PROPOSA
L 1: ELECTION OF DIRECTORS
The Board
is currently comprised of nine directors, divided into three classes of three
members each, with the terms of one class of directors expiring each
year. The Board has nominated Thomas Fischer, Rakesh Sachdev and
Carol Skornicka for election at the Annual Meeting as Class C directors to serve
until the 2011 annual meeting of shareholders and, for all nominees, until their
successors are duly elected and qualified. All of our other directors
are expected to serve on the Board until their respective terms expire as
indicated below. As a result, the Board has nominated individuals for
election as directors with respect to all open seats on the Board.
Unless
shareholders otherwise specify, the shares represented by the proxies received
will be voted in favor of the election as directors of the persons named as
nominees herein. The Board has no reason to believe that any of the
listed nominees will be unable or unwilling to serve as a director if
elected. However, in the event that any nominee should be unable or
unwilling to serve, the shares represented by proxies received will be voted for
another nominee selected by the Board.
The
following sets forth certain information, as of March 5, 2008, about each of the
Board nominees for election at the Annual Meeting and each director whose term
will continue after the Annual Meeting. Except as otherwise noted,
each nominee has engaged in the principal occupation or employment and has held
the offices shown for more than the past five years.
Nominees
for Election at the Annual Meeting
Name
|
Age
|
Director
Since
|
Principal
Occupation; Office, if any,
Held
in the Company; Other Directorships
|
Class
C Directors—Terms Expiring at the 2011 Annual Meeting of
Shareholders
|
Thomas
J. Fischer
|
60
|
2004
|
Corporate
financial and accounting consultant since 2002; retired Milwaukee office
managing partner, Arthur Andersen LLP; director, Badger Meter Inc.,
Actuant Corporation and Wisconsin Energy Corporation.
|
Rakesh
Sachdev
|
51
|
2007
|
Sr.
Vice President and President of Asia Pacific, ArvinMeritor, Inc. (supplier
of integrated systems, modules and components to the motor vehicle
industry); employed with ArvinMeritor since 1999. Mr. Sachdev was
appointed as a director by the Board in July 2007 to fill the vacancy
created by the retirement of Mr. Stephen Graff. Mr. Sachdev was
originally recommended as a nominee by a third-party search firm acting on
behalf of the Corporate Governance and Director Affairs
Committee.
|
Carol
N. Skornicka
|
66
|
2006
|
Retired
Sr. Vice President-Corporate Affairs, Secretary and General Counsel of
Midwest Air Group (a holding company for a commercial airline company);
employed by Midwest from 1996 to her retirement in February 2008; director
of Johnson Financial Group, Inc. Ms. Skornicka was appointed by the Board
as a director in 2006. Ms. Skornicka was originally recommended
as a nominee by the Corporate Governance and Director Affairs
Committee.
|
THE
BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH
SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.
Directors
Continuing in Office:
Name
|
Age
|
Director
Since
|
Principal
Occupation; Office, if any,
Held
in the Company; Other Directorships
|
Class
A Directors—Terms Expiring at the 2009 Annual Meeting of
Shareholders
|
G.
Frederick Kasten, Jr.
|
68
|
1995
|
Retired
Chairman and director, Robert W. Baird & Co., Inc.; served as
President of Robert W. Baird & Co., Inc. from 1979-1999; as Chief
Executive Officer from 1983-2000; and as Chairman and director from
2000-2005.
|
Henry
W. Knueppel
|
59
|
1987
|
Chairman
of the Board and Chief Executive Officer of the Company since April 2006;
elected Chief Executive Officer April 2005; President and Chief Operating
Officer from 2002-2005; Executive Vice President from 1987-2002; employed
by the Company since 1979.
|
Dean
A. Foate
|
49
|
2005
|
President
and Chief Executive Officer of Plexus Corporation (an electronics
manufacturing services company) since 2002; served as Chief Operating
Officer of Plexus Corporation from 2001-2002; director of Plexus
Corporation.
|
Class
B Directors—Terms Expiring at the 2010 Annual Meeting of
Shareholders
|
Christopher
L. Doerr
|
58
|
2003
|
Co-CEO
of Sterling Aviation Holdings, Inc. (aircraft management and charter
company) since 2004 and Co-CEO of Passage Partners, LLC (a private
investment company) since 2001; former President and Co-CEO, LEESON
Electric Corporation from
1986-2001.
|
Name
|
Age
|
Director
Since
|
Principal
Occupation; Office, if any,
Held
in the Company; Other Directorships
|
Mark
J. Gliebe
|
47
|
2007
|
President
and Chief Operating Officer of the Company since December 2005; Vice
President and President-Electric Motors Group of the Company from January
2005 to December 2005; prior thereto employed by General Electric Company
(a diversified industrial and commercial manufacturing corporation) as the
General Manager of GE Motors & Controls in the GE Consumer &
Industrial business unit from 2000-2004.
|
Curtis
W. Stoelting
|
48
|
2006
|
Chief
Executive Officer of RC2 Corporation (a designer, producer and marketer of
toys, collectibles, hobby and infant care products) since 2003; prior
thereto as Chief Operating Officer from 2000-2003 and Executive Vice
President from 1998-2003 of RC2
Corporation.
|
BOA
RD OF DIRECTORS
Corporate
Governance and Independent Directors
The Board
has in effect Corporate Governance Guidelines that, in conjunction with the
Board committee charters, establish processes and procedures to help ensure
effective and responsive governance by the Board. The Corporate
Governance Guidelines are available, free of charge, on our website at
www.regalbeloit.com
or in print to any shareholder who requests a copy in writing addressed to the
Company’s Secretary. We are not including the information contained
on or available through our website as a part of, or incorporating such
information by reference into, this Proxy Statement.
The
Corporate Governance Guidelines provide that a majority of the members of the
Board must be independent directors under the listing standards of the
NYSE. The Board has adopted certain categorical standards of director
independence, which specifically relate to the rules imposed by the NYSE listing
standards, to assist it in making determinations of director independence and
which are contained in the Corporate Governance Guidelines. A copy of
these categorical standards of director independence are also attached as
Appendix A
to this
Proxy Statement.
Based on
these standards, the Board has affirmatively determined by resolution that
Messrs. Doerr, Fischer, Foate, Kasten, Sachdev and Stoelting and Ms. Skornicka
have no material relationship with the Company, and, therefore, each is
independent in accordance with the NYSE listing standards. The Board
will regularly review the continuing independence of the directors.
Code
of Business Conduct and Ethics
The Board
has adopted the Regal Beloit Corporation Code of Business Conduct and Ethics,
which applies to our directors, officers and employees. The Code is available,
free of charge, on our website at
www.regalbeloit.com
or in print to any shareholder who requests a copy in writing addressed to the
Company’s Secretary.
Presiding
Director; Executive Sessions
The
Corporate Governance Guidelines require that the Board designate a “Presiding
Director” to lead each executive session of the Board. The position
of the Presiding Director rotates periodically among the non-employee directors
as determined by the Board upon the recommendation of the Corporate Governance
and Director Affairs Committee. Mr. Foate currently serves as the
Presiding Director.
The
Board will have at least four regularly scheduled meetings a year at which the
non-employee directors will meet in executive session without members of our
management being present. The non-employee directors may also meet
without management present at such other times as they determine
appropriate. Members of the Company’s senior executive management who
are not members of the Board will participate in Board meetings to present
information, make recommendations, and be available for direct interaction with
members of the Board.
Communications
with the Board
Shareholders
and other interested parties may communicate with the full Board, the Chairman
of the Board, non-management directors as a group or individual directors,
including the Presiding Director, by delivering a written communication to Regal
Beloit Corporation, Attention: Board of Directors, 200 State Street, Beloit,
Wisconsin 53511, or by sending an e-mail communication to
board.inquiry@regalbeloit.com
. The
communications should be addressed to the specific director or directors whom
the shareholder or interested party wishes to contact and should specify the
subject matter of the communication. The Company’s Secretary will deliver
appropriate communication directly to the director or directors to whom it is
addressed. The Secretary will generally not forward to the director
or directors communication that he determines to be primarily commercial in
nature or concerns our day-to-day business activities, or that requests general
information about the Company.
Concerns
about accounting or auditing matters or possible violations of the Regal Beloit
Corporation Code of Ethics should be reported pursuant to the procedures
outlined in the Code of Conduct and in our policy regarding Reporting Ethical,
Legal and Accounting Concerns, both of which are available on our website at
www.regalbeloit.com
.
Committees
We have
standing Audit, Compensation and Human Resources, and Corporate Governance and
Director Affairs Committees of the Board. Each committee is appointed
by and reports to the Board. The Board has adopted, and may amend
from time to time, a written charter for each of the Audit, Compensation and
Human Resources, and Corporate Governance and Director Affairs
Committees. We make copies of each of these charters available free
of charge on our website at
www.regalbeloit.com
. Shareholders
may also obtain a copy of the charters by directing a written request to the
Company’s Secretary.
Audit
Committee
. The Audit Committee consists of Messrs. Fischer
(Chairperson) and Stoelting and Ms. Skornicka. Each of the members of
the committee is independent as defined by the NYSE listing standards and the
rules of the Securities and Exchange Commission (the “SEC”). The
Board has determined that each of Messrs. Fischer and Stoelting qualifies as an
“audit committee financial expert” as defined in SEC rules and meets the
expertise requirements for audit committee members under the NYSE listing
standards. The principal functions performed by the Audit Committee,
which met four times in 2007, are to assist the Board in monitoring the overall
quality of the Company’s financial statements and financial reporting, the
independent auditor’s qualifications and independence, our accounting controls
and policies, the performance of our internal audit function and independent
auditors, and our compliance with legal and regulatory requirements. The Audit
Committee has the sole authority to appoint, retain, compensate and terminate
our independent auditors and to approve the compensation paid to the independent
auditors. The committee has conditioned its selection of independent
auditors for 2008 upon the ratification of this selection by our shareholders at
the Annual Meeting. See “Proposal 2: Ratification of Deloitte &
Touche LLP as the Company’s Independent Auditors for 2008.”
One
member of the Audit Committee, Mr. Fischer, serves on the audit committees of
three other public companies. On February 1, 2008, the Board of
Directors considered what it believes to be all of the relevant facts and
responsibilities relating to such simultaneous service by Mr. Fischer and
affirmatively determined that the simultaneous service would not impair Mr.
Fischer’s ability to serve effectively on our Audit Committee.
Compensation and Human Resources
Committee
. The Compensation and Human Resources Committee
consists of Messrs. Doerr (Chairperson), Foate and Stoelting. Each of
the members of the Compensation and Human Resources Committee is independent as
defined by the NYSE listing standards. The principal functions of the
Compensation and Human Resources Committee, which met four times in 2007, are to
help develop our overall compensation philosophy; administer our incentive
compensation plans (including our equity incentive plans); determine and approve
the Chief Executive Officer’s compensation; recommend to the Board the annual
compensation of the other principal corporate officers; review and monitor
succession and leadership development planning; and review, formulate, recommend
and administer short- and long-range compensation programs for the principal
corporate officers and key employees. A more complete description of
our Compensation and Human Resources Committee’s practices can be found in the
Compensation Discussion and Analysis section of this Proxy
Statement.
Corporate Governance and Director
Affairs Committee
. The Corporate Governance and Director
Affairs Committee consists of Messrs. Kasten (Chairperson) and Sachdev and Ms.
Skornicka. Each of the members of the Corporate Governance and
Director Affairs Committee is independent as defined by the NYSE listing
standards. The principal functions of the Corporate Governance and
Director Affairs Committee, which met three times in 2007, are to develop and
recommend to the Board a set of corporate governance principles applicable to
our company, including matters of (a) Board organization, membership,
compensation, independence and function, (b) committee structure and
membership; and (c) otherwise take a leadership role in shaping our
corporate governance; to identify directors qualified to serve on the committees
established by the Board; and to recommend to the Board the members and the
chairperson for each committee to be filled by the Board. This Committee also
serves as the nominating committee of the Board and is responsible for
identifying individuals qualified to become directors (consistent with the
criteria approved by the Board) and to recommend candidates for all
directorships to be filled by the Board or by our shareholders.
Nominations
of Directors
The
Corporate Governance and Director Affairs Committee will consider persons
recommended by shareholders to become nominees for election as directors in
accordance with the criteria set forth in the Corporate Governance Guidelines
under the heading “Director’s Qualifications”. The Corporate
Governance and Director Affairs Committee will only review recommendations for
director nominees from any shareholder or group of shareholders beneficially
owning in the aggregate at least 5% of the issued and outstanding shares of our
common stock for at least one year as of the date that the recommendation is
made. Recommendations with respect to the 2009 annual meeting of
shareholders must be submitted by February 11, 2009, for the recommendation to
be considered by the Corporate Governance and Director Affairs
Committee.
In
identifying and evaluating nominees for director, the Corporate Governance and
Director Affairs Committee believes that directors must possess the highest
personal and professional ethics, integrity and values, and commitment to
representing the long-term interest of the shareholders. Directors
must also possess a diverse set of skills and experience with a background in
areas that are relevant to our activities. Directors should also be inquisitive
and have an objective perspective, a practical wisdom and mature judgment.
Directors must be willing and able to devote whatever time is necessary to carry
out their duties and responsibilities effectively. Directors will not be
nominated unless they are willing to serve for an extended period of
time.
For a
timely recommendation submitted by a shareholder to be considered by the
Corporate Governance and Director Affairs Committee, the candidate recommended
by a shareholder must be “independent” as defined in the NYSE independence
standards and the SEC regulations, and meet the minimum expectations for a
director set forth in the Company’s Corporate Governance
Guidelines. The Corporate Governance and Director Affairs Committee
will have sole discretion whether to nominate an individual recommended by a
shareholder. As to any candidate identified by the Corporate Governance and
Director Affairs Committee to become a nominee, the candidate must possess the
requisite qualifications, although the Corporate Governance and Director Affairs
Committee need not require such nominee to be independent. Nevertheless, we
strive to have all directors, other than those directors who are members of our
management, be independent as defined by the NYSE independence standards and the
SEC regulations.
Policies
and Procedures Regarding Related Person Transactions
Our Board
of Directors has adopted written policies and procedures regarding related
person transactions. For purposes of these policies and
procedures:
|
·
|
a
“related person” means any of our directors, executive officers, nominees
for director or greater than 5% shareholder, and any of their immediate
family members, as well as any entity in which any of these persons is
employed or is a partner or principal or in a similar position or in which
such person has a 5% or greater beneficial ownership interest;
and
|
|
·
|
a
“related person transaction” generally is a transaction in which we were
or are to be a participant and the amount involved exceeds $120,000, and
in which any related person had or will have a direct or indirect
interest.
|
The
related person, the director, executive officer, nominee or beneficial owner who
is an immediate family member of a related person, or a business unit or
function/department leader of the Company responsible for a proposed related
person transaction must notify our General Counsel of certain information
relating to proposed related person transactions. If our General
Counsel determines that a proposed transaction is a related person transaction
subject to the policy, then he will submit the transaction to the Corporate
Governance and Director Affairs Committee for consideration at the next
committee meeting or, if expedited consideration is required, to the committee
chairperson. The committee or chairperson, as applicable, will
consider all of the relevant facts and circumstances available regarding the
proposed related person transaction and will approve only those related person
transactions that are in, or are not inconsistent with, the best interests of
our company and our shareholders. The chairperson is required to
report to the committee at the next committee meeting any approval granted under
the policy.
The
policy also provides for ongoing review by the General Counsel of any amounts
paid or payable to, or received or receivable from, any related
person. Additionally, at least annually, the Corporate Governance and
Director Affairs Committee is required to review any previously approved or
ratified related person transactions that remain ongoing and have a remaining
term of more than six months or remaining amounts payable to or receivable from
us of more than $60,000. Based on all relevant facts and
circumstances, the committee will determine if it is in the best interests of
our company and our shareholders to continue, modify or terminate the related
person transaction.
If any of
our Chief Executive Officer, Chief Financial Officer or General Counsel becomes
aware of a pending or ongoing related person transaction that has not been
previously approved or ratified under the policy, then the transaction must be
disclosed to the Corporate Governance and Director Affairs Committee or its
chairperson. The committee or the chairperson must then determine
whether to ratify, amend or terminate the related person transaction, or take
any other appropriate action. If the related person transaction is
complete, then the committee or its chairperson will evaluate the transaction to
determine if rescission of the transaction and/or any disciplinary action is
appropriate.
In 2007,
there were no proposed, pending or ongoing related person transactions subject
to review by the Corporate Governance and Director Affairs Committee under the
policy.
Meetings
and Attendance
The Board
held nine meetings in 2007. Each director attended at least 75% of
the aggregate of (a) the total number of meetings of the Board and (b) the total
number of meetings held by all committees of the Board on which the director
served during 2007 during the time that such person served as
director.
Directors
are expected to attend our annual meeting of shareholders each
year. All of the current directors who were directors at the time of
the 2007 annual meeting of shareholders attended that meeting.
STOC
K OWNERSHIP
Management
The
following table sets forth information, as of March 5, 2008, regarding
beneficial ownership of our common stock by each director and nominee, each of
our named executive officers as set forth in the Summary Compensation Table, and
all of the directors and executive officers as a group. As of March
5, 2008, no director or executive officer beneficially owned one percent or more
of our common stock, other than Mr. Knueppel, who beneficially owned 2.1% of our
common stock. On that date, the directors and executive officers as a
group beneficially owned 3.1% of our common stock. Except as
otherwise indicated in the footnotes, all of the persons listed below have sole
voting and investment power over the shares of our common stock identified as
beneficially owned.
Name
of Beneficial Owner
|
|
Amount
and Nature of
Beneficial
Ownership
(1)(2)(3)(4)
|
|
David
A. Barta . . . . . . . . . . . . . . . . . . . . .
|
|
|
17,764
|
|
|
Terry
R. Colvin . . . . . . . . . . . . . . . . . . . . .
|
|
|
1,006
|
|
|
Christopher
L. Doerr . . . . . . . . . . . . . . . .
|
|
|
28,075
|
|
|
David
L. Eisenreich . . . . . . . . . . . . . . . . .
|
|
|
70,276
|
|
|
Thomas
J. Fischer . . . . . . . . . . . . . . . . . .
|
|
|
23,000
|
|
|
Dean
A. Foate . . . . . . . . . . . . . . . . . . . .
.
|
|
|
19,000
|
|
|
Mark
J. Gliebe . . . . . . . . . . . . . . . . . . . . . .
|
|
|
53,758
|
|
|
Paul
J. Jones . . . . . . . . . . . . . . . . . . . . . . .
|
|
|
1,250
|
|
|
G.
Frederick Kasten, Jr. . . . . . . . . . . . . . .
|
|
|
75,088
|
|
|
Henry
W. Knueppel . . . . . . . . . . . . . . . .
|
|
|
656,672
|
|
|
Rakesh
Sachdev. . . . . . . . . . . . . . . . . . . .
|
|
|
7,000
|
|
|
Carol
N. Skornicka. . . . . . . . . . . . . . . . . .
|
|
|
11,000
|
|
|
Curtis
W. Stoelting. . . . . . . . . . . . . . . . . .
|
|
|
20,500
|
|
|
All
directors and executive officers
as
a group (13 persons) . . . . . . . . . . .
|
|
|
984,389
|
|
|
(1)
|
Includes
shares subject to currently exercisable rights to acquire common stock and
options exercisable within 60 days of March 5, 2008 as
follows: Mr. Barta, 13,332 shares; Mr. Colvin, 0 shares Mr.
Doerr, 23,000 shares; Mr. Eisenreich, 59,250 shares; Mr. Fischer, 20,000
shares; Mr. Foate, 14,000 shares; Mr. Gliebe, 44,000 shares; Mr. Jones, 0
shares; Mr. Kasten, 25,000 shares; Mr. Knueppel, 354,000 shares; Ms.
Skornicka, 10,000 shares; Mr. Stoelting, 13,000 shares; and all directors
and executive officers as a group, 520,332 shares. Also
includes shares of restricted stock that are subject to forfeiture until
they vest on the third anniversary of the date of grant as follows: Mr.
Barta, 3,000 shares; Mr. Colvin, 750 shares; Mr. Eisenreich, 3,000 shares;
Mr. Gliebe, 8,000 shares; Mr. Jones, 1,250 shares; and Mr. Knueppel,
25,000 shares.
|
(2)
|
Amount
shown for Mr. Knueppel includes 14,111 shares that are held in trust under
the Company’s Personal Savings Plan (401(k)) or a non-Company sponsored
individual retirement account and 83,821 shares related to the exercise of
options in 2002, the delivery of which shares is delayed until Mr.
Knueppel’s normal retirement.
|
(3)
|
Amounts
shown for Messrs. Fischer and Knueppel include 1,000 shares and 149,930
shares, respectively, as to which they share voting and investment power
with their spouses. The amount shown for Mr. Stoelting includes
7,500 shares held in the Curtis W. Stoelting 1994 Revocable Trust over
which Mr. Stoelting retains sole voting and investment power during his
lifetime.
|
(4)
|
Amounts
shown for Messrs. Colvin, Eisenreich and Gliebe include 256 shares, 6,073
shares and 465 shares, respectively, held in trust under the Company’s
401(k) plans.
|
Other
Beneficial Owners
The
following table sets forth information, as of December 31, 2007, regarding
beneficial ownership by the only persons known to us to own more than 5% of our
outstanding common stock. The beneficial ownership set forth below
has been reported on filings made on Schedule 13G with the SEC by the beneficial
owners.
|
Amount and Nature of Beneficial
Ownership
|
|
|
|
|
|
|
|
Voting Power
|
Investment Power
|
|
|
Name
and Address
of Beneficial Owner
|
Sole
|
Shared
|
Sole
|
Shared
|
Aggregate
|
Percent
of
Class
|
|
|
|
|
|
|
|
AXA
Financial, Inc.
1290
Avenue of the Americas
New
York, NY 10104
|
1,784,789
|
5,901
|
2,740,865
|
49
|
2,740,914
|
8.80%
|
|
|
|
|
|
|
|
Dimensional
Fund Advisors LP
1299
Ocean Avenue
Santa
Monica, CA 90401
|
2,049,136
|
--
|
2,049,136
|
--
|
2,049,136
|
6.38%
|
|
|
|
|
|
|
|
Barclays
Global Investors, NA
45
Fremont Street
San
Francisco, CA 94105
|
1,245,863
|
--
|
1,625,794
|
--
|
1,625,794
|
5.06%
|
COMPE
NSATION DISCUSSION AND ANALYSIS
What
is our company’s general compensation philosophy?
We
recognize the importance of maintaining sound principles for the development and
administration of our compensation and benefit programs. Our overall
compensation philosophy is to offer the opportunity for our management team to
earn competitive pay, with performance having a direct connection to total
compensation and the creation of shareholder value. Our Compensation
and Human Resources Committee, or the Committee, is responsible for making
executive compensation decisions and recommendations regarding program design
and individual pay. Our executive compensation programs are designed
to advance principles that we have identified as being core to the function of
executive compensation. These principles are:
·
|
Attract and Retain Quality
People
— We provide the opportunity for executives to be
compensated at competitive levels to ensure we attract and retain a highly
competent and committed management
team.
|
·
|
Pay for Creation of
Value
— We provide our executives the opportunity to earn
above-median pay (as measured against selected peer groups) for
performance that creates shareholder value by generating ever increasing
returns as compared to our cost of capital. We believe that
this level of performance results in long-term value creation for our
shareholders via appreciation in our stock
price. Alternatively, we pay compensation below the median
level for corporate performance that fails to generate those levels of
returns.
|
·
|
Link to Shareholder
Interests
— We link compensation to corporate performance through
equity-based awards to ensure that executives receive above-median
compensation only when we create long-term value for our
shareholders.
|
·
|
Alignment through Equity
Ownership
— We ensure that executives’ long-term interests are
further aligned with shareholders’ interests by requiring our executives
to own a significant equity stake in our
company.
|
We
believe that a focus on these principles will benefit our shareholders in the
long-term by assuring that we can attract and retain highly qualified executives
who are committed to our long-term success and the creation of shareholder
value.
How
do we set executive compensation?
Our
Board, our Committee and our Chief Executive Officer, or CEO, each play a role
in setting the compensation of our named executive officers. Our
Board appoints the members of the Committee, which consists entirely of
independent directors who are “outside directors” for purposes of Section 162(m)
of the Internal Revenue Code and “non-employee directors” for purposes of the
Securities Exchange Act of 1934. The current members of the Committee
are Messrs. Doerr (Chairman), Foate and Stoelting. The Committee,
subject to the approval of our Board, is responsible for establishing the
executive compensation packages offered to our named executive
officers. The Committee administers and has final authority for
setting awards under our annual cash incentive and long-term equity incentive
plans.
The
Committee reviews data from market surveys, proxy statements of companies it
considers our peers and independent compensation consultants to assess our
competitive position with respect to total executive compensation, including
annual compensation, deferred compensation, benefits and
perquisites. In reviewing data with respect to annual compensation,
we assess the following components of executive compensation:
·
|
Long-term
incentive compensation.
|
The
Committee’s objective generally is to establish base compensation between the
thirty-fifth (35
th
) and
fiftieth (50
th
)
percentile as compared with our selected peer group, with the opportunity for
our executives to earn above-median total compensation for performance that
generates ever increasing returns in excess of our cost of capital as measured
against our peer group.
The
Committee also considers individual performance, the level of responsibility and
skills and the experience of our executive officers in recommending base salary
levels for approval by the Board. For annual and long-term
incentives, the Committee considers a peer group analysis as well as other
existing compensation awards or arrangements in making compensation decisions
and recommendations. The Committee considers internal comparisons
relative to pay equity among our executive officers, but does not use a
formulaic approach in setting compensation levels among those executive
officers. In its decision-making process, the Committee receives and
considers the recommendations of our CEO as to executive compensation to be paid
to all of our executive officers, other than his own compensation as to which he
makes no recommendation.
Based on
the foregoing information, the Committee reviews and makes recommendations to
the Board on our compensation and benefit programs, with the objective of making
our executive compensation and benefits programs consistent with our overall
compensation philosophy. The Committee makes and recommends to the
Board decisions regarding adjustments to future base salaries, annual incentives
and long-term incentives concurrent with the assessment of the executives’
performance for the year.
The
Committee periodically solicits proposals from a variety of independent
compensation consultants to assist the Committee in the performance of its
responsibilities. After selecting an independent compensation
consultant, the Committee periodically meets with that consultant throughout the
year at such times as the Committee deems appropriate, and receives reports and
advice from the consultant on matters of executive compensation. Our
CEO has access to the independent compensation consultant only at the direction
of the Committee.
For 2007,
the Committee selected Towers Perrin to serve as its independent compensation
consultant. For 2008, the Committee has engaged The Delves Group to
serve as the independent compensation consultant. The Committee has
also engaged Stern Stewart & Co. every three years to assist with the
setting of goals under our Shareholder Value Added (SVA) Plan. The
independent compensation consultants retained by the Committee perform no other
services for us or our named executive officers other than the services provided
at the direction of the Committee.
In
assisting the Committee in setting compensation for 2007, the Committee directed
Towers Perrin to assemble compensation data for our named executive officers and
compare those data against aggregated data for persons holding
similarly-situated positions in other companies. Pursuant to its
engagement and to approximate our market, Towers Perrin benchmarked compensation
data against approximately 100 companies in both the industrial manufacturing
and the electronics and scientific equipment industries. We refer to
these 100 companies and the sixteen companies described in the next paragraph as
our “peer group.” In reviewing and analyzing these data, Towers
Perrin considered information for each named executive officer position with
respect to the following elements of compensation:
·
|
Total
cash compensation (salary and actual
bonus);
|
·
|
Long-term
incentives; and
|
·
|
Total
direct compensation (salary, actual bonus and long-term
incentives).
|
The
Committee directed Towers Perrin to prepare benchmarking statistics that
reflected performance at our peer group’s twenty-fifth (25
th
),
fiftieth (50
th
) and
seventy-fifth (75
th
)
percentiles in connection with the foregoing analysis. The Committee
requested Towers Perrin to report on the methodology that it used in its
analysis, a summary of its findings, and its general views relating to market
trends in executive compensation.
In
addition to the peer analysis performed by Towers Perrin on the aggregated peer
group data, the Committee also reviewed compensation data on a
company-by-company basis for sixteen companies that the Committee identified and
considered to be most comparable to our company based on the criteria set forth
below. The sixteen companies include the following:
American
Power Conversion Corp.
|
|
AMETEK
Inc.
|
|
A.O.
Smith Corp.
|
Crane
Co.
|
|
Donaldson
Co. Inc.
|
|
Federal
Signal Corp.
|
Gardner
Denver Inc.
|
|
Hubbell
Inc.
|
|
IDEX
Corporation
|
Lincoln
Electric Holdings Inc.
|
|
Modine
Manufacturing Co.
|
|
Roper
Industries Inc.
|
Sauer
Danfoss Inc.
|
|
Superior
Essex Inc.
|
|
Thomas
& Betts Corp.
|
Wabash
National Corp.
|
|
|
|
|
The
Committee selected the companies in this comparison group because they generally
meet all or most of the following criteria:
·
|
Comparable
revenue and/or similar market capitalization;
|
|
|
·
|
Compete
with our company in the
marketplace;
|
·
|
Compete
with our company for executive talent;
and
|
·
|
Are
manufacturing companies in our
industries.
|
What
specific steps did the Committee take in 2007?
In
fulfilling its objectives as described above, the Committee took the following
steps in 2007:
·
|
Engaged
and directed Towers Perrin to assess the competitiveness of our overall
compensation and benefits programs and to provide the Committee with
guidance as to the composition of our peer group for compensation
benchmarking purposes.
|
·
|
Reviewed
in consultation with our CEO (other than with respect to his own
compensation) and Towers Perrin each element of compensation per officer
individually as well as in the aggregate using tally sheets that reflected
each component of compensation as well as total
compensation.
|
·
|
With
the assistance of Towers Perrin, adjusted executive compensation
structures in accordance with our philosophy to target base salaries
between the thirty-fifth (35
th
)
and fiftieth (50
th
)
percentile as measured against our peer group while also providing
executives the opportunity to earn above-median annual incentives for
above-average performance.
|
·
|
Reviewed
the performance of our CEO (independent of input from him) and recommended
to the independent members of the Board the total compensation for the CEO
based on competitive levels and using the same philosophies as stated
above as measured against our peer
group.
|
·
|
Reviewed
the performance of our other executive officers with assistance from our
CEO and recommended to the independent members of the Board the total
compensation for each individual officer based on competitive levels and
using the same philosophies as stated above as measured against our peer
group.
|
·
|
Maintained
the practice of holding executive sessions (without management present) at
every Committee meeting, including executive sessions in which our
independent compensation consultants
participated.
|
·
|
Reviewed
the overall incentive compensation program for our executive
officers.
|
How
do we determine total compensation?
We intend
to continue our strategy of compensating our executives at competitive levels as
compared to our peer group, with the opportunity to earn above-median
compensation for performance that generates ever increasing returns as compared
to our cost of capital (which we believe results in long-term equity
appreciation), through programs that emphasize performance-based incentive
compensation in the form of annual cash payments, deferred cash payments and
equity-based awards. To that end, total executive compensation is
tied directly to our performance and is structured to ensure that, due to the
nature of our business, there is an appropriate balance focused on our long-term
versus short-term performance, and also a balance between our financial
performance, individual performance of our executive officers and the creation
of shareholder value. The Committee’s balance with respect to annual
and long-term compensation is focused on providing above-median compensation
through long-term incentives, but only to the extent the executive officers
create long-term value for shareholders. In this regard, the
Committee does not fix a percentile at which it seeks to tie the amount of
overall compensation paid by us to each of our named executive officers; rather,
the Committee allows our named executive officers the opportunity to earn
above-median compensation for performance that generates ever increasing returns
as compared to our cost of capital. In this way, the Committee
believes our named executive officers are only rewarded with above-median pay if
they are able to create value for our shareholders.
We
believe that the total compensation paid or awarded to our named executive
officers during 2007 was consistent with our financial performance and the
individual performance of each of our named executive officers. We
paid above-median total compensation in 2007 because we generated results that
produced increased returns in excess of our cost of capital. Based on
the Committee’s analysis and the advice of Towers Perrin, we also believe that
the compensation was reasonable in its totality as compared to our peer group
and is consistent with our compensation philosophies as described
above.
What
are the components of total compensation?
We
achieve our executive compensation objectives through the following ongoing
programs. All of our named executive officers participate in these
programs. A more detailed discussion of each program is provided
below in this Compensation Discussion and Analysis.
Program
|
|
Description
|
|
Participants
|
|
Objectives Achieved
|
Annual
Cash Compensation
|
Base
Salary
|
|
·
Annual
cash compensation
|
|
·
All
employees
|
|
·
Retention
·
Drive
superior performance
§
Individual
contribution
|
Shareholder
Value Added (SVA) Annual Cash Bonus
|
|
·
Annual
bonus with target awards established at each employee level
·
Payments
can be higher (subject to a 200% cap) or lower than target, based on
business unit and total company annual results
|
|
·
All
executive officers and key managers
|
|
·
Drive
superior performance
§
Across
total company
§
Across
business units
·
Retention
|
Long-Term
Incentive Programs
|
Long-Term
Incentive (LTI) Equity Awards
|
|
·
Long-term
incentive awards paid in SARs and/or RSUs; grant amounts vary to reflect
individual contribution
|
|
·
All
executive officers and key managers
|
|
·
Drive
superior performance
§
Individual
contribution
§
Increase
stock price
·
Focus
on long-term success
·
Ownership
·
Retention
|
Retirement
Programs
|
Retirement
(401(k)) Savings Plan
|
|
·
Company
matching and annual contributions
|
|
·
All
Employees
|
|
·
Retention
|
Target
Supplemental Retirement Plan
|
|
·
Retirement
benefits for executives who have at least 15 years of service and work
with us until the age of 58
|
|
·
Key
Executives
|
|
·
Retention
·
Competitive
Practices
|
Other
Executive Benefits
|
Perquisites
and Executive Benefits
|
|
·
Available
to certain executives to assure protection of Company assets and/or focus
on Company business with minimal disruption
|
|
·
Specific
benefits are offered to different groups of executive officers based on
business purpose
|
|
·
Retention
·
Competitive
Practices
|
Other
Benefits
|
|
·
Medical,
welfare and other benefits
|
|
·
All
employees
|
|
·
Retention
|
Base Salaries
. We
believe that the purpose of base salary is to provide a competitive fixed rate
of pay, recognizing different levels of responsibilities within our
company. We determine base salaries for our executives based upon job
responsibilities, level of experience, individual performance and expectations
with respect to contributions to our future performance as well as comparisons
to the salaries of executives in similar positions as compared to our peer
group. The Committee’s goal for the base salary component is to
compensate executives between the thirty-fifth (35
th
) and
fiftieth (50
th
)
percentile as compared to similarly-situated executives within our peer
group. The Committee consulted with Towers Perrin in making
recommendations for base salary adjustments for 2007 based on the factors set
forth above. Our CEO in turn made recommendations to the Committee
with respect to the base compensation of executives other than
himself. In setting base salary increases for 2007, the individual
performance factors reviewed for Mr. Knueppel included revenue growth (including
increases in organic revenue), return on invested capital, cash flow, total
shareholder returns and performance against specified individual performance
objectives, such as execution of our annual operating plan, implementation of a
business talent review process, improvement of the depth of our management
talent, development of an HR function and training center function, completion
of a new business strategy, successful information technology transition related
to prior acquisitions and consummation of several strategic
acquisitions. The individual performance factors reviewed for Messrs.
Barta, Gliebe and Eisenreich included revenue growth (including increases in
organic revenue), operating profit improvement, cash flow and performance
against specified individual performance objectives, including (i) for Mr.
Barta, strengthening the finance team, reducing monthly report cycles,
perfecting metrics and data bases used to compute our critical measures as
against peer companies and reducing cash cycle days, (ii) for Mr. Gliebe,
implementing a business talent review process, implementing a long-range
planning process, achieving agreed upon Six Sigma savings, achieving a capital
plan and associated productivity and executing an annual operating plan and
(iii) for Mr. Eisenreich, the financial and operating performance, including
return on invested capital, cash flow and growth rates, of the individual
businesses for which he had reporting responsibility. The Committee
does not employ a formula or any type of weighting in its analysis of these
factors but instead considers these factors in the exercise of its subjective
judgment in setting salary levels for our named executive
officers. The Committee did not consider any such individual
performance factors for Messrs. Jones and Colvin since they did not join our
company until September 2006.
While
merit-based salary increases historically took effect on January 1 of each year,
the 2007 merit-based increases took effect on February 1,
2007. Beginning in 2008, merit-based increases will take effect in
April of each year coincident with the completion of annual performance reviews
for the rest of the Company. In 2007, Mr. Knueppel received an 18.1%
increase in base salary, which reflected the larger size of our company (our
revenues grew from approximately $619 million in 2003 to $1.6 billion in 2006),
as well as his individual performance against objectives. Mr.
Knueppel’s increase also reflected our intent to increase his salary over time
to be within the stated thirty-fifth (35
th
) to
fiftieth (50
th
)
percentile range for similarly-situated officers as compared to our peer
group. Mr. Knueppel’s salary for 2007 placed him in the thirty-fifth
(35
th
)
percentile relative to CEOs in our peer group. The
other named executive
officers, Mr. Barta, Mr. Gliebe, Mr. Jones, Mr. Colvin and Mr. Eisenreich
received base salary increases of 4.7%, 5.9%, 3.8%, 10.0% and 2.8%,
respectively. Mr. Barta’s salary increase reflected our increased
size, his individual performance and contributions to our company’s performance,
as well as the intent to increase his salary over time to be within the stated
thirty-fifth (35
th
) to
fiftieth (50
th
)
percentile range as compared to our peer group. With the increase for
2007, Mr. Barta was in the thirtieth (30
th
)
percentile for salaries relative to CFOs in our peer group. The
salary increases for Messrs. Gliebe, Jones, Colvin and Eisenreich were
reflective of their individual performance and our objectives regarding the
level of base salaries paid to our executives as described above. The
salaries for Messrs. Gliebe, Jones, Colvin and Eisenreich in 2007 placed them in
the forty-fifth (45
th
),
thirty-fifth (35
th
),
twenty-fifth (25
th
) and
the forty-fifth (45
th
)
percentiles, respectively, for salaries relative to similarly-situated persons
in our peer group.
Annual Incentives
. We have in
effect a Shareholder Value Added (SVA) Plan, which was approved by our
shareholders in 2006 and is designed to promote the maximization of shareholder
value over the long term. We chose SVA as the basis for annual
incentives for the following reasons. First, it is the corporate
performance measure that is tied most directly, both theoretically and
empirically, to the creation of shareholder wealth. Managing for high
SVA is, by definition, managing for higher stock price. Second, it is
a framework developed for setting goals and measuring performance that rewards
participants for both short and long term results realized by the
Company. Finally, by focusing on our financial performance as a
function of invested capital, management is incented to make prudent investments
in assets that are capable of providing strong returns. In summary,
we believe that SVA, as we use it, best recognizes the value that members of our
management team add to the capital invested by our stockholders. We
intend the SVA plan to provide a competitive amount of compensation for the
executive officers based on their individual participation levels when the
Company achieves the SVA targets as approved by the Committee. The
SVA plan provides bonus opportunities based on a comparison of actual annual SVA
to target SVA for the year in question. Performance above target SVA
earns a bonus greater than the target bonus, while performance below target SVA
earns a bonus less than the target bonus or no bonus at all. In years
of strong corporate performance, the bonus amount that an executive can earn
would be considered above the median level for our peer group, and the bonus
amount that an executive can earn would be below the median level for our peer
group in years when we are underperforming. To benchmark and
determine target bonus amounts, and to determine an annual improvement factor
and leverage factor that impacts the target bonus amount, the Committee retains
nationally-recognized independent compensation consultants every three years, or
more frequently as deemed necessary. The targets for the SVA plan
were last established in 2006 with the assistance of Stern Stewart &
Co.
SVA is a
calculation that attempts to approximate the value executives add to our company
above our cost of capital. SVA is calculated by subtracting a charge
for the average net capital employed by us during a fiscal year from the net
operating profit after tax that we earn during that same year. For
this purpose, the cost of capital is determined based on our weighted average
cost of equity and our after-tax cost of debt. To encourage improved
performance in accordance with the SVA plan, the Committee establishes an
expected improvement factor in addition to setting a target SVA
amount. The SVA target amount for 2007 was $32,310,000, which we
surpassed. This target was set by formula. The formula is (previous
year target + previous year actual) divided by 2 + improvement factor = new
target. As a result of the improvement factor, incentive payments
under the SVA plan are dependent upon our executives driving ever increasing
returns as compared to our cost of capital.
In
addition to setting target SVA, the Committee also sets the target bonus
percentage amount for each of our executive officers. This amount is
based on a percentage of the base salary paid to the executive
officers. For fiscal year 2007, Messrs. Knueppel, Barta, Gliebe,
Jones, Colvin and Eisenreich had target bonus percentage amounts of 100%, 50%,
60%, 45%, 40% and 50%, respectively, which equated to target bonus amounts of
$725,000, $167,500, $273,000, $123,750, $88,000 and $145,000,
respectively. The Committee, in consultation with Towers Perrin and
our CEO (other than with respect to his own compensation), set target bonus
amounts at the median level with respect to each respective position held by our
executive officers relative to our peer group. As a result, our
executives were given the opportunity to earn above-median annual cash incentive
awards for generating ever increasing returns as compared to our cost of capital
while at the same time facing below-median awards (or no award at all) for
failing to meet that objective. The Committee believes that tying
above-median incentives to generating returns in excess of our cost of capital
is a disciplined way to reward our named executive officers for creating
shareholder value.
Based on
our performance in 2007, we achieved actual SVA substantially in excess of our
SVA target, which would indicate an earned bonus of 200.9% of the target
bonus. However, we have capped the maximum bonus at
200%. The Committee established this cap based on competitive data
supplied by Towers Perrin with respect to peer group company bonus plans, and
believes the cap eliminates the potential for a windfall award based on
unexpectedly high corporate performance in any given year. The
Committee approved bonuses for 2007 equal to 200% of the target bonus in
accordance with the terms of the SVA plan. As a result, the Committee
determined that Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and Eisenreich
earned SVA bonuses of $1,450,000, $335,000, $546,000, $247,500, $176,000 and
$290,000, respectively. We pay fully all bonuses earned up to the
target bonus (100% bonus) in cash following the end of that year in accordance
with the SVA plan. Bonus amounts earned above the target bonus value
are paid in installments, with one-third of the above-target amount being paid
to the participant in cash after the end of each of the following three years,
so long as the named executive officer has not voluntarily terminated his
employment with us or been terminated for cause. We do not credit
participants with interest on amounts subject to payment in
installments. In 2007, since the bonus performance value was approved
at 200%, a portion of each of the SVA bonuses identified above as being earned
will be paid in installments. The amounts subject to payment in
installments for Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and Eisenreich
were $725,000, $167,500, $273,000, $123,750, $88,000 and $145,000,
respectively.
Long-Term
Compensation
. We believe that equity-based compensation
ensures that our executives have a continuing stake in the long-term success of
our company and allows our executives to earn above-median compensation only if
our shareholders experience appreciation in their equity
holdings. The Committee granted stock appreciation rights and
restricted stock units to our named executive officers in fiscal year 2007 as
described below.
Consistent
with our overall compensation philosophy, the Committee, in consultation with
Towers Perrin, granted long-term compensation awards (namely, stock appreciation
rights and restricted stock units) other than to Mr. Knueppel at levels
approximating the median level of these awards granted by the companies in our
peer group. We value such awards using the binomial
formula. After considering Mr. Knueppel’s substantial existing
holdings of our common stock, the Committee granted to Mr. Knueppel a long-term
compensation award below the median level of these awards granted by companies
in our peer group. In addition to the analysis undertaken against our
peer group, the Committee also considered our performance against our strategic
plan generally as well as the number of awards granted to our officers as
compared to grants to all of our other employees.
Other
than in the case of newly hired executives, we generally plan (starting in 2008)
to grant long-term equity-based awards in April of each year coincident with the
completion of annual performance reviews. In any event, we make
equity-based awards only during an “open window” period following the release of
either our quarterly or annual company financial results.
Stock Appreciation
Rights.
The Committee granted stock appreciation rights to
each named executive officer in 2007 in the amounts indicated in the “Grants of
Plan-Based Awards Table for Fiscal 2007” and the narrative following the
table. The Committee set the base price per share of all of the stock
appreciation rights that it granted in 2007 equal to the closing market price of
our common stock on the date of grant so that the stock appreciation rights will
have value only if the market price of our common stock increases after the
grant date. In addition, the Committee made the stock appreciation
rights subject to ratable vesting over five years to provide additional
incentive for our named executive officers to remain in our
employment. Although in previous years the Committee has granted
stock options to our named executive officers, in 2007 the Committee granted
stock appreciation rights in place of stock options because it viewed stock
appreciation rights as less dilutive to our shareholders.
Restricted Stock
Units.
The Committee awarded restricted stock units to each of
our named executive officers in 2007 in the amounts indicated in the Grants of
Plan-Based Awards Table for Fiscal 2007 and the narrative following the
table. A restricted stock unit gives the holder a right to have us
issue a share of our common stock upon the conditions or date specified in the
award. In addition to providing competitive compensation and an
incentive to create shareholder value, these awards are intended to align
management and shareholder interests as well as provide a retention incentive
for the executive to remain employed by our company. The Committee
determined the number of restricted stock units to grant to each of our
executives with reference to the compensation philosophy described
above. The Committee made the restricted stock units
subject to forfeiture until the third anniversary of the grant date to provide
an additional incentive for our named executive officers to remain in our
employment.
What
other benefits do we provide to our executives?
We have
certain other plans that provide, or may provide, compensation and benefits to
our named executive officers. These plans are principally our 401(k)
Plan and our Target Supplemental Retirement Plan and Marathon Electric Pension
Plans. We also provide life and medical insurance as part of our
compensation package. The Committee considers all of these plans and
benefits when reviewing total compensation of our executive
officers.
401(k)
. Our 401(k)
plan covers eligible hourly and salaried employees including Messrs. Knueppel,
Barta, Gliebe, Jones and Colvin. In addition to a company match,
there is an annual company contribution for employees.
Mr.
Eisenreich participates in the Marathon Electric Salaried Employees 401(k)
Savings Plan, which allows an eligible employee to receive a company matching
contribution.
Target Supplemental Retirement
Plan
. The Target Supplemental Retirement Plan limits
participants to officers and other key employees recommended by our CEO and
approved by the Committee. The purpose of the plan is to extend
retirement benefits to participants without regard to statutory limitations
under tax-qualified plans. To be eligible for a benefit from this
plan, an employee must have provided fifteen (15) years of uninterrupted service
to our company and remain employed with us until at least age
58. When the plan was adopted by the Board in January 1994, the
benefit amounts were benchmarked against a group of then peer companies in
consultation with a compensation consultant. The Committee
periodically reviews these benchmarks to determine if they are still
appropriate. The Committee completed its most recent review of the
benefit amounts provided under the plan in 2006 with the assistance of Towers
Perrin. The peer companies the Committee considered in its 2006
benchmarking analysis approximate the companies included in our peer group as
discussed above. Based on its 2006 review, the Committee approved
adjustments to the plan in 2007 that lowered the age of a participant’s
eligibility for early retirement from 62 to 58 years of age; revised the
calculation of benefits under the plan for participants who retire on or after
January 1, 2008 to include the participant’s target bonus for the year rather
than the participant’s actual bonus for the year; and increased the death
benefits payable to the surviving spouse of a deceased plan participant to 100%
of the participant’s monthly benefit payment (from 50% of the participant’s
monthly benefit payment). Messrs. Knueppel, Barta, Gliebe, Jones and
Colvin participate in the Target Supplemental Retirement Plan. The
Committee’s intent in offering benefits under the Target Supplemental Plan is to
provide a competitive retirement package to our named executive
officers. For more information regarding this plan, see the narrative
discussion following the “Pension Benefits for Fiscal 2007” table.
Marathon Electric Pension
Plan
s. Mr. Eisenreich participates in the Marathon Electric
Pension Plans. No other named executive officers participate in these
plans. To find more information regarding the Marathon Electric
Pension Plans, see the narrative discussion after the “Pension Benefits for
Fiscal 2007” table.
What
perquisites do we provide?
We
provided a modest level of personal benefits to named executive officers in
2007, as summarized below:
·
|
Messrs.
Knueppel and Gliebe had limited use of a company aircraft for personal
travel.
|
·
|
All
of the executive officers had use of a company car for personal
travel.
|
·
|
Mr.
Knueppel has a special life insurance benefit and does not receive a life
insurance benefit under the basic program offered to other named executive
officers and other salaried employees. We are the owner of the
policy on the life of Mr. Knueppel with a basic death benefit of
$3,000,000. At the time Mr. Knueppel ceases to be employed by
us, we become the sole beneficiary on his policy. Mr.
Knueppel’s beneficiary would receive $500,000 in the event of his death
while employed by us. The balance of Mr. Knueppel’s death
benefit would be paid to us, including any increased death benefit, since
the policy has increasing death benefits as cash value is
created. We pay the entire annual premium on the policy, and
income is imputed to Mr. Knueppel in accordance with governmental
regulations.
|
·
|
Our
executive officers are provided with enhanced short-term and long-term
disability benefits compared with our other salaried
employees. For salaried employees who are not executive
officers, the short-term disability benefit provides up to six months of
salary replacement in an amount between 60% and 100% of the salaried
employee’s base salary depending on the salaried employee’s credited years
of service with our company. For our executive officers, salary
replacement is 100% regardless of credited years of
service. For salaried employees who are not executive officers,
the long-term disability benefit commences following six months of
disability and provides a benefit of 60% of base salary (capped at
$300,000). For our executive officers, the same formula applies
but there are no caps.
|
How
do we assure that compensation keeps our executives focused on long-term
success?
Our
long-term success depends on excellent financial and operational performance
year after year. Therefore, to focus on both the short and long-term
success of the Company, our named executive officers’ compensation includes a
significant portion—approximately 60%--that is “at risk” because the value of
such compensation is determined based on the achievement of specified
results. If short-term and long-term financial and operational goals
are not achieved, then performance-related compensation will
decrease. If goals are exceeded, then performance-related
compensation will increase.
In
addition, compensation paid in the form of equity awards, such as RSUs and SARs,
instead of cash is at-risk because its value varies with changes in the stock
price. By creating a total compensation package where a considerable
percentage is paid in equity awards, our executive officers have a significant
stake in the long-term success of the Company and gain financially along with
our shareholders.
As shown
in the following charts, in fiscal 2007, 63% of the CEO’s total compensation
and, on average, 59% of the other named executive officers’ compensation was
at-risk dependent on performance. Twenty-six percent (26%) of the
CEO’s total compensation and, on average, 32% of the other named executive
officers’ total compensation was paid in RSUs or SARs.
What
are our executive’s stock ownership requirements?
To
underscore the importance of linking executive compensation and shareholder
interests, we have implemented stock ownership requirements for certain
executives, including our named executive officers. Executives
subject to these stock ownership requirements must own a certain dollar value
amount of stock before they are permitted to sell shares (other than shares sold
to pay option exercise prices or shares sold or surrendered to cover
taxes). Executives who sell shares in violation of these requirements
may be ineligible for future long-term incentive awards. The stock
ownership policy requires our CEO to hold shares with a value five (5) times his
base salary. For our Chief Operating Officer and Chief Financial
Officer, the ownership threshold is three (3) times base salary and for all
other executives the ownership threshold is one (1) times base
salary.
What
severance and change in control benefits do we provide?
We have
no employment agreements with any of our named executive officers that provide
benefits prior to a change in control of our company. However, we have entered
into change in control and termination agreements with Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin, and, under our equity incentive plans, a change in
control of our company may trigger potential benefits for all participants,
including accelerated vesting of awards. For a detailed description
of the material terms and conditions of these agreements and the change in
control provisions of our equity incentive plans, see the “Potential Payments
upon a Termination or Change in Control” section below.
Based on
the subjective analysis of the Committee and the advice of our independent
compensation consultants, we believe that the change in control and termination
agreements and our equity incentive plans contain terms that are similar to
those offered to executives of comparable companies. The Committee
last reviewed the form of agreement in 2007 and, based on such review, the Board
determined that all of our named executive officers should have “double trigger”
termination provisions in their agreements. Formerly, we had on
occasion provided a “single trigger” provision that gave the executive officer
the right to receive severance benefits under the agreement based solely on his
voluntarily termination of his employment within a 30-day window following the
first anniversary of a change in control of our company. Following
the Board’s determination, all of our change in control agreements now contain
“double trigger” provisions, which means that, for an executive officer to
receive severance benefits under the agreement, in addition to the change in
control there must be some adverse change in the circumstances of the executive
officer’s employment. The Committee recommended double trigger
provisions because, based on the advice of our independent compensation
consultants and the experiences of the individual members of the Committee, the
Committee believed the single trigger provision was not required for us to
provide competitive change in control agreements to our executive
officers.
The
Committee believes the change in control and termination benefits that we
provide our named executive officers under the change in control and termination
agreements and our equity incentive plans are consistent with the Committee’s
overall objective of building shareholder value. The purpose of the
benefits is to focus our named executive officers on taking actions that are in
the best interests of our shareholders without regard to whether such action may
ultimately have an impact on their job security, and to avoid the loss of key
managers that may occur in connection with an anticipated or actual change in
control. The change in control benefits that we provide our executive
officers fulfill these purposes by generally maintaining the executive officers’
expected current and long-term compensation for a specified period following the
change in control, vesting awards granted prior to the change in control and
making the executive officers whole for certain excise taxes that may result
from compensation paid and benefits provided in connection with the change in
control and any related termination of employment. The Committee
selected the triggering events for change in control and termination benefits to
our named executive officers based on its subjective judgment that these events
were likely to result in the job security distractions and retention concerns
described above. Other than the change in control and termination
agreements, we have no formal severance program in place for our named executive
officers.
EXEC
UTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth for each of our named executive officers: (1) the
dollar value of base salary and bonus earned during the years indicated; (2) the
dollar value of the compensation cost of all outstanding stock and option awards
recognized during the years indicated, computed in accordance with FAS 123R; (3)
the dollar value of earnings for services pursuant to awards granted during the
indicated year under non-equity incentive plans; (4) the change in pension value
and non-qualified deferred compensation earnings during the years indicated; (5)
all other compensation for the years indicated; and, finally, (6) the dollar
value of total compensation for the years indicated. Our named
executive officers are our CEO, our vice president and chief financial officer,
each of our three other most highly compensated executive officers as of
December 31, 2007 (each of whose total cash compensation exceeded $100,000 for
fiscal year 2007) and one additional individual who would have been one of our
three most highly compensated executive officers for 2007 except that he was no
longer deemed an executive officer as of December 31, 2007 as a result of a
realignment of the executive group earlier in the year. In accordance
with the rules of the SEC, the table includes information for the years ended
December 30, 2006 and December 29, 2007 for Messrs. Knueppel, Barta, Gliebe and
Eisenreich and for the year ended December 29, 2007 for Messrs. Jones and
Colvin, who were not named executive officers for the year ended December 30,
2006.
SUMMARY COMPENSATION TABLE
FOR FISCAL 2007 AND FISCAL 2006
Name
and Principal Position
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(3)
|
|
|
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(4)
|
|
|
All
Other
Compensation
($)
(5)
|
|
|
Total
($)
|
|
Henry
W. Knueppel
|
2007
|
|
|
725,000
|
|
|
|
0
|
|
|
|
442,300
|
|
|
|
567,371
|
|
|
|
1,450,000
|
|
|
|
626,255
|
|
|
|
103,075
|
|
|
|
3,914,001
|
|
Chairman
and Chief Executive Officer
|
2006
|
|
|
613,686
|
|
|
|
0
|
|
|
|
300,430
|
|
|
|
627,826
|
|
|
|
968,000
|
|
|
|
1,946,774
|
|
|
|
82,365
|
|
|
|
4,539,081
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
A. Barta
|
2007
|
|
|
335,000
|
|
|
|
0
|
|
|
|
103,865
|
|
|
|
228,667
|
|
|
|
335,000
|
|
|
|
9,774
|
|
|
|
18,920
|
|
|
|
1,031,226
|
|
Vice
President and Chief Financial Officer
|
2006
|
|
|
319,851
|
|
|
|
0
|
|
|
|
58,310
|
|
|
|
133,019
|
|
|
|
315,000
|
|
|
|
0
|
|
|
|
21,628
|
|
|
|
847,808
|
|
(Principal
Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
J. Gliebe
|
2007
|
|
|
455,000
|
|
|
|
0
|
|
|
|
211,420
|
|
|
|
310,253
|
|
|
|
546,000
|
|
|
|
0
|
|
|
|
46,734
|
|
|
|
1,569,407
|
|
President
and Chief Operating Officer
|
2006
|
|
|
429,851
|
|
|
|
0
|
|
|
|
118,505
|
|
|
|
190,512
|
|
|
|
510,000
|
|
|
|
232,661
|
|
|
|
37,360
|
|
|
|
1,518,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
J. Jones
|
2007
|
|
|
275,000
|
|
|
|
0
|
|
|
|
30,027
|
|
|
|
62,746
|
|
|
|
247,500
|
|
|
|
0
|
|
|
|
13,062
|
|
|
|
628,335
|
|
Vice
President, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
R. Colvin
|
2007
|
|
|
220,000
|
|
|
|
0
|
|
|
|
18,016
|
|
|
|
37,836
|
|
|
|
176,000
|
|
|
|
0
|
|
|
|
8,431
|
|
|
|
460,283
|
|
Vice
President, Corporate Human Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Eisenreich
(6)
|
2007
|
|
|
290,000
|
|
|
|
0
|
|
|
|
67,549
|
|
|
|
95,927
|
|
|
|
290,000
|
|
|
|
246,145
|
|
|
|
18,778
|
|
|
|
1,008,399
|
|
Vice
President and President, Mechanical Components &
|
2006
|
|
|
282,000
|
|
|
|
0
|
|
|
|
61,265
|
|
|
|
206,710
|
|
|
|
282,000
|
|
|
|
218,000
|
|
|
|
12,030
|
|
|
|
1,062,005
|
|
Power
Generation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These
amounts reflect the dollar value of the compensation cost of all
outstanding stock awards recognized for the indicated fiscal year,
computed in accordance with FAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. The assumptions made in
valuing the stock awards for 2007 and 2006 are included under the caption
“Shareholders Investment” in Notes 2
and 7,
respectively, of the Notes to Consolidated Financial Statements in the
2007 and 2006 Annual Reports on Form 10-K, and such information is
incorporated herein by reference.
|
(2)
|
These
amounts reflect the dollar value of the compensation cost of all
outstanding option awards recognized over the requisite service period,
computed in accordance with FAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. The assumptions made in
valuing the stock awards for 2007 and 2006 are included under the caption
“Shareholders Investment” in Notes 2 and 7, respectively, of the Notes to
Consolidated Financial Statements in the 2007 and 2006 Annual Reports on
Form 10-K, and such information is incorporated herein by
reference.
|
(3)
|
As
discussed in more detail in the Compensation Discussion and Analysis,
under the SVA plan we pay any bonus amounts earned above the target bonus
value in three equal annual installments. Since the amounts
shown with respect to each named executive officer represent 200% of the
applicable target bonus value for the year indicated, we have paid or will
pay, as applicable, a portion of each amount in such installments as long
as the named executive officer has not voluntarily terminated his
employment with us or been terminated for cause on the installment payment
date.
|
(4)
|
The
values shown are the changes in the accumulated benefit obligations under
the Target Supplemental Retirement Plan for Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin in 2007 and, for Messrs. Knueppel, Barta and
Gliebe, in 2006. For Mr. Eisenreich, the values shown include
changes in accumulated benefit obligations in the Marathon Electric
Employee Pension Plan (qualified), the Marathon Electric Supplemental
Pension Plan (non-qualified), and the Supplemental Life Insurance and
Retirement Income Plan (non-qualified) of $29,898, $215,441 and $806,
respectively, for 2007, and $90,000, $124,000 and $4,000, respectively,
for 2006.
|
(5)
|
The
amounts shown include payments for personal benefits and for the other
items identified below. We provide a modest level of personal
benefits to named executive officers. These personal benefits
include use of a company car and very limited use of company aircraft for
personal travel, the payment of certain moving expenses and the payment of
life insurance premiums. We value the personal use of company
aircraft under an incremental cost method calculated based on the average
variable operating costs to our company. Variable operating costs include
fuel, maintenance, landing/ramp fees and other miscellaneous variable
costs. The total annual variable costs are divided by the annual number of
passenger miles the company aircraft flew to derive an average variable
cost per mile. This average variable cost per mile is then multiplied by
the miles flown for personal use to derive the incremental cost. The
methodology excludes fixed costs that do not change based on usage, such
as pilots’ and other employees’ salaries, purchase costs of the aircraft
and non-trip related hangar expenses. Based on this method, the
value of the personal use of company aircraft by Messrs. Knueppel, Barta,
Gliebe, Jones, Colvin and Eisenreich in 2007 was $18,236, $0, $13,457, $0,
$0 and $0, respectively. For 2007, other items included in this
column were: (a) quarterly payments, equal to the per share dividend paid
to shareholders, paid on the cumulative amount of restricted stock awards
held by the named executive officers of $15,620, $3,190, $5,200, $725,
$464 and $4,122 for Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and
Eisenreich, respectively; (b) payments in lieu of dividends for Mr.
Knueppel of $48,616 on shares related to his exercise of stock options in
2002, as delivery of the shares for which the stock options were exercised
was delayed until his retirement; (c) company contributions to the named
executive officers’ 401(k) plans of $7,775, $7,775, $11,975, $3,375,
$3,025 and $11,125 for Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and
Eisenreich, respectively; and (d) the reimbursement of amounts paid by
Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and Eisenreich for taxes
related to their use of the company aircraft of $4,434, $0, $2,773, $0,
$0and $0, respectively.
|
(6)
|
Due
to certain officer additions and other organizational changes, as of March
12, 2007, we determined that the position held by Mr. Eisenreich would no
longer be considered an “executive officer” position within our
organization. Because Mr. Eisenreich’s position was an
executive officer position for part of fiscal 2007, however, and his
compensation for fiscal 2007 otherwise qualifies him as a named executive
officer, we have included disclosure of his compensation in this proxy
statement.
|
|
Grants
of Plan-Based Awards
|
The
following table sets forth information regarding all incentive plan awards that
the Committee made to our named executive officers during 2007, including
incentive plan awards (equity-based and non-equity based) and other plan-based
awards. Disclosure on a separate line item is provided for each grant
of an award made to a named executive officer during the year. The
information supplements the dollar value disclosure of stock, option and
non-stock awards in the Summary Compensation Table by providing additional
details about these awards. Non-equity incentive plan awards are
awards that are not subject to FAS 123R and are intended to serve as an
incentive for performance to occur over a specified period.
GRANTS
OF PLAN-BASED AWARDS TABLE FOR FISCAL 2007
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards (1)
|
|
|
All
Other Stock Awards: Number of Shares of Stock or Units
(#)
|
|
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
|
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
|
|
|
Grant
Date
Fair
Value of
Stock
and Option Awards
($)
|
|
Name
|
Grant
Date
|
|
|
Threshold
($)
|
|
|
|
Target
($)
|
|
|
|
Maximum
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
W. Knueppel
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
48.05
|
|
|
|
480,500
|
|
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
18.11
|
|
|
|
1,267,700
|
|
|
|
|
|
0
|
|
|
|
725,000
|
|
|
|
1,450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
A. Barta
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
48.05
|
|
|
|
144,150
|
|
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
18.11
|
|
|
|
452,750
|
|
|
|
|
|
0
|
|
|
|
167,500
|
|
|
|
335,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
J. Gliebe
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
48.05
|
|
|
|
384,400
|
|
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
18.11
|
|
|
|
633,850
|
|
|
|
|
|
0
|
|
|
|
273,000
|
|
|
|
546,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
J. Jones
|
5/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
|
|
|
44.12
|
|
|
|
55,150
|
|
|
5/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
16.68
|
|
|
|
216,840
|
|
|
|
|
|
0
|
|
|
|
123,750
|
|
|
|
247,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
R. Colvin
|
5/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
|
|
44.12
|
|
|
|
33,090
|
|
|
5/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
16.68
|
|
|
|
125,100
|
|
|
|
|
|
0
|
|
|
|
88,000
|
|
|
|
176,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Eisenreich
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
48.05
|
|
|
|
48,050
|
|
|
2/06/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
18.11
|
|
|
|
181,100
|
|
|
|
|
|
0
|
|
|
|
145,000
|
|
|
|
290,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
table reflects the estimated future payouts at the time these awards were
granted under the SVA plan. As of the date of this proxy
statement, these awards have been earned and, up to the target amount,
paid out. As discussed in more detail in the Compensation
Discussion and Analysis, bonuses earned above the target bonus value under
the SVA plan are subject to payment in three equal annual
installments. To receive the installment payments, the named
executive officer must not have voluntarily terminated his employment with
us or been terminated for cause prior to the applicable payment
date. We do not credit interest on amounts subject to payment
in installments.
|
Equity
Incentive Plan Awards
As
reflected in the tables above, the Committee granted equity-based awards to our
named executive officers in 2007. The Committee granted these awards
under our two equity incentive plans: the 2003 Equity Incentive Plan,
or the 2003 Plan, and the 2007 Equity Incentive Plan, or the 2007
Plan. Our equity incentive plans are administered by the Committee
with respect to key employee participants, and the Committee generally has the
authority to set the terms of awards under the plans except to the extent the
plans specify such terms.
In
February 2007, the Committee awarded 10,000, 3,000, 8,000 and 1,000 restricted
stock units to Messrs. Knueppel, Barta, Gliebe and Eisenreich, respectively,
under the 2003 Plan. The restricted stock units had a grant date fair
value of $48.05 per share as determined pursuant to FAS 123R, which is equal to
the closing market price of a share of our common stock on the date of
grant. The units remain subject to forfeiture for three years
following the date of grant. In May 2007, the Committee awarded
1,250 and 750 restricted stock units to Messrs. Jones and Colvin, respectively,
under the 2007 Plan. The restricted stock units had a grant date fair
value of $44.12 per share as determined pursuant to FAS 123R, which is equal to
the closing market price of a share of our common stock on the date of
grant.
The
Committee also granted stock appreciation rights, or SARs, to each of our named
executive officers in 2007. In February 2007, the Committee granted
Messrs. Knueppel, Barta, Gliebe and Eisenreich SARs under the 2003 Plan with
respect to 70,000, 25,000, 35,000 and 10,000 shares, respectively, at a per
share base price of $48.05. The base price of these SARs equals the
closing market price of a share of our common stock on the date of
grant. The SARs vest and become exercisable ratably over a five-year
period, and will expire on February 6, 2017. In May 2007, the
Committee granted Messrs. Jones and Colvin SARs under the 2007 Plan with respect
to 13,000 and 7,500 shares of our common stock, respectively, at a per share
base price of $44.12. These SARs vest in equal installments on each
of the first five anniversaries of May 1, 2007, but are not exercisable until
May 1, 2009. These SARs will expire on May 1, 2017.
Except as
otherwise provided by the Committee, awards under the 2003 Plan or any rights or
interest may not be assigned or transferred except by will or the laws of
descent and distribution during the lifetime of the
participant. Awards under the 2007 Plan and any rights under such
awards are generally not assignable, alienable, saleable or transferable by
participants.
Shareholder
Value Added Plan
As
reflected in the tables above, our named executive officers participated in the
SVA plan, which is designed to promote the maximization of shareholder value
over the long term. The SVA plan provides bonus opportunities based
on a comparison of actual annual SVA to target SVA for the year in
question. Performance above target SVA earns a bonus more than the
target bonus while performance below target SVA earns a bonus less than the
target bonus. Under the SVA plan, the bonuses earned in one year up
to the target bonus (100% bonus) are fully paid in cash following the end of
that year.
Bonus
amounts earned above the target bonus value are paid in installments, with
one-third of the above-target amount being paid to the participant in cash after
the end of each of the following three years, as long as the named executive
officer has not voluntarily terminated his employment with us or been terminated
for cause. We do not credit participants with interest on amounts
subject to payment in installments. In 2007, the percent of target
earned was 200%. Therefore, the bonus payouts for 100% of the target
bonus were $725,000, $167,500, $273,000, $123,750, $88,000 and $145,000 for
Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and Eisenreich,
respectively. The amounts subject to payment in installments for
Messrs. Knueppel, Barta, Gliebe, Jones, Colvin and Eisenreich for 2007 were
$725,000, $167,500, $273,000, $123,750, $88,000 and $145,000,
respectively. In 2006, the percent of target earned was 200%, the
maximum level permitted by the plan. Accordingly, the bonus payouts
for 100% of the target bonus for 2006 were $484,000, $157,500, $255,000 and
$141,000 for Messrs. Knueppel, Barta, Gliebe and Eisenreich,
respectively. The amounts subject to payment in installments for
Messrs. Knueppel, Barta, Gliebe and Eisenreich for 2006 were $484,000, $157,500,
$255,000 and $141,000, respectively.
Target
Supplemental Retirement Plan
The
column entitled “All Other Compensation” in the Summary Compensation Table
includes amounts attributable to the change in the actuarial present value of
the respective accumulated benefits under the Supplemental Plan for Messrs.
Knueppel, Barta, Gliebe, Jones and Colvin. The change in pension
value for Messrs. Knueppel, Barta and Gliebe reflects an increase in the present
value of the accumulated benefit under the Target Supplemental Retirement Plan
resulting from a change in 2005 to include in the calculation of benefits
bonuses earned under the SVA plan. The change in pension value for
Mr. Knueppel also reflects an increase in the present value of his accumulated
benefit resulting from his increased salary and target bonus related to his
promotions in 2005 and 2006 to CEO and Chairman, respectively.
|
Outstanding
Equity Awards at Fiscal Year-End
|
The
following table sets forth information on outstanding option and stock awards
held by our named executive officers at December 29, 2007, including the number
of shares underlying both exercisable and unexercisable portions of each stock
option as well as the exercise price and expiration date of each outstanding
option.
OUTSTANDING
EQUITY AWARDS AT FISCAL 2007 YEAR-END
|
Option
Awards
(1)
|
|
Stock
Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(2)
|
Market
Value
of
Shares or
Units
of Stock
That
Have Not
Vested
($)
(3)
|
Henry
W. Knueppel
|
20,000
|
0
|
28.63
|
1/23/2008
|
|
|
|
|
180,000
|
20,000
(4)
|
23.25
|
1/22/2009
|
|
|
|
|
40,000
|
0
|
16.38
|
4/22/2013
|
|
|
|
|
36,000
|
0
|
20.30
|
4/22/2014
|
|
|
|
|
50,000
|
0
|
29.75
|
1/21/2015
|
|
|
|
|
0
|
70,000
(5)
|
36.36
|
1/27/2016
|
|
|
|
|
0
|
70,000
(6)
|
48.05
|
2/06/2012
|
|
|
|
|
|
|
|
|
|
35,000
(7)
|
1,571,850
|
|
|
|
|
|
|
|
|
David
A. Barta
|
8,332
|
16,668
(8)
|
21.85
|
6/28/2014
|
|
|
|
|
5,000
|
5,000
(9)
|
29.75
|
1/21/2015
|
|
|
|
|
0
|
25,000
(10)
|
36.36
|
1/27/2016
|
|
|
|
|
0
|
25,000
(11)
|
48.05
|
2/06/2012
|
|
|
|
|
|
|
|
|
|
8,500
(12)
|
381,735
|
|
|
|
|
|
|
|
|
Mark
J. Gliebe
|
20,000
|
30,000
(13)
|
29.00
|
1/3/2015
|
|
|
|
|
0
|
35,000
(14)
|
36.36
|
1/27/2016
|
|
|
|
|
0
|
35,000
(15)
|
48.05
|
2/06/2012
|
|
|
|
|
|
|
|
|
|
16,000
(16)
|
718,560
|
|
|
|
|
|
|
|
|
Paul
J. Jones
|
0
|
13,000
(17)
|
44.12
|
5/01/2017
|
|
|
|
|
2,400
|
9,600
(18)
|
42.94
|
9/11/2016
|
|
|
|
|
|
|
|
|
|
2,500
(19)
|
112,275
|
|
|
|
|
|
|
|
|
Terry
R. Colvin
|
0
|
7,500
(20)
|
44.12
|
5/01/2017
|
|
|
|
|
1,500
|
6,000
(21)
|
42.94
|
9/11/2016
|
|
|
|
|
|
|
|
|
|
1,500
(22)
|
67,365
|
|
|
|
|
|
|
|
|
David
L. Eisenreich
|
15,000
|
0
|
16.38
|
4/22/2013
|
|
|
|
|
18,250
|
0
|
20.30
|
4/22/2014
|
|
|
|
|
5,000
|
0
|
23.66
|
10/28/2014
|
|
|
|
|
15,000
|
0
|
29.75
|
1/21/2015
|
|
|
|
|
0
|
15,000
(23)
|
36.36
|
1/27/2016
|
|
|
|
|
0
|
10,000
(24)
|
48.05
|
2/06/2012
|
|
|
|
|
|
|
|
|
|
5,500
(25)
|
247,005
|
|
|
|
|
|
|
|
|
_________________________
(1)
Exercisable
stock options are vested. Unexercisable stock options vest as
noted.
(2)
Restricted
stock and restricted stock units vest as noted.
(3)
Based on
$44.91 per share closing price of our common stock on the New York Stock
Exchange on December 28, 2007.
(4)
All vest
on 1/22/2008.
(5)
14,000
options vested on 1/27/2007 and 14,000 options will vest on each of 1/27/2008,
1/27/2009, 1/27/2010 and 1/27/2011, but no options were exercisable prior to
1/27/2008.
(6)
These stock appreciation rights vest with respect to 14,000 shares per year,
commencing 2/06/2008 through 2/06/2012.
(7)
5,000
shares vest on 1/21/2008, 20,000 shares vest on 1/27/2009 and 10,000 units vest
on February 6, 2010.
(8)
8,333 vest on 6/28/2008 and 8,333 vest on 6/28/2009.
(9)
All
vest on 1/21/2008.
(10)
5,000
options vested on 1/27/2007 and 5,000 options will vest on each of 1/27/2008,
1/27/2009, 1/27/2010 and 1/27/2011, but no options were exercisable prior to
1/27/2008.
(11)
These
stock appreciation rights vest with respect to 5,000 shares per year, commencing
2/06/2008 through 2/06/2012.
(12)
2,500
shares vest on 1/21/2008, 3,000 shares vest on 1/27/2009 and 3,000 units vest on
February 6, 2010.
(13)
10,000
options vest on each of 1/03/2008, 1/03/2009 and, 1/03/2010.
(14)
7,000
options vested on 1/27/2007 and 7,000 options will vest on each of 1/27/2008,
1/27/2009, 1/27/2010 and 1/27/2011, but no options were exercisable prior to
1/27/2008
(15) These
stock appreciation rights vest with respect to 7,000 shares per year, commencing
2/06/2008 through 2/06/2012.
(16) 8,000
shares vest on 1/27/2009 and 8,000 units vest on February 6,
2010.
(17)
These
stock appreciation rights vest with respect to 2,600 shares per year, commencing
on 5/01/2008 through 5/01/2012, but are not exercisable with respect to any
shares until 5/01/2009.
(18) These
stock appreciation rights vest with respect to 2,400 shares per year, commencing
on 9/11/2007 through 9/11/2011.
(19) 1,250
shares vest on September 11, 2009 and 1,250 units vest on May 1,
2010.
(20)
These
stock appreciation rights vest with respect to 1,500 shares per year, commencing
on 5/01/2008 through 5/01/2012, but are not exercisable with respect to any
shares until 5/01/2009.
(21) These
stock appreciation rights vest with respect to 1,500 shares per year, commencing
on 9/11/2007 through 9/11/2011.
(22) 750
shares vest on September 11, 2009 and 750 units vest on May 1,
2010.
(23)
3,000
options vested on 1/27/2007 and 3,000 options will vest on each of 1/27/2008,
1/27/2009, 1/27/2010 and 1/27/2011, but no options were exercisable prior to
1/27/2008.
(24)
These
stock appreciation rights vest with respect to 2,000 shares per year, commencing
2/06/2008 through 2/06/2012.
(25)
2,500
shares vest on 1/21/2008, 2,000 shares vest on 1/27/2009 and 1,000 units vest on
February 6, 2010.
Option
Exercises and Stock Vested
The
following table sets forth information relating to the number of stock options
exercised and the stock awards that vested during the last fiscal year for each
of our named executive officers on an aggregate basis.
OPTION
EXERCISES AND STOCK VESTED FOR FISCAL 2007
|
Option
Awards
|
Stock
Awards
|
Name
of
Executive
Officer
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
On
Exercise
($)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
Henry
W. Knueppel
|
0
|
0
|
4,000
|
180,400
|
David
A. Barta
|
0
|
0
|
0
|
0
|
Mark
J. Gliebe
|
0
|
0
|
2,000
|
102,500
|
Paul
J. Jones
|
0
|
0
|
0
|
0
|
Terry
R. Colvin
|
0
|
0
|
0
|
0
|
David
L. Eisenreich
|
2,000
|
48,810
|
2,100
|
94,710
|
PENSION
BENEFITS
The
following table sets forth the actuarial present value of each named executive
officer’s accumulated benefit under each defined benefit plan, assuming benefits
are paid at normal retirement age based on current levels of
compensation. The valuation method and all material assumptions
applied in quantifying the present value of the current accumulated benefit for
each of our named executive officers are included under the caption “Retirement
Plans” in Note 6
of
the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K
for the year ended December 29, 2007, and such information is incorporated
herein by reference. The table also shows the number of years of
credited service under each such plan, computed as of the same pension plan
measurement date used in our audited financial statements for the year ended
December 29, 2007. The table also reports any pension benefits paid
to each named executive officer during the year.
PENSION
BENEFITS FOR FISCAL 2007
Name
|
Plan
name
|
|
Number
of
Years
Credited
Service
(#)
|
|
|
Present
Value
of
Accumulated
Benefit
($)
|
|
|
Payments
During
Last
Fiscal
Year ($)
|
|
Henry
W. Knueppel
|
Regal
Beloit Target Supplemental
|
|
|
28
|
|
|
|
3,682,302
|
|
|
|
0
|
|
|
Retirement
Plan (non-qualified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
A. Barta
|
Regal
Beloit Tartet Supplemental
|
|
|
3
|
|
|
|
9,774
|
|
|
|
0
|
|
|
Retirement
Plan (non-qualified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
J. Gliebe
|
Regal
Beloit Target Supplemental
|
|
|
26
|
|
|
|
796,098
|
(1)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
J. Jones
|
Regal
Beloit Target Supplemental
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
Retirement
Plan (non-qualified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
R. Colvin
|
Regal
Beloit Target Supplemental
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
Retirement
Plan (non-qualified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Eisenreich
|
Marathon
Electric Employee Pension Plan (qualified)
|
|
|
27
|
|
|
|
703,188
|
|
|
|
0
|
|
|
Marathon
Electric Supplemental Pension Plan (non-qualified)
|
|
|
27
|
|
|
|
581,779
|
|
|
|
0
|
|
|
Supplemental
Life Insurance and Retirement Income Plan (non-qualified)
|
|
|
27
|
|
|
|
69,464
|
|
|
|
0
|
|
(1)
|
In addition to the three years
that Mr. Gliebe has been employed by us, he has been credited under the
Regal Beloit Target Supplemental Retirement Plan with the 23 years for
which he had credit under his previous employer’s retirement
plan. When Mr. Gliebe’s benefits are paid under the Target
Supplemental Retirement Plan, we will deduct from the benefit owed to Mr.
Gliebe those amounts paid by his previous employer under the previous
employer’s retirement plan
.
|
Target
Supplemental Retirement Plan
Messrs.
Knueppel, Barta, Gliebe, Jones and Colvin participate in the Supplemental
Plan. The Supplemental Plan limits participants to officers and other
key employees selected by the Committee. The purpose of the
Supplemental Plan is to provide replacement income for executives, which is
comparable, on a percentage basis, to the retirement income that other employees
are entitled to receive and to provide competitive retirement benefits as
compared to our peer group of companies. The Supplemental Plan does
this by supplementing retirement income which is lost to higher paid employees
due to Social Security caps and limits on income considered for our qualified
retirement plans. Under the Supplemental Plan, participants are
entitled, upon normal or approved early retirement, to receive a target
supplemental retirement benefit. This benefit ensures that a
participant receives an annual pension benefit that provides up to a maximum of
60% of compensation replacement by paying a benefit that is equal to two percent
of the participant’s average annual earnings, which is comprised of the
participant’s base salary and target bonuses, including bonuses pursuant to the
SVA plan, during the final five years of service with our company, multiplied by
the participant’s years of service with our company (up to a maximum of 30
years). The monthly pension benefit payable to a participant under
the Supplemental Plan is reduced by estimated monthly Social Security and 401(k)
plan benefits. For Mr. Gliebe, the monthly pension benefit payable
under the Supplemental Plan is also reduced by the amount payable to Mr. Gliebe
under his previous employer’s retirement plan. To receive benefits
under the Supplemental Plan, a participant needs a minimum of 15 years of
continuous service and to have reached the age of at least 58 to qualify for
retirement benefits. However, the Committee has discretion to grant
additional years of service and/or revise the retirement age requirement for a
participant to qualify for benefits, which discretion has never been
exercised.
Marathon
Electric Salaried Pension Plans
Mr.
Eisenreich participates in the Marathon Electric Salaried Pension Plan, a
qualified plan, and the Marathon Electric Supplemental Pension
Plan. The Marathon Electric Supplemental Plan provides benefits that
would otherwise be denied to Mr. Eisenreich under the Marathon Electric Pension
Plan by reason of (1) Internal Revenue Code limitations on qualified benefit
plans and (2) the exclusion of cash bonuses in calculating benefits under the
qualified plan. The benefits payable to Mr. Eisenreich under these
plans are based upon remuneration covered by the plans, which includes Mr.
Eisenreich’s base salary, and, for purposes of calculating the Marathon Electric
Supplemental Plan benefits, includes cash bonuses paid to Mr. Eisenreich
(including payments pursuant to the SVA plan), multiplied by Mr. Eisenreich’s 27
years of credited service. These benefits are not reduced by the
annual Social Security payment.
Mr.
Eisenreich is eligible for early retirement. For each month he would
choose to retire prior to his normal retirement date at age 65, his benefits
under the Marathon Electric Pension Plan would be reduced by one-half of one
percent (0.5%). The following table sets forth estimated benefits for
Mr. Eisenreich at various average annual earnings and years of credited
service.
|
Years
of Credited Service
|
Average
Annual Earnings for the Final
Applicable
Years of Service
|
25
|
30
|
$300,000
|
$ 96,600
|
$115,900
|
$400,000
|
$131,600
|
$157,900
|
$500,000
|
$166,600
|
$199,900
|
$600,000
|
$201,600
|
$241,900
|
Marathon
Electric Supplemental Life Insurance and Retirement Income Plan
Mr.
Eisenreich participates in the Marathon Electric Supplemental Life Insurance and
Retirement Income Plan, a non-qualified plan. The plan provides
$100,000 of life insurance to his designated beneficiary upon his death while he
is employed by us. After he is no longer our employee, we become the
beneficiary of this life insurance policy. He, or his estate in the
event of his death, will then receive monthly payments for 10 years totaling
$100,000.
Potential
Payments on a Termination or Change in Control
We have
no employment agreements with any of our named executive officers that provide
for any benefits prior to a change in control of our company. We have
entered into agreements and maintain plans that require us to provide certain
benefits to our named executive officers if we undergo a change in control and
if the employment of our named executive officers terminates or is adversely
affected under circumstances specified in the agreements and plans.
Termination
of Employment Prior to a Change in Control
Under our
equity incentive plans, if a named executive officer’s employment with us
terminates for any reason other than “cause,” all outstanding stock option and
stock appreciation right awards generally expire on approximately the thirtieth
day following the termination, and all unvested restricted stock awards are
forfeited, subject, under certain circumstances, to exceptions permitted by the
Committee. If a named executive officer’s employment is terminated
for cause, restricted stock awards that have not vested are generally forfeited
immediately, and each unexpired and uncancelled stock option or stock
appreciation right award, to the extent not previously exercised, terminates
immediately. “Cause” is defined under our equity incentive plans as
(i) the participant’s commission of any felony; (ii) the participant’s
fraud, dishonesty, theft, embezzlement, disclosure of trade secrets or
confidential information or (iii) other acts or omissions by the participant
that result in a breach of any fiduciary duty the participant owes to
us.
Change
in Control without Termination of Employment
Other
than the protections provided by our equity incentive plans, we do not maintain
any formal severance program for our named executive officers outside of the
context of a change in control of our company. In the context of a
change in control, however, our key executive employment and termination
agreements with each of our named executive officers other than Mr. Eisenreich
as well as our equity incentive plans require us to provide certain benefits to
covered named executive officers in the event of a change in control of our
company. The agreements also provide for enhanced benefits if the
employment of the covered named executive officers terminates in connection with
a change in control of our company. A change in control under our
agreements with our named executive officers and our equity incentive plans
means any of the following: (i) a person or entity acquires 20% or more of our
common stock, (ii) a change occurs in the composition of the board of directors
that is not approved by at least two-thirds of the existing directors, (iii) our
shareholders approve a merger, consolidation or share exchange other than one
that would result in less than a 50% change in ownership of us as the surviving
entity, or (iv) our shareholders approve a plan for our dissolution or
liquidation.
Under our
agreements with our named executive officers other than Mr. Eisenreich, upon a
change in control, we are required to cause all restrictions on any restricted
stock awards made to the named executive officer prior to the change in control
to lapse and to fully and immediately vest all stock options and SARs granted to
the named executive officer prior to the change in control. We are
also required, after the change in control, generally to maintain base salaries,
fringe benefits, and incentive compensation opportunities at a level equivalent
to or higher than the level at which we provided such benefits prior to the
change in control.
In
addition, in the event of a change in control, under our equity incentive plans,
any participant holding a stock option or SAR may exercise the option or SAR in
full, even if the option was not otherwise exercisable, and has the right to
receive, upon sixty days’ written notice to us after the change in control, cash
equal to the excess of the change in control price of the shares covered under
the surrendered option or SAR over the exercise or base price of the surrendered
options or SARs. On the date of the change in control, any unvested
restricted stock awards held by a participant vests in full and each participant
has the right, upon sixty days’ written notice to us, to receive, in exchange
for the surrender of the restricted stock awards, an amount of cash equal to the
change in control price of the restricted stock awards.
If the
change in control transaction would trigger the adjustment provisions of our
equity incentive plans, because, under the 2003 Plan, it is a recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of shares, or because,
under the 2007 Plan, it is a merger, specified subdivision, combination or
dividend of shares, a cash dividend meeting certain requirements, or other event
that, in the judgment of the Board or the Committee requires an adjustment to
prevent dilution or enlargement of the benefits under the 2007 Plan, the
Committee or the Board may make appropriate adjustments to prevent dilution or
enlargement of the benefits or potential benefits available under our equity
incentive plans. Under the adjustment provision, the Committee may
also determine a cash payment amount to be paid to the holder of any outstanding
award in exchange for cancellation of all or a part of the
award. However, under the 2003 Plan, if the event or transaction
creates a change in control, then any such payment must be the greatest amount
the participant could have received under the change in control provisions
described above and, if the Committee determines it is necessary, each share
subject to an award may be substituted by the number and kind of shares, other
securities, cash or other property to which holders of our common stock are or
will be entitled pursuant to the transaction.
Termination
of Employment Connected to a Change in Control
The
severance benefits provided under our agreements with our named executive
officers are triggered if, during the period starting six months before and
ending, in the case of Messrs. Knueppel, Barta and Gliebe, three years or, in
the case of Messrs. Jones and Colvin, two years, after a change in control of
our company, the executive’s employment is terminated. If the
executive’s employment is terminated for cause, or as a consequence of death or
disability, our obligations under the agreement are limited to the payment of
amounts already earned, plus a prorated portion of any bonus, including under
the SVA plan, assuming the performance goal for such bonus had been
attained. We may terminate the executive for “cause” under these
agreements if he (i) engages in intentional conduct not taken in good faith
that has caused us demonstrable and serious financial injury, (ii) is convicted
of a felony which substantially impairs the executive’s ability to perform his
duties, or (iii) willfully and unreasonably refuses to perform his duties or
responsibilities.
If the
executive’s employment is terminated other than for cause or as a result of
death or disability, or by the executive with good reason, our full obligations
under the agreement will be triggered. The executive may terminate
his employment with “good reason” under the agreements if
·
|
we
breach the terms of the agreement;
|
·
|
we
reduce the executive’s base salary, bonus opportunity or
benefits;
|
·
|
we
remove the executive from positions within our
company;
|
·
|
the
executive determines in good faith that there has been a material adverse
change in his working conditions or
status;
|
·
|
we
relocate the executive; or
|
·
|
we
require the executive to travel 20% more frequently than prior to the
change in control.
|
Under the
agreements, the executive will receive a termination payment that is equal to,
in the case of Messrs. Knueppel, Barta and Gliebe, three times or, in the case
of Messrs. Jones and Colvin, two times the sum of (1) the executive’s
annual base salary then in effect (2) the higher of (i) the
executive’s annual incentive target bonus for the fiscal year of the
termination, which includes payments under the SVA plan, or (ii) the annual
bonus received in the year prior to the change in control and (3) the value of
all fringe benefits. The agreements also contain a gross-up provision
which provides for additional payments to the executives to compensate them for
any excise taxes on payments related to the change in control that may be
imposed on the executives under the Internal Revenue
Code. Additionally, the executive will receive outplacement services,
health and life insurance for up to, in the case of Messrs. Knueppel, Barta and
Gliebe, three years, or, in the case of Messrs. Jones and Colvin, two years, and
the reimbursement of certain accounting and legal fees related to calculating
the tax impact of these payments. We will also waive any minimum
years of service requirements with respect to supplemental retirement programs,
including the Target Supplemental Retirement Plan, and will make a payment equal
to the value of any additional retirement benefits the executive would receive
if he had remained employed for, in the case of Messrs. Knueppel, Barta and
Gliebe, three years, or in the case of Messrs. Jones and Colvin, two
years. The executive will also be credited with, in the case of
Messrs. Knueppel, Barta and Gliebe, three years’ or, in the case of Messrs.
Jones and Colvin, two years’ additional service under any post-retirement
welfare benefit plan that we maintain. Finally, we will pay any
performance awards granted under a long-term incentive plan at target as if all
performance requirements were met, but offset by any amount paid upon the change
in control under the same award. We do not currently maintain any
long-term cash incentive plan and no awards are outstanding to our named
executive officers under any such plan.
Tables
Summarizing Payments Upon Termination or Change in Control
The
following tables describe the potential payments upon termination and change in
control. These tables assume that the triggering event or events
occurred on December 28, 2007, the last business day of our fiscal year,
and the price per share of our common stock was $44.91, the closing market price
on that date.
The
following table sets forth certain information relating to the compensation of
Mr. Knueppel, our Chairman and Chief Executive Officer, upon a change in control
of our company and following a termination of Mr. Knueppel’s
employment. Mr. Knueppel is currently eligible for early retirement,
although he is not currently eligible for normal
retirement. Accordingly, the table omits a termination relating to
normal retirement.
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
|
Voluntary
Termination/
Early
Retirement
(1)
|
|
|
Involuntary
Not
for Cause Termination
(2)
|
|
|
For
Cause Termination
|
|
|
Change
in
Control
without
Termination
|
|
|
Involuntary
or
Good
Reason
Termination
/
Change
in Control
(3)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
$
|
721,027
|
|
|
$
|
721,027
|
|
|
|
|
|
|
|
|
$
|
721,027
|
|
|
$
|
721,027
|
|
Payment
of SVA from Prior Years
|
|
$
|
689,749
|
|
|
$
|
689,749
|
|
|
|
|
|
|
|
|
$
|
689,749
|
|
|
$
|
689,749
|
|
Termination
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,172,195
|
|
|
|
|
|
Target
Supplemental Plan
(4)
|
|
$
|
5,116,067
|
|
|
$
|
5,116,067
|
|
|
$
|
5,116,067
|
|
|
$
|
5,116,067
|
|
|
$
|
5,116,067
|
|
|
$
|
5,116,067
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
$
|
912,000
|
|
|
|
|
|
|
|
|
|
|
$
|
912,000
|
|
|
$
|
912,000
|
|
|
$
|
912,000
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
$
|
1,571,850
|
|
|
|
|
|
|
|
|
|
|
$
|
1,571,850
|
|
|
$
|
1,571,850
|
|
|
$
|
1,571,850
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment Under Retirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
620,216
|
(5)
|
|
|
|
|
Post-termination
Health & Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
84,981
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
(5)
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
213,000
|
(6)
|
Accrued
Vacation Pay
|
|
$
|
55,769
|
|
|
$
|
55,769
|
|
|
$
|
55,769
|
|
|
$
|
55,769
|
|
|
$
|
55,769
|
|
|
$
|
55,769
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
72,500
|
|
|
|
|
|
280G
Tax Gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,038,846
|
|
|
|
|
|
Total:
|
|
$
|
9,066,462
|
|
|
$
|
6,582,612
|
|
|
$
|
5,171,836
|
|
|
$
|
7,655,686
|
|
|
$
|
18,070,200
|
|
|
$
|
9,679,462
|
(7)
|
(1)
Assumes
an approved early retirement. Benefits upon a voluntary termination
that is not an approved early retirement would consist of a target supplemental
retirement benefit of $5,116,067 and accrued vacation of
$55,769.
(2)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason not in connection with a change in control of our
company.
(3)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason in connection with a change in control of our
company.
(4)
Present
value of annuity commencing on retirement and paid monthly for 15
years.
(5)
Reflects
a cash payment that is equal to the value of additional retirement benefits that
the executive would have received if he remained employed with us for an
additional three years.
(6)
Disability
benefit payable only in event of disability. The amount shown
reflects only the enhanced disability benefits that would be payable to the
executive over the course of a year compared with the disability benefits to
which non-executive officer salaried employees would receive over the same
period.
(7)
The total
amount shown is larger than the amount the executive would receive on a
termination of employment in the event of death or disability because it
includes both amounts that would be payable only on death and amounts that would
be payable only on disability.
The
following table sets forth certain information relating to the compensation of
Mr. Barta, our Vice President and Chief Financial Officer, upon a change in
control of our company and following a termination of Mr. Barta’s
employment. Mr. Barta is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
|
Voluntary
Termination
|
|
|
Involuntary
Not
for Cause Termination
(1)
|
|
|
For
Cause Termination
|
|
|
Change
in Control without Termination
|
|
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
|
|
|
$
|
166,582
|
|
|
|
|
|
|
|
|
$
|
166,582
|
|
|
$
|
166,582
|
|
Payment
of SVA from Prior Years
|
|
|
|
|
$
|
232,966
|
|
|
|
|
|
|
|
|
$
|
232,966
|
|
|
$
|
232,966
|
|
Termination
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,607,555
|
|
|
|
|
|
Target
Supplemental Plan
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,666
|
|
|
|
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
631,134
|
|
|
$
|
631,134
|
|
|
$
|
631,134
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
381,735
|
|
|
$
|
381,735
|
|
|
$
|
381,735
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment Under Retirement
Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,939
39,885
|
(4)
|
|
|
|
|
Post-termination
Health & Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
(5)
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,000
|
(6)
|
Accrued
Vacation Pay
|
|
$
|
25,769
|
|
|
$
|
25,769
|
|
|
$
|
25,769
|
|
|
$
|
25,769
|
|
|
$
|
25,769
|
|
|
$
|
12,885
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,500
|
|
|
|
|
|
280G
Tax Gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,434,337
|
|
|
|
|
|
Total:
|
|
$
|
25,769
|
|
|
$
|
425,317
|
|
|
$
|
25,769
|
|
|
$
|
1,038,638
|
|
|
$
|
5,883,068
|
|
|
$
|
1,596,302
|
(7)
|
(1)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason not in connection with a change in control of our
company.
(2)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason in connection with a change in control of our
company.
(3)
Present
value of annuity commencing on retirement and paid monthly for 15
years.
(4)
Reflects
a cash payment that is equal to the value of additional retirement benefits that
the executive would have received if he remained employed with us for an
additional three years.
(5)
Life
insurance death benefit payable only in event of death.
(6)
D
isability
benefit payable only in event of disability. The amount shown
reflects only the enhanced disability benefits that would be payable to the
executive over the course of a year compared with the disability benefits to
which non-executive officer salaried employees would receive over the same
period.
(7)
The total
amount shown is larger than the amount the executive would receive on a
termination of employment in the event of death or disability because it
includes both amounts that would be payable only on death and amounts that would
be payable only on disability.
The
following table sets forth certain information relating to the compensation of
Mr. Gliebe, our President and Chief Operating Officer, upon a change in control
of our company and following a termination of Mr. Gliebe’s
employment. Mr. Gliebe is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
|
Voluntary
Termination
|
|
|
Involuntary
Not for Cause Termination
(1)
|
|
|
For
Cause Termination
|
|
|
Change
in Control without Termination
|
|
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
|
|
|
$
|
271,504
|
|
|
|
|
|
|
|
|
$
|
271,504
|
|
|
$
|
271,504
|
|
Payment
of SVA from Prior Years
|
|
|
|
|
$
|
375,854
|
|
|
|
|
|
|
|
|
$
|
375,854
|
|
|
$
|
375,854
|
|
Termination
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,360,553
|
|
|
|
|
|
Target
Supplemental Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,402,956
|
(3)
|
|
|
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
716,700
|
|
|
$
|
716,700
|
|
|
$
|
716,700
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
718,560
|
|
|
$
|
718,560
|
|
|
$
|
718,560
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment Under Retirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
460,674
|
(4)
|
|
|
|
|
Post-termination
Health & Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,345
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
250,
000
|
(5)
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,000
|
(6)
|
Accrued
Vacation Pay
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,500
|
|
|
|
|
|
280G
Tax Gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,682,821
|
|
|
|
|
|
Total:
|
|
$
|
35,000
|
|
|
$
|
682,358
|
|
|
$
|
35,000
|
|
|
$
|
1,470,260
|
|
|
$
|
10,124,467
|
|
|
$
|
2,460,618
|
(7)
|
(1)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason not in connection with a change in control of our
company.
(2)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason in connection with a change in control of our
company.
(3)
Present
value of annuity commencing on retirement and paid monthly for 15
years.
(4)
Reflects
a cash payment that is equal to the value of additional retirement benefits that
the executive would have received if he remained employed with us for an
additional three years.
(5)
Life
insurance death benefit payable only in event of death.
(6)
Disability
benefit payable only in event of disability. The amount shown reflects only the
enhanced disability benefits that would be payable to the executive over the
course of a year compared with the disability benefits to which non-executive
officer salaried employees would receive over the same
period.
(7)
The total
amount shown is larger than the amount the executive would receive on a
termination of employment in the event of death or disability because it
includes both amounts that would be payable only on death and amounts that would
be payable only on disability.
The
following table sets forth certain information relating to the compensation of
Mr. Jones, our Vice President, General Counsel and Secretary, upon a change in
control of our company and following a termination of Mr. Jones’s
employment. Mr. Jones is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
|
Voluntary
Termination
|
|
|
Involuntary
Not for Cause Termination
(1)
|
|
|
For
Cause Termination
|
|
|
Change
in Control without Termination
|
|
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
|
|
|
$
|
123,072
|
|
|
|
|
|
|
|
|
$
|
123,072
|
|
|
$
|
123,072
|
|
Payment
of SVA from Prior Years
|
|
|
|
|
$
|
32,619
|
|
|
|
|
|
|
|
|
$
|
32,619
|
|
|
$
|
32,619
|
|
Termination
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
823,500
|
|
|
|
|
|
Target
Supplemental Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,276
|
|
|
$
|
112,276
|
|
|
$
|
112,276
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,182
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,182
|
|
|
$
|
29,182
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment Under Retirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,412
|
(4)
|
|
|
|
|
Post-termination
Health & Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,130
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
(5)
|
Accrued
Vacation Pay
|
|
$
|
21,154
|
|
|
$
|
21,154
|
|
|
$
|
21,154
|
|
|
$
|
21,154
|
|
|
$
|
21,154
|
|
|
$
|
21,154
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
|
|
280G
Tax Gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
372,774
|
|
|
|
|
|
Total:
|
|
$
|
21,154
|
|
|
$
|
176,845
|
|
|
$
|
21,154
|
|
|
$
|
162,612
|
|
|
$
|
1,635,619
|
|
|
$
|
418,303
|
|
(1)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason not in connection with a change in control of our
company.
(2)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason in connection with a change in control of our
company.
(3)
No
benefit based on years of service.
(4)
Reflects
a cash payment that is equal to the value of additional retirement benefits that
the executive would have received if he remained employed with us for an
additional two years.
(5)
Life
insurance death benefit payable only in event of death.
The
following table sets forth certain information relating to the compensation of
Mr. Colvin, our Vice President, Corporate Human Resources, upon a change in
control of our company and following a termination of Mr. Colvin’s
employment. Mr. Colvin is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
|
Voluntary
Termination
|
|
|
Involuntary
Not for Cause Termination
(1)
|
|
|
For
Cause Termination
|
|
|
Change
in Control without Termination
|
|
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
|
|
|
$
|
87,518
|
|
|
|
|
|
|
|
|
$
|
87,518
|
|
|
$
|
87,518
|
|
Payment
of SVA from Prior Years
|
|
|
|
|
$
|
21,543
|
|
|
|
|
|
|
|
|
$
|
21,543
|
|
|
$
|
21,543
|
|
Termination
Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
642,000
|
(3)
|
|
|
|
|
Target
Supplemental Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
67,366
|
|
|
$
|
67,366
|
|
|
$
|
67,366
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,745
|
|
|
$
|
17,745
|
|
|
$
|
17,745
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment Under Retirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-termination
Health & Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,590
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
(4)
|
Accrued
Vacation Pay
|
|
$
|
16,923
|
|
|
$
|
16,923
|
|
|
$
|
16,923
|
|
|
$
|
16,923
|
|
|
$
|
16,923
|
|
|
$
|
16,923
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,000
|
|
|
|
|
|
280G
Tax Gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Total:
|
|
$
|
16,923
|
|
|
$
|
125,984
|
|
|
$
|
16,923
|
|
|
|
102,034
|
|
|
$
|
916,685
|
|
|
$
|
311,095
|
|
(1)
A
ssumes
the executive’s employment is terminated by us without cause or by the executive
with good reason not in connection with a change in control of our
company.
(2)
Assumes
the executive’s employment is terminated by us without cause or by the executive
with good reason in connection with a change in control of our
company.
(3)
No
benefit based on years of service.
(4)
Life
insurance death benefit payable only in event of death.
The
following table sets forth certain information relating to the compensation of
Mr. Eisenreich, our Vice President and President, Mechanical Components &
Power Generation, upon a change in control and following a termination of Mr.
Eisenreich’s employment. Mr. Eisenreich is currently eligible for
early retirement. Accordingly, the table includes a termination under
that circumstance.
Executive
Benefits
and
Payments
Upon
Termination
|
|
Voluntary
Termination
|
|
|
Involuntary
Not
for Cause
Termination
(1)
|
|
|
For
Cause
Termination
|
|
|
Change
in
Control
without
Termination
|
|
|
Involuntary
or
Good
Reason Termination/
Change
in
Control
(2)
|
|
|
Retirement
(3)
|
|
|
Death
or Disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Year SVA Bonus
|
|
|
|
|
$
|
144,205
|
|
|
|
|
|
|
|
|
$
|
144,205
|
|
|
$
|
144,205
|
|
|
$
|
144,205
|
|
Payment
of SVA from Prior Years
|
|
|
|
|
$
|
228,708
|
|
|
|
|
|
|
|
|
$
|
228,708
|
|
|
$
|
228,708
|
|
|
$
|
228,708
|
|
Termination
Payment
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Plan
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
|
|
$
|
1,427,923
|
(4)
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102,600
|
|
|
$
|
102,600
|
|
|
$
|
102,600
|
|
|
$
|
102,600
|
|
Restricted
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
247,005
|
|
|
$
|
247,005
|
|
|
$
|
247,005
|
|
|
$
|
247,005
|
|
Stock
Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Care and Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
(5)
|
Disability
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Vacation Pay
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
|
$
|
22,308
|
|
Accounting
and Legal Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outplacement
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G
Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
1,450,231
|
|
|
$
|
1,823,144
|
|
|
$
|
1,450,231
|
|
|
|
1,799,836
|
|
|
$
|
2,
172,749
|
|
|
$
|
2,172,749
|
|
|
$
|
2,272,749
|
(6)
|
(1)
|
Assumes
the executive’s employment is terminated by us without cause not in
connection with a change in control of our
company.
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause in connection
with a change in control of our company. Mr. Eisenreich does
not have a provision in any agreement for a good reason termination not in
connection with a change in control of our
company.
|
(3)
|
As
of December 29, 2007, Mr. Eisenreich was eligible for early retirement and
would have retired 5 months before the normal retirement date established
by the pension plans in which he participates. Those pension
plans reduce his pension benefits by 0.5% for each month prior to his
normal retirement date that his early retirement
occurs.
|
(4)
|
Assumes
the executive’s employment is terminated as a result of
disability. In the event of the executive’s death prior to
termination of employment, the executive’s surviving spouse would receive
50% of the executive’s benefit, or
$713,962.
|
(5)
|
Life
insurance death benefit payable only in event of
death.
|
(6)
|
Assumes
the executive’s employment is terminated as a result of
disability. In the event of the executive’s death, the total
value of benefits would be
$2,272,749.
|
We set
forth below a description of the assumptions that we used in creating the tables
above. Unless otherwise noted, the descriptions of the payments below
are applicable to all of the above tables relating to potential payments upon
termination.
Current
Year SVA Bonus
In the
event of a termination of the executive upon retirement, death, disability or in
connection with or upon a change in control of our company, the executive is
entitled to receive a prorated portion of the target award for the current year
SVA. In the event of a voluntary termination, the executive is not
entitled to a portion of the target award for the current year SVA.
Prior
Year
SVA Bonus Subject to Installment
Payments
In the
event of an involuntary termination not for cause or a termination of the
executive upon retirement, death, disability or following a change in control,
the executive is entitled to receive the balance of the SVA awards from prior
years that have not been paid. Such amounts will be paid as soon as
practical following the termination. In the event of a voluntary termination,
the executive is not entitled to any deferred SVA awards from previous
years.
Stock
Options, Restricted
Stock, Restricted Stock Units and
Stock Appreciation Rights
Under our
equity incentive plans, in the event of a termination for death, disability or
retirement, other than in connection with a change in control, our Board
generally has discretion to fully vest any unvested awards. The
tables assume the Board exercises such discretion and fully vests the stock
options, SARs, restricted stock and restricted stock units. All
unvested stock options, SARs, restricted stock and restricted stock units vest
upon a change in control.
Life
Insurance
Proceeds
Life
insurance proceeds are the death benefits on company paid life
insurance. No life insurance payments will be made in connection with
a termination for disability.
The
following items apply only to a termination in the context of a change in
control for Messrs. Knueppel, Barta, Gliebe, Jones and Colvin. We
assume the termination is without cause or by the executive with good
reason. Further, we assume that the change in control and the
executive’s termination of employment both occurred on December 29, 2007, the
last business day of our fiscal year.
Target
Supplemental
Retirement
Plan
In the
event of a termination related to a change in control, we will waive the years
of service requirement under the Target Supplemental Retirement
Plan. Amounts reported in the table reflect the present value of the
accumulated benefit, using a six and thirty six hundredths percent (6.36%)
discount rate.
Equity
Acceleration
The
executive will be entitled to the vesting of all of the executive’s then
unvested stock options, SARs, restricted stock and restricted stock units upon a
change in control.
Cash
Payment Under Retirement Plans
The
amounts relating to the cash payments under our retirement plans in the tables
above reflect the cash payment that is equal to the value of additional
retirement benefits that each executive would have received if he remained
employed with our company for an additional three years, in the case of Messrs.
Knueppel , Barta and Gliebe, or two years, in the case of Messrs. Jones and
Colvin.
Post
-
Retirement
Health
Care
Benefits
The
executive will be covered under our health and life insurance for, in the case
of Messrs. Knueppel, Barta and Gliebe, three years or, in the case of Messrs.
Jones and Colvin, two years unless the executive obtains equal or greater
benefits from another employer. We have assumed the executive will
not obtain benefits from another employer.
Accounting
and
Legal
Services
We are
obligated to reimburse the executive for up to $15,000 for accounting and legal
services related to the calculation of the tax gross-up amount described
below. The tables assume the entire amount is reimbursed to the
executive.
Outplacement
The
executive will be entitled to receive outplacement services up to the amount
that is equal to ten percent (10%) of the executive’s base
salary. The tables assume the executive will use the full amount of
this benefit.
Section
280G
Tax
Gross
-
up
Upon a
change in control of our company the executive may be subject to certain excise
taxes pursuant to Section 280G of the Internal Revenue Code. We have
agreed to reimburse the executive for all excise taxes that are imposed on the
executive under Section 280G and any income and excise taxes that are payable by
the executive as a result of any reimbursements for Section 280G excise
taxes. The total Section 280G tax gross-up amount in the above tables
assumes that the executive is entitled to a full reimbursement by us of (i) any
excise taxes that are imposed upon the executive as a result of the change in
control, (ii) any income and excise taxes imposed upon the executive as a result
of our reimbursement of the excise tax amount and (iii) any additional income
and excise taxes that are imposed upon the executive as a result of our
reimbursement of the executive for any excise or income taxes. The
calculation of the Section 280G gross-up amount in the above tables is based
upon a Section 280G excise tax rate of 20%, a 35% federal income tax rate, a
1.45% Medicare tax rate and a 6.75% state income tax rate. For
purposes of the Section 280G calculation it is assumed that no amounts will be
discounted as attributable to reasonable compensation and no value will be
attributed to any non-competition agreement. The payment of the
Section 280G tax gross-up will be payable to the executive for any excise tax
incurred unless the executive is terminated for cause, death, disability or
pursuant to a voluntary termination without good reason. The
calculation of this gross-up assumes we can prove, by clear and convincing
evidence, that we did not make the equity-based awards in 2007 in connection
with or contemplation of a change in control of our company.
Non
-
Competition
As a
condition to each executive’s entitlement to receive the severance payments and
other benefits described above, the executive is required to execute a waiver of
claims and be bound by the terms of a non-competition agreement which prohibits
the executive from working in a business that engages in substantial competition
with us, for a period of one year from the executive’s termination of
employment. Our Board may waive this provision.