably approximate the Company’s actual money damages.
(c) Any and all remedies herein expressly conferred herein upon the Company shall be deemed to be cumulative with, and not exclusive of, any other remedy conferred hereby, or by law, in equity, by contract, or otherwise upon the Company, and the exercise by the Company of any one remedy will not preclude the exercise of any other remedy. Without limiting the generality of the foregoing, the rights and remedies of the Company hereunder, and the obligations and liabilities of Employee hereunder, are in addition to their respective rights, remedies, obligations and liabilities under the laws of unfair competition, misappropriation of trade secrets and the like. This Agreement does not limit Employee’s obligations or the rights of the Company under the terms of any other agreement between Employee and the Company.
8. Termination of Services to the Company. Employee’s obligations under this Agreement shall not be eliminated or diminished by the termination of Employee’s employment, whether termination is voluntary or otherwise. Employee shall, during the Non-Competition Period, within three (3) business days after accepting any employment, consulting engagement, engagement as an independent contractor, partnership or other association, furnish any such employer with a copy of this Agreement or relevant portions hereof.
9. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via electronic mail (with acknowledgment of receipt) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice or, if specifically provided for elsewhere in this Agreement, by email); provided, however, that notices sent by mail will not be deemed given until received:
(a)if to the Company, to:
NortonLifeLock Inc.
350 Ellis St.
Mountain View, CA 94043
Attention: Chief Legal Officer
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Rico Rosales
Email: rrosales@wsgr.com
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Rico Rosales
Email: rrosales@wsgr.com
(b)if Employee, to the address or email address set forth on his or her signature page hereto.
All such notices and other communications shall be deemed to have been duly given or sent (i) one (1) business day following the date mailed if sent by overnight commercial messenger or courier service or five (5) business days following the date mailed if sent by other mail service, or (ii) on the date on which delivered personally or by facsimile or electronic mail transmission, as the case may be, and addressed as aforesaid.
10. Governing Law. This Agreement, and all claims, causes of action (whether in contract, tort or statute) or other matter that may result from, arise out of, be in connection with or relating to this Agreement, or the negotiation, administration, performance, or enforcement of this Agreement (the
“Relevant Matters”), shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Arizona, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, including its statutes of limitations. Regardless of the existence of any other agreement between Employee and the Company, any claims and remedies sought herein shall not be subject to mandatory arbitration. All claims, remedies, and disputes of any kind arising out of this Agreement shall exclusively be subject to State and Federal Court jurisdiction in the State of Arizona.
11. Choice of Venue. The Employee and the Company irrevocably consent to the exclusive jurisdiction and venue of the state and federal courts located in the State of Arizona. Each Party agrees not to commence any legal proceedings with respect to a Relevant Matter except in such courts. The Parties hereto irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the delivery of copies thereof by overnight courier to the address for such party to which notices are deliverable hereunder. Any such service of process shall be effective upon delivery.
12. Labor Code 925 Confirmation. Employee represents, warrants, and confirms that the Company has advised Employee as to the existence of California Labor Code Section 925 and its protections as to the law applicable to, and location for the resolution of, any claim or controversy between Employee and the Company that arises in California. Employee acknowledges and confirms the Company has instructed her to consult counsel regarding the terms of this Agreement, and Employee states under penalty of perjury that Employee has in fact consulted independent counsel (i) as to the negotiation of the terms of this Agreement, (ii) its designation of Arizona law as the law applying to any dispute that may result from, arise out of, be in connection with or relate to this Agreement and Employee’s obligations thereunder (including its post-employment restrictive covenants), Employee’s employment with or separation from the Company (including claims or controversies arising in California), as well as (iii) this Agreement’s designation of Arizona courts as the exclusive venue or forum where any such disputes will be resolved. Employee agrees to provide the Company any further written confirmation requested to confirm the consultation referred to in this section. IN THE EVENT THAT THE COMPANY HAS OFFERED TO PAY, OR HAS PAID, ANY FEES OR COSTS ASSOCIATED WITH EMPLOYEE’S CONSULTATION OF INDEPENDENT COUNSEL, EMPLOYEE AGREES THAT EMPLOYEE’S RETENTION OF SUCH COUNSEL WAS NEVERTHELESS VOLUNTARY AND NOT COERCED, AND THAT SUCH PAYMENT DOES NOT CREATE ANY CONFLICT OF INTEREST. EMPLOYEE HEREBY WAIVES ANY RIGHT TO ARGUE, AND AGREES NOT TO ARGUE, THAT THERE WAS ANY COERCION OR A CONFLICT OF INTEREST IN THE EXECUTION OF THIS AGREEMENT BASED ON EMPLOYEE’S USE OF INDEPENDENT COUNSEL OR THE COMPANY’S PAYMENT OF ANY FEES IN CONNECTION WITH SUCH CONSULTATION. EMPLOYEE UNDERSTANDS THAT COMPLIANCE WITH THE TERMS OF THIS PARAGRAPH IS A MATERIAL TERM OF THIS AGREEMENT AND EMPLOYEE’S FAILURE TO DO SO, INCLUDING PROVIDING ANY DOCUMENTATION REQUESTED TO CONFIRM THAT EMPLOYEE HAS IN FACT CONSULTED WITH COUNSEL AS TO THE NEGOTIATION OF THE TERMS OF THIS AGREEMENT SHALL CONSTITUTE A BREACH OF THE AGREEMENT.
13. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT, OR ANY OTHER RELEVANT MATTER.
14. Waiver. Neither the failure nor any delay by any party in exercising any right, power, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any right, power, privilege or remedy under this Agreement, shall operate as a waiver of such right, power, privilege or remedy; and no single or partial exercise of any such right, power, privilege or remedy shall preclude any other or further exercise thereof or of any other right, power, privilege or remedy. No party shall be deemed to have waived any claim arising out of this Agreement, or any right, power, privilege or remedy under this Agreement, unless the waiver of such claim, right, power, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the waiving party; and any such waiver shall only apply to the specific instance to which such waiver relates.
15. Entire Agreement/Amendment. This Agreement and the documents and instruments and other agreements referenced herein constitute the entire agreement among the Parties with respect to the specific subject matter set forth in this Agreement and supersede all prior agreements and understandings both written and oral, among the Parties with respect to the specific subject matter of this Agreement, except that the terms of the Confidentiality Agreement shall remain in full force and effect and shall be deemed to supplement and not diminish Employee’s obligations to protect said Company information. This Agreement may be amended by the Parties hereto at any time by execution of an instrument in writing signed on behalf of the Party against whom enforcement is sought. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all parties need not sign the same counterpart. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the Parties to the terms and conditions of this Agreement.
16. Binding Nature/Assignment. This Agreement and all obligations hereunder are personal to Employee and may not be assigned, delegated or otherwise transferred by Employee at any time. This Agreement will be binding upon Employee and Employee’s representatives, executors, administrators, estate, heirs, successors and assigns, and will inure to the benefit of the Company and its direct and indirect affiliates and subsidiaries, each of whom (other than the Company) is an express third-party beneficiary of this Agreement with the ability to enforce this Agreement as if it were the Company hereunder. The Company may assign this Agreement and all other rights acquired hereunder in their entirety or in part at any time to any affiliate of or successor to the Company.
17. Construction. Each Party has, in fact, been represented by counsel during the negotiation and execution of the Agreement and hereby waives the application of any law or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
“EMPLOYEE”
_____________________________
By: _____________________________
Date: ____________________________
Address:
Email:
“COMPANY” NORTONLIFELOCK INC., a Delaware corporation
By: _Bryan Ko______________________
Title: _Chief Legal Officer_____________
Date:__August 19, 2022______________
Exhibit 31.01
Certification
I, Vincent Pilette, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NortonLifeLock Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Vincent Pilette | ||||||||
| Vincent Pilette | ||||||||
| Chief Executive Officer | ||||||||
Date: November 9, 2022
Exhibit 31.02
Certification
I, Natalie Derse, certify that:
1. I have reviewed this quarterly report on Form 10-Q of NortonLifeLock Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Natalie Derse | ||||||||
| Natalie Derse | ||||||||
| Chief Financial Officer | ||||||||
Date: November 9, 2022
Exhibit 32.01
Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Vincent Pilette, Chief Executive Officer of NortonLifeLock Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (i) the Company’s quarterly report on Form 10-Q for the period ended September 30, 2022, to which this Certification is attached (the “Form 10-Q”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Vincent Pilette | ||||||||
| Vincent Pilette | ||||||||
| Chief Executive Officer | ||||||||
Date: November 9, 2022
This Certification which accompanies the Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
Exhibit 32.02
Certification Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
I, Natalie Derse, Chief Financial Officer of NortonLifeLock Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (i) the Company’s quarterly report on Form 10-Q for the period ended September 30, 2022, to which this Certification is attached (the “Form 10-Q”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Natalie Derse | ||||||||
| Natalie Derse | ||||||||
| Chief Financial Officer | ||||||||
Date: November 9, 2022
This Certification which accompanies the Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.