PROXY STATEMENT
This proxy statement relates to the solicitation
by Regal Beloit Corporation (“we” or our “Company”), on behalf of its Board of Directors (our “Board”),
of your proxy to vote your shares of our Company’s common stock at the 2020 Annual Meeting of Shareholders and all adjournments
or postponements thereof (the “Annual Meeting”). We mailed our Notice of Internet Availability of Proxy Materials and
we are making available this proxy statement on March 19, 2020. We solicit proxies to give all shareholders of record an opportunity
to vote on matters that will be presented at the Annual Meeting. In this proxy statement, you will find information on these matters,
which is provided to assist you in voting your shares.
Commonly
Asked Questions and Answers
About the Annual Meeting
Q:
|
What am I being asked to vote on?
|
A:
|
·
|
The election of directors;
|
|
·
|
An advisory vote on the compensation of our named executive officers as disclosed in this proxy
statement; and
|
|
·
|
Ratification of the selection of Deloitte & Touche LLP as our independent registered public
accounting firm for the year ending January 2, 2021.
|
A:
|
Holders of our common stock as of the close of business on the record date, March 5, 2020, may vote at the Annual Meeting,
either in person or by proxy. Each share of common stock is entitled to one vote.
|
A:
|
On March 19, 2020, we mailed our Notice of Internet Availability of Proxy Materials, which
includes instructions for accessing this proxy statement and our 2019 Annual Report, as well as instructions for our shareholders
to vote over the Internet, via a toll-free telephone number or by mail by signing, dating and returning a paper proxy card. You
can vote in the following ways:
|
By
Proxy—Before the Annual Meeting, you can give a proxy to vote your shares of common stock in one of the following ways:
|
·
|
by using the Internet; or
|
|
·
|
by completing and signing a proxy card and mailing it in time to be received by 5:00 p.m., Central
Daylight Time, Friday, April 24, 2020, if you request to receive a paper copy of a proxy card.
|
The telephone and Internet voting
procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions
have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are printed on the
Notice of Internet Availability of Proxy Materials.
If you mail your properly
completed and signed proxy card to us and we receive it by 5 p.m., Central Daylight Time, Friday, April 24, 2020, or
vote by telephone or the Internet, then your shares of common stock will be voted according to the choices that you specify.
If you sign and mail your proxy card to us without making any choices, your proxy will be voted:
|
·
|
FOR the election of all persons nominated by our Board for election as directors;
|
|
·
|
FOR the approval of the compensation of our named executive officers; and
|
|
·
|
FOR the ratification of the selection of Deloitte & Touche LLP as our independent registered
public accounting firm for the year ending January 2, 2021.
|
Other than the election of directors,
approval of the compensation of our named executive officers and the ratification of the selection of our independent registered
public accounting firm, we are not currently aware of any other matters that will be brought before the Annual Meeting. However,
by giving your proxy, you appoint the persons named as proxies as your representatives at the Annual Meeting. If a matter comes
up for a vote at the Annual Meeting that is not included in the proxy materials, then the proxy holders will vote your shares in
accordance with their best judgment.
In Person—You may
come to the Annual Meeting and cast your vote there. If your shares are held in the name of your broker, bank or other nominee
and you wish to vote at the Annual Meeting, then your broker, bank or other nominee will provide you with instructions for voting
your shares.
Q:
|
May
I change or revoke my vote?
|
|
A:
|
You may change your vote or revoke your proxy at any time prior to your shares being voted by:
|
|
·
|
notifying our Secretary in writing that you are revoking your proxy;
|
|
·
|
giving another signed proxy that is dated after the date of the proxy that you wish to revoke;
|
|
·
|
using the telephone or Internet voting procedures; or
|
|
·
|
attending the Annual Meeting and voting in person (attendance at the Annual Meeting alone will
not revoke your proxy).
|
|
Q:
|
Will my shares be voted if I do not provide my proxy?
|
A:
|
It depends on whether you hold your shares in your own name or in the name of a brokerage firm.
If you hold your shares directly in your name, then they will not be voted unless you provide a proxy or vote in person at the
Annual Meeting. Brokerage firms or other nominees generally have the authority to vote customers’ uninstructed shares on
certain “routine” matters. If your shares are held in the name of a brokerage firm, the brokerage firm may have the
discretionary authority to vote your shares in connection with the ratification of our independent registered public accounting
firm if you do not timely provide your proxy because this matter is considered “routine” under the New York Stock Exchange
(“NYSE”) listing standards.
|
However, if you have not provided
directions to your broker, your broker will not be able to vote your shares with respect to the election of directors or the approval
of the compensation of our named executive officers. We strongly encourage you to submit your proxy card and exercise your
right to vote as a shareholder.
Q:
|
What constitutes a quorum?
|
A:
|
As of the record date, March 5, 2020, 40,655,723 shares of our common stock were issued and
outstanding and entitled to vote at the Annual Meeting. To conduct the Annual Meeting, a majority of the shares entitled to vote
must be present in person or by proxy. This is referred to as a “quorum.” If you submit a properly executed proxy card
or vote by telephone or the Internet, then you will be considered present at the Annual Meeting for purposes of determining the
presence of a quorum. Abstentions and broker “non-votes” will be counted as present and entitled
to vote for purposes of determining the presence of a quorum. A broker “non-vote” occurs when a broker or other nominee
who holds shares for another person has not received voting instructions from the owner of the shares and, under NYSE rules, does
not have discretionary authority to vote on a proposal.
|
Q:
|
What vote is needed for these proposals to be adopted?
|
|
A:
|
Proposal 1—The affirmative vote of the holders of a majority of the shares of our
common stock represented in person or by proxy at the Annual Meeting is required to elect each director (assuming a quorum is present).
Abstentions and broker “non-votes” will have the effect of votes against the election of director nominees.
|
Proposal 2—The affirmative
vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting is
required to approve the compensation of our named executive officers (assuming a quorum is present). Because this vote is advisory,
the results of the vote are not binding on our Board or our Compensation and Human Resources Committee. However, if there is a
significant vote against the compensation of our named executive officers, then our Board and our Compensation and Human Resources
Committee will carefully evaluate whether any actions are necessary to address those concerns. Abstentions and broker non-votes
will have the effect of votes against this proposal.
Proposal 3—The affirmative
vote of the holders of a majority of the shares of our common stock represented and voted at the Annual Meeting (assuming a quorum
is present) is required to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting
firm for the year ending January 2, 2021. Abstentions will have the effect of votes against this proposal. See the Q&A,
above, titled “Will my shares be voted if I do not provide my proxy?” regarding the effect broker non-votes will have
on this proposal.
Q:
|
Who conducts the proxy solicitation and how much will it cost?
|
A:
|
We are requesting your proxy for the Annual Meeting and will pay all costs of soliciting shareholder
proxies. In addition to soliciting proxies by mail and through the Internet, we may request proxies personally and by telephone,
fax or other means. We can use our directors, officers and regular employees to request proxies. These people do not receive additional
compensation for these services. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket and clerical expenses for forwarding solicitation materials to beneficial owners of our common stock.
|
Q:
|
Are our Company’s proxy materials available on the Internet?
|
A:
|
Yes. Our Company’s proxy statement for the Annual Meeting and 2019 Annual Report to Shareholders
are available at www.proxyvote.com.
|
Proposal
1: Election of Directors
Our Board is currently comprised of eleven
directors with the terms of each director expiring at the Annual Meeting. Our Board has nominated Jan A. Bertsch, Stephen M. Burt,
Anesa T. Chaibi, Christopher L. Doerr, Dean A. Foate, Michael F. Hilton, Louis V. Pinkham, Rakesh Sachdev and Curtis W. Stoelting,
each of whom is currently serving as a director, for election at the Annual Meeting to serve until the 2021 annual meeting of shareholders
and until their successors are duly elected and qualified. We include background information on all of the nominees below.
Upon election, the directors will hold office
for a term expiring at the 2021 annual meeting of shareholders and until their successors have been duly elected and qualified.
Our Board has established a retirement age of 72 within the Corporate Governance Guidelines and our Company Bylaws. Specifically,
a director is expected to retire from our Board on the day and hour of the annual shareholders meeting next following his or her
72nd birthday. Thomas J. Fischer and Jane L. Warner, who have attained the ages of 72 and 73, respectively, will be retiring from
our Board at the expiration of their terms at the Annual Meeting. Our Board will act to reduce the size of the Board to nine directors
effective immediately following their retirements.
Unless shareholders otherwise specify, the
shares represented by the proxies received will be voted in favor of our Board’s nominees for election as directors. Our
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 our Board.
Our Corporate Governance and Director Affairs
Committee periodically reviews and recommends to our Board the qualities, skills and attributes desired in our directors to reflect
the unique challenges facing, and business strategies of, our Company. The Corporate Governance and Director Affairs Committee
reviews the qualities, skills and attributes of proposed nominees when it makes director nominee recommendations to our Board and
compares them against the desired qualities, skills and attributes. Our Board reviews this information when considering proposed
nominees.
Some of the challenges and strategies we
face in our business, and the corresponding desired qualities, skills and attributes, are described in the following table.
Challenges/Strategies
|
Desired Qualities, Skills, Attributes
|
We are a global company with operations and customers around the world
|
· Diversity of gender, race, nationality, cultural and/or professional experience
· Significant
international experience
· Experience as a current or former chief executive officer or chief operating officer, or significant operations experience
|
We have grown substantially through acquisition, and future acquisitions are one component of our capital deployment strategy
|
· Business development/M&A experience
·
Knowledge of investment banking and/or capital markets
|
Our presence and sales in multiple global jurisdictions and across several business platforms results in a wide variety of transactions in many different currencies
|
·
Experience as a current or former chief financial officer
·
Expertise in matters of public accounting
|
We believe that good corporate governance will improve our operating performance and aligns with the interests of our shareholders
|
·
Public company board experience
·
Knowledgeable in corporate governance
|
Our industry has numerous unique challenges associated with manufacturing our products as well as conducting our business
|
· Knowledge and experience in our industry
·
Current or past experience with manufacturing, including supply chain management and lean principles
·
Experience with having responsibility for the profit and loss of a business/operation
|
One of the key elements of our strategy is to profitably grow organically by innovating our products around the themes of energy efficiency and disruptive technologies
|
·
Experience in driving growth with innovative products, systems or services
·
Entrepreneurial experience
·
Expertise in technology, engineering and information technology
·
Commercial expertise, including in sales and marketing and 80/20
|
The following sets forth certain information,
as of March 5, 2020, about each of our Board’s nominees for election at 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 our Company; Other Directorships
|
Jan A. Bertsch
|
63
|
2019
|
Ms. Bertsch is retired and was most
recently the Senior Vice President and Chief Financial Officer of Owens-Illinois, Inc., from 2015–2019. Prior to this
role, Ms. Bertsch served as Executive Vice President and Chief Financial Officer of Sigma-Aldrich Corporation from 2012–2015.
Prior to that role, Ms. Bertsch served as Treasurer and then Vice President, Controller and Principal Accounting Officer at
BorgWarner, from 2009–2012. Ms. Bertsch also served as Corporate Treasurer and Chief Information Officer at Chrysler
LLC and earlier in various roles of increasing responsibility in Finance and Treasury at Ford Motor Company. Ms. Bertsch has
a B.S. in Finance from Wayne State University and an M.B.A. from Eastern Michigan University, and she serves as a director of BWX
Technologies, Inc. and Meritor, Inc. Among the qualities, skills, and attributes desired by our Board, Ms. Bertsch
has
· CFO
experience;
· Expertise
in matters of public accounting;
· Extensive
M&A experience;
· Gender,
ethnic or racial diversity;
· Innovation
/ Entrepreneurial experience;
· Experience
in manufacturing;
· Global
experience;
· Engineering
/ IT / Technical expertise; and
· Operating
(P&L) experience.
|
Stephen M. Burt
|
55
|
2010
|
Mr. Burt is the Managing Director
of Duff & Phelps (a provider of independent financial advisory and investment banking services). Mr. Burt is currently
the leader of the firm’s Mergers and Acquisitions Advisory practice, as well as the President of Duff & Phelps Securities,
LLC (a provider of merger and acquisition advisory services), and has been with the company since 1994. Mr. Burt has a B.S.
in Finance from Indiana University and an M.B.A. in Finance from DePaul University. Mr. Burt is an NACD Board Leadership Fellow
and serves on the Finance Advisory Board in the Driehaus College of Business at DePaul University. Among the qualities, skills,
and attributes desired by our Board, Mr. Burt has
· Extensive
M&A experience;
· Investment
banking and capital markets expertise;
· Experience
in our industry;
· Global
experience;
· Marketing
expertise;
· Operating
(P&L) experience;
· Corporate
governance knowledge; and
· Shareholder
/ Investor relations experience.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Anesa T. Chaibi
|
53
|
2014
|
Ms. Chaibi is an industry advisor
in the Industrial and Business Services Group with Warburg Pincus, a leading global private equity firm focused on growth investing.
Prior to that role, Ms. Chaibi was the Chief Executive Officer and Director of Optimas OE Solutions, LLC (a global provider
of integrated supply chain solutions and engineering support), from 2016-2019. Previously, Ms. Chaibi served as President
and Chief Executive Officer of HD Supply Facilities Maintenance, a division of HD Supply Holdings, Inc. (an industrial supplier),
from 2005–2015. Prior to this role, Ms. Chaibi held a variety of roles of increasing responsibility within several business
units at General Electric from 1989–2005. Ms. Chaibi has a B.S. in Chemical Engineering from West Virginia University
and an M.B.A. from the Fuqua School of Business at Duke University. Additionally, Ms. Chaibi is an NACD Board Leadership Fellow.
Among the qualities, skills, and attributes desired by our Board, Ms. Chaibi has
· CEO
experience;
· Industrial
technology background;
· Extensive
M&A experience;
· Gender,
ethnic or racial diversity;
· Innovation
/ Entrepreneurial experience;
· Experience
in manufacturing;
· Global
experience;
· Engineering
/ IT / Technical expertise;
· Marketing
expertise;
· Operating
(P&L) experience; and
· Corporate
governance knowledge.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Christopher L. Doerr
|
70
|
2003
|
Mr. Doerr is the Chief Executive Officer
of Passage Partners, LLC (a private investment company) and served as the Co-Chief Executive Officer from 2001–2016. In prior
roles, Mr. Doerr served as the Co-Chief Executive Officer of Sterling Aviation Holdings, Inc. (an aircraft management
and charter company), from 2004–2014; Executive Chairman and Chief Executive Officer of Karl’s Rental, Inc. (a
global manufacturer and supplier of portable event structures and related equipment), from 2009–2011; and as the President
and Co-CEO of Leeson Electric Corporation, from 1986–2001. Mr. Doerr has served as a director of several privately-held
and publicly-traded companies and currently serves as a director of Roadrunner Transportation Systems, Inc. (a transportation
and supply chain solutions provider). Among the qualities, skills, and attributes desired by our Board, Mr. Doerr has
· CEO
experience;
· Industrial
technology background;
· Extensive
M&A experience;
· Public
company board experience;
· Innovation
/ Entrepreneurial experience;
· Experience
in our industry;
· Experience
in manufacturing;
· Global
experience;
· Engineering
/ IT / Technical expertise;
· Operating
(P&L) experience; and
· Marketing
expertise.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Dean A. Foate
|
61
|
2005
|
Mr. Foate is the non-executive Chairman
of the Board of Plexus Corporation (an electronics manufacturing services company), since 2016. Prior to that, Mr. Foate served
as the President and Chief Executive Officer of Plexus Corporation, from 2002–2016, and as the Chief Operating Officer of
Plexus Corporation from 2001–2002. Prior to that time, Mr. Foate held other various leadership roles at Plexus Corporation
since joining the company in 1984. Mr. Foate has a B.S. in Electrical and Computer Engineering from the University of Wisconsin,
and an M.S. in Engineering Management from the Milwaukee School of Engineering. Among the qualities, skills, and attributes desired
by our Board, Mr. Foate has
· CEO
experience;
· Industrial
technology background;
· Extensive
M&A experience;
· Public
company board experience;
· Innovation
/ Entrepreneurial experience;
· Experience
in manufacturing;
· Global
experience;
· Engineering
/ IT / Technical expertise;
· Marketing
expertise;
· Operating
(P&L) experience;
· Corporate
governance knowledge; and
· Shareholder
/ Investor relations experience.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Michael F. Hilton
|
65
|
2019
|
Mr. Hilton is newly retired and most
recently was a director and the President and Chief Executive Officer of Nordson Corporation (an engineering and manufacturing
company), from 2010–2019. Prior to that, Mr. Hilton served at Air Products and Chemicals, Inc. (a manufacturer
of industrial gases), beginning in 1976 in various roles of increasing responsibility, serving most recently as the Senior Vice
President and General Manager, Electronics and Performance Materials, from 2007–2010. Mr. Hilton has both a B.S. in
Chemical Engineering and an M.B.A. from Lehigh University. Mr. Hilton serves as a director of Lincoln Electric Holdings, Inc.,
since 2015, and Ryder System, Inc., since 2012. Among the qualities, skills, and attributes desired by our Board, Mr. Hilton
has
· CEO
experience;
· Public
company board experience;
· Shareholder
/ Investor relations experience;
· Corporate
governance knowledge;
· Operating
(P&L) experience;
· Experience
in manufacturing;
· Engineering
/ IT / Technical expertise;
· Marketing
expertise;
· Industrial
technology background;
· Global
experience;
· Innovation/
Entrepreneurial experience; and
· Extensive
M&A experience.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Louis V. Pinkham
|
48
|
2019
|
Mr. Pinkham joined Regal Beloit Corporation
in April 2019 as Chief Executive Officer. Prior to joining the Company, Mr. Pinkham was Senior Vice President of Crane
Co. from 2016–2019. Prior thereto he served in other leadership roles at Crane Co. from 2012–2016. Prior to joining
Crane Co., Mr. Pinkham was Senior Vice President and General Manager of the Critical Power Solutions Division, Electrical
Group at Eaton Corporation plc. From 2000–2012, he held successive and increasing roles of global responsibility at Eaton.
Prior to joining Eaton, Mr. Pinkham held an Engineering and Quality Manager position at ITT Sherotec and a Process Design
Engineer position with Molecular Biosystems, Inc. Mr. Pinkham has a B.S. in Engineering from Duke University, an M.S.
in Engineering Management from Northwestern University’s McCormick School of Engineering, and an M.B.A. from Northwestern
University’s Kellogg Graduate School of Management. Among the qualities, skills, and attributes desired by our Board, Mr. Pinkham
has
· CEO
experience;
· Extensive
M&A experience;
· Industrial
technology background;
· Public
company board experience;
· Experience
in manufacturing;
· Innovation
/ Entrepreneurial experience;
· Global
experience;
· Engineering
/ IT / Technical expertise;
· Operating
(P&L) experience; and
· Shareholder
/ Investor relations experience.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Rakesh Sachdev
|
64
|
2007
|
Mr. Sachdev is a director of Element
Solutions Inc (formerly Platform Specialty Products Corporation, a global diversified producer of high-technology specialty chemicals
and a provider of technical services), since 2016, a director of Avantor, Inc., since 2019, and a director of Edgewell Personal
Care Company. In 2019, he retired from his position as the Chief Executive Officer of Platform Specialty Products Corporation.
Prior to that role, Mr. Sachdev served as a director and the President and Chief Executive Officer of Sigma-Aldrich Corporation
(a life science and technology company), from 2010–2015 and as the Vice President and Chief Financial Officer, from 2008–2010.
Mr. Sachdev also served in various executive positions at ArvinMeritor, Inc. (a supplier of automotive components), from
1999–2008. Mr. Sachdev has a B.S. in Mechanical Engineering from the Indian Institute of Technology in New Delhi, India,
an M.B.A. in Finance from Indiana University, and an M.S. in Mechanical Engineering from the University of Illinois. Among the
qualities, skills, and attributes desired by our Board, Mr. Sachdev has
· CEO
experience;
· Extensive
M&A experience;
· CFO
experience;
· Expertise
in matters of public accounting;
· Public
company board experience;
· Gender,
ethnic or racial diversity;
· Innovation
/ Entrepreneurial experience;
· Investment
banking and capital markets expertise;
· Experience
in manufacturing;
· Global
experience;
· Engineering
/ IT / Technical expertise;
· Operating
(P&L) experience;
· Corporate
governance knowledge; and
· Shareholder
/ Investor relations experience.
|
Name
|
Age
|
Director
Since
|
Principal Occupation; Office, if any,
Held in our Company; Other Directorships
|
Curtis W. Stoelting
|
60
|
2005
|
Mr. Stoelting is the Chief Executive
Officer of Roadrunner Transportation Systems, Inc. (a transportation and logistics service provider), since May 2017,
and was previously the President and Chief Operating Officer of Roadrunner from 2016–2017. Prior to that role, Mr. Stoelting
served as the Chief Executive Officer and a director of TOMY International (formerly RC2 Corporation, a designer, producer, and
marketer of products for infants and toddlers), from 2003–2013. Prior to that role, Mr. Stoelting served in several
leadership roles at RC2 from 1994–2003, including as the Chief Operating Officer and a director beginning in 2000. Mr. Stoelting
has a B.A. in Accounting from the University of Illinois and is a Certified Public Accountant. Mr. Stoelting serves as a director
of Roadrunner Transportation Systems, Inc. Among the qualities, skills, and attributes desired by our Board, Mr. Stoelting
has
· CEO
experience;
· Extensive
M&A experience;
· CFO
experience;
· Expertise
in matters of public accounting;
· Public
company board experience;
· Investment
banking and capital markets expertise;
· Experience
in manufacturing;
· Innovation
/ Entrepreneurial experience;
· Global
experience;
· Marketing
expertise;
· Operating
(P&L) experience;
· Corporate
governance knowledge; and
· Shareholder
/ Investor relations experience.
|
OUR BOARD RECOMMENDS THE FOREGOING NOMINEES
FOR ELECTION AS DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.
Board
of Directors
Corporate Governance Highlights
We believe good governance is one critical
element to achieving long-term shareholder value. We are committed to governance policies and practices that serve our and our
shareholders’ long-term interests, as well as enable solid risk management and our performance-based focus. The following
table summarizes certain highlights of our corporate governance practices and policies:
ü Annual
election of all directors
ü Majority
voting for directors
ü At
least 20% of our Board is female
ü All
standing committees are composed entirely of independent directors
ü Annual
Board and Committee evaluations
ü Cyclical
individual director evaluations
|
ü Right
of shareholders to call special meetings
ü No
“poison pill”
ü Share
ownership guidelines for directors and executives
ü Commitment
to sustainability
ü Proxy
access right granted to shareholders
|
Corporate Governance and Independent
Directors
Our Board has in effect Corporate Governance
Guidelines that, in conjunction with our Board committee charters, establish processes and procedures to help ensure effective
and responsive governance by our Board. The Corporate Governance Guidelines are available, free of charge, on our website at www.regalbeloit.com.
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 our Board must be independent directors under the listing standards of the NYSE. Our Board has
also adopted certain categorical standards of director independence to assist it in making determinations of director independence
and which are contained in the Corporate Governance Guidelines.
Based on these standards, our Board affirmatively
determined by resolution that Messrs. Burt, Doerr, Foate, Hilton, Sachdev and Stoelting and Mses. Bertsch and Chaibi have
no material relationship with our Company, and, therefore, each is independent in accordance with the NYSE listing standards and
with the categorical standards of director independence adopted by our Board. Our Board regularly reviews the continuing independence
of the directors.
Code of Business Conduct and
Ethics
Our Board has adopted the Regal Beloit Corporation
Code of Business Conduct and Ethics (the “Code”), which applies to our directors, officers and employees. The Code
is available, free of charge, on our website at www.regalbeloit.com.
Board Leadership Structure
Our Board does not maintain a policy
on whether or not the roles of Chief Executive Officer (“CEO”) and Chairman of the Board (“Chairman”)
should be separate. Our Board reserves the right to vest the responsibilities of the CEO and Chairman in different
individuals or in the same individual if, in our Board’s judgment, a combined CEO and Chairman position is in the best
interest of our Company. In the circumstance where the responsibilities of the CEO and Chairman are vested in the same
individual, or where the Chairman is not considered independent, our Board will designate a Presiding Director from among the
independent directors. The position of the Presiding Director, when such position is applicable, rotates periodically among
the non-employee directors as determined by our Board upon the recommendation of the Corporate Governance and Director
Affairs Committee. The Presiding Director is an independent and empowered director who is appointed by the independent
directors and who works closely with the Chairman. The Corporate Governance Guidelines outline the role and responsibilities
of the Presiding Director.
Through March 31, 2019, Mark J. Gliebe,
our former Chairman and CEO, served as the combined CEO and Chairman until the election of Louis V. Pinkham to serve as Mr. Gliebe’s
successor as CEO. Mr. Gliebe resigned from the role of CEO on March 31, 2019. Through the 2019 annual meeting of shareholders,
Mr. Gliebe continued to serve in the role of Chairman, after which he no longer served as a director of our Company.
Through the 2019 annual meeting of shareholders,
Mr. Sachdev served as the Presiding Director, which is a role that supplemented the combined Chairman and CEO positions. Mr. Sachdev
has served as the Chairman since Mr. Gliebe’s departure from our Board. Our Board believes Mr. Pinkham as CEO is
best supported by an independent Chairman who has a deep understanding of our business and governance structure, and that the separation
of these positions will allow Mr. Pinkham to more fully focus his attention on the requirements of the CEO role. Our Board
determined that upon the appointment of Mr. Sachdev as the Chairman, there was no longer a need for a Presiding Director at
this time.
Oversight of Risk Management
Our full Board is responsible for the oversight
of our Company’s operational and strategic risk management process. Our Board believes that oversight of risk management
belongs at the full Board level rather than with any one particular committee primarily because of the importance of understanding
and mitigating risk to the overall success of our Company. In furtherance of our Board’s risk management oversight goals,
our Board oversees the work of a Risk and Compliance Committee comprised of senior management and key managers of certain of our
Company’s business units and functions around the world. The Risk and Compliance Committee is charged with, among other things,
identifying, assessing and developing a mitigation strategy for significant risks that could impact our ability to meet our objectives
and execute our strategies.
The Risk and Compliance Committee identifies
and clarifies significant risks (including cybersecurity and sustainability matters) that may impact our Company and assesses those
risks, resulting in the establishment of a plan response/mitigation strategy for significant risks. The Risk and Compliance Committee
delivers a summary of its activities and findings directly to our CEO, the Audit Committee, and our full Board. The summary is
also used by our management team as part of our disclosure controls and procedures to ensure that information regarding material
risks applicable to our Company are appropriately disclosed in our public filings.
While our Board has determined to maintain
responsibility for oversight of risk management, it relies on our Audit Committee to address significant financial risk exposures
facing our Company and the steps management has taken to monitor, control and report such exposures, with appropriate reporting
of these risks to be made to the full Board. Our Board also relies on our Compensation and Human Resources Committee to address
significant risk exposures facing our Company with respect to compensation programs and incentives, also with appropriate reporting
of these risks to be made to the full Board. Our Board’s role in our Company’s risk oversight has not affected our
leadership structure.
Executive Sessions
Our Board will have at least four
regularly scheduled meetings per year at which the non-employee directors will meet in executive session without members of
our management being present, and at least one regularly scheduled meeting per year at which the independent directors will
meet in executive session without members of management or other directors present. The non-employee directors may also meet
without management present at such other times as they determine appropriate. Members of our Company’s senior executive
management who are not members of our Board will participate in Board meetings to present information, make recommendations,
and be available for direct interaction with members of our Board.
Communications with our Board
Shareholders and other interested parties
may communicate with the full Board, the Chairman, non-management directors as a group or individual directors 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.
Our 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 our Company.
Concerns about accounting or auditing matters
or possible violations of the Code should be reported pursuant to the procedures outlined in the Code, which is available on our
website at www.regalbeloit.com.
Committees
We have three standing committees of our
Board: Audit Committee, Compensation and Human Resources Committee, and Corporate Governance and Director Affairs Committee. Ad
hoc committees are created for specific purposes from time to time. Each committee is appointed by and reports to our Board. Our
Board has adopted, and may amend from time to time, a written charter for each of the standing committees. Copies of each of these
charters are available free of charge on our website at www.regalbeloit.com.
Audit Committee. The Audit Committee
consists of Messrs. Burt (Chairperson), Fischer, Hilton and Ms. Bertsch. 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”).
Our Board determined that each of Messrs. Burt, Fischer, Hilton and Ms. Bertsch qualify 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 eight times in 2019, are to assist
our Board in monitoring the overall quality of our Company’s financial statements and financial reporting, our independent
registered public accounting firm’s qualifications and independence, our accounting controls and policies, the performance
of our internal audit function and independent registered public accounting firm, and our compliance with legal and regulatory
requirements. The Audit Committee has the sole authority to appoint, retain, compensate and terminate our independent registered
public accounting firm and to approve the compensation paid to our independent registered public accounting firm. The Audit Committee
has presented to shareholders for ratification at the Annual Meeting its selection of our independent registered public accounting
firm for 2020. See “Proposal 3: Ratification of Deloitte & Touche LLP as Our Independent Registered Public Accounting
Firm for the Year Ending January 2, 2021.”
Compensation and Human Resources
Committee. The Compensation and Human Resources Committee consists of Messrs. Stoelting (Chairperson) and Sachdev
and Ms. Chaibi. 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 six times in
2019, are to help develop our overall compensation philosophy; administer our incentive compensation plans (including our
equity incentive plans); determine and approve the compensation of the Chief Executive Officer and 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. The Compensation and Human Resources Committee from time to time
uses independent compensation consultants to assist the committee in the performance of its responsibilities. As part of its
evaluation of potential compensation consultants, the committee considers all factors relevant to the consultant’s
independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE
listing standards. 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. In 2019, the committee selected Willis Towers Watson PLC to serve as its
independent compensation consultant.
Corporate Governance and Director Affairs
Committee. The Corporate Governance and Director Affairs Committee consists of Mses. Warner (Chairperson) and Chaibi and Messrs. Doerr
and Foate. 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 four times in
2019, are to develop and recommend to our Board a set of corporate governance principles applicable to our Company, including matters
of Board organization, membership, compensation, independence and function, and committee structure and membership; take a leadership
role in shaping our corporate governance; identify directors qualified to serve on the committees established by our Board; and
to recommend to our Board the members and the chairperson for each committee to be filled by our Board. This Committee also serves
as the nominating committee of our Board and is responsible for identifying individuals qualified to become directors (consistent
with the criteria approved by our Board) and to recommend candidates for all directorships to be filled by our Board or by our
shareholders.
Nominations of Directors
In 2017, our Board amended and restated
our Company’s Amended and Restated Bylaws to implement proxy access. Proxy access is provided to a shareholder, or a group
of up to 20 shareholders, owning at least 3% of our Company’s outstanding common stock continuously for at least three years.
Eligible shareholders are permitted to nominate up to 20% of the total number of directors, rounded down to the nearest whole number
(but not less than two), provided that the shareholders and nominees satisfy the requirements specified in the bylaws. Nominating
shareholders are required to satisfy certain informational and procedural requirements, including (i) that such shareholders
do not have an intent or objective to influence or change control of our Company and (ii) that their nominees will not have
entered into any agreements as to how they will vote or act on different matters. Under the bylaws, we must receive notice of a
shareholder’s director nomination for the 2021 annual meeting of shareholders pursuant to the proxy access bylaw provision
no sooner than October 20, 2020 and no later than November 19, 2020. If the notice is received outside of that time frame,
then we are not required to include the nominees in our proxy materials for the 2021 annual meeting of shareholders.
The Corporate Governance and Director Affairs
Committee will also 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 “The Directors-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 2021 annual meeting of
shareholders must be submitted by November 19, 2020 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 all directors should be financially literate and
must be committed to understanding our Company and its industry, and must also 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, 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.
While the Corporate Governance and
Director Affairs Committee does not have a formal policy relating specifically to the consideration of diversity in its
process to select and evaluate director nominees, the Committee does consider diversity of viewpoint, background, industry
knowledge and perspectives, as well as ethnic and gender diversity, as part of its overall evaluation of candidates for
director nominees. Specifically, our criteria for director nominees, included as Appendix A to our Corporate Governance
Guidelines, provide that directors should be selected so that our Board represents diverse backgrounds and perspectives.
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 SEC regulations, and meet the minimum expectations
for a director set forth in our 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 current or former members of our management, be independent
as defined by the NYSE independence standards and SEC regulations.
Sustainability
We believe that a commitment to sustainability
is about commitment to doing everything better. We believe that positive environmental, social and governance-related business
practices strengthen our Company, increase our connection with our stakeholders and help us better serve our customers and the
communities in which we operate. We believe that sustainability goes beyond compliance and extends to worker health and safety,
the environment, anti-corruption and trade compliance, responsible sourcing, human rights and labor practices. At Regal, we believe
that decreasing our footprint and increasing our handprint are creating a better tomorrow. Our Sustainability Report is available
on our website at sustainability.regalbeloit.com.
Among the ways in which we have demonstrated
our commitment to sustainability are the following:
|
·
|
We implement environmentally-friendly solutions for our customers, including innovative products to minimize water usage, energy
consumption, wastewater discharge and sound levels.
|
|
·
|
Our formal environmental, health, safety and sustainability program, called our Compliance Citizenship Review, helps us to
systematically decrease our footprint, and we assess progress at each of our sites at least twice a year.
|
|
·
|
We contribute to the communities where we live and work by supporting local charitable organizations and contributing a significant
number of volunteer hours.
|
|
·
|
We foster a strong corporate culture that promotes the highest standards of ethics and compliance for our business, including
the Code that sets forth principles to guide the conduct of our directors, officers and employees.
|
|
·
|
We maintain an Integrity Alert Line whereby suspected violations of the Code can be reported via phone or the web on a confidential
basis and are investigated.
|
|
·
|
We are committed to continually improving workplace safety through our “zero harm” expectation.
|
|
·
|
We invest in training employee-led “high energy teams” to actively participate in our safety programs and drive
improvements in safety, speed, quality, cost and sustainability.
|
|
·
|
We have global anti-corruption and third-party engagement policies and conduct regular audits and assessments of our business
partners.
|
|
·
|
We are an equal opportunity employer, emphasizing inclusion and committed to maintaining a workplace free of harassment and
discrimination.
|
|
·
|
We promote having a diverse talent pipeline by ensuring that we employ and promote qualified people without discrimination.
|
Policies and Procedures Regarding
Related Person Transactions
Our Board 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 a person who has a
greater than 5% beneficial ownership, 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 our 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 2019, 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
Our Board held six meetings in 2019. Each
director attended at least 75% of the aggregate of (a) the total number of meetings of our Board and (b) the total number
of meetings held by all committees of our Board on which the director served during 2019, in each case during the period in which
the director was serving on our Board or the applicable committee.
Directors are expected to attend our annual
meeting of shareholders each year. All but one of our directors who stood for election at the 2019 annual meeting of shareholders
attended the 2019 annual meeting of shareholders in person.
Stock
Ownership
Management
The following table sets forth information,
as of March 5, 2020, regarding beneficial ownership of our common stock by each director and nominee, each of our current
named executive officers as set forth in the Summary Compensation Table, and all of the directors and current executive officers
as a group. As of March 5, 2020, no director or executive officer beneficially owned one percent or more of our common stock.
On that date, the current directors and executive officers as a group beneficially owned 0.69% 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)
|
|
|
Restricted Stock
Units(4)
|
|
John M. Avampato
|
|
|
37,375
|
|
|
|
4,964
|
|
Jan A. Bertsch
|
|
|
0
|
|
|
|
972
|
|
Stephen M. Burt
|
|
|
15,764
|
|
|
|
1,772
|
|
Anesa T. Chaibi
|
|
|
7,066
|
|
|
|
1,772
|
|
Christopher L. Doerr
|
|
|
13,992
|
|
|
|
1,772
|
|
Thomas J. Fischer
|
|
|
22,489
|
|
|
|
1,772
|
|
Dean A. Foate
|
|
|
29,164
|
|
|
|
1,772
|
|
Mark J. Gliebe, former Chief Executive Officer and Chairman(5)
|
|
|
418,855
|
|
|
|
62,400
|
|
Michael F. Hilton
|
|
|
0
|
|
|
|
423
|
|
Louis V. Pinkham
|
|
|
6,970
|
|
|
|
37,923
|
|
Robert J. Rehard
|
|
|
7,155
|
|
|
|
8,576
|
|
Rakesh Sachdev
|
|
|
17,764
|
|
|
|
1,772
|
|
Jonathan J. Schlemmer, former Chief Operating Officer(6)
|
|
|
48,551
|
|
|
|
0
|
|
Curtis W. Stoelting
|
|
|
27,771
|
|
|
|
1,772
|
|
Thomas E. Valentyn
|
|
|
11,100
|
|
|
|
8,890
|
|
Jane L. Warner
|
|
|
10,493
|
|
|
|
1,772
|
|
All current directors and executive officers as a group (19 persons)
|
|
|
281,733
|
|
|
|
96,220
|
|
(1)
|
Includes shares subject to currently exercisable rights to acquire common stock and options exercisable within 60 days of March 5, 2020 as follows: Mr. Avampato, 29,450 shares; Mr. Rehard, 4,365 shares; Mr. Valentyn, 8,290 shares; and all current directors and executive officers as a group, 101,934 shares.
|
|
|
(2)
|
The amount shown for Mr. Stoelting includes 9,202 shares held in the Curtis W. Stoelting 1994 Revocable Trust over which Mr. Stoelting retains sole voting and investment power during his lifetime and 805 shares held by Mr. Stoelting’s children, over which he retains investment power.
|
|
|
(3)
|
Amount shown for Mr. Avampato includes 1,666 shares held in trust under our Company’s 401(k) plans as of March 5, 2020.
|
|
|
(4)
|
This column includes shares of restricted stock or restricted stock units that are subject to forfeiture until they vest on either the first, second, or the third anniversary of the date of grant pursuant to the terms of the applicable vesting schedule.
|
(5)
|
The amount shown for Mr. Gliebe is based on the amount reported in the stock ownership table of our definitive proxy statement for our 2019 annual meeting of shareholders. This amount does not take into consideration any changes in his beneficial ownership of our common stock since such date, including any actions taken in connection with his retirement (including, for the avoidance of doubt, any of the actions contemplated by the Retirement Agreement, dated October 10, 2018, between the Company and Mr. Gliebe).
|
|
|
(6)
|
The amount shown for Mr. Schlemmer is based on his last known direct share balance, as reported on his most recent Form 4 filed with the SEC on November 8, 2019, less his unvested restricted stock unit balance at that time, the acceleration and vesting of 6,112 restricted stock units pursuant to his Retirement Agreement, dated December 27, 2019, and 1,588 shares held in trust under the Company’s 401(k) plans as of March 5, 2020.
|
Other Beneficial Owners
The following table sets forth information,
as of December 31, 2019 or otherwise, as noted, regarding beneficial ownership by the only persons known to us to own more
than 5% of our outstanding common stock. The beneficial ownership information 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
|
|
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
|
|
|
4,049,290
|
|
|
|
0
|
|
|
|
4,280,680
|
|
|
|
0
|
|
|
|
4,280,680
|
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, TX 78746
|
|
|
2,882,482
|
|
|
|
0
|
|
|
|
2,941,686
|
|
|
|
0
|
|
|
|
2,941,686
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FMR LLC
245 Summer Street
Boston, MA 02210
|
|
|
225,548
|
|
|
|
0
|
|
|
|
3,623,064
|
|
|
|
0
|
|
|
|
3,623,064
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Vanguard Group(1)
100 Vanguard Blvd.
Malvern,
PA 19355
|
|
|
21,727
|
|
|
|
6,238
|
|
|
|
4,094,009
|
|
|
|
21,728
|
|
|
|
4,115,737
|
|
|
|
10.0
|
|
|
(1)
|
This information is provided as of January 31, 2020 based on a Schedule 13G/A filed with the SEC by The Vanguard Group
on February 10, 2020.
|
Compensation
Discussion and Analysis
Introduction
This Compensation Discussion and Analysis
provides detailed information about our compensation programs for our named executive officers (“NEOs”) for fiscal
2019. During fiscal 2019, a significant development affecting our NEO compensation programs was the election of Louis V. Pinkham
as our Chief Executive Officer effective April 1, 2019. Mr. Pinkham succeeded Mark J. Gliebe, who resigned from the role
of Chief Executive Officer on March 31, 2019 as part of his previously announced retirement transition. The compensation-related
actions that occurred in connection with this transition are described below under the headings “Severance and Change in
Control Benefits” and “Potential Payments on a Termination or Change in Control – Retirement Agreements.”
In addition, during this transition, there were adjustments in our compensation philosophy as described below.
Executive Compensation Philosophy
What is your compensation philosophy?
Our overall compensation philosophy is summarized
as follows:
|
·
|
The compensation of our NEOs should be structured so that their interests
are aligned with the long-term interests of our shareholders. We have a “pay-for-performance” philosophy, meaning that
we will pay higher compensation, in particular higher incentive compensation, to the NEOs when the performance of the Company delivers
incremental value to the shareholders.
|
|
·
|
To further align our NEOs’ interests with the interests of our
shareholders, and to reinforce our pay-for-performance philosophy, we believe our NEOs should have the opportunity to earn above-median
total compensation if the Company performs well, and should earn below-median total compensation if it does not.
|
|
·
|
In order to attract and retain talented executives, we believe we
should offer overall compensation levels that are competitive in the marketplace. As a result, we seek to set compensation levels
so that our NEOs can earn total compensation at approximately the median level compared to similarly situated executives in our
peer group. We consider compensation within a 15% range above or below the fiftieth (50th) percentile of peer group data to be
at approximately the “median” level.
|
We believe this to be a conservative approach
to executive compensation.
Do you consider the results of the shareholders’
“say on pay” vote in your philosophy and in determining compensation?
Yes, each year we and the Compensation and
Human Resources Committee of the Board of Directors (for purposes of this Compensation Discussion and Analysis, the “Committee”)
scrutinize the results of our shareholders’ non-binding vote on our NEOs’ compensation (the “say on pay”
vote) and consider other shareholder inputs to determine whether our shareholders believe we need to change our compensation philosophy
or practices. Most recently, in April 2019, our shareholders supported our NEOs’ compensation with more than 90% of
votes cast in favor. Consistent with this strong vote of shareholder approval, we took care, in considering changes to our executive
compensation philosophy and programs, to retain all key elements of our continuing commitment to pay for performance.
What compensation policies and practices reflect your
compensation philosophy?
What We Do
|
|
Pay-for-Performance (pages 26-27)
|
|
Balance Long-Term and Short-Term Incentives (pages 27-28)
|
|
Use Multiple Performance Metrics, Including a Relative Metric, for Incentive Compensation (pages 37-39)
|
|
Benchmark Compensation Against an Appropriate Peer Group (page 31-32)
|
|
Maintain a Clawback Policy (page 72)
|
|
Monitor for Risk-Taking Incentives (pages 71-73)
|
|
Maintain Stock Ownership Requirements (page 43)
|
|
Prohibit Hedging, Pledging and the Like (page 44)
|
|
Limit Perquisites (pages 42)
|
|
Engage an Independent Compensation Consultant (pages 30-31)
|
|
Hold Executive Sessions at Each Committee Meeting
|
What We Do Not Do
|
X
|
No New Agreements With Gross-Ups for Taxes (page 45)
|
X
|
No Employment Agreements with Pre-Change of Control Severance (page 44)
|
X
|
No “Single Trigger” Severance Agreements (page 45)
|
X
|
No Repricing of Options
|
X
|
No Guaranteed Bonuses or Salary Increases
|
Did the NEOs’ compensation in 2019 align with corporate
performance and the creation of shareholder value?
We believe our executive compensation in
fiscal 2019 aligned well with the objectives of our compensation philosophy and with our corporate performance. Although 2019 was
a challenging year, we delevered at 15.5% from fiscal 2018 (i.e. our adjusted operating income was down $30.6 million on a $197
million reduction in adjusted net sales), improving on historical performance in this area. We also achieved total shareholder
return of 24% and generated free cash flow to adjusted net income of 151%, while purchasing $165.1 million of our shares. Additionally,
the Company has paid a dividend every quarter since January 1961 and increased the dividend by over 7% in fiscal 2019.
In 2019, our company also achieved sales
of $3.185 billion, adjusted operating profit as a percentage of sales of 10.8%, and trade working capital as a percentage of sales
of 26.4%. Those operating results led our Committee to approve annual cash incentives under our Incentive Compensation Plan (“ICP”)
at 40% of target for fiscal 2019 for our NEOs. The Committee’s determination of the annual cash incentives is described further
below under “What were the NEOs’ target cash incentive amounts for 2019 and how much did they earn?”
Our Committee also approved the payout of
shares under our performance share unit (“PSU”) awards that we granted in 2017 with a performance period of 2017-2019
at a level of 45% of target based on our achievement of total shareholder return of 62% and return on invested capital (“ROIC”)
of 28% over the three-year performance period.
We believe the compensation of our NEOs
aligns well with our performance, but we also believe that this alignment is not always reflected in the Summary Compensation Table
in the same way we view the alignment for our internal purposes. This is because the Summary Compensation Table values are required
by Securities and Exchange Commission rules to include the full grant date fair value of equity awards in the year the awards
are granted. The grant date fair value is an accounting value that projects the potential value of awards based on assumptions
about, among other things, certain future events. The grant date fair value is different from the economic value of the awards
to our NEOs, which may be lower or higher than the grant date fair value depending on the price of our common stock. For this reason,
we are including in this proxy statement, as a supplement to the required Summary Compensation Table, a comparison of our NEOs’
realizable pay for 2019 with their total compensation as shown in the Summary Compensation Table.
Name
and Principal Position
|
|
2019
Summary
Compensation
Table Total
Compensation ($)
|
|
|
2019
Total
Realizable
Compensation ($)
|
|
Louis V. Pinkham
Chief Executive Officer
(Since April 1, 2019)
|
|
|
6,390,215
|
|
|
|
4,822,667
|
|
|
|
|
|
|
|
|
|
|
Mark J. Gliebe
Former Chairman and Chief Executive Officer
(Chairman through the 2019 annual meeting of
shareholders; Chief Executive Officer through
March 31, 2019)
|
|
|
2,066,982
|
|
|
|
2,066,982
|
|
|
|
|
|
|
|
|
|
|
Robert J. Rehard
Vice President, Chief Financial Officer
|
|
|
1,573,055
|
|
|
|
1,116,001
|
|
|
|
|
|
|
|
|
|
|
Jonathan J. Schlemmer
Former Chief Operating Officer
(Through January 31, 2020)
|
|
|
3,294,473
|
|
|
|
2,678,109
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Valentyn
Vice President, General Counsel and Secretary
|
|
|
1,186,214
|
|
|
|
882,033
|
|
|
|
|
|
|
|
|
|
|
John M. Avampato
Vice President, Chief Information Officer
|
|
|
1,117,087
|
|
|
|
944,537
|
|
The 2019 total realizable pay disclosure
in the table above is the same as the 2019 compensation shown in the Summary Compensation Table except that the equity-based compensation
that we granted during 2019 is valued based on the price of our common stock at fiscal year-end and, in the case of PSUs, the relevant
performance trend at fiscal year-end. Specifically, restricted stock units (“RSUs”) are valued as the product of the
number of shares granted to the NEO during the year multiplied by the year-end stock price, assuming for purposes of this disclosure
that the grants were vested. Stock appreciation rights (“SARs”) are valued as the product of the number of rights granted
to the NEO during the year multiplied by the excess, if any, of the year-end stock price over the grant price of the rights, assuming
for purposes of this disclosure that the grants were vested. PSUs with a performance metric of relative total shareholder return
(“TSR PSUs”) are valued using 0% of the target number of shares that we granted to each NEO during 2019 (which is approximately
the number of shares that would vest if our total relative total shareholder return for the entire applicable performance period
is the same as it was at the end of 2019), multiplied by the year-end stock price. PSUs with a performance metric of return on
invested capital (“ROIC PSUs”) are valued using 39% of the target number of shares that we granted to each NEO during
2019 (which is approximately the number of shares that would vest if our ROIC for the entire applicable performance period is the
same as it was at the end of 2019), multiplied by the year-end stock price. The 2019 total realizable pay disclosure in the table
above does not include equity-based compensation granted in prior years that was paid or became payable in 2019.
This section includes non-GAAP financial
measures. Descriptions of why we believe these non-GAAP financial measures are useful and reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP financial measures are included in our earnings release for fiscal year 2019.
Since you have a pay-for-performance
compensation philosophy, what percentage of your NEOs’ target compensation was “at risk” in 2019?
To focus on both our short and long-term
success, our NEOs’ target compensation includes a significant portion—more than 71% on average—that is “at
risk” because the value of such compensation is determined based on the achievement of specified results or subject to forfeiture.
This “at risk” compensation includes compensation elements intended to reward the achievement of both short- and long-term
financial goals. If such goals are not achieved, then performance-related compensation will decrease. If goals are exceeded, then
performance-related compensation will increase.
Payments under the ICP are “at risk”
because the payments are dependent on achievement of one-year performance goals. In addition, compensation paid in the form of
equity awards, such as RSUs, SARs and PSUs, 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 that are subject to vesting over
multiple years or dependent on achieving multi-year performance goals, our NEOs have a significant stake in our long-term success
and gain financially along with our shareholders.
As shown in the following charts, in fiscal
2019, 83% of the CEO’s target compensation and, on average, 62% of the other NEOs’ target compensation was at risk.
For purposes of this disclosure, target compensation includes base salary, target annual incentive awards, grant date fair value
of equity awards, change in pension value and all other compensation. For Mr. Pinkham, this disclosure also includes the RSU
award he received in connection with his election as our Chief Executive Officer as “at risk” compensation, and the
lump sum cash signing bonus in the amount of $133,000 he received pursuant to the terms of his employment agreement as compensation
that is not “at risk.”
Have you made changes to your compensation program for
your NEOs that will apply in 2020?
The Committee adopted changes to our compensation
program for our NEOs for 2020 to place greater emphasis on those performance measures that we believe most directly reflect our
financial performance and strategic objectives and more closely align with competitive market practice. Specifically, for 2020,
we implemented the following changes:
|
·
|
The Committee established ICP performance measures for our NEOs for
2020 based on adjusted earnings per share (weighted 65%), free cash flow (weighted 20%) and sales growth (weighted 15%), rather
than, as in 2019, sales growth and adjusted operating profit as a percentage of sales (together weighted 75%) as well as working
capital as a percentage of sales (weighted 25%).
|
|
·
|
Amounts earned above the targets established by the Committee with
respect to the ICP will be paid in a single payment following the end of the applicable performance period, rather than, as in
2019, being paid in installments, with one-third of the
above-target amount being paid after the end of each of the three years that follow the applicable performance period.
|
|
·
|
The proportion of overall long-term incentive target value represented
by each form of award for our NEOs for 2020 is 50% PSUs, 25% SARs and 25% RSUs, rather than, as in 2019, 33% PSUs, 34% SARs and
33% RSUs.
|
|
·
|
The RSUs granted in 2020 will vest ratably over the first three anniversaries
of the grant date, rather than, for the RSUs granted in 2019, 100% on the third anniversary of the grant date.
|
|
·
|
The SARs granted in 2020 will vest ratably over the first three anniversaries
of the grant date, rather than, for the SARs granted in 2019, 40% on the second anniversary of the grant date and 20% on each of
the third, fourth and fifth anniversaries of the grant date.
|
The Committee also amended our Supplemental
Defined Contribution Retirement Plan effective January 1, 2020 to provide for full vesting after three years of service rather
than after reaching age 58 with 10 years of service.
Setting Executive Compensation
What is the role of the Board in setting NEOs’ compensation?
The Board’s primary roles in setting
our executive compensation are:
|
·
|
to annually review and consider our compensation philosophy;
|
|
·
|
to appoint the members of the Committee; and
|
|
·
|
to review and approve certain recommendations of the Committee relating
to compensation.
|
The Committee consists entirely of independent
directors who are “non-employee directors” for purposes of the Securities Exchange Act of 1934. The current members
of the Committee are Messrs. Stoelting (Chairperson) and Sachdev and Ms. Chaibi.
What is the role of the Committee in setting NEOs’
compensation?
The Committee is responsible for determining
the components of our executive compensation program, consistent with the compensation philosophy determined by our Board, and
the executive compensation packages offered to our NEOs. The Committee determines executive salaries, administers the ICP, administers
our long-term equity incentive plans and makes awards under the plans.
The Committee reviews data from market surveys
and proxy statements from our established peer group and retains an independent compensation consultant to assess our competitive
position with respect to total executive compensation.
The Committee takes various factors into
account in setting compensation levels and does not use a formulaic approach, but generally seeks to closely align target total
direct compensation (i.e., the sum of base salary, target annual cash incentive opportunity and target long-term incentives) with
the peer group and survey median.
What is the role of the CEO in setting NEOs’ compensation?
In its decision-making process, the Committee
receives and considers the recommendations of our CEO with respect to compensation to be paid to our NEOs other than himself. Our
CEO makes no recommendation with respect to his own compensation.
Does the Committee use an independent compensation consultant
to help in setting NEOs’ compensation?
Yes. The Committee periodically solicits
proposals from independent compensation consultants to assist the Committee in the performance of its responsibilities. As part
of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s
independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing
standards. 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.
Willis Towers Watson served as the Committee’s
independent compensation consultant for 2019. In July 2019, the Committee reviewed the independence of Willis Towers Watson
and the individual representatives of Willis Towers Watson who served as the Committee’ consultants, including considering
factors contained in applicable SEC rules and NYSE listing standards.
During 2019, our management separately engaged
Willis Towers Watson to provide insurance brokerage services. The personnel who performed the insurance brokerage services operated
separately and independently of the Willis Towers Watson personnel who performed compensation consulting services for the Committee.
Willis Towers Watson has advised the Committee of a number of policies it maintains to ensure that the compensation consulting
advice provided to the Committee is not influenced by the insurance brokerage services, including the following:
|
·
|
Individuals who are not part of the compensation consulting team are
precluded from involvement in the development of recommendations regarding the compensation of our executive officers and directors.
|
|
·
|
Compensation consultants who advise the Committee on director and
executive officer compensation may not serve in broader relationship-management roles for us.
|
|
·
|
The compensation paid to Willis Towers Watson compensation consultants
is not tied to the fees paid, or to the expansion of fees paid, by us for insurance brokerage services.
|
The Committee concluded, based on the evaluation
and factors described above, that Willis Towers Watson was and remains independent.
How did the compensation consultant help the Committee
in setting NEOs’ compensation for 2019?
In setting compensation for 2019, the Committee
directed Willis Towers Watson to assemble compensation data for our NEOs and compare the data against aggregated peer group proxy
data and general industry survey data for persons holding similarly situated positions in our peer group.
The Committee’s policy is generally
to review the composition of the peer group we use for this purpose every year for potential changes in light of acquisitions,
changes in comparable revenue size, or other factors it deems appropriate.
In reviewing our peer group for potential
updates in 2019, the Committee selected companies that it believed to be comparable to our Company by generally using the following
criteria:
|
·
|
Comparable revenue (target companies with annual revenues ranging
from approximately 0.5 to 2.0 times our annual revenues and with an overall median revenue that approximates ours);
|
|
·
|
Compete in an industry similar to ours and/or have the level of complexity
and business model similar to ours; and
|
|
·
|
Contains companies that we compete with for executive talent.
|
For 2019, the 20 companies in our peer group
for purposes of NEO benchmarking were:
AMETEK, Inc.
|
|
Carlisle Companies Inc.
|
|
Colfax Corporation
|
Crane Co.
|
|
Donaldson Company, Inc.
|
|
Dover Corporation
|
Flowserve Corp.
|
|
Hubbell Incorporated
|
|
ITT Inc.
|
Kennametal Inc.
|
|
Lennox International
|
|
Lincoln Electric Holdings Inc.
|
Owens Corning
|
|
Pentair plc
|
|
Rexnord Corp.
|
Rockwell Automation, Inc.
|
|
Terex Corporation
|
|
The Timken Co.
|
Valmont Industries, Inc.
|
|
Xylem Inc.
|
|
|
During 2018, the Committee approved replacing
three of the companies in our 2018 peer group – Rockwell Collins, Inc., Roper Technologies, Inc. and Snap-On Incorporated
– with three new companies – Carlisle Companies Incorporated, Dover Corporation and ITT Inc. – in our 2019 peer
group effective as of January 1, 2019. The Committee approved these replacements because Rockwell Collins, Inc. was being
acquired by another company and because the Committee determined that Carlisle Companies Incorporated, Dover Corporation and ITT, Inc.
were more appropriate peer companies than Roper Technologies, Inc. and Snap-On Incorporated based on a peer of peers analysis,
revenue size, relative market capitalization, pay structure and product portfolio.
During 2019, Willis Towers Watson benchmarked
our executive compensation opportunities using (i) the above referenced peer group as the primary benchmark for our Chief
Executive Officer, Vice President, Chief Financial Officer and Vice President, General Counsel positions and (ii) general
industry data from Willis Towers Watson’s Executive Compensation Survey as the primary benchmark for our Chief Operating
Officer and Vice President, Chief Information Officer positions.
In reviewing and analyzing these data, Willis
Towers Watson considered information for each NEO position with respect to the following elements of compensation:
|
·
|
Target annual cash incentive under the ICP;
|
|
·
|
Target total cash compensation (salary and target annual cash incentive);
|
|
·
|
Target of annual long-term incentives at grant-date value; and
|
|
·
|
Target total direct compensation (sum of target cash and target long-term
incentives).
|
In keeping with the Committee-approved
methodology, Willis Towers Watson analyzed each element of target total direct compensation for our NEOs compared to the
market median from the two different data sources. Willis Towers Watson reported on the methodology that it used in its
analysis and provided a summary of its findings and its observations on our programs relative to the data and market trends
in executive compensation. In connection with this review, Willis Towers Watson also analyzed our annual share utilization
rate and dilution relative to market practice.
During 2019, the Committee also reviewed
market data relating to perquisites provided to our NEOs using the same peer group and general industry survey data provided by
Willis Towers Watson discussed above. Consistent with prior years, we continued to limit the perquisites that we provide our NEOs.
We did not make any changes as a result of our 2019 review.
The Elements of Total Compensation
We achieve our executive compensation objectives
through the following ongoing programs. All of our NEOs participate in these programs except as otherwise noted below.
Program
|
|
Description
|
|
Participants
|
|
Principal Objectives
|
Annual Cash Compensation
|
Base Salary
|
|
Annual cash compensation
|
|
All employees
|
|
Competitive practices
Individual contribution
|
ICP Annual Cash Incentive
|
|
Annual cash incentive with target awards established at each
employee level
Payments can be higher (subject to a 200% cap) or lower than
target, based on Company annual results
Amounts earned above target are deferred and remain subject
to forfeiture until they are paid; payment occurs in three equal annual installments beginning in the second year following the
applicable performance period
|
|
All executive officers and key employees
|
|
Drive superior performance
· Across
total Company
· Across
business segments
Competitive practices
Shareholder alignment
|
Program
|
|
Description
|
|
Participants
|
|
Principal Objectives
|
Long-Term Incentive Programs
|
Long-Term Incentive (“LTI”) Equity Awards
|
|
Long-term incentive awards paid in SARs, RSUs and PSUs
|
|
All executive officers and key employees
|
|
Drive superior performance
· Individual
contribution
· Increase
stock price
Focus on long-term success
Ownership
Shareholder alignment
|
Retirement Programs
|
Retirement (401(k)) Savings Plan
|
|
Company matching and annual contributions
|
|
All U.S. Employees
|
|
Retention
Competitive practices
|
Target Supplemental Retirement Plan (the “Target SRP”) (Closed to new participants 1/1/2017)
|
|
Defined benefit retirement plan for executives who have at least 10 years of service and work with the Company until the age of 58
|
|
Key executives eligible prior to January 1, 2017
|
|
Retention
Competitive practices
|
Supplemental Defined Contribution Retirement Plan (the “SDCRP”)
|
|
Defined contribution retirement plan for executives who have at least 10 years of service and work with the Company until the age of 58 (this vesting requirement was changed to at least 3 years of service without regard to the participant’s age effective January 1, 2020)
|
|
Key executives not covered by the Target SRP
|
|
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
|
|
Competitive practices
|
Other Benefits
|
|
Medical, welfare and other benefits
|
|
All employees
|
|
Competitive practices
|
Base Salaries
How do you determine base salaries, and what were the
NEOs’ base salaries for 2019?
We determine base salaries for our NEOs
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.
In April 2019, the Committee set the base salaries of our NEOs in accordance with the factors identified in the preceding
sentence. Effective as of April 1, 2019, the base salaries of our NEOs who were employed through the end of fiscal 2019 were
as follows:
Name
|
|
Base Salary
|
|
|
Change from 2018
|
|
Louis V. Pinkham
|
|
$
|
950,000
|
|
|
|
--
|
|
Robert J. Rehard
|
|
$
|
500,000
|
|
|
|
+42.8
|
%
|
Jonathan J. Schlemmer
|
|
$
|
635,000
|
|
|
|
+3.2
|
%
|
Thomas E. Valentyn
|
|
$
|
427,500
|
|
|
|
+3.0
|
%
|
John M. Avampato
|
|
$
|
390,000
|
|
|
|
--
|
|
Mr. Gliebe’s 2019 base salary
did not change from his 2018 base salary until his resignation from the role of Chief Executive Officer on March 31, 2019.
In setting base salary levels, the Committee compared the NEOs’ base salary levels to the salary levels of the executive
officers in our peer group based on proxy statement data as well as general industry data from Willis Towers Watson’s Executive
Compensation Database and made changes accordingly.
With respect to each of our NEOs, compared
to the median base salaries of similarly situated executive officers in the data reviewed by the Committee, after the changes,
all were determined to be at the median level (according to the established target range). The base salary levels set by the Committee
did not affect decisions regarding other compensation elements.
Annual Cash Incentives
Do you provide annual cash incentive awards? If so, how
are they structured?
In fiscal year 2019, we provided annual
cash incentive awards through our ICP, which was approved by shareholders at our annual meeting of shareholders on April 25,
2016. Under our ICP, annual cash incentive awards are paid out based on the Company’s achievement of performance goals related
to certain financial measures.
How does the ICP work?
Early in 2019, the Committee set performance
goals (as described below under “What were the ICP performance measures for 2019? How did you determine the target for each
metric?”) and a targeted level of annual cash incentive compensation for each NEO that would be earned for achievement of
target performance. For each NEO, the target cash incentive amount is based on a percentage of base salary. The Committee, in consultation
with Willis Towers Watson and our CEO (other than with respect to his own compensation), set annual cash incentive targets under
the ICP near the median level with respect to each respective position held by our NEOs relative to our peer group. Our NEOs whose
annual cash incentive targets under the ICP were set near the median level were given the opportunity to earn above median annual
cash incentive awards if the Company-wide financial targets under the ICP plan were exceeded, while being at risk of receiving
below median awards (or no awards at all) if our financial performance did not meet the targeted results. For 2019, the target
cash incentive amounts for each of our NEOs were as follows:
Name
|
|
Target % of Base Salary
|
|
|
Target Amount
|
|
Louis V. Pinkham(1)
|
|
|
110
|
%
|
|
$
|
1,045,000
|
|
Robert J. Rehard
|
|
|
75
|
%
|
|
$
|
375,000
|
|
Jonathan J. Schlemmer
|
|
|
90
|
%
|
|
$
|
571,500
|
|
Thomas E. Valentyn
|
|
|
60
|
%
|
|
$
|
256,500
|
|
John M. Avampato
|
|
|
50
|
%
|
|
$
|
195,000
|
|
(1) Mr. Pinkham’s award was pro rated to reflect his partial year of service.
Mr. Gliebe did not receive an ICP award
for 2019 due to his expected retirement.
If the Company-wide financial performance
goals described in the section below titled “What were the ICP performance goals for 2019? How did you determine the
target for each metric?” are met at the target level, then each eligible NEO receives their target amount. However,
actual incentive compensation can range from zero to two times the target amount, as described in more detail below, depending
on our financial performance during the year.
There was also a threshold requirement for
our NEOs to receive any amount under the ICP for 2019. The requirement was that we have positive adjusted operating profit (as
determined by the Committee) for fiscal year 2019. If we had positive adjusted operating profit for the year, then up to the maximum
ICP amount was authorized, subject to the Committee’s discretion to reduce the amount payable based on our financial performance
as described below.
What were the ICP performance measures for 2019? How did
you determine the target for each measure?
Our ICP performance goals for 2019, as established
by the Committee, were based on sales growth, adjusted operating profit as a percentage of sales and trade working capital as a
percentage of sales. We selected sales growth, adjusted operating profit as a percentage of sales and trade working capital as
a percentage of sales as performance measures under the ICP because we considered them to be three fundamental operational metrics
of our business for 2019 that, when improved, would increase shareholder value.
We defined these performance measures in
the ICP as follows:
|
·
|
“Sales” means adjusted net sales reported in our earnings
release for fiscal 2019.
|
|
·
|
“Adjusted operating profit” means adjusted income from
operations as reported in our earnings release for fiscal 2019.
|
|
·
|
“Trade working capital” means (1) the aggregate of
average accounts receivable on the last day of each of the 13 months beginning with December 2018 and ending with December 2019
plus (2) the aggregate of average inventory on the last day of each of the same 13 months minus (3) the aggregate of
average accounts payable on the last day of each of the same 13 months.
|
At the beginning of fiscal 2019, as part
of our annual business planning process, the Committee established the following total year targets for sales, adjusted operating
profit as a percentage of sales and trade working capital as a percentage of sales:
Performance Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Sales ($ in millions)
|
|
$
|
3,387
|
|
|
$
|
3,560
|
|
|
$
|
3,733
|
|
Adjusted Operating Profit as % of Sales
|
|
|
11.2
|
%
|
|
|
11.8
|
%
|
|
|
12.3
|
%
|
Trade Working Capital as % of Sales
|
|
|
27.3
|
%
|
|
|
25.4
|
%
|
|
|
23.5
|
%
|
The incentive under the ICP was determined
based on performance against the targets established by the Committee as follows:
|
·
|
75% of the incentive was based on performance against the combined
total year targets for:
|
|
o
|
Adjusted operating profit as a percentage of sales
|
|
·
|
25% of the incentive was based on performance against the total year
target for working capital as a percentage of sales
|
The 75% of the incentive based on sales
growth and adjusted operating profit as a percentage of sales rewards performance where actual sales are greater than target and/or
adjusted operating profit as a percentage of sales is greater than target and reduces the bonus where actual sales are less than
target and/or adjusted operating profit as a percentage of sales is less than target.
The 25% of the incentive based on trade
working capital as a percentage of sales rewards performance where trade working capital as a percentage of sales is lower than
target and reduces the bonus where trade working capital as a percentage of sales is higher than target.
Performance under the ICP was adjusted to
exclude the impact of restructuring and related costs, purchase accounting and transaction costs, gain on businesses divested and
assets to be exited, net income from businesses divested/to be exited, executive transition costs, and gain on sale of assets.
The Committee also set the following threshold,
target and maximum payout percentages under the ICP:
Performance Measure
|
Weight
(applied
to Target
Amount)
|
Payout %
at
Threshold
|
Payout %
at
Target
|
Payout %
at
Maximum
|
Sales Growth and Adjusted Operating Profit as % of Sales
|
75%
|
25%
|
100%
|
200%
|
Trade Working Capital as % of Sales
|
25%
|
25%
|
100%
|
200%
|
As noted in the table, if the maximums were
met for sales growth, adjusted operating profit percentage and the trade working capital percentage, then the NEOs would be eligible
to receive 200% of their target amount. If only the thresholds were met for the three performance measures, then the NEOs would
be eligible to receive 25% of their target amount. If the actual results were to fall between threshold and target, or target and
maximum, then the payout percentage would be interpolated on a non-linear basis between threshold and target, or target and maximum,
respectively, such that the rate of increase is greater at levels immediately above threshold than for levels closer to target.
If the actual results were to fall below threshold, then each eligible NEO would still be eligible to receive, at the discretion
of the Committee, an annual cash incentive award equal to 25% of his target amount if the NEO met specified individual performance
targets approved by the CEO (for the NEOs other than himself). The CEO’s personal objectives are approved by the Board. If
actual results were to fall below threshold for both the trade working capital percentage and the adjusted operating profit percentage,
and the NEO were not to meet his individual goals, then the NEO would not receive any annual incentive compensation.
As described above, for 2020 the ICP will
be based on adjusted earnings per share (weighted 65%), free cash flow (weighted 25%) and sales growth (weighted 10%).
How much did the NEOs actually earn under the ICP in 2019?
As discussed above, the annual incentive
amount actually earned by each NEO for fiscal 2019 was dependent upon actual Company performance with respect to sales growth,
adjusted operating profit as a percentage of sales and trade working capital as a percentage of sales. Our actual results for 2019
were as follows:
Performance Measure
|
Weight
|
Actual Results for
Fiscal 2019
|
Actual Payout %
|
Sales Growth and Adjusted Operating Profit as % of Sales
|
75%
|
Sales of $3,185 million and Adjusted Operating Profit as % of Sales of 10.8%
|
25%*
|
Trade Working Capital as % of Sales
|
25%
|
26.4%
|
84.9%
|
Total:
|
100%
|
--
|
40%
|
*Based on achievement of individual performance
targets as described below.
The actual results for the 2019 ICP Performance
Measures were: (1) sales were $3,185 million, less than the amount required to exceed the growth threshold; (2) adjusted
operating profit as a percentage of sales was 10.8%, which was also below threshold; and (3) trade working capital as a percentage
of sales was 100 basis points above target, but 90 basis points better than threshold. Sales growth and adjusted operating profit
are consistent with any adjustments made to sales and income from operations in our earnings release for fiscal 2019.
Although actual results for sales growth
and adjusted operating profit as a percentage of sales were below the threshold levels established by the Committee, the Committee
determined that the NEOs achieved their specified individual performance targets. Therefore, consistent with the terms of their
ICP awards, the Committee exercised its discretion in awarding 25% of the target amount with respect to such performance measures
of the ICP awards.
The
NEOs’ individual performance targets related to successfully achieving individual and collective objectives around (i) operating
margins, which in some cases exceeded historical highs, (ii) deleverage rates, which were significantly improved in the face
of reductions in sales, (iii) departmental spending and budget targets, (iv) the CEO transition, (v) assisting
and enhancing the decentralization and re-segmentation of the Company’s businesses, and (vi) leading impactful continuous
and process improvement initiatives including 80/20, among others.
As a result, the NEOs who received ICP awards
for 2019 earned payouts in the following amounts:
Name
|
|
Annual Incentive
Compensation
|
|
Louis V. Pinkham(1)
|
|
$
|
314,921
|
|
Robert J. Rehard
|
|
$
|
150,000
|
|
Jonathan J. Schlemmer
|
|
$
|
228,600
|
|
Thomas E. Valentyn
|
|
$
|
102,600
|
|
John M. Avampato
|
|
$
|
78,000
|
|
|
|
|
|
|
(1) Mr. Pinkham’s award was pro rated to reflect his partial year of service.
|
Long-Term Incentives
Do you provide long-term incentives? If so, how are they
structured?
We provide long-term incentives to our NEOs
in the form of equity-based compensation. Consistent with our compensation philosophy, we believe long-term equity incentives help
to ensure that our NEOs have a continuing stake in the long-term success of our Company and allow our NEOs to earn above-median
compensation only if our shareholders experience appreciation in their equity holdings.
Other than in the case of newly hired executives,
we generally make determinations concerning long-term equity-based awards in April of each year at the same time we complete
our annual performance reviews. In any event, we grant all equity-based awards effective two days after the release of either our
quarterly or annual financial results.
What long-term incentives were provided to NEOs in 2019?
In 2019, as in 2018 the Committee
granted SARs, RSUs and PSUs. These awards were granted under our 2018 Equity Incentive Plan that was approved by our
shareholders at our 2018 annual meeting of shareholders (our “2018 Plan”). The proportion of overall long-term
incentive target value represented by each form of award granted in 2019 was 34% SARs, 33% RSUs and 33% PSUs, the same
proportions as the awards that we granted in 2018. The Committee granted SARs, RSUs and PSUs to each of our NEOs in 2019 in
the amounts indicated in the “Grants of Plan-Based Awards Table for Fiscal 2019” and the narrative following the
table. We value SARs using a Black-Scholes formula and PSUs using either a Monte Carlo methodology (in the case of PSUs using
a TSR performance metric) or grant date fair market value (in the case of PSUs using an ROIC metric). Consistent with our
overall compensation philosophy, the Committee, after consultation with Willis Towers Watson, granted long-term compensation
awards in 2019 at levels approximating the median level of these awards granted by the companies in our peer group. In
connection with his election to Chief Executive Officer, the Committee approved grants of long-term compensation awards to
Mr. Pinkham approximately 25% below the median level of similarly situated executive officers. We expect to increase
Mr. Pinkham’s long-term compensation awards to competitive market levels over the next few years. The target
long-term incentive levels set by the Committee did not affect decisions regarding other compensation elements.
Award
Type
|
|
Description
|
|
Other
|
|
Vesting Period
|
SARs
|
|
The right to receive stock in an amount equal to the appreciation in value of a share of stock over the base price per share.
|
|
The base price per share of all of the SARs is equal to the closing market price of our common stock on the date of grant so that SARs will have value only if the market price of our common stock increases after the grant date. The Committee granted SARs rather than stock options because it views SARs as less dilutive to our shareholders.
|
|
Five years (40% on the second anniversary of the grant date and 20% on each of the third, fourth and fifth anniversaries of the grant date)
|
|
|
|
|
|
|
|
RSUs
|
|
The right to have us issue a share of our common stock upon the vesting date specified in the award, if the participant is still employed by us at the time of vesting.
|
|
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 NEO to remain employed by our Company.
|
|
Three years (100% on the third anniversary of the grant date)
|
|
|
|
|
|
|
|
PSUs
|
|
The right to have us issue a share of our common stock upon achievement of the performance conditions specified in the award
|
|
The 2019 grants have a three-year performance period. Fifty percent (50%) of the PSUs will be earned or forfeited based on a performance metric of total shareholder return, or TSR, relative to our peer group over our fiscal years 2019-2021. The other fifty percent (50%) of the PSUs will be earned or forfeited based on a performance metric of return on invested capital, or ROIC.
|
|
For the PSUs using a TSR performance metric, TSR at or below the 25th percentile of the peer group will result in no PSUs being earned. For TSR at the 50th percentile of the peer group, the target number of PSUs will be earned. For TSR at the 75th percentile of the peer group, the maximum number of PSUs (which is 200% of the target PSUs) will be earned. For performance between the 50th and 75th percentile, the number of PSUs earned is interpolated between target and maximum.
For the PSUs using an ROIC performance metric, ROIC below the minimum threshold ROIC level will result in no PSUs being earned. For ROIC at the target ROIC level, the target number of PSUs will be earned. For ROIC at or above the maximum threshold level, the maximum number of PSUs (which is 200% of the target PSUs) will be earned. For ROIC between the threshold and target levels, or between the target and maximum levels, the number of PSUs earned is interpolated between threshold and target, or between target and maximum, respectively.
|
As indicated in the description above, the
PSUs granted in fiscal 2019 had two performance metrics, TSR and ROIC, which were the same metrics we used for the PSUs that we
granted in 2018. Half of the 2019 PSUs were subject to the TSR performance metric and half were subject to the ROIC metric. For
the half that were subject to the ROIC metric the threshold, target and maximum ROIC levels were 8.8%, 9.8% and 10.8%, respectively.
In 2019, the three-year performance period
for the PSUs that we granted to our NEOs in 2017 (the “2017 PSUs”) was completed. The 2017 PSUs were subject to two
performance metrics: half were subject to a relative TSR metric (the “2017 TSR PSUs”) and half were subject to an ROIC
metric (the “2017 ROIC PSUs”). For the 2017 TSR PSUs, if our TSR was at or below the 25th percentile of the peer group,
that would have resulted in none of the 2017 TSR PSUs being earned. For TSR at the 50th percentile of the peer group, the target
number of 2017 TSR PSUs would have been earned, and for TSR at the 75th percentile of the peer group, the maximum number of 2017
TSR PSUs (which was 200% of the target 2017 TSR PSUs) would have been earned. For our 2017 ROIC PSUs, the threshold, target and
maximum ROIC levels were 8.3%, 9.4% and 10.5%, respectively. ROIC below the minimum threshold level would result in no 2017 ROIC
PSUs being earned. For ROIC at the target level, the target number of 2017 ROIC PSUs would be earned. For ROIC at or above the
maximum ROIC level, the maximum number of 2017 ROIC PSUs (which is 200% of the target 2017 ROIC PSUs) would be earned. For both
the 2017 TSR PSUs and 2017 ROIC PSUs, performance between the threshold and target levels, or between the target and maximum levels,
the number of 2017 PSUs earned would be interpolated between threshold and target, or between target and maximum, respectively.
Based on our performance for the period ending in 2017, 62% of the 2017 TSR PSUs were earned, and 28% of the 2017 ROIC PSUs were
earned.
In connection with Mr. Pinkham’s
election as our Chief Executive Officer, the Committee approved an additional RSU award with a target grant date value of $1,750,000
to compensate him for forfeitures of certain incentive compensation awards upon leaving his prior employer. This additional RSU
award will vest one-third on each of the first, second and third anniversaries of the effective date of his election provided that
he remains continuously employed through the vesting date.
In connection with Mr. Gliebe’s
retirement effective June 30, 2019, the Committee approved accelerated vesting of his outstanding equity-based awards in recognition
of his significant contributions to our Company during his tenure as our Chairman and Chief Executive Officer. The performance
level used to calculate the number of PSUs that accelerated was based on actual performance through the date of his retirement.
The approximate value of all of the outstanding equity-based awards that vested on an accelerated basis, measured using the closing
share price on the date of Mr. Gliebe’s retirement, was $5,967,694.
As described above, the long-term incentives
for our NEOs for 2020 are granted in the form of 50% PSUs, 25% SARs and 25% RSUs. The RSUs granted in 2020 will vest ratably over
the first three anniversaries of the grant date, and the SARs granted in 2020 will vest ratably over the first three anniversaries
of the grant date.
Other Benefits and Perquisites
Do you provide any other benefits or perquisites to your
NEOs?
We have certain other plans that provide,
or may provide, compensation and benefits to our NEOs. The Committee considers all of these plans and benefits when reviewing total
compensation of our NEOs. These plans include the following:
Plan or
Benefit
|
|
Description
|
|
Other
|
|
401(k)
|
|
Participants are eligible to contribute a portion of their compensation on a pre-tax basis, up to the limits imposed by the Internal Revenue Service and we make a matching contribution equal to 100% of the first 1% and 50% of the next 5% of base salary contributed by the employees into their 401(k) accounts.
|
|
|
|
|
|
|
|
|
|
Target SRP
|
|
A supplemental defined benefit pension benefit plan that provides a competitive retirement package by extending retirement benefits without regard to statutory limitations under tax-qualified plans.
|
|
In 2017, the Committee decided to close the Target SRP to new participants and replaced the Target SRP with the SDCRP for individuals who became eligible after December 31, 2016. Messrs. Gliebe, Schlemmer and Avampato are our only NEOs that participate in the Target SRP.
|
|
|
|
|
|
|
|
SDCRP
|
|
A supplemental defined contribution plan that provides a competitive retirement package through annual contributions to eligible participants’ accounts.
|
|
In 2019, Messrs. Gliebe, Schlemmer and Avampato were our only NEOs who did not participate in the SDCRP.
|
|
|
|
|
|
|
|
Disability Benefits
|
|
Provides short-term disability benefit in the form of up to six months of base salary replacement.
Provides long-term
disability benefit of 60% of base salary.
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
We provide our NEOs with Company-paid term life insurance.
|
|
The premiums paid for each of our NEOs for this life insurance in 2019 are included below in the “Summary Compensation Table for Fiscal Years 2017-2019” in the column entitled “All Other Compensation.” We do not provide a tax gross up in connection with this benefit.
|
|
Perquisites
|
|
Each of the NEOs had use of a company car for business and personal travel. We also pay for annual medical physicals for our NEOs. In 2019, we also reimbursed Mr. Pinkham for relocation expenses and legal fees relating to the preparation of his employment agreement.
|
|
|
|
In connection with Mr. Pinkham’s
election as our Chief Executive Officer in 2019, the Committee approved a cash signing bonus equal to $133,000 to compensate him
for forfeitures of certain incentive compensation awards upon leaving his prior employer. This signing bonus is subject to a pro-rata
repayment obligation if, within two years of his start date, Mr. Pinkham resigns without “good reason” or is terminated
by the Company for “cause” (as those terms are defined in his employment agreement).
Executive 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 NEOs. 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 the following levels of ownership:
Position
|
|
Ownership Required as
Multiple of Base Salary
|
|
Chief Executive Officer
|
|
5x
|
|
Chief Financial Officer and Chief Operating Officer(1)
|
|
3x
|
|
Other Executive Officers
|
|
1x
|
|
|
(1)
|
As previously disclosed, effective with the retirement of Mr. Schlemmer and consistent with a reorganization of our leadership
team, we eliminated the Chief Operating Officer position effective January 31, 2020.
|
Each of our NEOs are in compliance with
this policy either because they own the target value of stock or because they have not sold shares.
Policy Against Hedging and Pledging Transactions
We have adopted a policy prohibiting our
employees, including our NEOs, and our directors from trading in puts, calls and other derivative securities relating to our common
stock. The prohibition includes the purchase of any financial instruments (including prepaid variable forward contracts, equity
swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our common stock, whether
or not such instruments are classified as derivative securities. We also prohibit our employees, including our NEOs, and directors
from pledging shares of our common stock that he or she owns as collateral to secure personal
loans or other obligations under our Insider Trading Policy.
Employment Agreements and Severance and Change in Control
Benefits
As previously disclosed, in fiscal 2019,
in connection with the election of Mr. Pinkham to succeed Mr. Gliebe as our Chief Executive Officer effective April 1,
2019, we entered into an employment agreement with him that provides for severance benefits upon certain terminations of employment.
The terms of Mr. Pinkham’s employment agreement are described below under the heading “Potential Payments Upon
Termination or Change in Control – Employment Agreement.” In addition, we have entered into change in control and termination
agreements with Messrs. Pinkham, Rehard, Schlemmer, Valentyn and Avampato.
As previously disclosed, in connection with
the announcement of Mr. Gliebe’s retirement in fiscal 2018, we entered into a retirement agreement with him. Mr. Gliebe’s
retirement agreement is described below under the heading “Potential Payments Upon Termination or Change in Control –
Retirement Agreements.”
As previously disclosed, in connection with
the announcement of Mr. Schlemmer’s retirement in fiscal 2020, we entered into a retirement agreement with him. Mr. Schlemmer’s
retirement agreement is described below under the heading “Potential Payments Upon Termination or Change in Control –
Retirement Agreements.”
Other than the employment agreement with
Mr. Pinkham, the retirement agreement with Mr. Gliebe, and the retirement agreement with Mr. Schlemmer we had no
employment agreements with any of our NEOs that provided benefits prior to a change in control of our Company. The Committee believes
the employment agreement with Mr. Pinkham, the retirement agreement with Mr. Gliebe, the retirement agreement with Mr. Schlemmer,
and the change in control and termination benefits 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 and contain terms that are similar
to those offered to executives of comparable companies.
The purpose of the employment agreement
with Mr. Pinkham is to provide clarity concerning the terms and conditions of Mr. Pinkham’s employment as our Chief
Executive Officer and the benefits he would receive upon certain terminations of employment, and to ensure that Mr. Pinkham
will be subject to our confidentiality and restrictive covenant agreements.
The purpose of the retirement agreement
with Mr. Gliebe was to ensure an orderly and successful transition and provide an appropriate retention incentive for Mr. Gliebe
to continue to lead our company until his successor was appointed.
The purpose of the retirement agreement
with Mr. Schlemmer is to ensure an orderly and successful transition of his duties and provide an appropriate retention incentive
for Mr. Schlemmer to continue to serve as our Chief Operating Officer until his retirement.
The purpose of the change in control and
termination benefits under the change in control and termination agreements and our equity incentive plans is to focus our NEOs
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.
All of our change in control agreements
contain “double trigger” provisions, which means that, for an NEO 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 NEO’s employment. The
Committee selected the triggering events for change in control and termination benefits to our NEOs based on its judgment that
these events were likely to result in the job security distractions and retention concerns described earlier in this paragraph.
Other than the employment agreement with
Mr. Pinkham and the change in control and termination agreements described above, we have no formal severance program in place
for our NEOs.
The Committee has adopted a policy eliminating
tax gross-ups from all new change in control and termination agreements that we enter into with our NEOs. This policy was applied
to the change in control and termination agreements entered into with Messrs. Pinkham, Rehard, Schlemmer, Valentyn and Avampato,
which contain no tax gross-ups.
Tax Considerations
Code Section 162(m) generally
disallows a tax deduction to public corporations for compensation in excess of $1 million paid for any fiscal year to covered
employees, generally including our NEOs. Because many different factors influence a well-rounded, comprehensive and competitive
executive compensation program, we reserve the right to award compensation to our NEOs in excess of $1 million regardless of the
potential loss of tax deductibility if the Committee believes such compensation is suitable to continue to provide competitive
arrangements intended to attract and retain, and provide appropriate incentives to, our NEOs.
EXECUTIVE
COMPENSATION
Summary Compensation Table
The following table sets forth for each
of our NEOs: (1) the dollar value of base salary and annual cash incentive earned during the years indicated; (2) the
full grant date fair value of RSUs, SARs and PSUs granted during the years indicated, computed in accordance with Financial Accounting
Standards Board Accounting Standards Codification (ASC) Topic 718; (3) the dollar value of earnings for services pursuant
to awards granted during the indicated year under non-equity incentive plans; (4) the change in pension value and non-qualified
deferred compensation earnings during the years indicated; (5) all other compensation for the years indicated; and (6) the
dollar value of total compensation for the years indicated. Our NEOs are our Chief Executive Officer, our former Chairman and Chief
Executive Officer, our Vice President, Chief Financial Officer, and each of our three other most highly compensated executive officers
as of December 28, 2019, the last day of our most recent fiscal year. In accordance with the rules of the SEC, the table
includes information for the fiscal years ended December 30, 2017, December 29, 2018 and December 28, 2019.
SUMMARY COMPENSATION TABLE for
Fiscal YEARs 2017-2019
Name and Principal
Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)(2)
|
|
|
Stock
Awards
($)(3)
|
|
|
Option
Awards
($)(4)
|
|
|
Non-
Equity
Incentive
Plan
Compens
ation
($)
|
|
|
Change in
Pension
Value and
Non-
qualified
Deferred
Compensat
ion
Earnings
($)(5)
|
|
|
All Other
Compens
ation
($)(6)
|
|
|
Total
($)
|
|
Louis V. Pinkham Chief Executive Officer(7)
|
|
|
2019
|
|
|
|
712,500
|
|
|
|
133,000
|
|
|
|
3,777,439
|
|
|
|
1,104,954
|
|
|
|
314,921
|
|
|
|
0
|
|
|
|
347,401
|
|
|
|
6,390,215
|
|
Mark J. Gliebe
|
|
|
2019
|
|
|
|
350,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,701,868
|
|
|
|
15,114
|
|
|
|
2,066,982
|
|
Fmr. Chairman and Chief
|
|
|
2018
|
|
|
|
995,000
|
|
|
|
0
|
|
|
|
2,876,286
|
|
|
|
1,506,712
|
|
|
|
1,200,000
|
|
|
|
424,673
|
|
|
|
81,933
|
|
|
|
7,084,604
|
|
Executive Officer(8)
|
|
|
2017
|
|
|
|
973,750
|
|
|
|
0
|
|
|
|
2,905,640
|
|
|
|
1,496,003
|
|
|
|
1,147,776
|
|
|
|
1,310,920
|
|
|
|
32,339
|
|
|
|
7,866,428
|
|
Robert J. Rehard
|
|
|
2019
|
|
|
|
462,500
|
|
|
|
0
|
|
|
|
574,673
|
|
|
|
305,803
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
80,079
|
|
|
|
1,573,055
|
|
Vice President,
|
|
|
2018
|
|
|
|
350,000
|
|
|
|
0
|
|
|
|
321,474
|
|
|
|
167,665
|
|
|
|
175,000
|
|
|
|
0
|
|
|
|
54,211
|
|
|
|
1,068,350
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan J. Schlemmer
|
|
|
2019
|
|
|
|
630,000
|
|
|
|
0
|
|
|
|
1,309,114
|
|
|
|
441,773
|
|
|
|
228,600
|
|
|
|
657,041
|
|
|
|
27,945
|
|
|
|
3,294,473
|
|
Fmr. Chief Operating Officer(9)
|
|
|
2018
|
|
|
|
612,500
|
|
|
|
0
|
|
|
|
786,566
|
|
|
|
412,058
|
|
|
|
553,500
|
|
|
|
268,075
|
|
|
|
23,802
|
|
|
|
2,656,501
|
|
|
|
|
2017
|
|
|
|
601,250
|
|
|
|
0
|
|
|
|
811,734
|
|
|
|
418,438
|
|
|
|
501,908
|
|
|
|
406,101
|
|
|
|
18,776
|
|
|
|
2,758,207
|
|
Thomas E. Valentyn
|
|
|
2019
|
|
|
|
424,375
|
|
|
|
0
|
|
|
|
382,463
|
|
|
|
204,216
|
|
|
|
102,600
|
|
|
|
0
|
|
|
|
72,560
|
|
|
|
1,186,214
|
|
Vice President, General
|
|
|
2018
|
|
|
|
405,000
|
|
|
|
0
|
|
|
|
384,653
|
|
|
|
200,630
|
|
|
|
249,000
|
|
|
|
0
|
|
|
|
71,323
|
|
|
|
1,310,606
|
|
Counsel and Secretary
|
|
|
2017
|
|
|
|
356,250
|
|
|
|
0
|
|
|
|
331,209
|
|
|
|
170,173
|
|
|
|
219,600
|
|
|
|
0
|
|
|
|
79,318
|
|
|
|
1,156,550
|
|
John M. Avampato
|
|
|
2019
|
|
|
|
387,500
|
|
|
|
0
|
|
|
|
216,872
|
|
|
|
115,653
|
|
|
|
78,000
|
|
|
|
292,929
|
|
|
|
26,133
|
|
|
|
1,117,087
|
|
Vice President, Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The salary amounts shown in the table reflect amounts actually earned during the year, rather than the annual base salary rates in effect any point in time.
|
|
|
(2)
|
The bonus amount reflects a signing bonus granted to Mr. Pinkham in connection with his election as Chief Executive Officer.
|
|
|
(3)
|
These amounts reflect the full grant date fair value of the RSU awards and PSU awards granted during the indicated fiscal year, computed in accordance with ASC Topic 718, Compensation-Stock Compensation. In the case of PSUs, the amounts shown are based on the probable outcome of performance conditions, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under ASC Topic 718 as follows: Mr. Pinkham – $1,050,075; Mr. Gliebe — $0; Mr. Rehard -- $290,690; Mr. Schlemmer --$419,015; Mr. Valentyn -- $192,488; and Mr. Avampato -- $109,154. The values of the PSUs at the grant date if the highest level of performance conditions were to be achieved would be as follows: Mr. Pinkham – $2,008,436; Mr. Gliebe — $0; Mr. Rehard -- $556,308; Mr. Schlemmer – $801,738; Mr. Valentyn – $368,145; and Mr. Avampato – $208,616. 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 2019, 2018 and 2017 are included under the caption “Shareholders’ Equity” in Note 10 of the Notes to Consolidated Financial Statements in the 2019, 2018 and 2017 Annual Reports on Form 10-K, and such information is incorporated herein by reference.
|
|
|
(4)
|
These amounts reflect the full grant date fair value of all option awards granted during the indicated fiscal year, computed in accordance with ASC Topic 718. 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 2019, 2018 and 2017 are included under the caption “Shareholders’ Equity” in Note 10 of the Notes to Consolidated Financial Statements in the 2019, 2018 and 2017 Annual Reports on Form 10-K, and such information is incorporated herein by reference.
|
|
|
(5)
|
The values shown are not current cash benefits, but rather actuarial calculations of the change in the accumulated benefit obligations under the Target SRP. Mr. Gliebe had 38 years of credited service with our Company under the Target SRP. We do not pay above market earnings under the SDCRP, and as such, no accumulated benefits under such plan are included in this table, consistent with SEC rules.
|
|
|
(6)
|
The amounts shown include payments for personal benefits and for the other items identified in the following sentences. We provide a modest level of personal benefits to NEOs. These personal benefits in 2019 included use of a company car and spousal travel on the corporate aircraft in connection with business travel by the NEO and, for Mr. Pinkham, $ 179,941 in reimbursement to cover the cost of his expenses relating to his relocation and $23,438 in reimbursement to cover the cost of his legal fees relating to the preparation of his employment agreement. Other items included in this column for 2019 included the payment of life insurance premiums, the cost of annual executive physicals and Company contributions to the NEOs’ 401(k) plan accounts and, for Messrs. Pinkham, Rehard and Valentyn, our contributions to their SDCRP accounts.
|
|
|
(7)
|
Mr. Pinkham was appointed Chief Executive Officer effective April 1, 2019.
|
|
|
(8)
|
Mr. Gliebe resigned from the role of Chief Executive Officer effective March 31, 2019 and retired from our Company effective June 30, 2019.
|
|
|
(9)
|
Mr. Schlemmer retired from our Company effective January 31, 2020.
|
Grants of Plan-Based Awards
The following table sets forth information
regarding all incentive plan awards that the Committee made to our NEOs during fiscal 2019, including incentive plan awards (equity-based
and non-equity based) and other plan-based awards. Disclosure on a separate line item is provided for each grant of an award made
to a NEO during the year. The information supplements the dollar value disclosure of stock, option and non-stock awards in the
Summary Compensation Table by providing additional details about these awards. Non-equity incentive plan awards are awards that
are not subject to ASC Topic 718 and are intended to serve as an incentive for performance to occur over a specified period.
GRANTS OF PLAN-BASED AWARDS TABLE for
Fiscal 2019
|
|
|
|
|
|
|
|
Estimated
Future Payouts Under Non-
Equity Incentive Plan Awards (1)
|
|
|
Estimated
Future Payouts Under
Equity Incentive Plan Awards (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
GrantDate
|
|
|
Date
of
Committee
Action
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
All
Other Stock
Awards:
Number of
Shares of Stock
or Units (#)(3)
|
|
|
All
Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
|
|
Exercise
or
Base Price of
Option
Awards
($/Sh)
|
|
|
Grant
Date Fair
Value of Stock
and Option Awards ($)
|
|
Louis V. Pinkham
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
12,275
|
|
|
|
24,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050,075
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,100
|
|
|
|
|
|
|
|
|
|
|
|
1,026,254
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,025
|
|
|
|
81.81
|
|
|
|
1,104,954
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
1,045,000
|
|
|
|
2,090,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2019
|
|
|
|
3/11/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,911
|
|
|
|
|
|
|
|
|
|
|
|
1,701,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark J. Gliebe
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Rehard
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
3,400
|
|
|
|
6,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290,690
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,625
|
|
|
|
|
|
|
|
|
|
|
|
283,983
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,675
|
|
|
|
81.81
|
|
|
|
305,803
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
375,000
|
|
|
|
750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan J. Schlemmer
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
4,900
|
|
|
|
9,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419,015
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,362
|
|
|
|
|
|
|
|
|
|
|
|
890,099
|
|
|
|
|
5/8/2019
|
|
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,200
|
|
|
|
81.81
|
|
|
|
441,773
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
571,500
|
|
|
|
1,143,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards (1)
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Date of
Committee
Action
|
|
Threshold
($)
|
|
|
Target($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
All Other Stock
Awards:
Number of
Shares of Stock
or Units (#)(3)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
|
|
Exercise or
Base Price of
Option
Awards
($/Sh)
|
|
|
Grant Date Fair
Value of Stock and
Option Awards ($)
|
|
Thomas E. Valentyn
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
2,250
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192,488
|
|
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
189,975
|
|
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,800
|
|
|
|
81.81
|
|
|
|
204,216
|
|
|
|
|
|
|
|
|
0
|
|
|
|
256,500
|
|
|
|
513,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Avampato
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
1,275
|
|
|
|
2,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,154
|
|
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375
|
|
|
|
|
|
|
|
|
|
|
|
107,718
|
|
|
|
5/8/2019
|
|
4/29/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,550
|
|
|
|
81.81
|
|
|
|
115,653
|
|
|
|
|
|
|
|
|
0
|
|
|
|
195,000
|
|
|
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These columns reflect the estimated future payouts at the time these awards were granted under the ICP, based on the base salaries
that become effective on April 1, 2019. The amounts earned under these awards based on performance during fiscal year 2019
are shown in the “Non-Equity Incentive Compensation” column for fiscal year 2019 in the Summary Compensation Table.
|
|
(2)
|
These columns show the range of potential payouts for the PSUs that we described in the section titled “The Elements
of Total Compensation – Long-Term Incentives” in the Compensation Discussion and Analysis. The number of PSUs that
are earned, if any, will be based on performance for fiscal years 2019 to 2021 and will be determined after the end of fiscal year
2021.
|
|
(3)
|
The amounts shown in this column reflect the number of RSUs we granted to each NEO pursuant to our 2018 Plan.
|
Equity Incentive Plan Awards
As reflected in the tables above, the Committee
granted equity-based awards to our NEOs in 2019. The Committee granted these awards under our 2018 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.
Effective May 2019, the Committee awarded
the RSUs with an effective grant date of May 8, 2019 indicated in the table above under our 2018 Plan. Pursuant to its practice
of granting equity-based awards only during an “open window” period following the release of our quarterly or annual
financial results, the Committee awarded these RSUs with an effective grant date at the beginning of the first open window period
following the Committee’s action. These RSUs had a grant date fair value determined pursuant to ASC Topic 718. All of these
RSUs remain subject to forfeiture for three years following the date of grant. The Committee also awarded the RSUs with an effective
grant date of April 1, 2019 indicated in the table above under our 2018 Plan to Mr. Pinkham in connection with his election
as our Chief Executive Officer. These RSUs had a grant date fair value determined pursuant to ASC Topic 718. These RSUs will vest
one-third on each of the first, second and third anniversaries of the date of grant.
The Committee also granted the SARs shown
in the table above under our 2018 Plan at a per share base price of $81.81. Pursuant to its practice of granting equity-based awards
only during an “open window” period following the release of our quarterly or annual financial results, the Committee
awarded these SARs with an effective grant date of May 8, 2019, which was the beginning of the first open window period following
the Committee’s action. The base price of the SARs equals the closing market price of a share of our common stock on the
date of grant. The SARs vest and become exercisable over a five-year period, with 40% vesting on the second anniversary of the
grant date and 20% vesting on each of the third, fourth and fifth anniversaries of the grant date. The SARs will expire on May 8,
2029.
The Committee also granted the PSUs shown
in the table above under our 2018 Plan. The Committee approved the performance goals and maximum potential values for the awards
in early 2019, and determined the final terms for the grants in April 2019. The PSUs have a three-year performance period,
from fiscal year 2019 to fiscal year 2021, and will be earned or forfeited based on performance metrics of total shareholder return
relative to our peer group and return on invested capital.
Awards under our 2018 Plan and any rights
under such awards are generally not assignable, alienable, saleable or transferable by participants.
Incentive Compensation Plan Cash Awards
As reflected in the non-equity incentive
columns of the tables above, our NEOs participated in the ICP, which is designed to promote the maximization of shareholder value
over the long term, during fiscal 2019. The ICP provides annual cash incentive opportunities to our NEOs if the Company meets
or exceeds certain financial target metrics during the fiscal year. Company performance above target earns an annual cash incentive
more than the target annual cash incentive while Company performance below target earns an annual cash incentive less than the
target annual cash incentive. Under the ICP, the annual cash incentives earned up to 100% of the target amount are fully paid
in cash following the end of that year.
Annual cash incentive amounts earned
above 100% of the target amount 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 NEO’s employment with us has not
been voluntarily terminated (other than upon retirement) or terminated for cause. We do not credit participants with interest
on amounts subject to payment in installments.
Supplemental Retirement Plans
The column entitled “Change in Pension
Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table includes amounts attributable to
the change in the actuarial present value of the respective accumulated benefits under the Target SRP for each of the NEOs.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information
on outstanding stock options, SARs and other equity-based awards held by our NEOs on December 28, 2019, including the number
of shares underlying both exercisable and unexercisable portions of each stock option and SAR as well as the exercise or grant
price and expiration date of each outstanding option and SAR.
Outstanding
Equity Awards at Fiscal 2019 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
($)(3)
|
|
|
Equity
Incentive
Plan
Awards;
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(2)
|
|
|
Equity
Incentive
Plan
Awards;
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(3)
|
|
Louis V. Pinkham(4)
|
|
|
0
|
|
|
|
53,025
|
(5)
|
|
|
81.81
|
|
|
|
5/8/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,011
|
|
|
|
2,905,220
|
|
|
|
24,550
|
|
|
|
2,097,061
|
|
Mark J. Gliebe
|
|
|
0
|
|
|
|
0
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Robert J. Rehard
|
|
|
1,640
|
|
|
|
410
|
(6)
|
|
|
78.15
|
|
|
|
5/12/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,899
|
|
|
|
1,266
|
(7)
|
|
|
57.43
|
|
|
|
5/11/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
826
|
|
|
|
1,239
|
(8)
|
|
|
80.70
|
|
|
|
5/10/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
7,375
|
(9)
|
|
|
77.60
|
|
|
|
5/9/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
14,675
|
(10)
|
|
|
81.81
|
|
|
|
5/8/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,329
|
(11)
|
|
|
540,623
|
|
|
|
10,700
|
|
|
|
913,994
|
|
Jonathan J. Schlemmer (12)
|
|
|
16,200
|
|
|
|
0
|
|
|
|
64.99
|
|
|
|
5/2/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,800
|
|
|
|
0
|
|
|
|
75.76
|
|
|
|
5/7/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,140
|
|
|
|
3,535
|
(13)
|
|
|
78.15
|
|
|
|
5/12/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,500
|
|
|
|
11,000
|
(14)
|
|
|
57.43
|
|
|
|
5/11/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,180
|
|
|
|
10,770
|
(15)
|
|
|
80.70
|
|
|
|
5/10/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
18,125
|
(16)
|
|
|
77.60
|
|
|
|
5/9/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
21,200
|
(17)
|
|
|
81.81
|
|
|
|
5/8/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,612
|
(18)
|
|
|
1,846,097
|
|
|
|
19,300
|
|
|
|
1,648,606
|
|
Thomas E. Valentyn
|
|
|
5,370
|
|
|
|
3,580
|
(19)
|
|
|
57.43
|
|
|
|
5,11
|
/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,920
|
|
|
|
4,380
|
(20)
|
|
|
80.70
|
|
|
|
5/10/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
8,825
|
(21)
|
|
|
77.60
|
|
|
|
5/9/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
9,800
|
(22)
|
|
|
81.81
|
|
|
|
5/8/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,025
|
(23)
|
|
|
600,076
|
|
|
|
9,150
|
|
|
|
781,593
|
|
John M. Avampato
|
|
|
6,000
|
|
|
|
0
|
|
|
|
72.29
|
|
|
|
5/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500
|
|
|
|
0
|
|
|
|
63.56
|
|
|
|
5/3/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,875
|
|
|
|
0
|
|
|
|
64.99
|
|
|
|
5/2/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600
|
|
|
|
0
|
|
|
|
75.76
|
|
|
|
5/7/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,600
|
|
|
|
900
|
(24)
|
|
|
78.15
|
|
|
|
5/12/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,095
|
|
|
|
2,730
|
(25)
|
|
|
57.43
|
|
|
|
5/11/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,780
|
|
|
|
2,670
|
(26)
|
|
|
80.70
|
|
|
|
5/10/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
4,700
|
(27)
|
|
|
77.60
|
|
|
|
5/9/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,550
|
(28)
|
|
|
81.81
|
|
|
|
5/8/2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,975
|
(29)
|
|
|
339,545
|
|
|
|
5,000
|
|
|
|
427,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Exercisable stock options are vested. Unexercisable stock options vest as noted.
|
|
(2)
|
RSUs vest as noted. PSUs are shown in the table at their maximum levels. For the PSUs granted in fiscal year 2018, performance
through the end of fiscal year 2019 was below the target level, but it is possible that an amount above the target could be earned
in the performance period. For the PSUs granted in fiscal year 2019, performance through the end of fiscal year 2019 was below
the target level. As of the last day of fiscal year 2019, PSUs were eligible to be earned as follows: For Mr. Pinkham: 24,550
units were eligible to be earned based on performance through the end of fiscal year 2021. For Mr. Rehard: 3,900 units were
eligible to be earned based on performance through the end of fiscal year 2020 and 6,800 units were eligible to be earned based
on performance through the end of fiscal year 2021. For Mr. Schlemmer: 9,500 units were eligible to be earned based on
performance through the end of fiscal year 2020 and 9,800 units were eligible to be earned based on performance through the end
of fiscal year 2021. For Mr. Valentyn: 4,650 units were eligible to be earned based on performance through the end of
fiscal year 2020 and 4,500 units were eligible to be earned based on performance through the end of fiscal year 2021. For Mr. Avampato:
2,450 units were eligible to be earned based on performance through the end of fiscal year 2020 and 2,550 units were eligible to
be earned based on performance through the end of fiscal year 2021.
|
|
(3)
|
Based on $85.42 per share closing price of our common stock on the New York Stock Exchange on the last trading day of our fiscal
year 2019.
|
|
(4)
|
The vesting of Mr. Pinkham’s equity-based awards shown in this table is subject to the provisions of his employment
agreement, which is described under the heading “Potential Payments on a Termination or Change in Control—Employment
Agreement.”
|
|
(5)
|
These SARs vest with respect to 21,210 shares on 5/8/2021 and 10,605 shares on each of 5/8/2022, 5/8/2023 and 5/8/2024.
|
|
(6)
|
These SARs vest with respect to 410 shares on 5/12/2020.
|
|
(7)
|
These SARs vest with respect to 633 shares on each of 5/11/2020 and 5/11/2021.
|
|
(8)
|
These SARs vest with respect to 413 shares on each of 5/10/2020, 5/10/2021 and 5/10/2022.
|
|
(9)
|
These SARs vest with respect to 2,950 shares on 5/9/2020 and 1,475 shares on each of 5/9/2021, 5/9/2022 and 5/9/2023.
|
|
(10)
|
These SARs vest with respect to 5,870 shares on 5/8/2021 and 2,935 shares on each of 5/8/2022, 5/8/2023 and 5/8/2024.
|
|
(11)
|
579 shares vest on 5/10/2020; 2,125 shares vest on 5/9/2021; and 3,625 shares vest on 5/8/2022.
|
|
(12)
|
As described below under the heading “Potential Payments Upon Termination or Change in Control – Retirement Agreements,”
in connection with Mr. Schlemmer’s retirement on January 31, 2020, he received a cash payment equal to 2/3rds of
the acceleration value of his outstanding and unvested equity-based awards.
|
|
(13)
|
These SARs vest with respect to 3,535 shares on 5/12/2020.
|
|
(14)
|
These SARs vest with respect to 5,500 shares on each of 5/11/2020 and 5/11/2021.
|
|
(15)
|
These SARs vest with respect to 3,590shares on each of 5/10/2020, 5/10/2021 and 5/10/2022.
|
|
(16)
|
These SARs vest with respect to 7,250 shares on 5/9/2020 and 3,625 shares on each of 5/9/2021, 5/9/2022 and 5/9/2023.
|
|
(17)
|
These SARs vest with respect to 8,480 shares on 5/8/2021 and 4,240 shares on each of 5/8/2022, 5/8/2023 and 5/8/2024.
|
|
(18)
|
5,025shares vest on 5/10/2020; 5,225 shares vest on 5/9/2021; and 11,362 shares vest on 5/8/2022.
|
|
(19)
|
These SARs vest with respect to 1,790 shares on each of 5/11/2020 and 5/11/2021.
|
|
(20)
|
These SARs vest with respect to 1,460 shares on shares on each of 5/10/2020, 5/10/2021 and 5/10/2022.
|
|
(21)
|
These SARs vest with respect to 3,530 shares on 5/9/2020 and 1,765 shares on each of 5/9/2021, 5/9/2022 and 5/9/2023.
|
|
(22)
|
These SARs vest with respect to 3,920 shares on 5/8/2021 and 1,960 shares on each of 5/8/2022, 5/8/2023 and 5/8/2024.
|
|
(23)
|
2,050 shares vest on 5/10/2020; 2,550 shares vest on 5/9/2021; and 2,425 shares vest on 5/8/2022.
|
|
(24)
|
These SARs vest with respect to 900 shares on 5/12/2020.
|
|
(25)
|
These SARs vest with respect to 1,365 shares on each of 5/11/2020 and 5/11/2021.
|
|
(26)
|
These SARs vest with respect to 890 shares on each of 5/10/2020, 5/10/2021 and 5/10/2022.
|
|
(27)
|
These SARs vest with respect to 1,880 shares on 5/9/2020 and 940 shares on each of 5/9/2021, 5/9/2022 and 5/9/2023.
|
|
(28)
|
These SARs vest with respect to 2,220 shares on 5/8/2021 and 1,110 shares on each of 5/8/2022, 5/8/2023 and 5/8/2024).
|
|
(29)
|
1,250 shares vest on 5/10/2020; 1,350 shares vest on 5/9/2021; and 1,375 shares vest on 5/8/2022.
|
Option Exercises and Stock Vested
The following table sets forth information
relating to the number of stock options and SARs exercised and the stock awards that vested during the last fiscal year for each
of our NEOs on an aggregate basis.
OPTION EXERCISES AND STOCK VESTED for
Fiscal 2019
|
|
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
($)
|
|
Louis V. Pinkham
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Mark J. Gliebe
|
|
|
620,200
|
|
|
|
7,088,776
|
|
|
|
99,005
|
|
|
|
8,032,112
|
|
Robert J. Rehard
|
|
|
0
|
|
|
|
0
|
|
|
|
1,353
|
|
|
|
108,700
|
|
Jonathan J. Schlemmer
|
|
|
48,500
|
|
|
|
799,125
|
|
|
|
11,752
|
|
|
|
944,156
|
|
Thomas E. Valentyn
|
|
|
0
|
|
|
|
0
|
|
|
|
3,825
|
|
|
|
307,301
|
|
John M. Avampato
|
|
|
12,000
|
|
|
|
339,660
|
|
|
|
2,915
|
|
|
|
234,191
|
|
Retirement Benefits
Pension Benefits
The following table sets forth the actuarial
present value of the accumulated benefit under each non-tax-qualified defined benefit plan for Messrs. Gliebe, Schlemmer and
Avampato, assuming benefits are paid at normal retirement age based on current levels of compensation. Messrs. Pinkham, Rehard
and Valentyn do not participate in any non-tax-qualified defined benefit plan. The valuation method and all material assumptions
applied in quantifying the present value of the current accumulated benefit for each of our NEOs included in the table below are
included under the caption “Retirement and Post-Retirement Plans” in Note 8 of the Notes to Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended December 28, 2019 and such information is incorporated
herein by reference. The table also shows the number of years of credited service under each such plan, computed as of the same
pension plan measurement date used in our audited financial statements for the year ended December 28, 2019. The table also
reports any pension benefits paid to each NEO during the year.
PENSION
BENEFITS for Fiscal 2019
Name
|
|
Plan name
|
|
Number of
Years Credited
Service (#)
|
|
|
Present Value
of Accumulated
Benefit ($)
|
|
|
Payments
During Last
Fiscal Year ($)
|
|
Mark J. Gliebe
|
|
Target SRP (non-qualified)
|
|
|
37.25
|
|
|
|
13,324,699 (1)
|
|
|
|
922,306
|
|
Jonathan J. Schlemmer
|
|
Target SRP (non-qualified)
|
|
|
11
|
|
|
|
2,487,494
|
|
|
|
0
|
|
John M. Avampato
|
|
Target SRP (non-qualified)
|
|
|
14
|
|
|
|
1,431,760
|
|
|
|
0
|
|
|
(1)
|
In addition to the 14.25 years that Mr. Gliebe was employed by us, he was credited under the Target SRP 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 SRP, 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 SRP
Each of Messrs. Gliebe, Schlemmer and
Avampato participate in the Target SRP. The Target SRP limits participants to officers and other key employees selected by the
Committee who were eligible as of December 31, 2016, the date that the Target SRP was closed to new entrants. The purpose
of the Target SRP is to provide replacement income for NEOs 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 Target SRP 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 Target SRP, participants are entitled, upon 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 (including any base salary that the participant
waived) and target annual cash incentives, including annual cash incentives pursuant to the ICP or former SVA Cash Incentive 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), less the participant’s Social Security retirement benefit. For Mr. Gliebe, the monthly
pension benefit payable under the Target SRP is reduced by the amount payable to Mr. Gliebe under his previous employer’s
retirement plan. For Mr. Schlemmer, the monthly pension benefit payable under the Target SRP is reduced by the amount payable
to Mr. Schlemmer under the Management Supplemental Retirement Plan (discussed below).
To be eligible to receive benefits under
the Target SRP upon termination, a participant must have been eligible to participate in the plan as of December 31, 2016,
and either have a minimum of 10 years of continuous service and reached the age of at least 58 or have reached the age of 65. The
Committee has discretion to grant additional years of service and/or revise the retirement age requirement for a participant to
qualify for benefits. Mr. Avampato is currently eligible to receive benefits under the Target SRP because he has at least
10 years of continuous service and has reached the age of at least 58.
Management Supplemental Retirement Plan
Prior to April 10, 2012, Mr. Schlemmer
did not participate in the Target SRP. Instead, he participated in a plan that was designed to provide a supplemental retirement
income benefit for certain employees who were disadvantaged by the freezing of the Marathon Electric Salaried Employees’
Pension Plan at the end of 2008 (the “Management Plan”). The Management Plan supplemented retirement income which was
lost as a result of the
freezing of the Marathon Electric Salaried Employees’
Pension Plan. Under that plan, eligible participants are entitled to receive a target supplemental retirement benefit that is equal
to a specified percent (0.6743% in the case of Mr. Schlemmer) of the participant’s final average annual earnings, which
is the average of the participant’s annual base salary during the final five years of service with our Company, multiplied
by the participant’s years of service with our Company on and after January 1, 2009 (up to a maximum of 30 years).
A participant may be eligible to receive
benefits under the Management Plan upon the earliest to occur of (i) completion of a minimum of 7 years of vesting service,
(ii) completion of a minimum of 10 years of vesting service and having reached the age of at least 58, (iii) having reached
the age of 65, or (iv) becoming disabled. Certain participants, including Mr. Schlemmer, receive credit for years of
vesting service completed with our Company and with their previous employer, General Electric Company. The Committee has discretion
to grant additional years of vesting service and/or revise the retirement age requirement for a participant to qualify for benefits,
which discretion has never been exercised.
On April 10, 2012, the Committee approved
the participation by Mr. Schlemmer in the Target SRP. To reflect his earlier participation in the Management Plan, the monthly
pension benefit payable to Mr. Schlemmer under the Target SRP will be reduced by the amount payable to him under the Management
Plan. This reduction is reflected in the terms of the Participation Agreement that Mr. Schlemmer executed in connection with
his participation in the Target SRP.
Nonqualified Defined Contribution Retirement Benefits
The table below sets forth information regarding
benefits Messrs. Pinkham, Rehard and Valentyn have earned under our SDCRP. The SDCRP replaced the Target SRP for officers
who become eligible to receive supplemental retirement benefits after December 31, 2016. Messrs. Pinkham, Rehard and
Valentyn are the only NEOs who are currently eligible to participate in the SDCRP. Under the terms of the SDCRP, we make annual
contributions to eligible participants’ accounts. The amount of the annual Company contribution is calculated as a percentage
of total target cash compensation (which includes base salary plus the participant’s target ICP payout). The Company’s
contribution percentage will vary based on years of service as an officer of the Company. The contribution percentages applicable
to Messrs. Pinkham, Rehard and Valentyn are set forth in the following table:
Years of Service as an
Officer of the Company
|
|
Company Contribution %
|
0-5
|
|
7% per year
|
6-10
|
|
10% per year
|
11+
|
|
12% per year
|
Participants can elect to invest contributions, with the Plan’s
investment options being similar to the investment options under the Company’s 401(k) plan. Company contributions become
vested upon the participant attaining age 58 with a minimum of 10 years of service to our Company. Effective in 2020, the SDCRP
was amended to provide for full vesting after three years of service without regard to the participant’s age. Participants
are not permitted to make contributions to their account under the plan; only the Company may make contributions.
NONQUALIFIED DEFERRED COMPENSATION FOR
FISCAL 2019
Name
|
|
Plan
Name
|
|
Executive
contributions in
last FY
($)
|
|
|
Registrant
contributions in
last FY
($)(1)
|
|
|
Aggregate
earnings
(losses) in last
FY
($)
|
|
|
Aggregate
withdrawals/distributions
in last Fiscal Year
($)
|
|
|
Balance at
Fiscal Year
End ($)(2)
|
|
Louis V. Pinkham
|
|
SDCRP
|
|
|
--
|
|
|
|
139,650
|
|
|
|
--
|
|
|
|
--
|
|
|
|
139,650
|
|
Robert J. Rehard
|
|
SDCRP
|
|
|
--
|
|
|
|
61,250
|
|
|
|
9,085
|
|
|
|
--
|
|
|
|
107,085
|
|
Thomas E. Valentyn
|
|
SDCRP
|
|
|
--
|
|
|
|
47,880
|
|
|
|
17,391
|
|
|
|
--
|
|
|
|
150,145
|
|
|
(1)
|
The amounts shown in this column have previously been reported in the “All Other Compensation” column of the Summary
Compensation Table for 2019
|
|
(2)
|
The amounts shown in this column include $139,650 for Mr. Pinkham, $98,000 for Mr. Rehard, and $136,360 for Mr. Valentyn
that was previously reported in the Summary Compensation Table in any year.
|
Potential Payments on a Termination or Change in Control
Except for the employment agreement we entered
into with Mr. Pinkham, the retirement agreement we entered into with Mr. Gliebe, and the retirement agreement we entered
into with Mr. Schlemmer, we have no agreements with any of our NEOs that provide for any benefits prior to a change in control
of our Company. We have, however, entered into agreements and maintain plans that require us to provide certain benefits to our
NEOs if we undergo a change in control and if the employment of our NEOs terminates or is adversely affected under circumstances
specified in the agreements and plans.
Employment Agreement
Under Mr. Pinkham’s
employment agreement, Mr. Pinkham became Chief Executive Officer on April 1, 2019. The employment agreement provides
that Mr. Pinkham is entitled to:
|
·
|
a base salary of $950,000 per year;
|
|
·
|
eligibility for an annual cash bonus based on the achievement of company
performance goals, with a target award opportunity equal to 110% of base salary;
|
|
·
|
eligibility for annual equity awards, with his 2019 equity award having
a grant value of $3.25 million;
|
|
·
|
participation in our other employee benefit plans, including the SDCRP,
in accordance with the terms of such plans; and
|
|
·
|
reimbursement for reasonable legal fees that he incurred in negotiating
the employment agreement, up to a maximum of $25,000.
|
In addition, to compensate Mr. Pinkham
for forfeitures of certain incentive compensation awards upon leaving his prior employer, the employment agreement also provided
that we would pay Mr. Pinkham a cash signing bonus equal to $133,000 (which is subject to a pro-rata repayment obligation
if, within two years of his start date, Mr. Pinkham resigns without “good reason” or is terminated by us for “cause”
(as such terms are defined in the employment agreement)) and grant him an RSU award with a grant value of approximately $1.75 million,
which will vest in thirds over three years.
“Good reason” is defined in
Mr. Pinkham’s employment agreement generally to include certain material reductions in his base salary or target bonus
opportunity, certain relocations of his principal place of employment, any material breach by us of any agreement between us and
Mr. Pinkham, or certain material, adverse changes in his position, authorities, duties, or responsibilities.
“Cause” is defined in Mr. Pinkham’s
employment agreement generally to include certain willful and material failures to perform or instances of gross negligence; his
willful and material failure to comply with any valid and legal directive of the Board; his engagement in certain acts of dishonesty,
illegal conduct, or misconduct; his embezzlement, misappropriation, or fraud, or theft of company property; his conviction of or
plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a
misdemeanor involving moral turpitude; his material breach of any material obligation under any written agreement with us; or certain
material failures to comply with material provisions of our written policies or rules.
Retirement Agreements
Under Mr. Gliebe’s retirement
agreement, Mr. Gliebe resigned from the role of Chief Executive Officer on April 1, 2019, the effective date of the appointment
of Mr. Pinkham to that role. For 90 days after his resignation as Chief Executive Officer, Mr. Gliebe continued in our
employment as a full-time employee (the “Transition Period”), and his duties were to provide transition assistance
to Mr. Pinkham. Mr. Gliebe’s employment with us automatically terminated at the end of the Transition Period (the
“Retirement Date”). The Transition Period began on April 1, 2019 and ended on June 30, 2019.
The retirement agreement provided that
Mr. Gliebe was to continue to receive his then current base salary through the start of the Transition Period. During the
Transition Period, we paid Mr. Gliebe $100,000 of base salary compensation. Through the Retirement Date, Mr. Gliebe
continued to be eligible to participate in our employee benefits plans, programs and arrangements. Following the Retirement Date,
we paid to Mr. Gliebe his accrued but unpaid base salary and his accrued but unpaid vacation, and he was entitled to all
vested benefits required to be paid under any qualified retirement, welfare or other benefit plan that we sponsor. Mr. Gliebe
was entitled to receive retirement benefits under our Target SRP at the time of his retirement, in accordance with the terms of
the Target SRP.
In addition to the salary and benefits discussed
above, Mr. Gliebe received the following, in addition to other immaterial benefits, upon or following the Retirement Date:
|
·
|
accelerated and full vesting of all outstanding and unvested SARs
and time-based vesting RSUs, with the SARs remaining exercisable until the earlier of the first anniversary of the Retirement Date
or the expiration of the awards; and
|
|
·
|
pro rata vesting (based on number of days employed for the applicable
performance period) of outstanding and unvested PSUs based on the level of achievement of the current performance goals applicable
to the awards determined as of the Retirement Date.
|
In consideration of these various payments,
Mr. Gliebe agreed to customary non-competition, non-solicitation and non-interference covenants and releases of claims.
Mr. Gliebe was also entitled to up
to $50,000 in reimbursement to cover the cost of his legal fees relating to the preparation of the retirement agreement.
Under Mr. Schlemmer’s retirement
agreement, Mr. Schlemmer resigned from the role of Chief Operating Officer on January 31, 2020, the effective date of
Mr. Schlemmer’s retirement from our Company. The retirement agreement provided that Mr. Schlemmer was to continue
to receive his then current base salary through January 31, 2020. Through January 31, 2020, Mr. Schlemmer, continued
to be eligible to participate in our employee benefit plans, programs and arrangements. Mr. Schlemmer was also eligible to
receive his annual incentive award for the 2019 annual performance period, consistent with the discretionary review that was undertaken
pursuant to the terms of the award for other named executive officers. Mr. Schlemmer was not granted an annual incentive opportunity
for any portion of the 2020 annual performance period. Mr. Schlemmer also was not granted any equity awards for 2020, and
all of his outstanding equity awards that were unvested as of January 31, 2020 were forfeited, except as described below.
Following January 31, 2020, we paid to Mr. Schlemmer his accrued but unpaid base salary and his accrued but unpaid vacation,
and he was entitled to all vested benefits required to be paid under any qualified retirement, welfare or other benefit plan that
we sponsor.
In addition to the salary and benefits discussed
above, Mr. Schlemmer received the following, in addition to other immaterial benefits, upon or following January 31,
2020:
|
·
|
a one-time cash payment of $200,000;
|
|
·
|
accelerated vesting of 6,112 restricted stock units granted to Mr. Schlemmer
in May 2019;
|
|
·
|
a cash payment equal to 2/3rds of the acceleration value, determined
as of January 31, 2020, of Mr. Schlemmer’s other outstanding and unvested stock appreciation rights, performance
share units and time-based vesting restricted stock units, the approximate value of which was $1,324,379; and
|
|
·
|
early retirement benefits under our Target SRP, in accordance with
the terms of the Target SRP.
|
In consideration of these various payments,
Mr. Schlemmer agreed to customary non-competition, non-solicitation and non-interference covenants and releases of claims.
In addition, Mr. Schlemmer’s Key Executive Employment and Severance Agreement terminated as of January 31, 2020.
Termination of Employment Prior to a Change in
Control
Under Mr. Pinkham’s employment
agreement, he is entitled to receive severance benefits upon certain terminations of employment. Specifically, if we terminate
Mr. Pinkham without cause or if he resigns for good reason, then he would be entitled to cash severance equal to:
|
·
|
two times the sum of his annual base salary plus his target annual
incentive bonus if his employment terminates within two years of his start date, or
|
|
·
|
two times his annual base salary if his employment terminates after
the second anniversary of his start date.
|
In addition, upon his termination by us without cause, by him
for good reason, or as a result of his death or disability, Mr. Pinkham would be entitled to receive a pro-rata bonus for
the year of termination and full vesting of his initial RSU award. To receive any of the severance benefits described in this paragraph
(other than as a result of his death or disability), Mr. Pinkham would be required to sign a general release of claims against
us. His employment agreement also provides that Mr. Pinkham will be subject to our confidentiality and restrictive covenant
agreements.
Under our equity incentive plans, if a NEO’s
employment with us terminates for any reason other than “cause,” all outstanding stock option and SAR awards generally
expire on approximately the 90th day following the termination, and all unvested restricted stock and PSU awards are
forfeited, subject, under certain circumstances, to exceptions permitted by the Committee. If a NEO’s employment is terminated
for cause, restricted stock and PSU awards that have not vested are generally forfeited immediately, and each unexpired and uncancelled
stock option or SAR 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 and our employment agreement with Mr. Pinkham, we do not maintain any formal severance program for
our NEOs 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 NEOs (other than Mr. Gliebe, whose agreement expired in connection
with his resignation from the role of Chief Executive Officer as of March 31, 2019) as well as our equity incentive plans
require us to provide certain benefits to covered NEOs. The agreements also provide for enhanced benefits if the employment of
the covered NEOs terminates in connection with a change in control of our Company. A change in control under our agreements with
our NEOs and our existing equity incentive plans generally 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 NEOs, upon
a change in control, we are required to cause all restrictions on any restricted stock awards made to the NEO prior to the change
in control to lapse and to fully and immediately vest all stock options and SARs granted to the NEO 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 the event of a change in control, awards
granted under our 2018 Plan and our 2013 Equity Incentive Plan (the “2013 Plan”) are subject to “double-trigger”
vesting in a change in control transaction, which means that, if the surviving entity in the transaction agrees to assume the awards,
vesting continues and is accelerated only upon a termination of employment without cause or for good reason. If awards are not
assumed, then vesting accelerates. Awards granted prior to fiscal year 2013 under our 2003 Equity Incentive Plan (the “2003
Plan”), and the 2007 Equity Incentive Plan (the “2007 Plan”), are subject to different treatment in a transaction
that results in a change in control of our company. Under the 2003 Plan and the 2007 Plan, in the event of a change in control,
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 under
the 2003 Plan or the 2007 Plan vest 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 existing 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, the 2013 Plan or our 2018 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 2013 Plan or our 2018 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 current NEOs are triggered if, during the period starting six months before and ending two years after a change
in control of our Company, the NEO’s employment is terminated. If the NEO’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 annual cash incentives under the ICP, assuming the performance goal for such bonus
had been attained. We may terminate the NEO 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 NEO’s ability to perform his duties, or (iii) willfully and unreasonably refuses to
perform his duties or responsibilities.
If the NEO’s employment is terminated
other than for cause or as a result of death or disability, or by the NEO with good reason, our full obligations under the agreement
will be triggered. The NEO may terminate his employment with “good reason” under the agreements if:
·
|
we breach the terms of the agreement;
|
·
|
we reduce the NEO’s base salary,
annual cash incentive opportunity or benefits;
|
|
·
|
we remove the NEO from positions within
our Company;
|
|
·
|
the NEO determines in good faith that
there has been a material adverse change in his working conditions or status;
|
|
·
|
we relocate the NEO; or
|
|
·
|
we require the NEO to travel 20% more
frequently than prior to the change in control.
|
Under the agreements, the NEO will receive
a termination payment that is equal to, in the case of Mr. Pinkham, three times or, in the case of Messrs. Rehard, Schlemmer,
Valentyn and Avampato, two times the sum of (1) the NEO’s annual base salary then in effect (2) the higher of (i) the
NEO’s annual cash incentive target bonus for the fiscal year of the termination, which includes annual cash incentive payments
under the ICP, or (ii) the annual cash incentive received in the year prior to the change in control and (3) the value
of all fringe benefits. None of the agreements with Messrs. Pinkham, Rehard, Schlemmer, Valentyn or Avampato contain a gross-up
provision (i.e., a provision that provides for additional payments to the NEOs to compensate them for any excise taxes on payments
related to the change in control that may be imposed on the NEOs under the Internal Revenue Code.
The NEO also will receive outplacement services
and health and life insurance for up to 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 SRP, and will make a payment equal to the value of any additional retirement benefits the NEO would
receive if he had remained employed for, in the case of Mr. Pinkham, three years, or in the case of Messrs. Rehard, Schlemmer,
Valentyn and Avampato, two years. The NEO will also be credited with, in the case of Mr. Pinkham, three years or, in the case
of Messrs. Rehard, Schlemmer, Valentyn and Avampato, 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 NEOs under any such plan.
Tables Summarizing Payments Upon Termination or Change
in Control
The following tables describe the potential
payments upon various events of termination and change in control. These tables assume that the triggering event or events occurred
on December 28, 2019, the last day of our fiscal year, and the price per share of our common stock was $85.42, the closing
market price on the last trading day prior to such date.
The following table sets forth certain information
relating to the compensation of Mr. Pinkham, our Chief Executive Officer, upon a change in control of our Company and following
a termination of Mr. Pinkham’s employment. As of December 28, 2019, Mr. Pinkham was not 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 ICP Annual Cash Incentive
|
|
|
-
|
|
|
|
314,921
|
|
|
|
-
|
|
|
|
-
|
|
|
|
314,921
|
|
|
|
314,921
|
|
ICP Annual Cash Incentive Deferred from Prior Years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Termination Payment
|
|
|
-
|
|
|
|
3,990,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,484,647
|
|
|
|
-
|
|
Target SRP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,905,220
|
|
|
|
2,905,220
|
|
|
|
2,905,220
|
|
Stock Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,420
|
|
|
|
191,420
|
|
|
|
191,420
|
|
Performance Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,097,061
|
|
|
|
2,097,061
|
|
|
|
689,445
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment Under Retirement Plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Post-termination Health & Life Insurance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,124
|
|
|
|
-
|
|
Life Insurance Proceeds(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Disability(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
Accrued Vacation Pay
|
|
|
73,077
|
|
|
|
73,077
|
|
|
|
73,077
|
|
|
|
-
|
|
|
|
73,077
|
|
|
|
73,077
|
|
Accounting and Legal Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
Outplacement Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95,000
|
|
|
|
-
|
|
280G Tax Cutback
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
73,077
|
|
|
|
4,377,998
|
|
|
|
73,077
|
|
|
|
5,193,701
|
|
|
|
12,208,470
|
|
|
|
4,544,083
|
(5)
|
(1)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason not in connection with
a change in control of our Company.
|
(2)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason in connection with a change
in control of our Company.
|
(3)
|
Life insurance death benefit payable only in event of death. The amount shown reflects only the enhanced death benefits over
those offered to employees generally.
|
(4)
|
Disability benefit payable only in event of disability. The amount shown reflects only the enhanced disability benefits that
would be payable to the NEO over the course of a year compared with the disability benefits to which non-executive officer salaried
employees would receive over the same period.
|
(5)
|
The total amount shown is larger than the amount the NEO 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 set forth certain information
relating to the compensation of Mr. Rehard, our Vice President, Chief Financial Officer, upon a change in control of our Company
and following a termination of Mr. Rehard’s employment. As of December 28, 2019, Mr. Rehard was not 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 ICP Annual Cash Incentive
|
|
|
-
|
|
|
|
150,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
150,000
|
|
ICP Annual Cash Incentive Deferred from Prior Years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Termination Payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,907,728
|
|
|
|
-
|
|
Target SRP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
540,623
|
|
|
|
540,623
|
|
|
|
540,623
|
|
Stock Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
154,913
|
|
|
|
154,913
|
|
|
|
154,913
|
|
Performance Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
957,900
|
|
|
|
957,900
|
|
|
|
957,900
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment Under Retirement Plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Post-termination Health & Life Insurance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,502
|
|
|
|
-
|
|
Life Insurance Proceeds(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Disability(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
Accrued Vacation Pay
|
|
|
38,462
|
|
|
|
38,462
|
|
|
|
38,462
|
|
|
|
-
|
|
|
|
38,462
|
|
|
|
38,462
|
|
Accounting and Legal Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
Outplacement Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
280G Tax Cutback
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
38,462
|
|
|
|
188,462
|
|
|
|
38,462
|
|
|
|
1,653,436
|
|
|
|
3,858,128
|
|
|
|
2,211,898
|
(5)
|
(1)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason not in connection with
a change in control of our Company.
|
(2)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason in connection with a change
in control of our Company.
|
(3)
|
Life insurance death benefit payable only in event of death. The amount shown reflects only the enhanced death benefits over
those offered to employees generally.
|
(4)
|
Disability benefit payable only in event of disability. The amount shown reflects only the enhanced disability benefits that
would be payable to the NEO over the course of a year compared with the disability benefits to which non-executive officer salaried
employees would receive over the same period.
|
(5)
|
The total amount shown is larger than the amount the NEO 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 that Mr. Schlemmer, our former Chief Operating
Officer who retired from our Company effective January 31, 2020, would have been entitled to receive upon a change in control
of our Company and following a termination of Mr. Schlemmer’s employment occurring on December 28, 2019. The SEC’s
regulations require disclosure of each of the potential scenarios listed below; however, the benefits Mr. Schlemmer actually
received as a result of his retirement are described above under the heading “Potential Payments on a Termination or Change
of Control – Retirement Agreements.” As of December 28, 2019, Mr. Schlemmer was not 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 ICP Annual Cash Incentive
|
|
|
-
|
|
|
|
228,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
228,600
|
|
|
|
228,600
|
|
ICP Annual Cash Incentive Deferred from Prior Years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Termination Payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,466,460
|
|
|
|
-
|
|
Target SRP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,846,097
|
|
|
|
1,846,097
|
|
|
|
1,846,097
|
|
Stock Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
602,693
|
|
|
|
602,693
|
|
|
|
602,693
|
|
Performance Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,413,115
|
|
|
|
2,413,115
|
|
|
|
1,583,198
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment Under Retirement Plans(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
741,681
|
|
|
|
-
|
|
Post-termination Health & Life Insurance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,542
|
|
|
|
-
|
|
Life Insurance Proceeds(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Disability(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
Accrued Vacation Pay
|
|
|
48,846
|
|
|
|
48,846
|
|
|
|
48,846
|
|
|
|
-
|
|
|
|
48,846
|
|
|
|
48,846
|
|
Accounting and Legal Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
Outplacement Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,500
|
|
|
|
-
|
|
280G Tax Cutback
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
48,846
|
|
|
|
277,446
|
|
|
|
48,846
|
|
|
|
4,861,905
|
|
|
|
8,468,534
|
|
|
|
4,679,434
|
(6)
|
(1)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason not in connection with
a change in control of our Company.
|
(2)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason in connection with a change
in control of our Company.
|
(3)
|
Reflects a cash payment that is equal to the value of additional retirement benefits that the NEO would have received if he
remained employed with us for an additional two years.
|
(4)
|
Life insurance death benefit payable only in event of death. The amount shown reflects only the enhanced death benefits over
those offered to employees generally.
|
(5)
|
Disability benefit payable only in event of disability. The amount shown reflects only the enhanced disability benefits that
would be payable to the NEO over the course of a year compared with the disability benefits to which non-executive officer salaried
employees would receive over the same period.
|
(6)
|
The total amount shown is larger than the amount the NEO 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. Valentyn, our Vice President, General Counsel and Secretary, upon a change in control
of our Company and following a termination of Mr. Valentyn’s employment. As of December 28, 2019, Mr. Valentyn
was not 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 ICP Annual Cash Incentive
|
|
|
-
|
|
|
|
102,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
102,600
|
|
|
|
102,600
|
|
ICP Annual Cash Incentive Deferred from Prior Years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Termination Payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,510,690
|
|
|
|
-
|
|
Target SRP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
600,076
|
|
|
|
600,076
|
|
|
|
600,076
|
|
Stock Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
225,267
|
|
|
|
225,267
|
|
|
|
225,267
|
|
Performance Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,093,376
|
|
|
|
1,093,376
|
|
|
|
704,401
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment Under Retirement Plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Post-termination Health & Life Insurance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,076
|
|
|
|
-
|
|
Life Insurance Proceeds(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Disability(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76,500
|
|
Accrued Vacation Pay
|
|
|
32,885
|
|
|
|
32,885
|
|
|
|
32,885
|
|
|
|
-
|
|
|
|
32,885
|
|
|
|
32,885
|
|
Accounting and Legal Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
Outplacement Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,750
|
|
|
|
-
|
|
280G Tax Cutback
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
32,885
|
|
|
|
135,485
|
|
|
|
32,885
|
|
|
|
1,918,719
|
|
|
|
3,648,720
|
|
|
|
1,991,729
|
(5)
|
(1)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason not in connection with
a change in control of our Company.
|
(2)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason in connection with a change
in control of our Company.
|
(3)
|
Life insurance death benefit payable only in event of death. The amount shown reflects only the enhanced death benefits over
those offered to employees generally.
|
(4)
|
Disability benefit payable only in event of disability. The amount shown reflects only the enhanced disability benefits that
would be payable to the NEO over the course of a year compared with the disability benefits to which non-executive officer salaried
employees would receive over the same period.
|
(5)
|
The total amount shown is larger than the amount the NEO 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. Avampato, our Vice President, Chief Information
Officer, upon a change in control of our Company and following a termination of Mr. Avampato’s employment. As of December 28,
2019, Mr. Avampato was eligible for normal retirement.
Executive
Benefits
and Payments
Upon Change in Control or Termination
|
|
Voluntary
Termination/
Retirement
|
|
|
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 ICP Annual Cash Incentive
|
|
|
-
|
|
|
|
78,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,000
|
|
|
|
78,000
|
|
ICP Annual Cash Incentive Deferred from Prior Years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Termination Payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,219,836
|
|
|
|
-
|
|
Target SRP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
339,545
|
|
|
|
339,545
|
|
|
|
339,545
|
|
Stock Appreciation Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
152,348
|
|
|
|
152,348
|
|
|
|
152,348
|
|
Performance Share Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,151,035
|
|
|
|
1,151,035
|
|
|
|
1,163,523
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment Under Retirement Plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Post-termination Health & Life Insurance
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,422
|
|
|
|
-
|
|
Life Insurance Proceeds(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Disability(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
Accrued Vacation Pay
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Accounting and Legal Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
Outplacement Services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,000
|
|
|
|
-
|
|
280G Tax Cutback
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
30,000
|
|
|
|
108,000
|
|
|
|
30,000
|
|
|
|
1,642,928
|
|
|
|
3,067,186
|
|
|
|
2,067,416
|
(5)
|
(1)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason not in connection with
a change in control of our Company.
|
(2)
|
Assumes the NEO’s employment is terminated by us without cause or by the NEO with good reason in connection with a change
in control of our Company.
|
(3)
|
Life insurance death benefit payable only in event of death. The amount shown reflects only the enhanced death benefits over
those offered to employees generally.
|
(4)
|
Disability benefit payable only in event of disability. The amount shown reflects only the enhanced disability benefits that
would be payable to the NEO over the course of a year compared with the disability benefits to which non-executive officer salaried
employees would receive over the same period.
|
(5)
|
The total amount shown is larger than the amount the NEO 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.
|
Upon the retirement of Mr. Gliebe,
our former Chairman and Chief Executive Officer, as of June 30, 2019 he received accelerated vesting of outstanding equity
awards with an approximate value, based on the closing share price on the date of his retirement, of $5,967,694. Mr. Gliebe
also received $50,000 in reimbursement to cover the cost of his legal fees relating to the preparation of his retirement agreement.
We set forth below a description of the
facts and 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.
Impact of Certain Terminations of Employment
Current Year ICP Annual Cash Incentive
Under the ICP, in the event of a termination
of the NEO prior to payment, the NEO is not entitled to receive any portion of the ICP incentive, although the Committee may exercise
its discretion to make a payment in the event the termination is due to retirement.
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 RSUs. In the event of a change in control, the NEO would be entitled to the vesting of all
of the NEO’s then unvested stock options, SARs, restricted stock and RSUs, assuming that the acquirer does not choose to
assume or replace the awards. The table assumes that all stock options, SARs, restricted stock and RSUs would vest (rather than
being assumed by the acquirer) upon a change in control.
Performance Share Units
Under our equity incentive plans, in the
event of a termination for death, all outstanding performance awards, including PSUs, will be paid following the end of the performance
period based on achievement of the performance goals as if the participant had not died, but prorated based on the portion of the
performance period completed at the time of death. In the event of a termination as a result of disability, all outstanding PSUs
will be paid based on the degree to which the applicable performance goals have been attained, but prorated based on the portion
of the performance period that the participant has completed at the time of termination. In the event of a termination due to retirement,
our equity incentive plans provide that the Board generally has discretion to accelerate the vesting of any unvested PSUs, and
for purposes of the above tables, we assumed that the Board exercised such discretion. Upon a change in control, unless the acquiring
or surviving entity assumes or replaces the outstanding PSUs, all such units for which the performance period has not expired will
be cancelled in exchange for a cash payment equal to the amount that would have been due under the units if the performance goals
measured at the time of the change of control were to continue to be achieved at the same rate through the end of the performance
period, or if higher, assuming the target performance goals had been met at the time of the change of control. The tables assume
the payment would be at target.
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.
Impact of Change in Control Terminations
Except as otherwise noted, the following
items apply only to a termination in the context of a change in control for Messrs. Pinkham, Rehard, Schlemmer, Valentyn
and Avampato. We assume the termination is without cause or by the NEO with good reason. Further, we assume that the change in
control and the NEO’s termination of employment both occurred on December 28, 2019, the last day of our fiscal year.
Supplemental Retirement Plans
In the event of a termination related to
a change in control, we will waive the years of service requirement under the Target SRP. Amounts reported in the table reflect
the present value of the accumulated benefit, using a two and eighty-two hundredths percent (2.82%) discount rate. Per the terms
of the SDCRP, participants forfeit their account balance upon termination of employment prior to attaining age 58 with 10 years
of service, except that the participant will become 100% vested in their account balance upon a termination due to death. Effective
in 2020, the SDCRP was amended to provide for full vesting after three years of service without regard to the participant’s
age. In addition, under the terms of Messrs. Pinkham’s, Rehard’s and Valentyn’s agreements, in the event
they are terminated due to a change in control, they would become 100% vested in their SDCRP account balance.
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 NEO would have received if he remained employed with our Company for an additional three years, in the case of Mr. Pinkham,
or two years, in the case of Messrs. Rehard, Schlemmer, Valentyn and Avampato.
Post-Retirement Health Care Benefits
The NEO will be covered under our health
and life insurance for, in the case of Pinkham, three years or, in the case of Messrs. Rehard, Schlemmer, Valentyn and Avampato,
two years, unless the NEO obtains equal or greater benefits from another employer. We have assumed the NEO will not obtain benefits
from another employer.
Accounting and Legal Services
We are obligated to reimburse the NEO for
up to $15,000 for accounting and legal services related to the calculation of the tax gross-up amount described below under “Section 280G
Tax Gross-up or Cut Back.” The tables assume the entire amount is reimbursed to the NEO.
Outplacement
The NEO will be entitled to receive outplacement
services up to the amount that is equal to ten percent (10%) of the NEO’s base salary. The tables assume the NEO will use
the full amount of this benefit.
Section 280G Cutback
Upon a change in control of our Company
the NEO may be subject to certain excise taxes pursuant to Section 280G of the Internal Revenue Code. We adopted a policy
prohibiting provisions for the reimbursement of excise taxes that are imposed under Section 280G and any income and excise
taxes that are payable as a result of any reimbursement for Section 280G excise taxes in new change of control and severance
agreements with executive officers, and this policy applied to the agreements we entered into with Mr. Avampato in November 2010,
Mr. Schlemmer in May 2011, Mr. Valentyn in October 2016, Mr. Rehard in April 2018 and Mr. Pinkham
in 2019. To address Section 280G, the agreements with Messrs. Pinkham, Schlemmer, Valentyn, Rehard and Avampato include
a “best of” provision pursuant to which, if the amounts payable under the agreement or any other of our plans or agreements
with the NEO would constitute an excess parachute payment and result in an excise tax being imposed on the NEO, then the NEO will
receive either the full amount of such payments or a lesser amount such that no portion of the payments will be subject to the
excise tax, whichever would result in the greater after-tax benefit to the NEO.
Non-Competition
As a condition to each NEO’s entitlement
to receive the severance payments and other benefits described in this section, the NEO is required to execute a waiver of claims
and be bound by the terms of a non-competition agreement which prohibits the NEO from working in a business that engages in substantial
competition with us, for a period of one year from the NEO’s termination of employment. Our Board may waive this provision.
In addition, as a condition to each NEO’s entitlement to participate in the ICP, the NEO must agree to certain non-competition
restrictions.
Pay
Ratio
Pursuant to a mandate of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission (the “SEC”) adopted a rule requiring
annual disclosure of the ratio of the total annual compensation of the CEO to the median of the annual total compensation of all
employees. We are providing the following disclosure in compliance with such SEC rule.
We identified our median employee according
to the following process. First, we examined the base salary or wages that we paid during 2019 to all our employees, whether full-time
or part time, that we employed as of December 15, 2019. Our total numbers of U.S. and non-U.S. employees as of December 15,
2019 were 4,295 and 15,960, respectively. However, as allowed by the SEC rule, we excluded from our pay ratio analysis 561 employees
located in Thailand and 263 employees located in Brazil under the de minimis exception. For employees residing outside the
United States, we then converted their annual base salary into U.S. dollars using the average exchange rate for the compensation
period. For employees with less than one year of service, we annualized their pay. We then identified a small sampling of employees
that received base wages at or near the median base wage. From this sampling of similarly situated employees, we selected our representative
median employee for purposes of calculating the ratio.
To arrive at the median employee’s
total annual compensation, we added together all of the elements of such median employee’s compensation for 2019 in the same
way that we calculate the annual total compensation of our NEOs in the Summary Compensation Table. We then compared such number
to the total compensation of Mr. Pinkham, annualized as described below.
As such, for the year ended December 28, 2019:
|
·
|
The annual total compensation of Mr. Pinkham was $6,730,794.
|
|
·
|
The annual total compensation of our median employee was $13,433.
|
|
·
|
Based on the above information, the ratio of the annual total compensation
of Mr. Pinkham to the median of the annual total compensation of all other employees is estimated to be 501 to 1.
|
Mr. Pinkham was appointed Chief Executive
Officer on April 1, 2019. To calculate the total compensation of our Chief Executive Officer for the pay ratio calculation,
above, we annualized Mr. Pinkham’s compensation relative to the period that he was Chief Executive Officer. In annualizing
Mr. Pinkham’s compensation, we used his annual base salary and annual incentive bonus for the time period in which he
served as Chief Executive Officer, but we used his actual long-term compensation and all other compensation.
We compete on a global scale. The majority
of our electric motor competitors are located and produce their products outside of the United States. Most of our electric motor
manufacturing plants and approximately three-fourths of our employees are located outside of the United States, including our
median employee referenced above, who is located in Mexico.
Although we operate on a worldwide basis,
the form and amount of Mr. Pinkham’s annual total compensation is largely influenced by prevailing market practices
in the United States, as is the compensation of our other U.S. employees. In addition, we are incorporated and headquartered in
Wisconsin, and our common stock is traded on the New York Stock Exchange. For these reasons, we think that it is useful to understand
the relationship between the annual total compensation of Mr. Pinkham and our median U.S. employee, who was identified by
a similar process, using only U.S. employee base wages and determining annual total compensation. For the year ended December 28,
2019:
|
·
|
The annual total compensation of our median U.S. employee was $48,437.
|
|
·
|
The ratio of the annual total compensation of our CEO to the median
of the annual total compensation of our U.S. employees is estimated to be 139 to 1.
|
Risk Assessment of Compensation
Policies and Practices
We seek to design our compensation policies
and practices to reflect a balanced approach between incentives to achieve short-term and longer-term objectives, both of which
we believe will help us achieve sustained growth and success over the long term. While we recognize that the pursuit of our financial
performance objectives and the link between the amount of compensation earned under our incentive arrangements and achievement
of the objectives may lead to employee behavior that increases certain risks to our Company, we believe that we have designed our
compensation programs and policies to mitigate these concerns and help to ensure that our policies and practices are consistent
with our risk profile.
Our Board relies on the Committee to address
significant risk exposures facing the Company with respect to compensation, with appropriate reporting of these risks to be made
to the full Board. The Committee, with the assistance of management and independent compensation consultants, periodically evaluates
our compensation policies and practices to assess whether the risks arising from these policies and practices are likely to have
a material adverse effect on our Company and to assess the effect on these risks of any changes to our enterprise risk profile.
The Committee did not recommend or implement any material changes in 2019 as a result of its most recent assessment, but has identified
or implemented the following measures, among others, that it believes serve to mitigate any risks arising from our compensation
policies and practices:
|
·
|
We used sales growth, adjusted operating profit as a percentage of
sales and working capital as a percentage of sales as the performance measures under our annual cash incentive plans for our executive
officers and certain of our key non-executive officer employees in fiscal 2019 in part because these metrics tie rewards for participants
to the operational performance and efficiency of our business as it is actually realized. We believe that, because these metrics
tied directly to the financial performance of our business, they also tie ultimately to the creation of long-term shareholder value.
By focusing on our operational performance and efficiency, our annual cash incentive plans have created incentives for prudent
investments in assets that are capable of providing strong long-term returns.
|
|
·
|
We have capped payouts under our ICP cash incentive plan for our
executive officers at 200% and any cash incentive amounts earned in a year above 100% of the target amount for the year are
paid over time 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 NEO has not voluntarily terminated his or her employment with us or has
been terminated for cause. We believe that capping the maximum annual cash incentive and deferring over three years the
payment of any cash incentive amounts earned above the target cash incentive value
serve to limit participants’ incentives to take short-term or inappropriately risky measures to increase payouts in any given
year.
|
|
·
|
Our SAR, RSU and PSU awards under our long-term incentive compensation
arrangements are subject to five- and three-year vesting or performance periods, respectively, which we believe fosters employee
retention and further helps to mitigate incentives to take short-term risks, while encouraging our employees to focus on our sustained
growth over the long term. In addition, we have capped the payouts under the PSU awards at 200% of the target amount to limit participants’
incentives to take short-term or inappropriately risky measures to increase payouts in any given year.
|
|
·
|
We have implemented stock ownership guidelines for certain executives,
including our NEOs, which we believe help to focus our executives on long-term stock price appreciation and sustainability.
|
|
·
|
We have adopted a clawback policy requiring us to recoup incentive
compensation paid to our executive officers on the basis of financial results that are subsequently subject to a material restatement.
|
|
·
|
We have adopted a policy prohibiting our employees, including our
NEOs, from trading in puts, calls and other derivative securities relating to our common stock. The prohibition includes the purchase
of any financial instruments designed to hedge or offset any decease in the market value of our common stock. We also prohibit
our employees, including our NEOs, from pledging common stock that he or she owns as collateral
to secure personal loans or other obligations.
|
In addition to the ICP annual cash incentive plan discussed
above, we maintain revenue-based sales incentive compensation programs for certain of our non-executive officer employees at select
business units or functions. The eligible employees are generally engaged in sales functions and our general philosophy regarding
their compensation is to provide a portion of their compensation on a variable basis to create incentives for them to bring in
new customers and/or increase sales to existing customers. We designed the programs to limit the risks that participants will seek
to increase their payouts through low-quality sales or short-term revenue accompanied by long-term costs or additional risks by
capping the amount of compensation participants may earn under the programs and by not giving the individual participants final
authority over which sales are accepted. We monitor the programs periodically to determine whether our risk-management objectives
are being addressed by these features and intend to modify the programs if necessary to reflect changes to our risk profile.
Director
compensation
The following table sets forth certain information
relating to the compensation for our directors for the last fiscal year other than for Messrs. Pinkham and Gliebe, who received
no additional compensation for their service as directors.
Name
|
|
Fees Earned or Paid in
Cash ($)
|
|
|
Stock
Awards ($)(1)
|
|
|
Total ($)
|
|
Jan A. Bertsch(2)
|
|
|
22,500
|
|
|
|
72,501
|
|
|
|
95,001
|
|
Stephen M. Burt (Chairperson, Audit Committee)
|
|
|
105,750
|
|
|
|
144,967
|
|
|
|
250,717
|
|
Anesa T. Chaibi
|
|
|
91,250
|
|
|
|
144,967
|
|
|
|
236,217
|
|
Christopher L. Doerr(3)
|
|
|
110,000
|
|
|
|
144,967
|
|
|
|
254,967
|
|
Thomas J. Fischer
|
|
|
90,000
|
|
|
|
144,967
|
|
|
|
234,967
|
|
Dean A. Foate
|
|
|
92,500
|
|
|
|
144,967
|
|
|
|
237,467
|
|
Michael F. Hilton(4)
|
|
|
0
|
|
|
|
36,284
|
|
|
|
36,284
|
|
Rakesh Sachdev (Fmr. Presiding Director; Chairman effective April 30, 2019) (3)
|
|
|
197,500
|
|
|
|
144,967
|
|
|
|
342,467
|
|
Curtis
W. Stoelting (Chairperson, Compensation and Human Resources Committee) (3)
|
|
|
123,500
|
|
|
|
144,967
|
|
|
|
268,467
|
|
Jane L. Warner (Chairperson, Corporate Governance and
Director Affairs Committee)
|
|
|
101,250
|
|
|
|
144,967
|
|
|
|
246,217
|
|
|
(1)
|
These amounts reflect the full grant date fair value of all stock awards granted during fiscal 2019, computed in accordance
with FASB ASC Topic 718. As of December 28, 2019, none of our non-employee directors held outstanding option awards. As of
December 28, 2019, other than Ms. Bertsch and Mr. Hilton, each of our non-employee directors held 1,772 outstanding
restricted shares of common stock. Ms. Bertsch was awarded 972 shares of restricted stock with an effective grant date of
August 8, 2019. Mr. Hilton was awarded 423 shares of restricted stock with an effective grant date of December 18,
2019.
|
|
(2)
|
Ms. Bertsch joined the Board on June 17, 2019.
|
|
(3)
|
Messrs. Doerr, Sachdev, and Stoelting each received a one-time retainer fee of $20,000 for their services related to the
search for our new Chief Executive Officer.
|
|
(4)
|
Mr. Hilton joined the Board on December 6, 2019.
|
Our compensation policies for directors
are designed to attract and retain the most qualified individuals to serve on the Board in the industry in which we operate. The
equity portion of director compensation is designed to align directors’ interests with shareholders’ interests. The
non-employee directors are currently paid the following fees:
|
·
|
Annual retainer fee of $90,000 for each director.
|
|
·
|
Annual retainer fee of $150,000 for the Chairman.
|
|
·
|
Annual retainer fee of $16,500 for the chair of the Audit Committee;
$13,500 for the chair of the Compensation and Human Resources Committee; $12,500 for the chair of the Corporate Governance and
Director Affairs Committee; and a $5,000 additional fee for service on more than one committee.
|
|
·
|
Shares of restricted stock with a value of approximately $145,000
on the grant date.
|
Each individual non-employee director serving on the Board on
April 30, 2019, the date of our 2019 annual shareholders meeting, was awarded 1,772 shares of restricted stock with an effective
grant date of May 8, 2019.
Report
of the Compensation and
Human Resources Committee
The Compensation and Human Resources Committee
has reviewed and discussed the Compensation Discussion and Analysis set forth in this proxy statement with management. Based on
the foregoing review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and
Analysis section be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for
the year ended December 28, 2019.
This report of the Compensation and Human
Resources Committee has been presented by the following named directors currently comprising the Committee: Curtis W. Stoelting
(Chairperson), Anesa T. Chaibi and Rakesh Sachdev.
Compensation
Committee Interlocks and
Insider Participation
The current members of the Compensation
and Human Resources Committee of the Board of Directors are Curtis W. Stoelting (Chairperson), Anesa T. Chaibi and Rakesh Sachdev.
There are no interlocks among the Committee members and the Company.