8-KLeadership ChangesExhibits & Filings

COGNIZANT TECHNOLOGY SOLUTIONS CORP 8-K Report, Executive Changes (Jul 6, 2009)

Filed July 6, 2009For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) filed an 8-K on July 6, 2009, primarily to disclose the adoption and forms of award agreements under its 2009 Incentive Compensation Plan. This plan governs the issuance of stock options and restricted stock units (RSUs) to its officers and employees. The filing details the standard terms for these equity awards, including vesting schedules, exercise prices, and provisions related to changes in control. This information is crucial for investors to understand potential future dilution and the alignment of executive compensation with shareholder interests. The key takeaway for investors is that CTSH has formalized its equity compensation structure for the upcoming year. The reported award agreements outline typical four-year vesting for stock options and either three-year time-based or performance-based vesting for RSUs. Notably, the plan includes provisions for accelerated vesting upon a change in control, a common feature designed to retain talent during potential acquisition scenarios. The filing also clarifies how dividend equivalents will be handled for RSUs, providing further transparency into the mechanics of these compensation instruments.

Key Highlights

  • 1Cognizant Technology Solutions Corporation approved forms of award agreements and notices for restricted stock unit (RSU) awards and stock option grants under its 2009 Incentive Compensation Plan.
  • 2Stock options will have an exercise price not less than 100% of the fair market value on the grant date.
  • 3Stock options will vest over four years, with 25% vesting each year.
  • 4Restricted Stock Units (RSUs) will have either a three-year time-based vesting schedule (annual or quarterly installments) or performance-based vesting.
  • 5Both stock options and RSUs will generally vest in full upon a change in control, unless the award is assumed or replaced by the successor.
  • 6Phantom dividend equivalents will accrue for RSUs and be distributed when vested shares are issued.
  • 7The filing also outlines specific RSU award terms for non-employee directors, including deferred issuance upon separation from service, change in control, death, or disability.

Frequently Asked Questions

The main purpose of this 8-K filing is to inform investors about the adoption of standardized award agreements for equity compensation, specifically stock options and restricted stock units (RSUs), under Cognizant's 2009 Incentive Compensation Plan. It details the terms and conditions for these grants.

Stock options are set to vest over a four-year period, with 25% of the options becoming exercisable after each year of service. Restricted Stock Units (RSUs) will have either a three-year time-based vesting schedule (paid out in annual or quarterly installments) or vest based on the attainment of specific performance objectives over a period of at least one year.

In the event of a change in control of the company, both stock options and RSUs will generally vest in full. This accelerated vesting is subject to an exception if the awards are assumed or continued in effect by the acquiring company, or if they are replaced with a comparable cash incentive program that preserves the award's value and payout schedule.

Yes, the filing specifies that RSUs for non-employee directors can have deferred issuance terms. Shares can be issued upon the earliest of the director's separation from service, a change in control transaction, death, or permanent disability. Vesting for these awards can also occur in annual, quarterly, or monthly installments based on service.