PROPOSAL NO. 3—APPROVAL OF THE ARRAY TECHNOLOGIES, INC. EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, shareholders are being asked to approve the Array Technologies, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”), which was approved by the Board on December 1, 2021, subject to shareholder approval. The material features of the ESPP are summarized below.
The purpose of the ESPP is to enable eligible employees of the Company and certain of its subsidiaries to use payroll deductions to purchase shares of our common stock and thereby acquire an ownership interest in the Company. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code and to be exempt from the requirements of Section 409A of the Internal Revenue Code.
As of March 31, 2022, 19,081,046 shares of our Common Stock were available for future issuance or subject to outstanding awards under our 2020 Plan, which represents 12.7% of our common stock outstanding on such date. The maximum aggregate number of shares of our common stock that may be purchased under the ESPP will be 3,500,000 (the “Share Pool”), subject to adjustment as provided for in the ESPP, which represents 2.3% of our common stock outstanding as of March 31, 2022. In establishing the Share Pool, our Board considered the potential dilutive impact to stockholders, the estimated projected participation rate over the ten-year term of the plan, equity plan guidelines established by certain proxy advisory firms and advice provided by Pay Governance, the compensation consultant to the Compensation Committee. For information about options and restricted stock units outstanding under our existing equity plans and the number of shares available for issuance under these plans, each as of December 31, 2021, please see “Equity Compensation Plans” elsewhere in this Proxy Statement.
The full text of the ESPP is set forth in Annex A to this Proxy Statement. The following description of certain features of the ESPP is qualified in its entirety by reference to the full text of the ESPP.
Summary of the ESPP
Administration. The ESPP will be administered by the Compensation Committee (except that the Board may at any time act in the capacity of administrator), which will have the authority to interpret and determine eligibility under the plan, prescribe forms, rules and procedures relating to the plan, and otherwise do all things necessary or desirable to carry out the purposes of the plan. The Compensation Committee (or the Board, as applicable) may delegate its authority under the ESPP to one or more of its members (or one or more members of our Board) such of its duties, powers, and responsibilities as it may determine and to employees or other persons as it determines such ministerial tasks as it deems appropriate. As used in this summary, the term “administrator” refers to the Compensation Committee, our Board or any authorized delegates, as applicable.
Shares Subject to the ESPP. As noted above, the Share Pool consists of 3,500,000 shares of our common stock, subject to adjustment, as described below. Shares delivered upon exercise of options under the ESPP may be either shares of authorized but unissued common stock, treasury stock, or previously issued common stock acquired by the Company. In the event of any change in our outstanding common stock by reason of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company’s capital structure, the administrator will make appropriate adjustments to the aggregate number and type of shares available for purchase under the ESPP, the number and type of shares granted under any outstanding options, the maximum number and type of shares purchasable under any outstanding option, and/or the purchase price per share under an outstanding option.
Shares will not be treated as delivered, and will not reduce the number of shares in the aggregate unless and until, and to the extent, they are actually delivered to a participant. If any option granted under the ESPP expires or terminates for any reason without having been exercised in full or ceases for any reason to be exercisable in whole or in part, the unpurchased shares of common stock subject to such option will not reduce the Share Pool and will remain available for purchase under the ESPP. On March 31, 2022, the closing price of a share of our common stock was $11.27.
Eligibility. Participation in the ESPP will be limited to employees of the Company or a designated subsidiary (i) who have been continuously employed for a period of at least 14 days as of the first day of the option period, (ii) whose customary employment is for more than five months per calendar year, (iii) who