EXECUTIVE COMPENSATION
Compensation Committee Report
The Human ResourcesHR Committee (“HR Committee”) of the Board, acting in its capacity as the Compensation Committee of the Company, has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on such review and discussions, the HR Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for the fiscal year ended July 31, 2019.2022.
Submitted by the Human Resources Committee
Ajita G. Rajendra, Chair
Michael J. Hoffman Chair
Douglas A. Milroy
Richard M. Olson
James J. Owens
Ajita G. Rajendra
Compensation Discussion and Analysis
Summary
The Compensation Discussion and Analysis provides information on the Company’s executive compensation program and key elements of compensation awarded for fiscal 20192022 to the following Named Executive Officers (“NEOs”) whose compensation is reported in the Summary Compensation Table onpage 36:43:
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Named Executive Officer | Title for Fiscal 2022 | Title Effective November 1, 2022 (1) |
Tod E. Carpenter | Chairman, President and Chief Executive Officer (“CEO”) | Chairman, President and Chief Executive Officer |
Scott J. Robinson | Senior Vice President and Chief Financial Officer (“CFO”) | Chief Financial Officer |
Thomas R. Scalf | Senior Vice President, Engine Products | President, Enterprise Operations and Supply Chain |
Jeffrey E. Spethmann | Senior Vice President, Industrial Products | (2) |
Amy C. Becker,Richard B. Lewis | Senior Vice President, General Counsel and SecretaryGlobal Operations | President, Mobile Equipment Solutions |
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(1) On October 4, 2022, the Company announced an organizational redesign effective November 1, 2022, resulting in certain leadership changes, including title changes, for certain NEOs as reflected in this column. For all purposes of the disclosure in this Proxy Statement, the NEO titles presented are those that were in effect for fiscal 2022.
(2) With the new structure, Mr. Spethmann will cease to be an executive officer after October 7, 2022 and will depart the Company on November 1, 2022 after assisting with the transition.
This Compensation Discussion and Analysis should be reviewed in conjunction with the tables and narratives that follow it.
Executive Compensation Program Principles
The HR Committee establishes and administers the Company’s compensation program for its executive officers ("Officers"). Our executive compensation program is designed to support the Company's objective of creating long-term value through increasingly strong total return to stockholders. The key principles of the executive compensation strategy include:
•Aligning compensation to financial measures that balance both the Company’s annual and long-term financial results
•Providing significant portions of total compensation in variable, performance-based programs to focus the attention of our Officers on driving and increasing stockholder value
•Setting target total direct compensation based on an established proxy peer group (as recommended by an independent compensation consultant) and published market survey data
•Establishing high stock ownership requirements for our Officers
•Providing competitive pay, which enables us to attract, retain, reward, and motivate top leadership talent by generally setting compensation elements around the median of the peer group data and size-adjusted general industry survey data
The HR Committee believes the executive compensation program is a critical element for attracting and retaining a strong executive leadership team. The HR Committee also believes that the program design balances revenue and profit in a way that has contributed to the Company’s long history of delivering consistently strong return on invested capital.
Fiscal 20192022 Performance Highlights
Fiscal 2022 was another record year for Donaldson despite macroeconomic and geopolitical challenges, including inflation, supply chain disruptions, COVID-19 shutdowns in mainland China, and the Russia-Ukraine conflict. Our Donaldson team collaborated to deliver to our customers and in support of Advancing Filtration for a Cleaner World. We achieved record sales and earnings per share in fiscal 2019, and we continue to expand our technologies and solutions, extend our access to new markets and geographies, and execute strategic acquisitions.focused on near-term execution, while also laying the foundation for future growth. We invested $69 million in R&D and $85 million in capital expenditures to support these priorities duringdrive continued innovation, market share gains, and increased capacity and manufacturing efficiency. We also invested $69 million in acquisitions, primarily in the past year, and we realized benefits from our efforts, including growing our innovative products in new and existing markets and continued strength in sales of replacement parts; however, an increasingly mixed operating environment led to overall financial results that were below our initial plan targets.Life Sciences sector.
IncentiveOur incentive programs for our Officersexecutives are designedtied to link directly to our Company's performancefinancial metrics based on key financial metrics.Company performance. The performance achievements shown below for our annual and long-term incentive awards that concluded in fiscal 2019 are discussed in greater detail,following graphs summarize actual results versus the respective targets. Additional details, including pertinent adjustments, startingare provided beginning on page 30.37.
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* | Our target net sales is a range of ±1% of the amount reflected above. |
** Actuals reflect adjustments made for incentive purposes which exclude tax reform, BOFA International acquisition, and change to revenue recognition standard. Refer to the Annual Incentive section for more information.information on our financial results pertaining to incentive measures and applicable adjustments.
Compared with
Our fiscal 2022 results exceeded our initialtarget plan driven by robust demand across our end-markets in both our Engine and Industrial segments. Also contributing to sales were significant pricing benefits from strategic actions taken throughout the year to offset increased input costs. We effectively managed our operating expenses resulting in better-than-expected diluted earnings per share and return on invested capital. We also maintained our long-standing dedication to corporate responsibility, adding a notable portionDirector of the variance came from incremental currency translation headwindsESG and uneven customer demand related to macro-economic uncertainty in global tradea Director of Diversity, Equity and the geopolitical environment. These cyclical trends were addressed with incremental cost controls and acceleration of our cost-reduction initiatives, which position us well for future profit expansion.
To further support profitable growth, we invested nearly $62 million in R&D and $150 million of capital in fiscal 2019. We are developing advanced filtration technology, including intelligent filtration products and services, and much of the capital was used for capacity expansion around the world. In addition to the record level of capital expenditures in fiscal 2019, we also invested $96 million to acquire an 88 percent share of BOFA LTD in the United Kingdom. BOFA is a strong strategic additionInclusion to our Industrial segment, bringing complementary product offerings in stable, growing markets.team.
During fiscal 2019, we returned approximately $229 millionWe continue to prioritize returning cash to stockholders through dividends and share repurchases. We raisedFor over 66 years, Donaldson has paid a dividend and has increased the quarterly dividend 10.5 percent duringevery year for the year, which is the 24th consecutive year of annual increases. This long trend of growingpast twenty-six years allowing us to maintain our dividend qualified us for inclusionposition in the S&P High-Yield Dividend Aristocrats IndexAristocrat Index. In fiscal 2022, we paid $110 million in early 2016. We repurchased two percent of outstanding sharesdividends, an increase from $107 million in fiscal 2019, reflecting a2021. In addition, we repurchased 2.3% of our shares outstanding for $171 million. In total, investment of $129we returned almost $281 million and keeping with our multi-decade trend of share count reduction.to stockholders during fiscal 2022.
We remain clear on our strategic and operational priorities, and we remain committed to delivering strong returns and creating value for our stockholders.
20182021 Say-on-Pay Results and Future Say-on-Pay Votes
A non-binding advisory vote regarding Say-on-Pay at the Company's 20182021 annual stockholder meeting resulted in 95%96% of shares cast in favor of our executive compensation for the NEOs. The HR Committee believes that this strong support by stockholders reinforces our executive compensation philosophy and the structure of our program, and confirms that it is in alignment with the long-term interests of our stockholders. Our Board has determined to provide our stockholders with an annual Say-on-Pay vote.
Benchmarking
The HR Committee assists the Board in providing oversight onof executive compensation. The HR Committee reviews and approves our overall executive compensation philosophy, strategy, and policies. As part of the annual review and approval of all compensation for our Officers, the HR Committee takes into account competitive market analysis and recommendations by our CEO and Human Resources Department, and the independent compensation consultant.
For more information on the HR Committee, refer to the Corporate Governance - Human Resources Committee section of this Proxy Statement.
Compensation Consultant
The HR Committee has the authority to retain an independent compensation consultant to assist in the analysis of our executive compensation program. The HR Committee is also assisted in performing its duties by our Human Resources Department and seeks input from the CEO on compensation recommendations for the CEO's direct reports. The HR Committee engaged Willis Towers Watson as its executive compensation consultant to advise the HR Committee on matters related to executive compensation for our Officers.
Willis Towers Watson disclosed to the HR Committee other services it provides to the Company, including being engaged by management as the Company’s benefits broker since 2015 (breakout of services provided by Willis Towers Watson is included on page 18). In assessing the independence of Willis Towers Watson, the HR Committee considered the factors contained in the applicable SEC and NYSE rules, including the amount and nature of the additional consulting work provided to the Company, and concluded that no conflict of interest exists that would prevent Willis Towers Watson from independently advising the HR Committee.
Competitive Market
The HR Committee considers a competitive market assessment when establishing executive compensation programs. The annual review entails an evaluation of pay practices and benchmarking of base salary, target annual and long-term incentives, and target total direct compensation for our Officers. During fiscal 2019, Willis Towers Watson reviewed and discussed executive compensation with management and the HR Committee. The market studyassessment conducted by Willis Towers Watson included competitive market 25th, 50th and 75th percentile data for all Officers. Additionally, during fiscal 2019, Willis Towers Watson reviewed executive officerreviews Officer compensation recommendations made by management and participatedparticipates in discussions at the July and September HR Committee meetings regarding those recommendations.
Company Peer Group
For benchmarking purposes, the HR Committee established a list of peer companies (“Peer Group”) based on size and complexity comparable to Donaldson. TheKey considerations in establishing, reviewing and updating the Peer Group was reviewed and updated in January 2018 following the process outlined below:are:
Identified potential•Potential peer companies by assessingbased on Donaldson’s current peer group, companies naming Donaldson as a peer, and ISS and Glass Lewis selected peers; and
Conducted an analysis that focused on our size and complexity. The list of peer companies was further refined based on an analysis of the peers of our peers, revenue•Revenue comparisons, industry considerations and other scope criteria such as global footprint.
At its July 2022 meeting, the HR Committee engaged Willis Towers Watson in a review and discussion of the Peer Group. From this meeting, the following changes were approved and the modified Peer Group was used to benchmark fiscal 2019 and 20202023 compensation for our Officers.
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Peer Group |
Actuant Corporation Prior to July 2022 | Lincoln Electric Holdings, Inc.Modified Peer Group Effective July 2022 | | | |
A. O. Smith Corporation | Modine Manufacturing Co.A. O. Smith Corporation | | Removals | Additions |
AMETEK, Inc. | Nordson Corporation |
Briggs & Stratton CorporationAMETEK, Inc. | Polaris Inc. | | |
Colfax Corporation | Regal-Beloit CorporationCrane Company | | | |
Crane Company | RexnordESAB Corporation | | | |
Flowserve Corporation | Snap-On Inc.Flowserve Corporation | | | |
Graco Inc. | SPX CorporationGraco Inc. | | | |
Hubbell Inc. | The Timken CompanyHubbell Inc. | | | |
IDEX Corporation | IDEX Corporation | | | |
ITT Inc. | ITT Inc. | | | |
Kennametal Inc. | Kennametal Inc. | | | |
Lincoln Electric Holdings, Inc. | Lincoln Electric Holdings, Inc. | | | |
Nordson Corporation | Nordson Corporation | | | |
Pentair plc | Pentair plc | | | |
Regal-Beloit Corporation | Regal Rexnord Corporation | | | |
Snap-On Inc. | Snap-On Inc. | | | |
SPX Corporation | SPX Corporation | | | |
The Timken Company | The Timken Company | | | |
The Toro Company | The Toro Company | | | |
ITTWatts Water Technologies, Inc. | Watts Water Technologies, Inc. | | | |
KennametalWoodward, Inc. | Woodward, Inc. | | | |
Zurn Water Solutions | | | | |
Executive compensation information for the Peer Group is limited to individuals identified in those companycompanies' filings whose positions may or may not correspond to the roles held by, and responsibilities of, our Officers. Therefore, our Peer Group information is not the only source of data the HR Committee utilizes to determine compensation for our Officers. The HR Committee also uses survey data provided by Willis Towers Watson for positions where Peer Group compensation information is insufficient.
Executive Compensation Program Elements
The primary elements of our executive compensation program consist of base salary, annual cash incentive, long-term incentives, and benefits. The HR Committee believes each compensation element is supported by the principles described in the Executive Compensation Program Principles section. The following table provides a high-level overview of each element:
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| Element | Description | Purpose |
Fixed Pay
| Base Salary | A fixed amount of compensation, paid in cash. | Provides a market competitive pay level for each Officer based on position, scope of responsibility, individual performance, and sustained performance. |
Benefits | Benefits package includes, but is not limited to, medical, dental, vision, life, accident, disability insurance, and qualified and non-qualified retirement plans. | Provides competitive benefits and the opportunity for employees to save for retirement. All employees qualify for the same benefits except for the non-qualified retirement plans, which are available to individuals with earnings above the IRS annual compensation limit. |
Perquisites | ExecutiveAnnual executive physical assessment. | Provides a holistic preventative approach to health management for our key leadership team to minimize disruption to the Company and protect the interest of our stockholders. |
Performance-Based Pay | Annual Cash Incentive | A performance-based, annual incentive that is payable in cash based on achievement of key pre-determined financial goals for the applicable fiscal year financial plan as approved by the Company's Board. | Rewards Officers for their contributions toward the Company’s and business units' achievement of specific goals. This element focuses attention on the Company’s actual financial performance and represents approximately one-fifth to one-third of the performance-based variable component of total compensation. |
Stock Options (Long-Term Incentives)
| Awards are time-based and vest ratably over three years beginning on the first anniversary of grant date. Awards are granted annually and represent 50% of the total long-term incentive value. | Aligns the interests of our Officers with those of our stockholders. |
Long-Term Compensation Plan (Long-Term Incentives) | Performance-based awards payable in shares of common stock based on achievement of predetermined three fiscal-year financial goals.
Awards are granted annually and represent 50% of the total long-term incentive value.
| Aligns a significant portion of each Officer's compensation to deliver long-term financial goals, encourages focus on long-term Company and business unit performance, and promotes retention. |
Restricted Stock (Long-Term Incentives)
| Awards are not part of the Officers' annual total compensation package and are granted on a discretionary basis based on business needs.
The HR Committee may grant aan RSU award as part of the hiring of a new Officer, in recognition of a significant change in roles and responsibilities for an Officer, or as a retention vehicle for a current Officer.
Awards generally vest over three years in one-third increments.
RSUs were introduced in fiscal 2019 and replaced restricted stock awards going forward. This change was approved by the Human Resources Committee to better align with common market equity granting practices.
| Aligns the interests of our Officers with those of our stockholders. |
Compensation Mix at Target
It is a key principle of our executive compensation program that a significant portion of an Officer’s compensation is performance-based, and the performance-based compensation is proportionally increased based on position level in the Company. Our performance-based awards consist of the annual cash incentive and long-term incentives. The followingBelow is the compensation mix at target awarded by the HR Committee for fiscal 2019:2022:
The Company’s financial results directly drive the actual total direct compensation paid to our NEOs. Based on fiscal 20192022 Company performance, actual total direct compensation earned for fiscal 2019the year was abovebelow the target levels established for our NEOs.
| | | Fiscal 2019 Total Direct Compensation (TDC) | | Fiscal 2019 Performance-Based Incentive Plan Payout Achievement | | Fiscal 2022 Total Direct Compensation (TDC) | | Fiscal 2022 Performance-Based Incentive Plan Payout Achievement |
Name | Target TDC (1) ($) | Actual TDC (2) ($) | Actual as % of Target TDC | | Annual Incentive Plan (3) | Long-Term Compensation Plan (4) | Name | Target TDC (1) ($) | Actual TDC (2) ($) | Actual as % of Target TDC | | Annual Incentive Plan (3) | Long-Term Compensation Plan (4) |
Tod E. Carpenter | 6,174,488 |
| 9,189,274 |
| 149% | | 63% | 195% | Tod E. Carpenter | 6,319,182 | 6,132,552 | 97% | | 134% | 66% |
Scott J. Robinson | 1,853,212 |
| 2,468,683 |
| 133% | | 63% | 195% | Scott J. Robinson | 1,991,946 | 1,978,241 | 99% | | 134% | 66% |
Thomas R. Scalf | 1,524,356 |
| 1,960,734 |
| 129% | | 51% | 195% | Thomas R. Scalf | 1,593,908 | 1,603,433 | 101% | | 138% | 66% |
Jeffrey E. Spethmann | 1,428,198 |
| 1,824,137 |
| 128% | | 69% | 195% | Jeffrey E. Spethmann | 1,537,491 | 1,508,305 | 98% | | 130% | 66% |
Amy C. Becker | 1,152,266 |
| 1,458,919 |
| 127% | | 63% | 195% | |
Richard B. Lewis | | Richard B. Lewis | 1,335,032 | 1,350,719 | 101% | | 134% | 66% |
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(1) | Target TDC consists of base salary, target annual cash incentive for fiscal 2019, grant date fair value for the LTCP award for the three-year period ended July 31, 2019, and the grant date fair value of the annual stock option award for fiscal 2019. |
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(2) | Actual TDC consists of earned base salary, annual cash incentive earned for fiscal 2019, LTCP award payout value (based on July 31, 2019 closing stock price) for the three-year period ended July 31, 2019, and the grant date fair value of the annual stock option award for fiscal 2019. |
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(3) | Below target payout based on financial performance for fiscal 2019. Refer to our Annual Incentive section for additional information. |
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(4) | Above target payout based on financial performance for fiscal 2017-2019. Refer to the Long-Term Incentives section for additional information. |
(1)Target TDC consists of base salary, target annual cash incentive for fiscal 2022, grant date fair value for the LTCP award for the three-year period ended July 31, 2022, and the grant date fair value of the annual stock option award for fiscal 2022.
(2)Actual TDC consists of earned base salary, annual cash incentive earned for fiscal 2022, LTCP award payout value (based on July 29, 2022 closing stock price) for the three-year period ended July 31, 2022, and the grant date fair value of the annual stock option award for fiscal 2022.
(3) Above target payout based on financial performance for fiscal 2022. Refer to the Annual Incentive section for additional information.
(4)Below target payout based on financial performance for fiscal 2020-2022. Refer to the Long-Term Incentives section for additional information.
Base Salary
The HR Committee reviews Officers’ base salaries annually and may adjust them based on market competitiveness and individual performance. The following table outlines fiscal 20192022 base salary increasessalaries for our NEOs as approved by the HR Committee based on an analysis including a review of market analysis completeddata provided by Willis Towers Watson.
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Name | Fiscal 2022 Base Salary | Fiscal 2021 Base Salary | Increase % | Fiscal 2022 Competitive Market Positioning |
Tod E. Carpenter | $1,030,000 | $1,000,000 | 3.0% | Within a reasonable competitive range |
Scott J. Robinson | $540,000 | $520,000 | 3.8% | Within a reasonable competitive range |
Thomas R. Scalf | $485,000 | $470,000 | 3.2% | Within a reasonable competitive range |
Jeffrey E. Spethmann | $465,000 | $455,000 | 2.2% | Within a reasonable competitive range |
Richard B. Lewis | $450,000 | $385,000 | 16.9% (1) | Within a reasonable competitive range |
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Name | Fiscal 2019 Base Salary | Fiscal 2018 Base Salary | Increase % | Fiscal 2019 Competitive Market Positioning |
Tod E. Carpenter | $975,000 | $950,000 | 2.6% | Within a reasonable competitive range |
Scott J. Robinson | $500,000 | $458,000 | 9.2% | Within a reasonable competitive range |
Thomas R. Scalf | $460,000 | $440,000 | 4.5% | Within a reasonable competitive range |
Jeffrey E. Spethmann | $440,000 | $400,000 | 10.0% | Within a reasonable competitive range |
Amy C. Becker | $405,000 | $385,500 | 5.1% | Within a reasonable competitive range |
_______________(1) The HR Committee approved the increase in Mr. Lewis’ base pay to reflect the broad scope of Mr. Lewis’ position, along with his strong performance in the role and his tenure with the Company.
Annual Incentive
Each year, the HR Committee leverages competitive market data to establish the annual cash incentive target opportunities for Officers and to set the target incentive opportunities as a percentage of base salary. For fiscal 2019, theThe individual incentive target opportunity for our NEOs for fiscal 2022 ranged from 55%65% to 110%120% of base salary.
Under our annual cash incentive plan, potential payouts range from 0% to 200% of the target incentive opportunity based on financial performance achievements at fiscal year-end.
Performance Goals. Our fiscal 2022 annual incentive program for Officers is based on three financial measures: EPS, net sales, diluted earnings per share (EPS) and ROI.return on investment (ROI). All performance measures and associated goals are approved by the HR Committee each year based on the Company's Board-approved financial plan for the applicable fiscal year. ForConsistent with fiscal 2019,2021, the HR Committee established a performance target range of ±1% of the net sales target measure. This is consistent with the approach established in prior years since the HR Committee recognized the volatility of market conditionsranges for maximum and understood the variables involved in creating the business plan. The target range setting approach provided flexibility in plan design as a result of the externalities influencing budgeting and forecasting accuracy. Performance targets for EPS and ROI measures were established as a single, fixed goal similar to prior years. The HR Committee also established performance threshold and maximum levels for all measures.three measures were +/-15% of the targets.
Annual incentive awards for Officers with corporate responsibility (Mr. Carpenter, Mr. Robinson, and Ms. Becker)Mr. Lewis) are based on the Company’s overall financial results.Company net sales, Company diluted EPS and Company ROI. The annual incentive awards for Officers with business segment responsibility (Mr. Scalf and Mr. Spethmann) are based on the Company's overall dilutedCompany Diluted EPS and their specific business segment results for net sales and ROI.
For fiscal 2019,2022, our annual incentive plansplan for Officers werewas reviewed and approved by the HR Committee at its September 20182021 meeting. The plan provided that incentive targets and achievement can exclude items related but not limited to changes in tax laws, accounting rule changes, material restructuring and acquisitions if approved by the HR Committee.
The table below describes performance targets and actual results for fiscal 2019 overall Company performance measures.2022. We concluded the fiscal year with payouts ranging from 51%130% to 69%138% of target for the NEOs. In connection with approving the payouts for fiscal 2019 incentive related to financial measures,The calculated actual results below reflect adjustments approved by the HR Committee approved the following adjustments:
Exclude $20.7 million of net charges related to Tax Cutsthe discontinuation of business operations in Russia and Jobs Act (TCJA),
Exclude the acquisitions of P-A Industrial Services, Solaris Biotechnology and Purilogics, LLC. Diluted EPS - Incentive was calculated as the Company’s consolidated diluted EPS, increased by $0.02 due to the exclusion of the Russia related restructuring expenses of $2.6 million, net of tax, and increased by $0.02 due to the exclusion of impacts from the acquisitions, net of tax. Company and Industrial ROI - Incentive measures were calculated as net earnings for the fiscal year less the net effect of the applicable restructuring and acquisition related adjustments, net of tax then divided by the average invested capital for the fiscal year which is the total of average debt, stockholders’ equity, and the allowance for doubtful accounts less deferred taxes, adjusted for the applicable balance sheet impact of the new revenue recognition standard (which reducedrestructuring and acquisitions. No adjustments were made to Industrial ROI - Incentive due to the Company's net sales),Russia restructuring. Company Net Sales - Incentive and
Exclude Industrial Net Sales - Incentive were calculated by reducing Company Net Sales by $8.0 million and Industrial Net Sales by $8.0 million due to the impactexclusion of sales from the BOFA International LTD acquisition (which includes incremental revenue of $30.1 million).
acquired businesses.
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Fiscal 2019 Performance Measures (1) | Weighting | Threshold | Target | Maximum | Actual | Payout Scheme |
Company Net Sales - Incentive | 30% | $2.708 billion | $2.979 billion -$3.039 billion | $3.309 billion | $2.800 billion | 60.43% |
Company Diluted EPS - Incentive (2) | 50% | $2.08 | $2.45 | $2.82 | $2.25 | 67.57% |
Company ROI - Incentive | 20% | 19.2% | 21.3% | 23.4% | 19.7% | 54.29% |
Engine Net Sales - Incentive (3) | 30% | $1.853 billion | $2.038 billion - $2.080 billion | $2.265 billion | $1.911 billion | 58.81% |
Engine ROI - Incentive (3) | 20% | 20.8% | 23.1% | 25.4% | 19.7% | 0% |
Industrial Net Sales - Incentive (4) | 30% | $854.7 million | $940.1 million - $959.1 million | $1.045 billion | $889.0 million | 64.08% |
Industrial ROI - Incentive (4) | 20% | 21.2% | 23.5% | 25.9% | 22.7% | 79.13% |
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Fiscal 2022 Performance Measures | Weighting | Threshold | Target | Maximum | Actual | Payout Scheme (4) |
Company Net Sales - Incentive | 30% | $2.605 billion | $3.065 billion | $3.525 billion | $3.299 billion | 150.76% |
Company Diluted EPS - Incentive (1) | 50% | $2.21 | $2.60 | $2.99 | $2.70 | 125.64% |
Company ROI - Incentive | 20% | 15.8% | 18.6% | 21.4% | 19.4% | 128.57% |
Engine Net Sales (2) | 30% | $1.788 billion | $2.104 billion | $2.419 billion | $2.303 billion | 163.06% |
Engine ROI (2) | 20% | 18.0% | 21.2% | 24.4% | 22.2% | 131.25% |
Industrial Net Sales - Incentive (3) | 30% | $0.830 billion | $0.977 billion | $1.123 billion | $0.996 billion | 113.19% |
Industrial ROI - Incentive (3) | 20% | 16.7% | 19.6% | 22.5% | 21.5% | 165.52% |
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(1) | The HR Committee defined Diluted EPS-Incentive as GAAP diluted EPS and defined ROI-Incentive as net earnings divided by average capital during the period. Both measures are subject to adjustments for the impact of U.S. tax laws, restructuring costs, and the impact of acquisitions (as applicable) completed during the fiscal year. The fiscal 2019 calculation of these performance measures excluded the impact of the TCJA, the new revenue recognition standard, and BOFA. |
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(2) | The Company Diluted EPS - Incentive measure applied to all of the Officers. |
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(3) | Mr. Scalf's fiscal 2019 annual cash incentive plan was tied to Engine Net Sales - Incentive and Engine ROI - Incentive. |
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(4) | Mr. Spethmann's fiscal 2019 annual cash incentive plan was tied to Industrial Net Sales - Incentive and Industrial ROI - Incentive. |
(1)The Company Diluted EPS - Incentive measure applied to all Officers.
(2) Mr. Scalf's fiscal 2022 annual cash incentive plan was tied to Engine Net Sales and Engine ROI.
(3) Mr. Spethmann's fiscal 2022 annual cash incentive plan was tied to Industrial Net Sales - Incentive and Industrial ROI - Incentive.
(4) Represents payout results prior to applying the respective weighting for each measure.
Award Calculation Methodology. For each performance measure, a payout multiplier from 0% to 200% of the target incentive award amount is based on the level of achievement. The overall calculation methodology and payout design are illustrated below.
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| Target Incentive Award Amount | | Financial Performance Payout % | | Annual Incentive Payout | |
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| | | | | | X | | | | | | | | | | | | = | |
| | Base Salary | x | Target Incentive Percentage | | | Net Sales - Incentive Achievement | | + | | Diluted EPS - Incentive Achievement
| | + | | ROI - Incentive Achievement
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| | | | | | | | x↑ | | | | x↑ | | | | x↑ | | | | |
| | | | | | | | Payout Scheme (1) | | | | Payout Scheme (1) | | | | Payout Scheme (1) | | | | |
| | | | | | | | x | | | | x | | | | x | | | | |
| | | | | | | | 30% Measure Weighting
| | | | 50% Measure
Weighting
| | | | 20% Measure
Weighting
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(1) | 0% payout if achievement is below threshold performance |
(1) 0% payout if achievement is below threshold performance
40% of target incentive payout if achievement is at threshold performance
100% of target incentive payout if achievement is at financial plan target performance
200% of target incentive payout if achievement is at maximum performance
Payout will be interpolated when achievement level is between any of the predetermined performance levels outlined
above.
Payouts. Based on the financial performance achievement level for fiscal 2019,2022, actual payouts for our NEOs ranged from 51% to 69%130%-138% of target. The overall annual incentive payment for each NEO is set forth below.
| | Name | Target Award as a % of Base Salary | Target Award ($) | Actual Payout ($) | Name | Target Award as a % of Base Salary | Target Award ($) | Actual Payout ($) |
Tod E. Carpenter | 110% | 1,072,500 |
| 673,215 | Tod E. Carpenter | 120% | 1,236,000 | 1,653,326 |
Scott J. Robinson | 75% | 375,000 |
| 235,390 | Scott J. Robinson | 75% | 405,000 | 541,745 |
Thomas R. Scalf | 65% | 299,000 |
| 153,770 | Thomas R. Scalf | 70% | 339,500 | 468,467 |
Jeffrey E. Spethmann | 65% | 286,000 |
| 196,863 | Jeffrey E. Spethmann | 65% | 302,250 | 392,569 |
Amy C. Becker | 55% | 222,750 |
| 139,822 | |
Richard B. Lewis | | Richard B. Lewis | 65% | 292,500 | 391,260 |
Long-Term Incentives
The long-term incentives plan design includes a mix of 50% performance-based awards and 50% non-qualified stock options, which are tied to our common stock to align the interests of our Officers to those of our stockholders. On an annual basis, the HR Committee determines the long-term incentive values for each Officer based on market data provided in the analysis prepared by Willis Towers Watson.
During fiscal 2019,2022, the following long-term incentive awards were granted to our NEOs:
| | Name | Long-Term Compensation Plan Award (Target Shares) | Stock Option Award (Shares) | Name | Long-Term Compensation Plan Award (Target Shares) | Stock Option Award (Shares) |
Tod E. Carpenter | 39,300 | 152,000 | Tod E. Carpenter | 34,500 | 144,000 |
Scott J. Robinson | 10,100 | 39,000 | Scott J. Robinson | 9,300 | 38,600 |
Thomas R. Scalf | 8,000 | 30,800 | Thomas R. Scalf | 6,300 | 26,300 |
Jeffrey E. Spethmann | 8,000 | 30,800 | Jeffrey E. Spethmann | 6,300 | 26,300 |
Amy C. Becker | 5,600 | 21,600 | |
Richard B. Lewis | | Richard B. Lewis | 5,500 | 22,800 |
Based on competitive market data, the HR Committee establishes new awards, including the financial performance objectives, the award matrix, and payout targets (the number of performance units), for our Officers annually. The target number of performance units is based on that award value divided by the Company's three-month weighted average closing stock price closest toon the September HR Committee meeting.date of grant.
The LTCP utilizes two performance measures that the HR Committee believes are key to the creation of stockholder value: growth in net sales and ROI. These targets are approved by the HR Committee at the beginning of each performance cycle based on a three-year growth projection. The HR Committee believes it is a key objective for the Company to maintain a certain level of ROI for our stockholders. The ROI threshold performance level must be achieved to deliver a payout. Therefore, a payout range between 10% and 50% of target is available based on achievement of predetermined threshold ROI results and below threshold attainment for net sales.
| | Fiscal 2017-2019 Performance Measures | Target | Actual | Payout Achievement | |
Fiscal 2020-2022 Performance Measures | | Fiscal 2020-2022 Performance Measures | Target | Actual | Payout Achievement |
Company Net Sales - Incentive | 4% | 8.6% | 195% | Company Net Sales - Incentive | $9,111,170 | $8,742,359 | 66.3% |
Company ROI - Incentive | 18% | 21.2% | Company ROI - Incentive | 18.4% | 16.7% |
The LTCP payouts are based on the position the NEO held at the beginning of the cycle and the length of time in that role. Target awards and actual payouts for the cycle ended July 31, 20192022 for our NEOs were:
| | | | | | | | | | | | | | | | | |
Fiscal 2020-2022 LTCP Cycle | Mr. Carpenter | Mr. Robinson | Mr. Scalf | Mr. Spethmann | Mr. Lewis |
Target Shares | 38,900 | 9,700 | 7,700 | 7,700 | 5,400 |
Actual Share Payout | 25,791 | 6,431 | 5,105 | 5,105 | 3,580 |
|
| | | | | |
Fiscal 2017-2019 LTCP Cycle | Mr. Carpenter | Mr. Robinson | Mr. Scalf | Mr. Spethmann | Ms. Becker |
Target Shares | 56,900 | 12,600 | 9,700 | 8,100 | 6,500 |
Total Weighted Payout Achievement | 195% | 195% | 195% | 195% | 195% |
Actual Share Payout | 110,955 | 24,570 | 18,915 | 15,795 | 12,675 |
Stock Options. The HR Committee grants non-qualified stock option awards to our Officers annually under the 2010 Master Stock Incentive Plan.annually. Stock options represent approximately one-half of the long-term incentive value as approved by the HR Committee. Each stock option award has a ten-year term and vests over three years in one-third increments beginning on the first anniversary of the grant date. Stock options can provide compensation when they vest and the market price exceeds the exercise price, which is the market closing price on the date of the grant.
For stock options granted prior to fiscal 2011, awards provided to an Officer within the first five years of being named an Officer had a reload provision. This provision provided a new option grant to be established upon exercise of the original grant. Reload stock options are automatically granted under the terms of the original stock option agreement to which they relate and no further action of the Committee is required. The reload stock option is granted for the number of shares tendered as payment for the exercise price and tax withholding obligation. The option grant price of the reload option is equal to the market price of the stock on the date of exercise and will expire on the same date as the original option. Stock options that are currently granted to Officers do not have a reload provision.
Restricted Stock Units. Historically, Donaldson granted restricted stock awardsmay grant RSUs to Officers on a limited basis such as in connection with a competitive hiring offer, in recognition of a significant change in roles and responsibilities, and/or as a retention vehicle for a current Officer.
Effective September 2018, the Committee approved the use of restricted stock units (RSUs) instead of restricted stockvehicle. RSU awards for the same circumstances described above. RSUs generally vest over three years in one-third increments beginning on the first anniversary of the grant date. Award recipients are eligible to accrue dividend equivalent units during the vesting period. All dividend equivalent units are subject to the same vesting condition as the underlying RSUs. The Committee determined that the transition to RSUs better aligned with leading market practices. None of the NEOs received aan RSU award in fiscal 2019.2022.
Benefits
We provide a competitive total rewards program to our Officers, including indirect compensation such as health and welfare benefits and retirement benefits. The following benefits are provided to our Officers.
Health and Welfare Benefits. Our U.S. Officers participate in the same health and welfare programs as all other Company U.S. salaried employees.
Retirement Benefits. Our U.S. Officers participate in the following retirement plans, which are provided to most other Company U.S. salaried employees:
•Retirement Savings and Employee Stock Ownership Plan is a defined contribution plan designed to meet the requirements of a qualified plan under ERISA and the Internal Revenue Code and to encourage our employees to save for retirement. Most of ourAll U.S. employees are eligible to participate in this plan. ParticipantsEligible participants can contribute on a pretax basis up to 50% of their total cash compensation up to(within the IRS annual deferral limits.limits) on a pretax or after-tax basis. Most participants are eligible for a Company match and an annual Company contribution. The Company matchesmatch is 100% of the first 3% of compensation that a participant contributes plus 50% of the next 2% of compensation that a participant contributes.
Eligible employees also receive an automatic The Company retirementannual contribution equal toequals 3% of a participant's total compensation annually.compensation.
•Salaried Employees’ Pension Plan is a defined benefit pension plan that provides retirement benefits to eligible U.S. employees through a cash balance benefit. It is designed to meet the requirements of a qualified plan under ERISA and the Internal Revenue Code. See the Pension Benefits Table and narrative for more information
on this plan. Effective August 1, 2016, employees no longer accrue Company contribution credits under the plan.
Executive Benefits. The Company also provides the following benefit plans to our Officers to compete for key executive talent:
•Deferred Compensation and 401(k) Excess Plan
•Excess Pension Plan (as of August 1, 2016, employees no longer accrue Company contribution credits)
For details on these plans, refer to the Pension Benefits Table and narrative and the Non-Qualified Deferred Compensation Table and narrative.
Perquisites
We provide the following benefits to our Officers to enhance competitive advantage for the organization as well as to minimize business disruptions.
Executive Education. Select Officers leading major business segments or functions are eligible for selection to participate in an advanced management program as an important tool to further develop top leadership talent. Executive education offers our Officers comprehensive training and enhances knowledge that can be translated into new organizational capabilities. This type of leadership development is also aimed at fostering employee engagement and increasing our talent pipeline.
Executive Physical. All Officers are eligible for an annual executive physical program with an approximate value of $5,000 to cover a health and wellness assessment. The purpose of this program is to provide our key leadership team with a holistic preventative approach to health management to minimize disruption to the Company and protect the interest of our stockholders.
Except for these annual executive physical and executive education programs, we do not offer any other perquisites to executives that are not available to our employees.
Change in Control Agreements
The Company has entered into a "double trigger" Change in Control Agreement (“CIC Agreement”) with each of our Officers. Other than the CIC Agreements, we do not have any employment contracts with our NEOs. The change in control arrangements are designed to:
•Allow our Officers to take actions in the best interests of our stockholders without the personal distraction that could arise in connection with an anticipated or actual change in control
•Provide for a stable work environment by alleviating the financial impact of termination of employment
•Assure that we will have the continued dedication of our Officers by diminishing the loss of key leaders that may occur as a result of personal uncertainties and risks
Additional information regarding our CIC AgreementAgreements is provided in the “Potential Payments uponUpon Termination or Change in Control” section beginning on page 43.51.
Executive Incentive Compensation Clawback Policy
In July 2019, the Company formalized and adopted its current clawback policy. All annual and long-term incentive awards held by executive officersOfficers are subject to forfeiture and/or recoupment in the event of a financial restatement due to material noncompliance of the Company with financial reporting requirements or if the HR Committee determines that the executive officerOfficer has engaged in certain misconduct in accordance with the terms of the policy.
Stock Ownership Requirements
The HR Committee has established above-market stock ownership requirements for our Officers. This requirement links a significant portion of their personal holdings to the Company’s long-term success and further aligns Officers' interests to those of our stockholders. The stock ownership is defined based on common market practice by our peer group and companies of similar size. Our requirement levels remain unchanged from the prior year.
|
| | | | | | | |
Position | Donaldson Stock Ownership Requirement | Common Market Practice on Stock Ownership Requirement |
CEO | 10 times base salary | 5 times base salary |
CFO & Senior Vice Presidents | 5 times base salary | 3 times base salary |
Vice Presidents | 3 times base salary | 1 time base salary |
The HR Committee defines ownership as follows:
•All shares of Company stock owned by an Officer;
•Unvested restricted stock less assumed tax withholding rate; and
•In-the-money vested (unexercised) stock options less the exercise cost and assumed tax withholding rate. In-the-money stock options are included to ensure that our Officers are provided with the greatest upside potential and downside accountability to our stock price.
Officers are expected to meet their ownership requirement within five years of being named an Officer at their level.for one of the position levels outlined above. As of the end of fiscal 2019, all2022, of the NEOs with at least five years in their position, Mr. Carpenter and Mr. Scalf have either met thesatisfied their stock ownership requirement orrequirement. Mr. Robinson and Mr. Spethmann, having previously satisfied their stock ownership requirements, have been impacted by the decline in our stock price and currently do not beenmeet the requirements. Mr. Lewis is currently below the required ownership level but has yet to reach five years in their current position for five years.his position.
Stock Hedging and Pledging Policy
The Company's Hedging and Pledging Policy prohibits the Company’s directors and Officers from engaging in a hedge of Company stock, which includes any instrument or transaction through which the director or Officer offsets or reduces exposure to the risk of price fluctuations in Company stock. The policy does not restrict hedging by non-Officer employees or by designees of directors or Officers, or hedging securities indirectly owned. The policy also prohibits pledges of Company stock (e.g., as collateral for a loan or by holding Company securities in a margin account) by directors or Officers.
Tax Considerations
Section 162(m) of the Internal Revenue Code imposes a limit of $1 million limitin compensation per year on deductibility of compensation for any "covered employees". The Committee generally intends to continue to comply with the requirements of Section 162(m) as it existed prior to the tax reform legislationamount public companies may deduct with respect to certain executive officers. Prior to the Tax Act, the Company was able to deduct most of its performance-based executive compensation in excess of $1 million payable under outstanding awards granted before November 2, 2017, including incentive compensationpursuant to an exception that was awardedrepealed by the Tax Act. While the Tax Act significantly reduces the amount of compensation we can deduct under the 2010 Master Stock Incentive Plan in orderSection 162(m), our performance-based programs remain central to qualify them for the transitional relief to the extent available. However, no assurance can be given that theour compensation associated with these awards will qualify for the transitional relief, and we believe that our annual cash incentives and LTCP awards will not qualify under the interpretation of revised Section 162(m)program and the related requirements for transitional relief. Accordingly, the Company reserves the right to take actions that may result in the loss of a deduction if it determines that doing so is advisable based on all relevant facts and circumstances.
TheHR Committee continues to believe that stockholder interests are best served if its discretion and flexibility in structuring and awarding compensation is not restricted even though some compensation awards may have resulted in the past, and are expected to result in the future, in non-deductible compensation expensesexpense to the Company. The Committee’s ability to continue to provide a competitive compensation package to attract, motivate and retain the Company’s most senior executives is considered critical to the Company’s success and to advancing the interests of its stockholders.
The HR Committee designs and administers our equity compensation, our non-qualified deferred compensation, and CIC Agreements to be in compliance with Section 409A of the Internal Revenue Code, the federal tax rules affecting non-qualified deferred compensation.
Compensation Risk Analysis
The Company has reviewed and assessed the risks arising from its compensation plans. The findings have been reported to the HR Committee. We determined that our compensation programs, policies, and practices for our employees are not likely to have a material adverse effect on the Company. In making this determination, we took into account the compensation mix for our employees along with the various risk control features of our programs, including balanced performance targets, stock ownership guidelines, and appropriate incentive caps.
Summary Compensation Table
The following table summarizes compensation awarded to or earned by individuals who served as Chief Executive Officer and Chief Financial Officer during fiscal 20192022 and each of the other three most highly compensated Officers who served in such capacities as of July 31, 2019.2022.
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| | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary (1) ($) | Stock Awards (2) ($) | Option Awards (3) ($) | Non-Equity Incentive Plan Compensation (4) ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings (5) ($) | All Other Compensation (6) ($) | Total ($) |
Tod E. Carpenter | 2019 | 970,192 |
| 2,293,155 |
| 2,069,541 |
| 673,215 |
| 85,893 |
| 178,392 |
| 6,270,388 |
|
Chairman, President and | 2018 | 942,308 |
| 1,712,711 |
| 1,502,426 |
| 1,598,571 |
| 8,872 |
| 173,065 |
| 5,937,953 |
|
Chief Executive Officer | 2017 | 844,712 |
| 2,127,491 |
| 1,827,537 |
| 1,453,590 |
| 12,931 |
| 64,062 |
| 6,330,323 |
|
| | | | | | | | |
Scott J. Robinson | 2019 | 491,923 |
| 589,335 |
| 514,098 |
| 235,390 |
| — |
| 47,067 |
| 1,877,813 |
|
Senior Vice President and | 2018 | 451,539 |
| 427,042 |
| 375,357 |
| 490,432 |
| — |
| 46,207 |
| 1,790,577 |
|
Chief Financial Officer | 2017 | 412,923 |
| 471,114 |
| 406,119 |
| 436,723 |
| — |
| 30,049 |
| 1,756,928 |
|
| | | | | | | | |
Thomas R. Scalf | 2019 | 456,154 |
| 466,800 |
| 406,006 |
| 153,770 |
| 108,022 |
| 144,533 |
| 1,735,285 |
|
Senior Vice President, | 2018 | 437,254 |
| 295,295 |
| 257,559 |
| 417,757 |
| — |
| 64,361 |
| 1,472,226 |
|
Engine Products | 2017 | 418,284 |
| 362,683 |
| 312,822 |
| 438,825 |
| — |
| 30,299 |
| 1,562,913 |
|
| | | | | | | | |
Jeffrey E. Spethmann | 2019 | 432,308 |
| 466,800 |
| 406,006 |
| 196,863 |
| 14,436 |
| 59,422 |
| 1,575,835 |
|
Senior Vice President, | 2018 | 395,808 |
| 295,295 |
| 257,559 |
| 402,021 |
| — |
| 53,693 |
| 1,404,376 |
|
Industrial Products | 2017 | 368,375 |
| 302,859 |
| 263,429 |
| 328,944 |
| — |
| 20,204 |
| 1,283,811 |
|
| | | | | | | | |
Amy C. Becker | 2019 | 401,250 |
| 326,760 |
| 284,731 |
| 139,822 |
| 67,774 |
| 57,569 |
| 1,277,906 |
|
Vice President, General | 2018 | 380,109 |
| 245,322 |
| 214,632 |
| 294,856 |
| — |
| 49,243 |
| 1,184,162 |
|
Counsel and Secretary | 2017 | 345,468 |
| 243,035 |
| 208,548 |
| 283,014 |
| — |
| 24,858 |
| 1,104,923 |
|
_____________
| |
(1) | This column represents base salary earned by the NEOs for the reported fiscal years. The amounts reflect any applicable cash compensation deferred at the election of the NEOs under the Deferred Compensation and 401(k) Excess Plan. For more information on the Deferred Compensation and 401(k) Excess Plan, see the Non-Qualified Deferred Compensation section. |
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(2) | This column represents the aggregate grant date fair value of performance-based stock awards granted during the fiscal year under our Long-Term Compensation Plan for our NEOs and does not reflect compensation actually received by the NEOs. The performance award grant date fair value is based on the outcome of the performance conditions at the target payout under each award included in the column. The aggregate grant date fair value is computed in accordance with FASB ASC Topic 718. Assuming achievement of the maximum 200% of target performance, the value of the Long-Term Compensation Plan awards for the fiscal 2019-2021 cycle would be: Mr. Carpenter, $4,586,310 Mr. Robinson, $1,178,670; Mr. Scalf, $933,600; Mr. Spethmann, $933,600; and Ms. Becker, $653,520 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary (1) ($) | Stock Awards (2) ($) | Option Awards (3) ($) | Non-Equity Incentive Plan Compensation (4) ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings (5) ($) | All Other Compensation (6) ($) | Total ($) |
Tod E. Carpenter | 2022 | 1,025,385 | | 2,049,300 | | 2,050,553 | | 1,653,326 | | — | | 265,382 | | 7,043,946 | |
Chairman, President and | 2021 | 1,000,000 | | 1,902,278 | | 1,899,421 | | 1,999,272 | | 19,098 | | 58,881 | | 6,878,950 | |
Chief Executive Officer | 2020 | 1,033,654 | | 2,007,629 | | 1,975,495 | | 269,429 | | 83,788 | | 113,234 | | 5,483,229 | |
| | | | | | | | |
Scott J. Robinson | 2022 | 536,923 | | 552,420 | | 549,662 | | 541,745 | | — | | 87,245 | | 2,267,995 | |
Senior Vice President and | 2021 | 520,000 | | 474,418 | | 475,363 | | 678,014 | | — | | 48,611 | | 2,196,406 | |
Chief Financial Officer | 2020 | 536,154 | | 500,617 | | 493,321 | | 91,371 | | — | | 142,530 | | 1,763,993 | |
| | | | | | | | |
Thomas R. Scalf | 2022 | 482,692 | | 374,220 | | 374,511 | | 468,467 | | — | | 110,432 | | 1,810,322 | |
Senior Vice President, | 2021 | 470,000 | | 373,086 | | 374,806 | | 565,254 | | 3,358 | | 44,007 | | 1,830,511 | |
Engine Products | 2020 | 486,154 | | 397,397 | | 389,347 | | 108,363 | | 134,389 | | 47,189 | | 1,562,839 | |
| | | | | | | | |
Jeffrey E. Spethmann | 2022 | 463,462 | | 374,220 | | 374,511 | | 392,569 | | — | | 88,984 | | 1,693,746 | |
Senior Vice President, | 2021 | 455,000 | | 373,086 | | 374,806 | | 412,142 | | 832 | | 39,547 | | 1,655,413 | |
Industrial Products | 2020 | 469,615 | | 397,397 | | 389,347 | | 69,290 | | 17,332 | | 48,025 | | 1,391,006 | |
| | | | | | | | |
Richard B. Lewis | 2022 | 440,000 | | 326,700 | | 324,671 | | 391,260 | | — | | 58,329 | | 1,540,960 | |
Senior Vice President, | | | | | | | | |
Global Operations | | | | | | | | |
_____________
(1) This column represents base salary earned by the NEOs for the reported fiscal years. The amounts reflect any applicable cash compensation deferred at the election of the NEOs under the Deferred Compensation and 401(k) Excess Plan. For more information on the Deferred Compensation and 401(k) Excess Plan, see the Non-Qualified Deferred Compensation section.
(2) This column represents the aggregate grant date fair value of performance-based stock awards granted during the fiscal year under our Long-Term Compensation Plan for our NEOs and does not reflect compensation actually received by the NEOs. The performance award grant date fair value is based on the outcome of the performance conditions at the target payout under each award included in the column. The aggregate grant date fair value is computed in accordance with FASB ASC Topic 718. Assuming achievement of the maximum 200% of target performance, the value of the Long-Term Compensation Plan awards for the fiscal 2022-2024 cycle would be: Mr. Carpenter, $4,098,600; Mr. Robinson, $1,104,840; Mr. Scalf, $748,440; Mr. Spethmann, $748,440; and Mr. Lewis, $653,400.
Refer to Note 1013 of the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 20192022 for our policy and assumptions made in the valuation of share-based payments.
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(3) | This column represents the aggregate grant date fair value of stock option awards granted during the fiscal year under the Company’s 2010 Master Stock Incentive Plan. These amounts were calculated in accordance with FASB ASC Topic 718. Refer to Note 10 of the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 2019 for our policy and assumptions made in the valuation of share-based payments. The grant price for annual stock option awards was the closing stock price on the date of grant. |
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(4) | (3)This column represents the aggregate grant date fair value of stock option awards granted during the fiscal year under the Company’s 2019 Master Stock Incentive Plan. These amounts were calculated in accordance with FASB ASC Topic 718. Refer to Note 13 of the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 2022 for our policy and assumptions made in the valuation of share-based payments. The grant price for annual stock option awards was the closing stock price on the date of grant. (4)This is the amount earned under our Annual Cash Incentive Plan as described in the Compensation Discussion and Analysis. Our NEOs can elect to defer all or a portion of their annual cash incentive to the Deferred Compensation and 401(k) Excess Plan. |
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(5) | This column includes the annual change, if positive on an aggregate basis, in the value of our NEOs' pension benefits for the following plans: |
Salaried Employees’ Pension Plan
Excess Pension Plan
| |
(6) | The All Other Compensation amounts for fiscal 2019 included the following: |
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| | | | | | | | | |
Name | Retirement Contributions (a) ($) | Life Insurance (b) ($) | Restricted Stock Dividend ($) | Executive Physical (c) ($) | Other (d) ($) | Total ($) |
Tod E. Carpenter | 175,381 |
| 3,011 | — | — | — | 178,392 |
|
Scott J. Robinson | 39,975 |
| 1,242 | 5,850 |
| — | — | 47,067 |
|
Thomas R. Scalf | 60,721 |
| 1,242 | 570 |
| — | 82,000 | 144,533 |
|
Jeffrey E. Spethmann | 57,610 |
| 1,242 | 570 |
| — | — | 59,422 |
|
Amy C. Becker | 48,176 |
| 1,841 | 2,340 |
| 5,212 | — | 57,569 |
|
______________
| |
a. | This includes the Company match to the Retirement Savings and Employee Stock Ownership Plan as well as the |
Deferred Compensation and 401(k) Excess Plan.
| |
b. | The imputed income on the Company-provided basic life insurance in excess of $50,000. |
| |
c. | The imputed income for health assessments that are not covered through regular medical insurance offered by the |
Company.
| |
d. | Includes costs associated with Mr. Scalf's executive education in relation to his management duties as described in |
(5)This column includes the Compensation Discussion and Analysis section.annual change, if positive on an aggregate basis, in the value of our NEOs' pension benefits for the following plans:
•Salaried Employees’ Pension Plan
•Excess Pension Plan
(6)The All Other Compensation amounts for fiscal 2022 included the following:
| | | | | | | | | | | | | | | | | | | | |
Name | Retirement Contributions (a) ($) | Life Insurance (b) ($) | Restricted Stock Dividend ($) | Executive Physical (c) ($) | Equalization Payment (d) | Total ($) |
Tod E. Carpenter | 114,147 | 3,564 | — | — | 147,671 | 265,382 |
Scott J. Robinson | 84,699 | 2,322 | — | 224 | — | 87,245 |
Thomas R. Scalf | 73,298 | 2,322 | — | 600 | 34,212 | 110,432 |
Jeffrey E. Spethmann | 61,319 | 2,322 | — | 40 | 25,303 | 88,984 |
Richard B. Lewis | 53,286 | 1,242 | — | 3,801 | — | 58,329 |
______________
a.This includes the Company match to the Retirement Savings and Employee Stock Ownership Plan as well as the Deferred Compensation and 401(k) Excess Plan.
b.The imputed income on the Company-provided basic life insurance in excess of $50,000.
c.The imputed income for health assessments that are not covered through regular medical insurance offered by the Company.
d. Represents tax gross-up payments made in connection with the Company's administrative error related to taxation of 401(k) Excess Plan deferrals in 2017.
Fiscal 20192022 Grants of Plan-Based Awards Table
This table provides information regarding all plan-based awards granted to our NEOs during fiscal 20192022 as follows:
•Fiscal 20192022 annual cash incentive pursuant to the Annual Cash Incentive Plan;
•Stock awards pursuant to the Long-Term Compensation Plan for the three-year performance cycle
(fiscal 2019-2021)2022-2024); and
•Annual stock options granted pursuant to the 20102019 Master Stock Incentive Plan during fiscal 20192022.
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) |
Name and Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Name and Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Tod E. Carpenter | | | Tod E. Carpenter | |
Annual Cash Incentive | | 429,000 | 1,072,500 | 2,145,000 | | | Annual Cash Incentive | | 494,400 | 1,236,000 | 2,472,000 | |
Stock Awards | 9/21/2018 | | 3,930 | 39,300 | 78,600 | | 2,293,155 |
| Stock Awards | 9/23/2021 | | 3,450 | 34,500 | 69,000 | | 2,049,300 | |
Stock Option Reload (3) | 9/14/2018 | | 8,960 | 59.04 | 16,771 |
| |
Stock Option Reload (3) | 9/14/2018 | | 11,065 | 59.04 | 49,106 |
| |
Annual Stock Option (4) | 9/21/2018 | | 152,000 | 59.18 | 2,003,664 |
| |
Annual Stock Option (3) | | Annual Stock Option (3) | 9/23/2021 | | 144,000 | 59.40 | 2,050,553 | |
Scott J. Robinson | | | Scott J. Robinson | |
Annual Cash Incentive | | 150,000 | 375,000 | 750,000 | | | Annual Cash Incentive | | 162,000 | 405,000 | 810,000 | |
Stock Awards | 9/21/2018 | | 1,010 | 10,100 | 20,200 | | 589,335 |
| Stock Awards | 9/23/2021 | | 930 | 9,300 | 18,600 | | 552,420 | |
Annual Stock Option (4) | 9/21/2018 | | 39,000 | 59.18 | 514,098 |
| |
Annual Stock Option (3) | | Annual Stock Option (3) | 9/23/2021 | | 38,600 | 59.40 | 549,662 | |
Thomas R. Scalf | | | Thomas R. Scalf | |
Annual Cash Incentive | | 119,600 | 299,000 | 598,000 | | | Annual Cash Incentive | | 135,800 | 339,500 | 679,000 | |
Stock Awards | 9/21/2018 | | 800 | 8,000 | 16,000 | | 466,800 |
| Stock Awards | 9/23/2021 | | 630 | 6,300 | 12,600 | | 374,220 | |
Annual Stock Option (4) | 9/21/2018 | | 30,800 | 59.18 | 406,006 |
| |
Annual Stock Option (3) | | Annual Stock Option (3) | 9/23/2021 | | 26,300 | 59.40 | 374,511 | |
Jeffrey E. Spethmann | | | Jeffrey E. Spethmann | |
Annual Cash Incentive | | 114,400 | 286,000 | 572,000 | | | Annual Cash Incentive | | 120,900 | 302,250 | 604,500 | |
Stock Awards | 9/21/2018 | | 800 | 8,000 | 16,000 | | 466,800 |
| Stock Awards | 9/23/2021 | | 630 | 6,300 | 12,600 | | 374,220 | |
Annual Stock Option (4) | 9/21/2018 | | 30,800 | 59.18 | 406,006 |
| |
Amy C. Becker | | | |
Annual Stock Option (3) | | Annual Stock Option (3) | 9/23/2021 | | 26,300 | 59.40 | 374,511 | |
Richard B. Lewis | | Richard B. Lewis | |
Annual Cash Incentive | | 89,100 | 222,750 | 445,500 | | | Annual Cash Incentive | | 117,000 | 292,500 | 585,000 | |
Stock Awards | 9/21/2018 | | 560 | 5,600 | 11,200 | | 326,760 |
| Stock Awards | 9/23/2021 | | 550 | 5,500 | 11,000 | | 326,700 | |
Annual Stock Option (4) | 9/21/2018 | | 21,600 | 59.18 | 284,731 |
| |
Annual Stock Option (3) | | Annual Stock Option (3) | 9/23/2021 | | 22,800 | 59.40 | 324,671 | |
_______________
| |
(1) | The Threshold, Target, and Maximum represent the range of potential payments for fiscal 2019 under the Annual Cash Incentive Plan described in the Compensation Discussion and Analysis based on the NEOs’ base salary as of July 31, 2019. The threshold amount reflects payment at threshold performance achievement across all applicable financial goals. The amount actually earned and paid out is based on the attainment of pre-established performance goals and is reflected in the Summary Compensation Table. |
| |
(2) | The Threshold, Target, and Maximum represent the range of payments under the Long-Term Compensation Plan described in the Compensation Discussion and Analysis. The amounts in these columns reflect shares of stock and are based on the attainment of pre-established three fiscal-year performance goals. |
| |
(3) | This is a reload of the original stock option award granted in fiscal years 2009 and 2010 as described in the Compensation Discussion and Analysis under Stock Options. The reload option was approved by the HR Committee as part of the initial grant and was granted pursuant to the 2001 Master Stock Incentive Plan. This reload stock option award vested immediately on the date of grant. |
| |
(4) | The annual stock option awards were granted to our NEOs on September 21, 2018 as described in the Compensation Discussion and Analysis section. These grants were approved by the HR Committee at its September meeting. All options were granted with an exercise price equal to the closing stock price of the Company’s common stock on the date of the grant and vest in three equal annual installments beginning on the first anniversary of the grant date. |
(1)The Threshold, Target, and Maximum represent the range of potential payments for fiscal 2022 under the Annual Cash Incentive Plan described in the Compensation Discussion and Analysis based on the NEOs’ base salary as of July 31, 2022. The threshold amount reflects payment at threshold performance achievement across all applicable financial goals. The amount actually earned and paid out is based on the attainment of pre-established performance goals and is reflected in the Summary Compensation Table.
(2)The Threshold, Target, and Maximum represent the range of payments under the Long-Term Compensation Plan described in the Compensation Discussion and Analysis. The amounts in these columns reflect shares of stock and are based on the attainment of pre-established three fiscal-year performance goals.
(3)The annual stock option awards were granted to our NEOs on September 23, 2021 as described in the Compensation Discussion and Analysis section. These grants were approved by the HR Committee at its September 2021 meeting. All options were granted with an exercise price equal to the closing stock price of the Company’s common stock on the date of the grant and vest in three equal annual installments beginning on the first anniversary of the grant date.
Outstanding Equity Awards at 20192022 Fiscal Year-End
The following table summarizes the equity awards held by our NEOs as of the last day of fiscal 2019.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares of Stock or Units That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) ($) |
Tod E. Carpenter | | | | | | | | | | |
Stock Options | 12/7/2012 | 24,500 | | — | | 33.58 | | 12/7/2022 | | | | | |
| 12/9/2013 | 23,500 | | — | | 42.07 | | 12/9/2023 | | | | | |
| 4/1/2014 | 20,000 | | — | | 42.68 | | 4/1/2024 | | | | | |
| 12/5/2014 | 54,000 | | — | | 38.78 | | 12/5/2024 | | | | | |
| 1/30/2015 | 55,000 | | — | | 36.56 | | 1/30/2025 | | | | | |
| 12/17/2015 | 160,500 | | — | | 28.00 | | 12/17/2025 | | | | | |
| 12/16/2016 | 166,500 | | — | | 42.72 | | 12/16/2026 | | | | | |
| 9/22/2017 | 150,500 | | — | | 45.43 | | 9/22/2027 | | | | | |
| 9/21/2018 | 152,000 | | — | | 59.18 | | 9/21/2028 | | | | | |
| 9/26/2019 | 119,067 | | 59,533 | | 51.61 | | 9/26/2029 | | | | | |
| 9/24/2020 | 62,334 | | 124,666 | | 46.06 | | 9/24/2030 | | | | | |
| 9/23/2021 | — | | 144,000 | | 59.40 | | 9/23/2031 | | | | | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/20 - 7/31/23 | | | | | | | | | 41,300 | | 2,247,133 | |
8/1/21 - 7/31/24 | | | | | | | | | 34,500 | | 1,877,145 | |
Scott J. Robinson | | | | | | | | | | |
Stock Options | 12/17/2015 | 24,000 | | — | | 28.00 | | 12/17/2025 | | | | | |
| 12/16/2016 | 37,000 | | — | | 42.72 | | 12/16/2026 | | | | | |
| 9/22/2017 | 37,600 | | — | | 45.43 | | 9/22/2027 | | | | | |
| 9/21/2018 | 39,000 | | — | | 59.18 | | 9/21/2028 | | | | | |
| 9/26/2019 | 29,733 | | 14,867 | | 51.61 | | 9/26/2029 | | | | | |
| 9/24/2020 | 15,601 | | 31,199 | | 46.06 | | 9/24/2030 | | | | | |
| 9/23/2021 | — | | 38,600 | | 59.40 | | 9/23/2031 | | | | | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/20 - 7/31/23 | | | | | | | | | 10,300 | | 560,423 | |
8/1/21 - 7/31/24 | | | | | | | | | 9,300 | | 506,013 | |
Thomas R. Scalf | | | | | | | | | | |
Stock Options | 12/7/2012 | 7,000 | | — | | 33.58 | | 12/7/2022 | | | | | |
| 12/9/2013 | 10,500 | | — | | 42.07 | | 12/9/2023 | | | | | |
| 12/5/2014 | 26,000 | | — | | 38.78 | | 12/5/2024 | | | | | |
| 12/17/2015 | 29,500 | | — | | 28.00 | | 12/17/2025 | | | | | |
| 12/16/2016 | 28,500 | | — | | 42.72 | | 12/16/2026 | | | | | |
| 9/22/2017 | 25,800 | | — | | 45.43 | | 9/22/2027 | | | | | |
| 9/21/2018 | 30,800 | | — | | 59.18 | | 9/21/2028 | | | | | |
| 9/26/2019 | 23,467 | | 11,733 | | 51.61 | | 9/26/2029 | | | | | |
| 9/24/2020 | 12,301 | | 24,599 | | 46.06 | | 9/24/2030 | | | | | |
| 9/23/2021 | — | | 26,300 | | 59.40 | | 9/23/2031 | | | | | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/20 - 7/31/23 | | | | | | | | | 8,100 | | 440,721 | |
8/1/21 - 7/31/24 | | | | | | | | | 6,300 | | 342,783 | |
|
| | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares of Stock or Units that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested (2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights that Have Not Vested (3) ($) |
Tod E. Carpenter | | | | | | | | | | |
Stock Options | 12/10/2010 | 15,000 |
| — |
| 29.07 |
| 12/10/2020 | | | | | |
| 12/9/2011 | 24,000 |
| — |
| 34.88 |
| 12/9/2021 | | | | | |
| 12/7/2012 | 24,500 |
| — |
| 33.58 |
| 12/7/2022 | | | | | |
| 12/9/2013 | 23,500 |
| — |
| 42.07 |
| 12/9/2023 | | | | | |
| 4/1/2014 | 20,000 |
| — |
| 42.68 |
| 4/1/2024 | | | | | |
| 12/5/2014 | 54,000 |
| — |
| 38.78 |
| 12/5/2024 | | | | | |
| 1/30/2015 | 55,000 |
| — |
| 36.56 |
| 1/30/2025 | | | | | |
| 12/17/2015 | 160,500 |
| — |
| 28.00 |
| 12/17/2025 | | | | | |
| 12/16/2016 | 111,000 |
| 55,500 |
| 42.72 |
| 12/16/2026 | | | | | |
| 9/22/2017 | 50,167 |
| 100,333 |
| 45.43 |
| 9/22/2027 | | | | | |
| 9/14/2018 | 11,065 |
| — |
| 59.04 |
| 12/11/2019 | | | | | |
| 9/21/2018 | — |
| 152,000 |
| 59.18 |
| 9/21/2028 | | | | | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/17 - 7/31/20 | | | | | | | | | 37,700 |
| 1,883,115 |
|
8/1/18 - 7/31/21 | | | | | | | | | 39,300 |
| 1,963,035 |
|
Scott J. Robinson | | | | | | | | | | |
Stock Options | 12/17/2015 | 24,000 |
| — |
| 28.00 |
| 12/17/2025 | | | | | |
| 12/16/2016 | 24,667 |
| 12,333 |
| 42.72 |
| 12/16/2026 | | | | | |
| 9/22/2017 | 12,534 |
| 25,066 |
| 45.43 |
| 9/22/2027 | | | | | |
| 9/21/2018 | — |
| 39,000 |
| 59.18 |
| 9/21/2028 | | | | | |
| | | | | | | | | | |
Restricted Stock | 12/8/2015 | | | | | | 7,500 |
| 374,625 |
| | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/17 - 7/31/20 | | | | | | | | | 9,400 |
| 469,530 |
|
8/1/18 - 7/31/21 | | | | | | | | | 10,100 |
| 504,495 |
|
Thomas R. Scalf | | | | | | | | | | |
Stock Options | 12/10/2010 | 1,000 |
| — |
| 29.07 |
| 12/10/2020 | | | | | |
| 12/9/2011 | 4,000 |
| — |
| 34.88 |
| 12/9/2021 | | | | | |
| 12/7/2012 | 7,000 |
| — |
| 33.58 |
| 12/7/2022 | | | | | |
| 12/9/2013 | 10,500 |
| — |
| 42.07 |
| 12/9/2023 | | | | | |
| 12/5/2014 | 26,000 |
| — |
| 38.78 |
| 12/5/2024 | | | | | |
| 12/17/2015 | 29,500 |
| — |
| 28.00 |
| 12/17/2025 | | | | | |
| 12/16/2016 | 19,000 |
| 9,500 |
| 42.72 |
| 12/16/2026 | | | | | |
| 9/22/2017 | 8,600 |
| 17,200 |
| 45.43 |
| 9/22/2027 | | | | | |
| 9/21/2018 | — |
| 30,800 |
| 59.18 |
| 9/21/2028 | | | | | |
| | | | | | | | | | |
Performance Shares | | | | | | | | | | |
8/1/17 - 7/31/20 | | | | | | | | | 6,500 |
| 324,675 |
|
8/1/18 - 7/31/21 | | | | | | | | | 8,000 |
| 399,600 |
|
47
| | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares of Stock or Units that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested (2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights that Have Not Vested (3) ($) | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares of Stock or Units That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) ($) |
Jeffrey E. Spethmann | | | | | |
Stock Options | 2/18/2013 | 7,500 |
| — |
| 37.60 |
| 2/18/2023 | | | |
| 12/9/2013 | 10,500 |
| — |
| 42.07 |
| 12/9/2023 | | | |
| 12/5/2014 | 12,000 |
| — |
| 38.78 |
| 12/5/2024 | | | |
| 12/17/2015 | 13,500 |
| — |
| 28.00 |
| 12/17/2025 | | | |
| 4/4/2016 | 10,000 |
| — |
| 31.35 |
| 4/4/2026 | | | |
| 12/16/2016 | 16,000 |
| 8,000 |
| 42.72 |
| 12/16/2026 | | | |
| 9/22/2017 | 8,600 |
| 17,200 |
| 45.43 |
| 9/22/2027 | | | |
| 9/21/2018 | — |
| 30,800 |
| 59.18 |
| 9/21/2028 | | | |
| | | | | |
Performance Shares | | | | | |
8/1/17 - 7/31/20 | | | | | 6,500 |
| 324,675 |
| |
8/1/18 - 7/31/21 | | | | | 8,000 |
| 399,600 |
| |
Amy C. Becker | | | | | |
Jeffrey E. Spethmann | | Jeffrey E. Spethmann | |
Stock Options | 1/14/2010 | 6,000 |
| — |
| 21.14 |
| 1/14/2020 | | | Stock Options | 2/18/2013 | 7,500 | | — | | 37.60 | | 2/18/2023 | |
| 12/10/2010 | 6,000 |
| — |
| 29.07 |
| 12/10/2020 | | | | 12/9/2013 | 10,500 | | — | | 42.07 | | 12/9/2023 | |
| 12/9/2011 | 6,000 |
| — |
| 34.88 |
| 12/9/2021 | | | | 12/5/2014 | 12,000 | | — | | 38.78 | | 12/5/2024 | |
| 12/7/2012 | 3,500 |
| — |
| 33.58 |
| 12/7/2022 | | | | 12/17/2015 | 13,500 | | — | | 28.00 | | 12/17/2025 | |
| 12/6/2013 | 3,000 |
| — |
| 42.05 |
| 12/6/2023 | | | | 4/4/2016 | 10,000 | | — | | 31.35 | | 4/4/2026 | |
| 12/5/2014 | 14,500 |
| — |
| 38.78 |
| 12/5/2024 | | | | 12/16/2016 | 24,000 | | — | | 42.72 | | 12/16/2026 | |
| 12/17/2015 | 18,500 |
| — |
| 28.00 |
| 12/17/2025 | | | | 9/22/2017 | 25,800 | | — | | 45.43 | | 9/22/2027 | |
| 12/16/2016 | 12,667 |
| 6,333 |
| 42.72 |
| 12/16/2026 | | | | 9/21/2018 | 30,800 | | — | | 59.18 | | 9/21/2028 | |
| 9/22/2017 | 7,167 |
| 14,333 |
| 45.43 |
| 9/22/2027 | | | | 9/26/2019 | 23,467 | | 11,733 | | 51.61 | | 9/26/2029 | |
| 9/21/2018 | — |
| 21,600 |
| 59.18 |
| 9/21/2028 | | | | 9/24/2020 | 12,301 | | 24,599 | | 46.06 | | 9/24/2030 | |
| | | | | | 9/23/2021 | — | | 26,300 | | 59.40 | | 9/23/2031 | |
| Performance Shares | | | | | Performance Shares | |
8/1/17 - 7/31/20 | | | | | 5,400 |
| 269,730 |
| |
8/1/18 - 7/31/21 | | | | | 5,600 |
| 279,720 |
| |
8/1/20 - 7/31/23 | | 8/1/20 - 7/31/23 | | 8,100 | | 440,721 | |
8/1/21 - 7/31/24 | | 8/1/21 - 7/31/24 | | 6,300 | | 342,783 | |
Richard B. Lewis | | Richard B. Lewis | |
Stock Options | | Stock Options | 12/7/2012 | 3,500 | | — | | 33.58 | | 12/7/2022 | |
| | | 12/6/2013 | 3,000 | | — | | 42.05 | | 12/6/2023 | |
| | | 12/5/2014 | 3,000 | | — | | 38.78 | | 12/5/2024 | |
| | | 6/30/2015 | 10,000 | | — | | 35.80 | | 6/30/2025 | |
| | | 12/17/2015 | 13,500 | | — | | 28.00 | | 12/17/2025 | |
| | | 12/16/2016 | 12,000 | | — | | 42.72 | | 12/16/2026 | |
| | | 9/22/2017 | 8,600 | | — | | 45.43 | | 9/22/2027 | |
| | | 9/21/2018 | 12,300 | | — | | 59.18 | | 9/21/2028 | |
| | | 9/26/2019 | 16,467 | | 8,233 | | 51.61 | | 9/26/2029 | |
| | | 9/24/2020 | 8,601 | | 17,199 | | 46.06 | | 9/24/2030 | |
| | | 9/23/2021 | — | | 22,800 | | 59.40 | | 9/23/2031 | |
| Performance Shares | | Performance Shares | |
8/1/20 - 7/31/23 | | 8/1/20 - 7/31/23 | | 5,700 | | 310,137 | |
8/1/21 - 7/31/24 | | 8/1/21 - 7/31/24 | | 5,500 | | 299,255 | |
_______________
| |
(1) | Stock options have a ten-year term and vest in three equal annual installments beginning on the first anniversary of the grant date. The vesting dates for options unexercisable as of July 31, 2019 are as follows: |
(1)Stock options have a ten-year term and vest in three equal annual installments beginning on the first anniversary of the grant date. The vesting dates for stock options unexercisable as of July 31, 2022 are as follows: |
| | | | | | | | | |
| | Stock Options Vesting |
| | September | December | September | September |
Name | Grant Date | 2019 | 2019 | 2020 | 2021 |
Tod E. Carpenter | 12/16/2016 | | 55,500 |
| | |
| 9/22/2017 | 50,166 |
| | 50,167 |
| |
| 9/21/2018 | 50,667 |
| | 50,666 |
| 50,667 |
|
Scott J. Robinson | 12/16/2016 | | 12,333 |
| | |
| 9/22/2017 | 12,533 |
| | 12,533 |
| |
| 9/21/2018 | 13,000 |
| | 13,000 |
| 13,000 |
|
Thomas R. Scalf | 12/16/2016 | | 9,500 |
| | |
| 9/22/2017 | 8,600 |
| | 8,600 |
| |
| 9/21/2018 | 10,267 |
| | 10,266 |
| 10,267 |
|
Jeffrey E. Spethmann | 12/16/2016 | | 8,000 |
| | |
| 9/22/2017 | 8,600 |
| | 8,600 |
| |
| 9/21/2018 | 10,267 |
| | 10,266 |
| 10,267 |
|
Amy C. Becker | 12/16/2016 | | 6,333 |
| | |
| 9/22/2017 | 7,166 |
| | 7,167 |
| |
| 9/21/2018 | 7,200 |
| | 7,200 |
| 7,200 |
|
| |
(2) | Restricted stock awards generally cliff vest at the end of the fifth anniversary of the grant date. The market value is calculated using the closing price of the Company's common stock on the NYSE at the end of fiscal 2019. |
| | | | | | | | | | | | | | |
| | Stock Options Vesting |
| | September | September | September |
Name | Grant Date | 2022 | 2023 | 2024 |
Tod E. Carpenter | 9/26/2019 | 59,533 | | |
| 9/24/2020 | 62,333 | 62,333 | |
| 9/23/2021 | 48,001 | 48,000 | 47,999 |
Scott J. Robinson | 9/26/2019 | 14,867 | | |
| 9/24/2020 | 15,600 | 15,599 | |
| 9/23/2021 | 12,867 | 12,867 | 12,866 |
Thomas R. Scalf | 9/26/2019 | 11,733 | | |
| 9/24/2020 | 12,300 | 12,299 | |
| 9/23/2021 | 8,767 | 8,767 | 8,766 |
Jeffrey E. Spethmann | 9/26/2019 | 11,733 | | |
| 9/24/2020 | 12,300 | 12,299 | |
| 9/23/2021 | 8,767 | 8,767 | 8,766 |
Richard B. Lewis | 9/26/2019 | 8,233 | | |
| 9/24/2020 | 8,600 | 8,599 | |
| 9/23/2021 | 7,601 | 7,600 | 7,599 |
| |
(3) | These amounts represent the Target payout for the performance-based stock awards pursuant to the Long-Term Compensation Plan as described in the Compensation Discussion and Analysis section. The market value is calculated using the closing price of the Company's common stock on the NYSE at the end of fiscal 2019. |
(2) These amounts represent the Target payout for the performance-based stock awards pursuant to the Long-Term Compensation Plan as described in the Compensation Discussion and Analysis section. The market value is calculated using the closing price of the Company's common stock on the NYSE on the last day of fiscal 2022. Fiscal 20192022 Option Exercises and Stock Vested Table
The following table summarizes information on stock option awards exercised during fiscal 2019,2022, the Long-Term Compensation Plan payouts for the cycle ending July 31, 2019,2022, and restricted stock awards that vested during fiscal 20192022 for our NEOs. For stock options, the value realized is based on the difference between the market price of our common stock at exercise and the exercise price. For stock awards, the value realized on vesting is based on the market price of our common stock at vesting.
| | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (2) ($) | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (2) ($) |
Tod E. Carpenter | 35,600 |
| 1,416,184 |
| | 110,955 |
| 5,726,388 |
| Tod E. Carpenter | — | | 25,791 | 1,312,504 |
Scott J. Robinson | — |
| — |
| | 24,570 |
| 1,268,058 |
| Scott J. Robinson | — | | 6,431 | 327,274 |
Thomas R. Scalf | — |
| — |
| | 21,915 |
| 1,137,303 |
| Thomas R. Scalf | 4,000 | 81,428 | | 5,105 | 259,793 |
Jeffrey E. Spethmann | — |
| — |
| | 18,795 |
| 976,280 |
| Jeffrey E. Spethmann | — | | 5,105 | 259,793 |
Amy C. Becker | 3,000 |
| 123,735 |
| | 15,675 |
| 798,337 |
| |
Richard B. Lewis | | Richard B. Lewis | — | | 3,580 | 182,186 |
_______________
(1)Amount reported represents the market price of our common stock on the exercise date, less the exercise price,
multiplied by the number of shares exercised.
(2) Amount reported represents the closing price of our common stock as of the vesting date multiplied by the number
of shares acquired on vesting.
Pension Benefits
The Company provides pension benefits to our U.S. Officers through the following plans:
•Salaried Employees’ Pension Plan
•Excess Pension Plan
Salaried Employees’ Pension Plan
The Salaried Employees’ Pension Plan is a defined benefit plan that provides cash balance retirement benefits to eligible employees. The Company contribution credits vary with service, age, and compensation. A participant’s benefit is 100% vested after three years of service. At retirement or termination, a participant who has a vested benefit can receive a distribution in the form of a lump sum or an actuarially equivalent annuity.
Effective August 1, 2016, employees no longer accrue Company contribution credits under the plan. Participants' cash balances continue to increase annually with interest credits. An employee’s account earns interest each year based on the average yield on one-year Treasury Constant Maturities during the month of June prior to the plan year plus 1%. This is the interest crediting rate. The minimum annual interest crediting rate is 4.83%.
Excess Pension Plan
The Excess Pension Plan mirrors the Salaried Employees’ Pension Plan. This plan is an unfunded, non-qualified plan that primarily provides retirement benefits that cannot be paid under the Salaried Employees’ Pension Plan due to the Internal Revenue Code limitations on qualified plans for compensation and benefits. Vested benefits are paid out of this plan on or after termination or retirement in up to 20 annual installments or a lump sum according to elections made by the participant in accordance with applicable IRS regulations.
Same as the Salaried Employees’ Pension Plan, employees no longer accrue Company contribution credits under this plan effective August 1, 2016.
Fiscal 20192022 Pension Benefits
The following table summarizes information with respect to pension plans for each eligible NEO.
| | | | | | | | | | | | | | |
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit (1) ($) | Payments During Last Fiscal Year ($) |
Tod E. Carpenter | Salaried Employees’ Pension Plan | 20 | 688,432 | — |
| Excess Pension Plan | 20 | 471,847 | — |
Scott J. Robinson (2) | Salaried Employees’ Pension Plan | — | — | — |
| Excess Pension Plan | — | — | — |
Thomas R. Scalf | Salaried Employees’ Pension Plan | 27 | 649,261 | — |
| Excess Pension Plan | 27 | 137,676 | — |
Jeffrey E. Spethmann | Salaried Employees’ Pension Plan | 3 | 86,622 | — |
| Excess Pension Plan | 3 | 30,069 | — |
Richard B. Lewis | Salaried Employees’ Pension Plan | 14 | 289,342 | — |
| Excess Pension Plan | 14 | 13,930 | — |
______________ |
| | | | | |
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year ($) |
Tod E. Carpenter | Salaried Employees’ Pension Plan | 20 | 636,293 |
| — |
| Excess Pension Plan | 20 | 436,111 |
| — |
Scott J. Robinson (2) | Salaried Employees’ Pension Plan | — | — |
| — |
| Excess Pension Plan | — | — |
| — |
Thomas R. Scalf | Salaried Employees’ Pension Plan | 27 | 649,250 |
| — |
| Excess Pension Plan | 27 | 137,674 |
| — |
Jeffrey E. Spethmann | Salaried Employees’ Pension Plan | 3 | 85,221 |
| — |
| Excess Pension Plan | 3 | 29,583 |
| — |
Amy C. Becker | Salaried Employees’ Pension Plan | 19 | 511,712 |
| — |
| Excess Pension Plan | 19 | 35,719 |
| — |
(1) The present value of the accumulated benefit for the Salaried Employees’ Pension Plan and the Excess Pension Plan was determined by projecting the July 31, 2022 cash balance amounts to age 65 using a 5.0% interest credit rate and discounting it using a 2.49% interest rate._______________
| |
(1) | The present value of the accumulated benefit for the Salaried Employees’ Pension Plan and the Excess Pension Plan was determined by projecting the July 31, 2019 cash balance amounts to age 65 using a 5.0% interest credit rate and discounting it using a 3.48% interest rate. |
The actual accrued balances as of the end of fiscal 20192022 are reflected in the table below. For additional assumptions used in this calculation, refer to Note 1114 of the Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 2019.2022. | | | | | | | | |
Name | Salaried Employees’ Pension Plan ($) | Excess Pension Plan ($) |
Tod E. Carpenter | 683,963 | 468,784 |
Scott J. Robinson | — | — |
Thomas R. Scalf | 627,877 | 133,142 |
Jeffrey E. Spethmann | 84,238 | 29,242 |
Richard B. Lewis | 274,484 | 13,215 |
(2) Mr. Robinson was hired after August 1, 2013 and, therefore, is not eligible to participate in our Salaried Employee's Pension Plan or the Excess Pension Plan.
|
| | | | |
Name | Salaried Employees’ Pension Plan ($) | Excess Pension Plan ($) |
Tod E. Carpenter | 593,712 |
| 406,927 |
|
Scott J. Robinson | — |
| — |
|
Thomas R. Scalf | 545,026 |
| 115,573 |
|
Jeffrey E. Spethmann | 73,122 |
| 25,383 |
|
Amy C. Becker | 440,670 |
| 30,760 |
|
| |
(2) | Mr. Robinson was hired after August 1, 2013 and, therefore, is not eligible to participate in our Salaried Employee's Pension Plan or the Excess Pension Plan. |
Non-Qualified Deferred Compensation
U.S. Officers are eligible to defer the following compensation through the Deferred Compensation and 401(k) Excess Plan:Plan ("Deferred Comp Plan"):
•Up to 75% of base salary
•Up to 100% of annual cash incentive
•Up to 100% of the Long-Term Compensation PlanLTCP award
•Up to 25% of compensation in excess of the qualified plan compensation limits ($280,000290,000 for 2019)2021 and $305,000 for 2022)
Participants have the following two investment alternatives forPrior to calendar 2020, participants were able to allocate the deferrals of base salary and annual cash incentive:
Allocate the accountincentive to be credited with a fixed rate of return (as approved by the HR Committee) equal to the ten-year Treasury Bond rate.rate or to one or more investment funds.
AllocateEffective January 1, 2020, participants are only able to allocate the accountdeferrals of base salary and annual cash incentive to one or more investment funds. Several mutual fund investments are available, and funds may be reallocated among the investment alternatives at any time. TheseSome of the funds mirror the funds utilized in our Retirement Savings and Employees Stock Ownership Plan. These amounts are funded through a non-qualified “rabbi” trust.
All stock deferrals (LTCPLTCP awards restricted stock awards, and stock option gains) remain in stock, are funded through a non-qualified “rabbi” trust and are paid out in stock. These deferrals earn quarterly dividends that are paid in the Company’s common stock.
Payments are made under these plans in the form of a lump sum or annual installments. Prior to calendar 2020, participants could elect annual installments of up to 20 years. Effective January 1, 2020, annual installment distributions can be elected for up to 10 years. The deferral elections and payment elections are made in accordance with the timing requirements of applicable IRS regulations.
The following table summarizes participation of our NEOs in our Deferred Compensation and 401(k) Excess Plan and our Deferred Stock Option GainComp Plan.
Fiscal 20192022 Non-Qualified Deferred Compensation
|
| | | | | | | | | | |
Name | Executive Contributions in Last FY (1) ($) | Registrant Contributions in Last FY (2) ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE (3) ($) |
Tod E. Carpenter | 160,563 |
| 156,131 |
| 19,913 |
| — |
| 1,171,328 |
|
Scott J. Robinson | — |
| 20,494 |
| 2,006 |
| — |
| 45,953 |
|
Thomas R. Scalf | 62,481 |
| 41,541 |
| 8,978 |
| — |
| 317,887 |
|
Jeffrey E. Spethmann | 66,501 |
| 37,482 |
| (2,341 | ) | — |
| 167,624 |
|
Amy C. Becker | 103,748 |
| 28,548 |
| 16,555 |
| — |
| 347,312 |
|
| | | | | | | | | | | | | | | | | |
Name | Executive Contributions in Last FY (1) ($) | Registrant Contributions in Last FY (2) ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE (3) ($) |
Tod E. Carpenter | 17,123 | 91,505 | (104,820) | — | 1,798,206 |
Scott J. Robinson | 44,920 | 64,138 | (19,430) | — | 260,877 |
Thomas R. Scalf | 103,471 | 53,173 | (64,245) | — | 684,117 |
Jeffrey E. Spethmann | 89,405 | 40,799 | (49,250) | — | 491,493 |
Richard B. Lewis | 486,401 | 25,064 | (33,774) | — | 571,097 |
______________
(1)Includes amounts in 401(k) excess contributions for all NEOs and the following deferrals reported as part of each NEO's salary
| |
(1) | Includes amounts in 401(k) Excess contributions for all NEOs and the following deferrals reported as part of each NEO's salary |
and non-equity incentive plan compensation in the Summary Compensation Table:
•$13,26913,058 deferred base salary and $20,888$56,525 deferred bonusannual cash incentive for Mr. Scalf
•$21,61523,154 deferred base salary and $20,101$41,214 deferred bonusannual cash incentive for Mr. Spethmann
•$40,12584,808 deferred base salary and $29,486$401,593 deferred bonusannual cash incentive for Ms. BeckerMr. Lewis
| |
(2) | This reflects the Company match for any applicable deferred salary, deferred annual incentive, and 401(k) Excess contributions. |
(2)This reflects the Company match for any applicable deferred salary, deferred annual cash incentive, and 401(k) excess contributions.
These amounts are reported under All Other Compensation in the Summary Compensation Table.
| |
(3) | A portion of the aggregated balances shown above were reported as salary, annual incentive compensation, and/or all other |
(3) A portion of the aggregated balances shown above were reported as salary, annual incentive compensation, and/or all other
compensation in the Summary Compensation Table for previous years: Mr. Carpenter, $258,634;$531,831; Mr. Robinson, $22,459;$98,292
Mr. Scalf, $58.794;$224,608; and Mr. Spethmann, $42,732; Ms. Becker, $80,561.$237,316.
Potential Payments Upon Termination or Change in Control
Our Officers are covered by CIC Agreements and stock plan award agreements that govern key payments and benefits in the event of a termination of employment. The following discussion highlights applicable compensation and benefitbenefits that would be provided under different termination scenarios.
Termination Absent a Change in Control
We have no formal employment agreements or severance agreements outside of a change in control that provides additional payments to an Officer in the event of a termination of employment, including voluntary termination, termination for cause, involuntary termination, death or disability. Upon a termination, an Officer would be entitled to receive the same benefits and payments available to our broad-based, salaried employee group as specified in the plan document of each applicable program.
Retirement
OurCertain of our compensation programs provide certain benefits when Officers are eligiblequalify for retirement at"retirement," which is defined as either being age 55 or being age 55 with at least five years of vesting service. UponThe following benefits apply in these retirement the following would generally apply:scenarios:
•An annual cash incentive payment at the end of the applicable fiscal year would be prorated based on time worked.
•Outstanding stock option awards continue to vest in accordance with the terms of the award agreement.
•Outstanding LTCP awards would be prorated based on time worked and payments would be processed at the end of the three-year performance cycle according to the Company's performance results.
•Outstanding restricted stock awards would be prorated based on time worked.
Involuntary Termination
In the event of an involuntary termination not for cause, the HR Committee has sole discretion to determine the amount, if any, of severance payments and benefits that will be offered to an Officer. We have no formal employment agreements with our Officers and they are not covered by our Company Severance Plan. Under our Severance Plan for U.S. salaried employees, the Company generally pays severance equal to one week of base salary for each year of service up to a maximum of 26 weeks (a minimum of 8 weeks for director level) and a target incentive prorated for full months actively employed. We generally pay for continued coverage for elected medical and dental benefits for a period of one or two months based on years of service.
Upon involuntary termination, the following would apply:
•Outstanding vested stock options must be exercised within one month of termination and unvested stock options would be forfeited.
•Outstanding restricted stock awards would be forfeited.
•Outstanding LTCP awards that are still within the three-year performance cycle would be forfeited.
Death
In the event of the death of an Officer, the following would apply:
•An annual cash incentive payment at the end of the applicable fiscal year would be prorated based on time worked.
•Outstanding vested stock options become exercisable by the named beneficiary for a period of 36 months following the death and unvested stock options would be forfeited.
•Outstanding restricted stock awards would be prorated based on time worked.
•Outstanding LTCP awards would be prorated based on time worked and payments would be processed at the end of the three-year performance cycle according to the Company's performance results.
•Payments under our Non-Qualified Deferred Compensation PlansComp Plan and Excess Pension Plan would be accelerated. The amounts reflected in the Non-Qualified Deferred Compensation Table and Pension Benefits Table would have been payable to the named beneficiary as a lump sum.
Disability
In the event of disability of an Officer, the following would apply:
•An annual cash incentive payment at the end of the applicable fiscal year would be prorated based on time worked.
•Outstanding vested stock options remain exercisable for a period of 36 months following the disability, and unvested stock options would continue to vest in accordance with the terms of the award agreement.
•Outstanding restricted stock awards would be prorated based on time worked.
•Outstanding LTCP awards would be prorated based on time worked and payments would be processed at the end of the three-year performance cycle according to the Company's performance results.
•Each U.S. Officer who participates in our broad-based, long-term disability program would receive an annual benefit equal to 60% of total cash compensation until the earlier of: (a) age 65; (b) recovery from the disability; or (c) death. The portion of compensation up to $200,000$120,000 is fully insured and payable by our insurance company, and the portion of compensation in excess of $200,000$120,000 is self-insured and payable by the Company.
•In the event of a qualifying disability, payments under our Non-Qualified Deferred Compensation PlansComp Plan and Excess Pension Plan would be accelerated.
Voluntary Termination and Termination for Cause
Our Officers are not entitled to receive any additional forms of severance payments or benefits upon a voluntary decision to terminate employment or upon a termination by the Company for cause prior to being eligible for retirement.
Termination Following or in Connection with a Change in Control
WeAll Officers have entered into CIC Agreements with each of the Officers.Company. Our CIC Agreements contain a “double-trigger” to enable our Officers to maintain objectivity in the event of a change in control situation and to better protect the interests of our stockholders. This independence is important in providing retention incentives during a time of uncertainty for Officers and offering additional assurances to the Company that it will be able to complete a transaction that the Board believes
is in the best interests of our stockholders. In addition to the CIC Agreements, our stock option awards, LTCP, and deferred compensation plans provide for the acceleration of certain benefits upon a change in control.
Upon the occurrence of a change in control, as generally defined below, with or without a qualifying termination of employment:
•Outstanding unvested stock options will immediately vest and become exercisable.
•Outstanding restricted stock awards will immediately vest.
•Outstanding LTCP awards will immediately vest and be paid in a lump sum stock distribution at target achievement level.
•Any unvested benefits under the Salaried Employees’ Pension Plan will immediately vest. As of the end of fiscal 2019,2022, all eligible Officers were 100% vested in the Salaried Employees’ Pension Plan.
Additionally, the CIC Agreements provide that upon a qualifying termination of employment in connection with a change in control, each Officer would receive the following:
•A cash lump sum equal to a multiple of the sum of the Officer’s base salary plus the Officer’s target cash incentive from the Annual Cash Incentive Plan then in effect. The multiple is based on level as follows:
| |
– | Chairman and CEO = three times the sum of base salary and target annual incentive |
| |
– | Senior Vice Presidents = two times the sum of base salary and target annual incentive |
| |
– | Vice Presidents = one times the sum of base salary and target annual incentive |
◦Chairman and CEO = three times the sum of base salary and target annual incentive
◦Senior Vice Presidents = two times the sum of base salary and target annual incentive
◦Vice Presidents = one times the sum of base salary and target annual incentive
•A lump sum of additional pension benefits equal to:
| |
– | The value of the benefit under each pension plan assuming the benefit is fully vested and the Officer had three additional years of benefit accrual; less |
| |
– | The value of the vested benefit accrued under each pension |
◦The value of the benefit under each pension plan assuming the benefit is fully vested and the Officer had three additional years of benefit accrual; less
◦The value of the vested benefit accrued under each pension
•36 months of continued medical, dental, vision, life, disability, and accident benefits
•Outplacement services suitable to the Officer’s position for a period of three years or until the first acceptance of an employment offer, whichever is earlier
The Officer’s payments will be reduced to the maximum amount that can be paid without triggering an excise tax liability. This reduction would only occur if the net amount of those payments is greater than the net amount of payments without the reduction.
Change in Control
Generally, a change in control includes the occurrence of any of the following events or circumstances:
•The acquisition of 25% or more of the combined voting power of the Company’s outstanding shares, other than any acquisition from or by the Company or any Company-sponsored employee benefit plan.
•Consummation of a merger or other business consolidation of the Company other than a transaction where the Company’s pre-transaction stockholders retain at least 60% ownership of the surviving entity.
•A change in the Board composition in which the incumbent directors, meaning those directors who were not elected in a contested fashion, are no longer a majority of the Board. The CIC Agreements specify the circumstances under which a director is deemed to have been elected in a contested fashion.
•Approval of a plan of liquidation or dissolution or a consummated agreement for the sale of all or substantially all of the Company’s assets to an entity, unless the Company’s pre-transaction stockholders retain at least 60% ownership of the surviving entity.
Qualifying Termination of Employment
The CIC Agreement providesAgreements provide that, upon a change in control, if an Officer’s employment with the Company is terminated within 24 months:
•by the Company or its successor without “cause,” or
•by the Officer for “good reason” (each as defined in the CIC Agreements),
the termination will be considered a qualifying termination of employment.
Potential Payments uponUpon Termination or Change in Control Table
The following table sets forth applicable payment estimates to our NEOs assuming each termination event occurred on July 31, 2019,29, 2022, the last business day of the fiscal year. The estimates are based on the July 31, 201929, 2022 closing stock price of $49.95.$54.41.
| | | | Potential Payments ($) | | Potential Payments ($) |
Triggering Event (1) | Compensation Component | Tod E. Carpenter | Scott J. Robinson | Thomas R. Scalf | Jeffrey E. Spethmann | Amy C. Becker | Triggering Event (1) | Compensation Component | Tod E. Carpenter | Scott J. Robinson | Thomas R. Scalf | Jeffrey E. Spethmann | Richard B. Lewis |
Death | Annual incentive | 673,215 |
| 235,390 |
| 153,770 |
| 196,863 |
| 139,822 |
| Death | Annual Incentive | 1,653,326 | 541,745 | 468,467 | 392,569 | 391,260 |
LTCP (4) | 1,906,243 |
| 480,295 |
| 348,989 |
| 348,989 |
| 272,558 |
| LTCP (5) | 2,121,405 | 541,653 | 407,628 | 306,142 |
Restricted stock | — |
| 268,481 |
| — |
| — |
| — |
| Restricted Stock | — |
Total | 2,579,458 |
| 984,166 |
| 502,759 |
| 545,852 |
| 412,380 |
| Total | 3,774,731 | 1,083,398 | 876,095 | 800,197 | 697,402 |
| | | |
Disability | Annual disability benefit (5) | 1,437,539 |
| 532,957 |
| 525,647 |
| 434,851 |
| 397,874 |
| Disability | Annual disability benefit (7) | 761,657 | 366,823 | 347,018 | 314,574 | 270,000 |
Annual incentive | 673,215 |
| 235,390 |
| 153,770 |
| 196,863 |
| 139,822 |
| Annual Incentive | 1,653,326 | 541,745 | 468,467 | 392,569 | 391,260 |
Stock Options | 854,770 |
| 202,466 |
| 146,429 |
| 135,584 |
| 110,573 |
| Stock Options | 1,207,654 | 302,139 | 238,254 | 166,664 |
LTCP (4) | 1,906,243 |
| 480,295 |
| 348,989 |
| 348,989 |
| 272,558 |
| LTCP (5) | 2,121,405 | 541,653 | 407,628 | 306,142 |
Restricted stock | — |
| 268,481 |
| — |
| — |
| — |
| Restricted Stock | — |
Total | 4,871,767 |
| 1,719,589 |
| 1,174,835 |
| 1,116,287 |
| 920,827 |
| Total | 5,744,042 | 1,752,360 | 1,461,367 | 1,353,025 | 1,134,066 |
| | | |
Involuntary Termination (2) | Cash severance | 1,503,750 |
| 451,923 |
| 529,000 |
| 353,692 |
| 386,308 |
| Involuntary Termination (2) | Cash severance | 1,751,000 | 488,077 | 582,000 | 382,731 | 465,577 |
Benefit continuation (6) | 2,811 |
| 1,048 |
| 4,064 |
| — |
| 2,334 |
| Benefit continuation (8) | 2,690 | 1,227 | 4,778 | — | 4,778 |
Total | 1,506,561 |
| 452,971 |
| 533,064 |
| 353,692 |
| 388,642 |
| Total | 1,753,690 | 489,304 | 586,778 | 382,731 | 470,355 |
| | | |
Retirement (3) | Annual incentive | 673,215 |
| — |
| — |
| — |
| — |
| Retirement (3) | Annual Incentive (4) | 1,653,326 | 541,745 | 468,467 | 392,569 | — |
Stock Options | 854,770 |
| — |
| — |
| — |
| — |
| Stock Options (6) | 1,207,654 | 302,139 | 238,254 | 238,254 | — |
LTCP (4) | 1,906,243 |
| — |
| — |
| — |
| — |
| LTCP (4, 5) | 2,121,405 | 541,653 | 407,628 | — |
Restricted stock | — |
| — |
| — |
| — |
| — |
| Restricted Stock (6) | — |
Total | 3,434,228 |
| — |
| — |
| — |
| — |
| Total | 4,982,385 | 1,385,537 | 1,114,349 | 1,038,451 | — |
| | | |
Change in Control | Stock options | 854,770 |
| 202,466 |
| 146,429 |
| 135,584 |
| 110,573 |
| Change in Control | Stock Options | 1,207,654 | 302,139 | 238,254 | 166,664 |
LTCP (4) | 3,846,150 |
| 974,025 |
| 724,275 |
| 724,275 |
| 549,450 |
| LTCP (5) | 4,124,278 | 1,066,436 | 783,504 | 609,392 |
Restricted stock | — |
| 374,625 |
| — |
| — |
| — |
| Restricted Stock | — |
Total | 4,700,920 |
| 1,551,116 |
| 870,704 |
| 859,859 |
| 660,023 |
| Total | 5,331,932 | 1,368,575 | 1,021,758 | 776,056 |
| | | |
Qualifying Termination Following or in Connection with a Change in Control | Cash severance (7) | 6,142,500 |
| 1,750,000 |
| 1,518,000 |
| 1,452,000 |
| 627,750 |
| Qualifying Termination Following or in Connection with a Change in Control | Cash severance (9) | 6,798,000 | 1,890,000 | 1,649,000 | 1,534,500 | 1,485,000 |
Pension benefits (8) | 1,020,414 |
| — |
| 333,999 |
| 242,879 |
| 261,988 |
| Pension benefits (10) | 1,202,936 | — | 402,368 | 280,033 | 283,607 |
Benefit continuation (6, 9) | 41,148 |
| 32,436 |
| 58,392 |
| 2,232 |
| 35,928 |
| Benefit continuation (8, 11) | 41,682 | 36,894 | 67,818 | 1,434 | 65,118 |
Outplacement (10) | 45,000 |
| 45,000 |
| 45,000 |
| 45,000 |
| 45,000 |
| Outplacement (12) | 45,000 | 45,000 |
Total | 7,249,062 |
| 1,827,436 |
| 1,955,391 |
| 1,742,111 |
| 970,666 |
| Total | 8,087,618 | 1,971,894 | 2,164,186 | 1,860,967 | 1,878,725 |
________________
| |
(1) | No forms of severance payments or additional benefits are provided to Officers upon a voluntary decision to terminate employment or a termination for cause prior to being eligible for retirement. |
| |
(2) | If the HR Committee were to follow our U.S. Severance Plan for broad-based employees, the payments above would have been made to our NEOs had they been involuntarily terminated at the end of fiscal 2019. |
| |
(3) | Mr. Carpenter is the only retirement eligible NEO as of July 31, 2019. |
| |
(4) | This represents the accelerated vesting of two LTCP award cycles outstanding as of July 31, 2019 and assumes payment at target achievement. |
| |
(5) | $120,000 of the annual disability benefit is fully insured and payable by the insurance company. Anything in excess of this amount is self-insured and payable by the Company. |
| |
(6) | Mr. Spethmann did not elect medical or dental coverage through Donaldson. |
| |
(7) | Under the CIC Agreement, this represents a lump sum equal to: |
(1) No forms of severance payments or additional benefits are provided to Officers upon a voluntary decision to terminate employment or a termination for cause prior to being eligible for retirement.
(2) If the HR Committee were to follow our Severance Plan for broad-based employees, the payments above would have been made to our NEOs had they been involuntarily terminated at the end of fiscal 2022.
(3) Mr. Lewis is not retirement eligible as of the last day of fiscal 2022.
(4) Retirement eligible definition is age 55 plus a requirement of five years of service.
(5) This represents the vesting of two LTCP award cycles outstanding as of the last day of fiscal 2022 and assumes payment at target achievement. Under a change in control situation, payout would be accelerated.
(6) Retirement eligible definition is age 55 without a minimum years of service requirement.
(7) $120,000 of the annual disability benefit is fully insured and payable by the insurance company. Anything in excess of this amount is self-insured and payable by the Company.
(8) Mr. Spethmann did not elect medical or dental coverage through Donaldson.
(9) Under the CIC Agreements, this represents a lump sum equal to:
•Three times the sum of base salary and the annual incentive at target for Mr. Carpenter
•Two times the sum of base salary and the annual incentive at target for Messrs. Robinson, Lewis, Scalf, and SpethmannSpethmann.
One times(10) Mr. Robinson was hired after August 1, 2013 and, therefore, is not eligible to participate in our Salaried Employee's Pension Plan.
(11) This reflects only Life, Long Term Disability, and Business Travel Accident benefits for Mr. Spethmann.
(12) This is based on the sum of base salary andassumption that the annual incentive at targetNEO would utilize $15,000 per year in outplacement services for Ms. Beckerthe full three years.
| |
(8) | Mr. Robinson was hired after August 1, 2013 and, therefore, is not eligible to participate in our Salaried Employee's Pension Plan. |
| |
(9) | This reflects only Life and Business Travel Accident benefits for Mr. Spethmann. |
| |
(10) | This is based on the assumption that the NEO would utilize $15,000 per year in outplacement services for the full three years. |
Under the CIC Agreement,Agreements, the payment may be reduced in situations where the Officer would otherwise be subject to the excise tax liability under Section 280G of the Internal Revenue Code. The amounts in the table above do not reflect any reductions that might be made.
With a change in control followed by a termination within 24 months, any payments under the Non-Qualified Deferred Compensation Plans and the Excess PensionComp Plan would become immediately payable to the participant in the form of a lump sum. Additionally, any accrued benefits under the Salaried Employees’ Pension Plan and the Excess Pension Plan also become immediately vested. As of the end of fiscal 2019,2022, all eligible Officers were 100% vested under these plans.
Pay Ratio Disclosure
In accordance with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing a disclosure of the ratio of our CEO’s annual total compensation to the annual total compensation of our
median employee. For fiscal 2019:
|
| | | | | | | |
| Annual Total Compensation of Median Employee | $34,68036,093 |
| Annual Total Compensation of our CEO | $6,270,3887,043,946 |
Based on this information, our fiscal 20192022 pay ratio of 181195 to 1 is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
ForOur median employee for our fiscal 2019,2022 pay ration calculation is the same employee used for our fiscal 2021 pay ratio calculation. We do not believe there were noany material changes to the Company’sCompany's employee population or compensation arrangements that would significantly impact the pay ratio disclosure and warrant calculating a new median employee.
We calculated annual total compensation for our identified median employee in accordance with the same methodology used for our NEOs as set forth in the Summary Compensation Table. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column reported in the Summary Compensation Table.
INFORMATION REGARDING THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Audit Committee Report
The following is the report of the Audit Committee with respect to Donaldson’s audited financial statements presented in its Annual Report on Form 10-K for the fiscal year ended July 31, 2019.2022.
The Audit Committee of the Board is composed entirely of non-employee directors, all of whom have been determined by the Board to be independent under the rules of the SEC and the NYSE. In addition, the Board has determined that Christopher M. Hilger, Trudy A. Rautio, Jacinth C. Smiley and John P. Wiehoff and Andrew Cecere are Audit Committee financial experts, as defined by the rules of the SEC.
The Audit Committee acts under a written charter approved by the Board. The Audit Committee assists the Board in carrying out its oversight of the Company’s financial reporting process, audit process, and internal controls. The Audit Committee formally met eightseven times during the past fiscal year in carrying out its oversight functions. The Audit Committee has the sole authority to appoint, terminate, or replace the Company’s independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee.
The Audit Committee reviewed and discussed the Company’s fiscal 20192022 audited financial statements with management, the internal auditor, and PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm. Management has represented and PwC has reported in its opinion to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles and fairly present, in all material respects, the financial position, results of operations, and cash flows of the Company.
As part of its activities, the Audit Committee also:
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1. | Discussed with PwC the matters required to be discussed under applicable Auditing Standards of the Public Company Accounting Oversight Board; |
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2. | Received the written disclosures and letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence; and |
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3. | Discussed with PwC its independence. |
1. Discussed with PwC the matters required to be discussed under applicable Auditing Standards of the Public Company Accounting Oversight Board and the SEC;
2. Received the written disclosures and letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence; and
3. Discussed with PwC its independence.
Based on the review and discussions with management and PwC, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2019.2022.
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| | | | | | | |
Members of the Audit Committee |
John P. Wiehoff,Pilar Cruz | | Trudy A. Rautio, Chair |
Christopher M. Hilger | | Jacinth C. Smiley |
Douglas A. Milroy |
Andrew Cecere | | Trudy A. Rautio |
Pilar Cruz | | John P. Wiehoff |
Independent Registered Public Accounting Firm Fees
The aggregate fees billedfor services rendered to the Company for fiscal 20192022 and fiscal 20182021 by PwC, the Company’s independent registered public accounting firm, are as follows:
| | | Fiscal 2019 | | Fiscal 2018 | | Fiscal 2022 | | Fiscal 2021 |
Audit Fees | | $3,497,323 | | | $3,196,016 | Audit Fees | $3,984,000 | | $3,557,000 |
Audit-Related Fees | | 45,889 | | 43,566 | Audit-Related Fees | $12,627 | | $29,861 |
Tax Fees | | 38,333 | | 181,810 | Tax Fees | $577,172 | | $190,862 |
All Other Fees | | 3,000 | | | 1,800 | All Other Fees | $9,150 | | $2,700 |
Total Fees | | $3,584,545 | | | $3,423,192 | Total Fees | $4,582,949 | | $3,780,423 |
Audit Fees include professional services rendered in connection with the audit of the Company’s financial statements, including the quarterly reviews, statutory audits of certain of the Company’s international subsidiaries, and the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Audit-
RelatedAudit-Related Fees include accounting advisory fees related to financial accounting matters. TaxThe increase in tax fees includeis due to additional recurring domestic tax consulting and tax return preparation.compliance services starting in fiscal 2022. All Other Fees include licensure for an accounting literature research tool.tools.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm, including the fees and terms for those services. The Audit Committee may delegate to one or more designated Committee members the authority to grant pre-approvals. This designated member is the Chair of the Audit Committee. Any pre-approval by the Chair must be presented to the full Audit Committee at its next scheduled meeting. All of the services provided by the independent registered public accounting firm during fiscal 20192022 and fiscal 2018,2021, including services related to the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies.
ITEM 2: NON-BINDING ADVISORY VOTE ON THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS
As required pursuant to Section 14A of the Securities Exchange Act of 1934, at the 2017 Annual Meeting, the Company provided our stockholders with an advisory vote on the frequency of conducting an advisory vote on the compensation of our NEOs. Consistent with the stockholders’ preference expressed in voting at the 2017 Annual Meeting, our Board determined that an advisory vote on the compensation of our NEOs will be conducted annually. Therefore, we are providing our stockholders with an advisory (non-binding) vote on the compensation of our NEOs as discussed in this Proxy Statement in accordance with the rules of the SEC.
As described in detail under Compensation Discussion and Analysis - Executive Compensation Program Principles, our objective is to create long-term stockholder value. Our executive compensation program is designed to directly support this objective and ensure that the interests of our officers are properly aligned with our stockholders’ short-term and long-term interests. The key principles of our executive compensation strategy include:
•Aligning compensation to financial measures that balance both the Company’s annual financial results and long-term growth
•Providing significant portions of total compensation in variable performance-based programs to focus the attention of our Officers on driving and increasing stockholder value
•Setting target total direct compensation based on established proxy peer group (as recommended by an independent compensation consultant) and published market survey data
•Establishing high stock ownership requirements for our Officers
•Providing competitive pay, which enables us to attract, retain, reward, and motivate top leadership talent by generally setting compensation elements around the median of the peer group data and size-adjusted general industry survey data
Please read the Compensation Discussion and Analysis for additional details about the Company’s executive compensation programs, including information about the compensation of our NEOs for fiscal 2019.2022.
We are presenting the following proposal, which gives stockholders the opportunity to support or not support our executive compensation program for our NEOs by voting for or against the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in Donaldson Company’s Proxy Statement for the 20192022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and other related narrative disclosures.”
This advisory vote on executive compensation is not binding on the Company, our Human ResourcesHR Committee, or our Board. However, our Human ResourcesHR Committee and our Board will take into account the result of the vote when determining future executive compensation arrangements.
Board Recommendation
The Board of Directors recommends stockholders vote FOR adoption of the resolution approving the compensation of our Named Executive OfficersNEOs described in this Proxy Statement.
ITEM 3: ADOPTION OF THE DONALDSON COMPANY, INC.
2019 MASTER STOCK INCENTIVE PLAN
Background and Purpose
On September 27, 2019, our Board adopted, subject to stockholder approval, the Donaldson Company, Inc. 2019 Master Stock Incentive Plan (the “2019 Stock Plan”). The purpose of the 2019 Stock Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non‑employee directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons incentives to put forth maximum effort for the success of the Company’s business. The 2019 Stock Plan, if approved by the stockholders, will replace the Donaldson Company, Inc. 2010 Master Stock Incentive Plan adopted in 2010 (the “Prior Stock Plan”).
The following discussion and summary of the material terms of the 2019 Stock Plan is qualified in its entirety by reference to the full text of the 2019 Stock Plan which is set forth in Appendix A to this proxy statement.
Key Features of the 2019 Stock Plan
The following features of the 2019 Stock Plan reflect equity incentive plan “best practices” intended to protect the interests of our stockholders:
Limit on Shares Available for Awards. Under the 2019 Stock Plan, the aggregate number of shares of the Company’s common stock that may be issued is 5,000,000 shares, plus in certain circumstances, shares subject to an outstanding award under the Prior Stock Plan that are forfeited under the Prior Stock Plan. Unused shares remaining under the Prior Stock Plan on the date of its termination (estimated in excess of 500,000 shares) will not be added to the shares available under the 2019 Stock Plan. However, if, after the effective date of the 2019 Stock Plan, outstanding awards under the Prior Stock Plan expire or otherwise terminate without being exercised, the shares of common stock not acquired pursuant to such awards again become available for issuance under the 2019 Stock Plan in accordance with the share counting provisions in the 2019 Stock Plan.
Separate Limit for Full Value Awards. All shares subject to awards, regardless the type of award, will count against the 2019 Stock Plan’s reserve on 1:1 basis for each share subject to the award. However, the aggregate number of shares that may be issued as “full value” awards (restricted stock, RSU's and other awards not based solely on an increase in value after the grant date) is 1,000,000 shares, plus in certain circumstances, shares subject to an outstanding full value award under the Prior Stock Plan that are forfeited under the Prior Stock Plan.
Individual Limits on Shares Issued. The aggregate number of shares of the Company’s common stock that may be issued to an employee, officer or consultant in a fiscal year under the 2019 Stock Plan is 500,000 shares. No non‑employee director may be granted awards denominated in shares the value of which in the aggregate exceeds $350,000 in any fiscal year.
No Evergreen Provision. The 2019 Stock Plan does not contain an “evergreen” provision that will automatically increase the number of shares authorized for issuance under the 2019 Stock Plan.
No Liberal Share “Recycling.”The 2019 Stock Plan provides that any shares (i) surrendered to pay the exercise price of an option, (ii) withheld by the Company or tendered to satisfy tax withholding obligations with respect to any award, (iii) covered by a stock settled stock appreciation right not issued in connection with settlement upon exercise, or (iv) repurchased by the Company using option proceeds will not be added back (“recycled”) to the 2019 Stock Plan.
No Discounted Stock Options or Stock Appreciation Rights. Stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our common stock on the date of grant (unless such award is granted in substitution for a stock option or stock appreciation right previously granted by an entity that is acquired by or merged with the Company).
No Repricing of Stock Options or Stock Appreciation Rights. The 2019 Stock Plan prohibits the repricing of stock options and stock appreciation rights (including a prohibition on the repurchase of “underwater” stock options or stock appreciation rights for cash or other securities).
No Liberal Change in Control Definition. The 2019 Stock Plan prohibits any award agreement from having a change in control provision that has the effect of accelerating the exercisability of any award or the lapse of restrictions relating to any award upon only the announcement or stockholder approval (rather than the consummation of) a change in control transaction, and does not otherwise contain liberal change in control provisions.
No Dividend Equivalents Paid on Unvested Awards. The 2019 Stock Plan prohibits the payment of dividend equivalents on awards until those awards are earned and vested. In addition, the 2019 Stock Plan prohibits the granting of dividend equivalents with respect to stock options, stock appreciation rights or an award the value of which is based solely on an increase in the value of the Company’s shares after the grant of the award.
Awards Subject to Forfeiture or Clawback. Awards under the 2019 Stock Plan will be subject to any Company recovery or clawback policy, as well as any other forfeiture and penalty conditions determined by the Human Resources Committee.
Minimum Vesting Period. Each award is subject to a minimum vesting period of at least one year following the date of grant, subject to limited exceptions.
Independent Committee Administration. The 2019 Stock Plan will be administered by the Human Resources Committee of the Board comprised entirely of independent directors.
The Human Resources Committee expects that the number of shares available, if approved by our stockholders, will satisfy equity compensation needs for up to five years based on historical grant practices.
Determination of Number of Shares for the 2019 Stock Plan
As of September 23, 2019, there were 126,194,547 shares of our common stock outstanding and the closing sale price of a share of our common stock was $52.18. In setting the number of shares authorized under the 2019 Stock Plan for which stockholder approval is being sought, the Human Resources Committee and the Board considered, among other factors, the historical amounts of equity awards granted by the Company and the potential future grants over the next several years. The Company has not authorized specific grants of awards to be made under the 2019 Stock Plan.
The 2019 Stock Plan does not set the number of shares subject to equity awards that will be granted in future years. In setting each year’s award amounts for Officers, the Human Resources Committee considers a variety of factors such as: the relative market position of the awards, the proportion of each Officer’s total compensation to be delivered as a long‑term incentive award, internal pay equity, executive performance, retention concerns, and the Company’s performance. Similar considerations are taken into account in granting awards to participants who are not executive officers.
To reduce the dilutive impact of our equity award grants on our stockholders’ interests, equity awards are generally limited to individuals whose personal performance makes them highly valuable to the Company and to essential new hires.
New Plan Benefits
No awards have been granted under the 2019 Stock Plan, as it will only take effect upon stockholder approval at the 2019 Annual Meeting of Stockholders. The number and types of awards that will be granted under the 2019 Stock Plan in the future are not determinable, as the Human Resources Committee will make these determinations in its sole discretion.
Description of 2019 Stock Plan
Administration. The Human Resources Committee will administer the 2019 Stock Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount and other terms and conditions of each award, consistent with the provisions of the 2019 Stock Plan. Subject to the provisions of the 2019 Stock Plan, the Human Resources Committee may amend the terms of, or accelerate the exercisability of, an outstanding award. The Human Resources Committee will have authority to interpret the 2019 Stock Plan and establish rules and regulations for the administration of the 2019 Stock Plan.
The Human Resources Committee may delegate its powers under the 2019 Stock Plan to the Chief Executive Officer and/or one or more Officers, subject to the requirements of Section 157(c) of the Delaware General Corporation Law. Furthermore, such delegated Officers will not be permitted to grant awards to any members of the Board or Officers who are subject to Section 16 of the Exchange Act.
Eligibility. Any employee, officer, non-employee director, consultant or independent contractor providing services to Donaldson Company, Inc. or an affiliate, or any person to whom an offer of employment or engagement has been made, and who is selected by the Human Resources Committee to participate, is eligible to receive an award under the 2019 Stock Plan. The number of persons eligible to participate as of September 23, 2019 (the record date for the meeting), had the Plan been in effect, is estimated to be approximately 14,000 employees, officers and consultants as a class; however, historically the Human Resources Committee has not granted awards to more than approximately 450 employees in any single fiscal year.
Shares Available for Awards. The aggregate number of shares that may be issued under all stock‑based awards made under the 2019 Stock Plan will be 5,000,000 shares, plus certain shares subject to outstanding awards under the Prior Stock Plan that are as described below. “Full value awards” (restricted stock, RSUs and other awards not based solely on an increase in value after the grant date) are also subject to a separate limit. The aggregate number of shares that may be issued as full value awards is 1,000,000 shares, plus shares subject to outstanding full value awards under the Prior Stock Plan that are forfeited as follows. If, after the effective date of the 2019 Stock Plan, outstanding awards under the Prior Stock Plan expire or otherwise terminate without being exercised, the shares of common stock not acquired pursuant to such awards again become available for issuance under the 2019 Stock Plan in accordance with the share counting provisions in the 2019 Stock Plan.
All shares subject to awards, regardless of the type of award, will count against the 2019 Stock Plan’s reserve on 1:1 basis for each share subject to the award. If awards issued under the 2019 Stock Plan expire or otherwise terminate without being exercised or settled, the shares of common stock not acquired pursuant to such awards again become available for issuance under the 2019 Stock Plan. However, under the share counting provisions of the 2019 Stock Plan, the following shares will not again be available for issuance: (i) shares unissued due to a “net exercise” of a stock option, (ii) any shares withheld or shares tendered to satisfy tax withholding obligations under any award, (iii) shares covered by a SAR that is not settled in shares upon exercise and (iv) shares repurchased using stock option exercise proceeds.
Awards under the 2019 Stock Plan are also subject to annual individual limitations. No employee, officer or consultant may be granted awards under the 2019 Stock Plan for more than 500,000 shares of our common stock in any fiscal year. No non‑employee director may be granted awards denominated in shares the value of which in the aggregate exceeds $350,000 in any fiscal year.
The Human Resources Committee will adjust the number of shares and share limit described above in the case of a stock dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split‑off, repurchase or exchange of shares, or other similar corporate transaction where such an adjustment is necessary to prevent dilution or enlargement of the benefits available under the 2019 Stock Plan. Any adjustment determination made by the Human Resources Committee shall be final, binding and conclusive.
Type of Awards and Terms and Conditions. The 2019 Stock Plan provides that the Human Resources Committee may grant awards to eligible participants in any of the following forms, subject to such terms, conditions and provisions as the Human Resources Committee may determine to be necessary or desirable:
stock options, including both incentive stock options (“ISOs”) and non‑qualified stock options (together with ISOs, “options”);
stock appreciation rights ("SARs");
restricted stock;
restricted stock units ("RSUs");
dividend equivalent rights; and
other stock‑based awards.
The Human Resources Committee will have the right to make the timing of the grant and/or the issuance, ability to retain, vesting, exercise and/or settlement of awards subject to completion of a minimum period of service, achievement of one or more performance goals or both as deemed appropriate by the Human Resources Committee; provided, that a maximum of five percent of the aggregate number of shares available for issuance under the 2019 Stock Plan may be issued with the terms providing for a right of exercise or a lapse on any vesting condition earlier than a date that is at least one year following the date of grant (or, in the case of vesting based upon performance‑based objectives, exercise and vesting restrictions cannot lapse earlier than the one year anniversary measured from the commencement of the period over which performance is evaluated).
1. Options and SARs. The holder of an option is entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the Human Resources Committee. The holder of a SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date) of a specified number of shares of our common stock over the grant price of the SAR.
Exercise Price. The exercise price per share of an option or SAR will in no event be less than 100% of the fair market value per share of our common stock underlying the award on the date of grant, unless such award is granted in substitution for an option or SAR previously granted by a merged or acquired entity. Without the approval of stockholders, the Company will not amend or replace previously granted options or SARs in a transaction that constitutes a “repricing” as defined in the 2019 Stock Plan.
Vesting. The Human Resources Committee has the discretion to determine when and under what circumstances an option or SAR will vest, subject to minimum vesting provisions described above.
Exercise. The Human Resources Committee has the discretion to determine the method or methods by which an option or SAR may be exercised, which methods may include a net exercise. The Human Resources Committee is not authorized under the 2019 Stock Plan to accept a promissory note as consideration.
Expiration. Options and SARs will expire at such time as the Human Resources Committee determines; provided, however, that no option or SAR may be exercised more than ten years from the date of grant, except in the case of an ISO held by a greater than 10% stockholder, the option may not be exercised more than five years from the date of grant.
Special Limitations on ISOs. In the case of a grant of an option intended to qualify as an ISO, no such option may be granted to a participant who, at the time of the grant, owns or immediately thereafter would own stock representing more than 10% of the total combined voting power of all classes of our stock or our subsidiaries unless the exercise price per share of our common stock subject to such ISO is at least 110% of the fair market value per share of our common stock on the date of grant, and such ISO award is not exercisable more than five years after its date of grant. In addition, options designated as ISOs shall not be eligible for treatment under the Internal Revenue Code as ISOs to the extent that either: (i) the aggregate fair market value of shares of common stock (determined as of the time of grant) with respect to which such ISOs are exercisable for the first time by the participant during any calendar year exceeds $100,000 or (ii) such ISOs otherwise remain exercisable but are not exercised within three months after termination of employment (or such other period of time provided in Section 422 of the Internal Revenue Code).
2. Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the Human Resources Committee for a specified time period determined by the Human Resources Committee. The holder of RSUs will have the right, subject to restrictions imposed by the Human Resources Committee, to receive shares of our common stock at some future date determined by the Human Resources Committee upon vesting of such RSUs. The grant, issuance, retention, vesting and/or settlement of restricted stock and RSUs will occur at such times and in such installments as are determined by the Human Resources Committee, subject to the minimum vesting provisions described above.
3. Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash or shares of our common stock) equivalent to the amount of cash dividends paid by the Company to stockholders with respect to the number of shares determined by the Human Resources Committee. Dividend equivalents will be subject to other terms and conditions determined by the Human Resources Committee, but the Human Resources Committee may not (i) grant dividend equivalents in connection with options or SARs or (ii) pay a dividend equivalent with respect to a share underlying an award prior to the date on which all conditions or restrictions on such share have been satisfied or lapsed.
4. Other Stock‑Based Awards. The Human Resources Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of our common stock, subject to terms and conditions determined by the Human Resources Committee and the limitations in the 2019 Stock Plan. No such stock‑based awards will contain a purchase right or an option‑like exercise feature.
Termination and Amendment. The 2019 Stock Plan has a term of ten years expiring on September 27, 2029, unless terminated earlier by the Board.The Board may from time to time amend, suspend or terminate the 2019 Stock Plan. No amendment or modification of the 2019 Stock Plan may be made that would adversely affect any outstanding award without the consent of the participant or the current holder of the award (except in the case of a corporate transaction as described below). Amendments to the 2019 Stock Plan must be approved by the stockholders if required under the listing requirements of the New York Stock Exchange or any other securities exchange applicable to the Company or if the amendment would (i) increase the number of shares authorized under the 2019 Stock Plan, (ii) permit a repricing of options or SARs, (iii) permit the award of options or SARs with an exercise price less than 100% of the fair market value of a share on the date of grant, (iv) increase the maximum term of options or SARs, or (v) increase the annual per‑person share or dollar value limits under the 2019 Stock Plan.
Effect of Corporate Transaction. Awards under the 2019 Stock Plan are generally subject to special provisions upon the occurrence of any reorganization, merger, consolidation, spin‑off, combination, split‑up, plan of arrangement, take‑over bid or tender offer, repurchase or exchange of shares, or any other similar corporate transaction or event involving the Company. In the event of such a corporate transaction, the Human Resources Committee or the Board may provide for any of the following to be effective upon the occurrence of the event (or effective immediately prior to the consummation of such event, provided the event is consummated):
termination of any award, whether vested or not, in exchange for an amount of cash and/or other property equal to the amount that would have been attained upon exercise of the vested portion of the award or the realization of the participant’s rights under the vested portion of the award. Awards may be terminated without payment if the Human Resources Committee or Board determines that no amount is realizable under the award as of the time of the transaction;
replacement of any award with other rights or property selected by the Human Resources Committee or the Board, in its sole discretion;
the assumption of any award by the successor or survivor entity (or its parent or subsidiary) or the arrangement for the substitution for similar awards covering the stock of such successor entity with appropriate adjustments as to the number and kind of shares and prices; or
require that the award cannot vest, be exercised or become payable until after a future date, which may be the effective date of the corporate transaction.
Limited Transferability of Awards. Generally, no award or other right or interest of a participant under the 2019 Stock Plan (other than fully vested and unrestricted shares issued pursuant to an award) shall be transferable by a participant other than by will or by the laws of descent and distribution, and no right or award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company or any affiliates. However, the Human Resources Committee may allow transfer of an award to family members for no value, and such transfer shall comply with the Form S‑8 rules. The Human Resources Committee may establish procedures to allow a named beneficiary to exercise the rights of the participant and receive any property distributable with respect to any award upon the participant’s death.
Federal Income Tax Consequences
Grant of Options and SARs. The grant of a stock option or SAR is not expected to result in any taxable income to the recipient.
Exercise of Options and SARs. Upon exercising a non‑qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of the Company’s common stock acquired on the date of exercise over the exercise price, and the Company generally will be entitled at that time to an income tax deduction for the same amount. The holder of an ISO generally will have no taxable income upon exercising the option (except that an alternative minimum tax liability may arise), and the Company will not be entitled to an income tax deduction. Upon exercising a SAR, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally are deductible by us.
Disposition of Shares Acquired Upon Exercise of Options and SARs. The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR will depend on how long the shares have been held and whether the shares were acquired by exercising an ISO or by exercising a non‑qualified stock option or SAR. Generally, there will be no tax consequence to the Company in connection with the disposition of shares acquired under an option or SAR, except that the Company may be entitled to an income tax deduction in the case of the disposition of shares acquired under an ISO if the disposition occurs before the applicable ISO holding periods set forth in the Internal Revenue Code have been satisfied.
Awards Other than Options and SARs. If an award is payable in shares of our common stock that are subject to substantial risk of forfeiture, unless a special election is made by the holder of the award under the Internal Revenue Code, the holder must recognize ordinary income equal to the excess of: (i) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for the shares by the holder of the award. The Company will generally be entitled at that time to an income tax deduction for the same amount. As to other awards granted under the 2019 Stock Plan that are payable either in cash or shares of our common stock not subject to substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to: (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date such shares are received) over (ii) the amount (if any) paid for the shares by the holder of the award.
Income Tax Deduction. Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, the Company generally will be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2019 Stock Plan. However, Section 162(m) of the Code prohibits publicly held corporations from deducting more than $1 million per year in compensation paid to certain NEOs. The Tax Cuts and Jobs Act (the “Act”), which was signed into law at the end of 2017, made significant changes to the deduction limit under Section 162(m), which are effective for taxable years beginning on and after January 1, 2018. The Act eliminated the exception to the deduction limit for qualified performance‑based compensation and broadens the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit. Therefore, compensation paid to a covered executive under the 2019 Stock Plan in excess of $1 million generally will not be deductible.
Special Rules for Executive Officers Subject to Section 16 of the Exchange Act. Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to the Internal Revenue Code, shares received through the exercise or settlement of an award may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any ordinary income recognized and the amount of income tax deducted will be determined as of the end of that period.
Section 409A of the Internal Revenue Code. The Human Resources Committee intends to administer and interpret the 2019 Stock Plan and all award agreements in a manner consistent to satisfy the requirements of Section 409A of the Internal Revenue Code to avoid any adverse tax results thereunder to a holder of an award.
Board Recommendation
The Board of Directors recommends that stockholders vote FOR the adoption of the Donaldson Company, Inc. 2019 Master Stock Incentive Plan described in this Proxy Statement.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of July 31, 20192022 regarding the Company's equity compensation plans:
| | Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted – average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted – average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| | (a) | | (b) | | (c) | | | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders | Equity compensation plans approved by security holders | | | | |
| Equity compensation plans approved by security holders | | | | |
1980 Master Stock Compensation Plan: | | |
| | | | |
| 1980 Master Stock Compensation Plan: | | | | | | |
Deferred Stock Option Gain Plan | | 8,789 |
| | $10.63 | | — |
| Deferred Stock Option Gain Plan | | 1,693 | | — | | — |
1991 Master Stock Compensation Plan: | | | | |
| 1991 Master Stock Compensation Plan: | | |
Deferred Stock Option Gain Plan | | 319,112 |
| | $23.17 | | — |
| Deferred Stock Option Gain Plan | | 176,827 | | — | | — |
Deferred LTC/Restricted Stock | | 126,558 |
| | $15.33 | | — |
| Deferred LTC/Restricted Stock | | 72,453 | | — | | — |
2001 Master Stock Incentive Plan: | | | | |
| 2001 Master Stock Incentive Plan: | | |
Stock Options | | 186,148 |
| | $23.27 | | — |
| |
Deferred LTC/Restricted Stock | | 72,097 |
| | $21.15 | | — |
| Deferred LTC/Restricted Stock | | 35,499 | | — | | — |
2010 Master Stock Incentive Plan: | | | | (1) |
| 2010 Master Stock Incentive Plan: | | (1) |
Stock Options | | 5,302,722 |
| | $40.92 | | — |
| Stock Options | | 5,036,527 | | $43.88 | | — |
Restricted Stock Units | | Restricted Stock Units | | 425 | | — | | — |
Deferred LTC/Restricted Stock | | 1,516 |
| | $37.79 | | — |
| Deferred LTC/Restricted Stock | | 1,572 | | — | | — |
Stock Options for Non-Employee Directors | | 999,180 |
| | $36.77 | | — |
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Long-Term Compensation | | 268,579 |
| | $39.61 | | — |
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Long-Term Compensation (2) | | Long-Term Compensation (2) | | 194,362 | | — | | — |
2019 Master Stock Incentive Plan: (1) | | 2019 Master Stock Incentive Plan: (1) | | (1) |
Stock Options | | Stock Options | | 1,890,634 | | $52.82 | | — |
Restricted Stock Units | | Restricted Stock Units | | 40,159 | | — | | — |
Long-Term Compensation (2) | | Long-Term Compensation (2) | | 376,412 | | — | | — |
Subtotal for plans approved by security holders | | 7,284,701 |
| | $38.40 | | |
| Subtotal for plans approved by security holders | | 7,826,563 | | $46.32 | | — |
| | | | | | | |
Equity compensation plans not approved by security holders | Equity compensation plans not approved by security holders | | |
| Equity compensation plans not approved by security holders | | |
Non-qualified Stock Option Program for Non-Employee Directors | | 43,200 |
| | $21.44 | | — |
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ESOP Restoration | | 4,660 |
| | $10.35 | | (2) |
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Subtotal for plans not approved by security holders | | 47,860 |
| | $20.36 | | |
| Subtotal for plans not approved by security holders | | — | | — | | |
Total | | 7,332,561 |
| | $38.28 | | |
| Total | | 7,826,563 | | $46.32 | | |
______________
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(1) | The 2010 Master Stock Incentive Plan limits the number of shares authorized for issuance to 9,200,000 during the 10-year term of the plan in addition to any shares forfeited under the 2001 plan. The plan allows for the granting of non-qualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards. As of July 31, 2019, there were 1,207,269 shares of the authorization remaining. |
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(2) | The Company has a non-qualified ESOP Restoration Plan established on August 1, 1990, to supplement the benefits for executive employees under the Company’s Employee Stock Ownership Plan that would otherwise be reduced because of the compensation limitations under the Internal Revenue Code. The ESOP’s 10-year term was completed on July 31, 1997, and the only ongoing benefits under the ESOP Restoration Plan are the accrual of dividend equivalent rights to the participants in the plan. |
(1)In November 2019, the Company's stockholders approved the adoption of the 2019 Master Stock Incentive Plan (the "2019 Plan"), which replaced the 2010 Master Stock Incentive Plan (the "2010 Plan"). The 2019 Plan limits the number of shares authorized for issuance to 5,000,000 during the 10-year term of the plan in addition to any shares forfeited under the 2010 Plan. Consistent with the 2010 Plan, the 2019 Plan allows for the granting of non-qualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards. As of July 31, 2022, there were 2,866,378 authorized shares remaining under the 2019 Plan.
(2)The amounts included for the Long-Term Compensation Plan described in the Compensation Discussion and Analysis represent the maximum number of shares that could be issued at vesting. The actual payments are based on the attainment of pre-established three fiscal-year performance goals and may differ from the number of shares presented.
ITEM 4:3: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm to audit the books and accounts of the Company for the fiscal year ending July 31, 2020.2023. PwC has audited the books and accounts of the Company since 2002. While the Company is not required to do so, it is submitting the selection of PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 20202023 for ratification in order to ascertain the views of the Company’s stockholders on this appointment. Whether or not the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent registered public accounting firm, may in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Representatives of PwC are expected to be present at the virtual meeting and will have the opportunity to make a statement and to respond to appropriate questions. In the event this appointment is not ratified, the Audit Committee will reconsider its selection.
Board Recommendation
The Audit Committee of the Board of Directors recommends that stockholders vote FOR ratification of the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 2020.2023.
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| By Order of the Board of Directors |
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| Amy C. Becker |
| Secretary |
October 8, 20194, 2022 | |
Appendix A
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DONALDSON COMPANY, INC.
2019 Master Stock Incentive Plan
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Table of Contents
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Section 1. | Purpose | 1 |
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Section 2. | Definitions | 1 |
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Section 3. | Administration | 4 |
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(a) | Power and Authority of the Committee | 4 |
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(b) | Delegation | 5 |
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(c) | Power and Authority of the Board of Directors | 5 |
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Section 4. | Shares Available for Awards | 5 |
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(a) | Shares Available | 5 |
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(b) | Counting Shares | 6 |
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(c) | Adjustments | 6 |
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(d) | Annual Limitations | 7 |
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Section 5. | Eligibility | 7 |
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Section 6. | Awards | 7 |
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(a) | Option | 7 |
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(b) | Stock Appreciation Rights | 9 |
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(c) | Restricted Stock and Restricted Stock Units | 9 |
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(d) | Dividend Equivalents | 10 |
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(e) | Other Stock-Based Awards | 10 |
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(f) | General | 10 |
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Section 7. | Amendment and Termination; Corrections | 13 |
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(a) | Amendments to the Plan and Awards | 13 |
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(b) | Corporate Transactions | 14 |
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(c) | Correction of Defects, Omissions and Inconsistencies | 14 |
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Section 8. | Income Tax Withholding | 15 |
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Section 9. | General Provisions | 15 |
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(a) | No Rights to Awards | 15 |
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(b) | Award Agreements | 15 |
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(c) | Plan Provisions Control | 15 |
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(d) | No Rights of Stockholders | 15 |
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(e) | No Limit on Other Compensation Arrangements | 15 |
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(f) | No Right to Employment or Directorship | 15 |
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(g) | Governing Law | 16 |
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(h) | Severability | 16 |
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(i) | No Trust or Fund Created | 16 |
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(j) | Other Benefits | 16 |
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(k) | No Fractional Shares | 16 |
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(l) | Headings | 16 |
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(m) | Forfeiture | 16 |
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Section 10. | Clawback or Recoupment | 17 |
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Section 11. | Effective Date of the Plan | 17 |
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Section 12. | Term of the Plan | 17 |
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DONALDSON COMPANY, INC.
2019 MASTER STOCK INCENTIVE PLAN
The purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non‑employee Directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s stockholders.
As used in the Plan, the following terms shall have the meanings set forth below:
(a)“Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.
(b)“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent or Other Stock‑Based Award granted under the Plan.
(c)“Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the Plan (including a document in an electronic medium) executed in accordance with the requirements of Section 9(b).
(d)“Board” shall mean the Board of Directors of the Company.
(e)“Change in Control” shall be the consummation of one of the following events:
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(i) | any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), either is or becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; |
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(ii) | during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new Director (other than a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this section) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two‑thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof, unless the approval of the election or nomination for election of such new Directors was in connection with an actual or threatened election or proxy contest; |
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(iii) | the merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such |
surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 30% of the combined voting power of the Company’s then outstanding securities; or
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(iv) | the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets or any transaction having a similar effect. |
(f)“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
(g)“Committee” shall mean the committee designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b 3, and each member of the Committee shall be a “non‑employee director” within the meaning of Rule 16b‑3.
(h)“Company” shall mean Donaldson Company, Inc., a Delaware corporation, and any successor corporation.
(i)“Director” shall mean a member of the Board.
(j)“Disability” shall have the meaning ascribed to that term in Section 22(e)(3) of the Code, or such other meaning as may be required under applicable local law.
(k)“Dividend Equivalent” shall mean any right granted under Section 6(d) of the Plan.
(l)“Eligible Person” shall mean any employee, officer, consultant, independent contractor, advisor or non‑employee Director providing services to the Company or any Affiliate.
(m)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(n)“Fair Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of a Share as of a given date shall be, if the Shares are then traded on the New York Stock Exchange, the closing price of one Share as reported on the New York Stock Exchange on such date or, if the New York Stock Exchange is not open for trading on such date, on the most recent preceding date when the New York Stock Exchange is open for trading.
(o)
“Full Value Award” shall mean any Award other than an Option or Stock Appreciation Right, the value of which Option or Stock Appreciation Right is based solely on an increase in the value of the Shares after the date of grant of such Award.
(p)“Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(q)“Non‑Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(r)“Option” shall mean an Incentive Stock Option or a Non‑Qualified Stock Option to purchase shares of the Company.
(s)“Other Stock‑Based Award” shall mean any right granted under Section 6(e) of the Plan.
(t)“Participant” shall mean an Eligible Person designated to be granted an Award under the Plan.
(u)“Plan” shall mean the Donaldson Company, Inc. 2019 Master Stock Incentive Plan, as amended from time to time.
(v)“Prior Plan” shall mean the Donaldson Company, Inc. 2010 Master Stock Incentive Plan, as amended from time to time.
(w)“Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan.
(x)“Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
(y)“Retirement” shall mean an Eligible Person’s termination of service at or after attainment of Retirement Age under such circumstances determined to constitute retirement by the Committee in its sole discretion; except that solely in the case of a non-employee Director, Retirement shall mean the Director retires or resigns from service as a Director of the Company in accordance with the age and term limits of the Corporate Governance Guidelines of the Company.
(z)“Retirement Age” shall mean age fifty‑five (55).
(aa)“Rule 16b‑3” shall mean Rule 16b‑3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation.
(bb)“Section 409A” shall mean Section 409A of the Code, or any successor provision, and applicable Treasury Regulations and other applicable guidance thereunder.
(cc) “Securities Act” shall mean the Securities Act of 1933, as amended.
(dd) “Shares” shall mean shares of common stock, $5.00 par value per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(ee) “Specified Employee” shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly with respect to all plans maintained by the Company that are subject to Section 409A.
(ff) “Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.
Section 3.Administration
(a)Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to:
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(i) | designate Participants; |
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(ii) | determine the type or types of Awards to be granted to each Participant under the Plan; |
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(iii) | determine the number of Shares to be covered by (or the method by which payments or other rights are to be calculated in connection with) each Award; |
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(iv) | determine the terms and conditions of any Award or Award Agreement, including any terms relating to the forfeiture of any Award and the forfeiture, recapture or disgorgement of any cash, Shares or other amounts payable with respect to any Award; |
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(v) | amend the terms and conditions of any Award or Award Agreement, subject to the limitations under Sections 6 and 7; |
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(vi) | accelerate the exercisability of any Award or the lapse of any restrictions relating to any Award, subject to the limitations under Sections 6 and 7, |
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(vii) | determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property (but excluding promissory notes), or canceled, forfeited or suspended; |
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(viii) | determine whether, to what extent and under what circumstances amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election |
of the holder thereof or the Committee, subject to the requirements of Section 409A and Section 6;
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(ix) | interpret and administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; |
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(x) | establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; |
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(xi) | make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and |
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(xii) | adopt such modifications, rules, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of non‑U.S. jurisdictions in which the Company or an Affiliate may operate, including, without limitation, establishing any special rules for Affiliates, Eligible Persons or Participants located in any particular country, in order to meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted to Participants located in such non‑United States jurisdictions. |
Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award or Award Agreement, and any employee of the Company or any Affiliate.
(b)Delegation. The Committee shall have the right, from time to time, to delegate to one or more officers of the Company the authority of the Committee to grant and determine the terms and conditions of Awards granted under the Plan, subject to the requirements of Section 157(c) of the Delaware General Corporation Law (or any successor provision) and such other limitations as the Committee shall determine. In no event shall any such delegation of authority be permitted with respect to Awards to any members of the Board or to any Eligible Person who is subject to Rule 16b‑3 under the Exchange Act. The Committee shall also be permitted to delegate, to any appropriate officer or employee of the Company, responsibility for performing certain ministerial functions under the Plan. In the event that the Committee’s authority is delegated to officers or employees in accordance with the foregoing, all provisions of the Plan relating to the Committee shall be interpreted in a manner consistent with the foregoing by treating any such reference as a reference to such officer or employee for such purpose. Any action undertaken in accordance with the Committee’s delegation of authority hereunder shall have the same force and effect as if such action were undertaken directly by the Committee and shall be deemed for all purposes of the Plan to have been taken by the Committee.
(c)Power and Authority of the Board of Directors. Notwithstanding anything to the contrary contained herein, the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Rule 16b‑3 or applicable law or exchange requirements.
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Section 4. | Shares Available for Awards |
(a)Shares Available.
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(i) | Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall equal 5,000,000 (the authorized net increase of Shares in connection with the adoption of the Plan), plus any Shares subject to any outstanding award under the Prior Plan that, after November 22, 2019, are not purchased or are forfeited or reacquired by the Company, or otherwise not |
delivered to the Participant due to termination or cancellation of such award, subject to the share counting provisions of Section 4(b) below.
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(ii) | Notwithstanding the foregoing and subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under all Full Value Awards shall not exceed the sum of 1,000,000, plus any Shares subject to any outstanding full value award under the Prior Plan that, after November 22, 2019, are not purchased or are forfeited or reacquired by the Company, or otherwise not delivered to the Participant due to termination or cancellation of such award, subject to the share counting provisions of Section 4(b) below. |
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(iii) | On and after stockholder approval of this Plan, no awards shall be granted under the Prior Plan, but all outstanding awards previously granted under the Prior Plan shall remain outstanding and subject to the terms of the Prior Plan. |
(b)Counting Shares. Except as set forth below in this Section 4(b), if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan.
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(i) | Shares Added Back to Reserve. Subject to the limitations in Section 4(b)(ii) below, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited or are reacquired by the Company, or if an Award otherwise terminates or is cancelled without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall again be available for granting Awards under the Plan.
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(ii) | Shares Not Added Back to Reserve. Notwithstanding anything to the contrary in Section (b)(i) above, the following Shares will not again become available for issuance under the Plan: (A) any Shares which would have been issued upon any exercise of an Option but for the fact that the exercise price was paid by a “net exercise” pursuant to Section 6(a)(iii)(B) or any Shares tendered in payment of the exercise price of an Option; (B) any Shares withheld by the Company or Shares tendered to satisfy any tax withholding obligation with respect to an Award; (C) Shares covered by a stock‑settled Stock Appreciation Right issued under the Plan that are not issued in connection with settlement in Shares upon exercise; or (D) Shares that are repurchased by the Company using Option exercise proceeds.
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(iii) | Cash Only Awards. Awards that do not entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate number of Shares available for Awards under the Plan.
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(iv) | Substitute Awards Relating to Acquired Entities. Shares issued under Awards granted in substitution for awards previously granted by an entity that is acquired by or merged with the Company or an Affiliate shall not be counted against the aggregate number of Shares available for Awards under the Plan.
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(c)Adjustments. In the event that any dividend (other than a regular cash dividend) or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split‑up, spin‑off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the purchase price or exercise price with respect to any Award and (iv) the limitations contained in Section 4(d) below; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be rounded down to the nearest whole number. Such adjustment shall be made by the Committee or the Board, whose determination in that respect shall be final, binding and conclusive.
(d)Annual Limitations.
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(i) | Annual Limitations for Awards Granted to Employees, Officers and Consultants, Etc. No Eligible Person who is an employee, officer or consultant, independent contractor or advisor may be granted any Award or Awards for more than 500,000 Shares (subject to adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any fiscal year.
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(ii) | Annual Limitation for Awards Granted to Non‑Employee Directors. No Director who is not also an employee of the Company or an Affiliate may be granted any Award or Awards denominated in Shares that exceed in the aggregate $350,000 (such value computed as of the date of grant in accordance with applicable financial accounting rules) in any fiscal year. The foregoing limit shall not apply to any Award made pursuant to any election by the Director to receive an Award in lieu of all or a portion of annual and committee retainers and annual meeting fees.
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Section 5.Eligibility
Any Eligible Person shall be eligible to be designated as a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full time or part time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.
(a)Options. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(i) | Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously granted by an entity that is acquired by or merged with the Company or an Affiliate.
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(ii) | Option Term. The term of each Option shall be fixed by the Committee at the time of grant but shall not be longer than 10 years from the date of grant.
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(iii) | Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised within the Option term, either in whole or in part, and the method of exercise, except that any exercise price tendered shall be in either cash, Shares
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having a Fair Market Value on the exercise date equal to the applicable exercise price or a combination thereof, as determined by the Committee.
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(A) | Promissory Notes. For avoidance of doubt, the Committee may not accept a promissory note as consideration.
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(B) | Net Exercises. The terms of any Option may be written to permit the Option to be exercised by delivering to the Participant a number of Shares having an aggregate Fair Market Value (determined as of the date of exercise) equal to the excess, if any, of the Fair Market Value of the Shares underlying the Option being exercised, on the date of exercise, over the exercise price of the Option for such Shares.
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(iv) | Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options which are intended to qualify as Incentive Stock Options:
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(A) | The Committee will not grant Incentive Stock Options in which the aggregate Fair Market Value (determined as of the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under this Plan and all other plans of the Company and its Affiliates) shall exceed $100,000. |
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(B) | All Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board or the date this Plan was approved by the stockholders of the Company. |
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(C) | Unless sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than ten (10) years after the date of grant; provided, however, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Affiliates, such Incentive Stock Option shall expire and no longer be exercisable no later than five (5) years from the date of grant.
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(D) | The purchase price per Share for an Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of the Incentive Stock Option; provided, however, that, in the case of the grant of an Incentive Stock Option to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its Affiliates, the purchase price per Share purchasable under an Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date of grant of the Incentive Stock Option.
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(E) | Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to qualify the Option as an Incentive Stock Option. |
(b)Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the
Stock Appreciation Right as specified by the Committee, which price shall not be less than one hundred percent (100%) of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that the Committee may designate a grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee (except that the term of each Stock Appreciation Right shall be subject to the term limitations in Section 6(a)(ii) applicable to Options). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c)Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant an Award of Restricted Stock and Restricted Stock Units to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
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(i) | Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. For purposes of clarity and without limiting the Committee’s general authority under Section 3(a), vesting of such Awards may, at the Committee’s discretion, be conditioned upon the Participant’s completion of a specified period of service with the Company or an Affiliate, or upon the achievement of one or more performance goals established by the Committee, or upon any combination of service‑based and performance‑based conditions (subject to the minimum requirements in Section 6. Notwithstanding the foregoing, rights to dividend or Dividend Equivalent payments shall be subject to the limitations described in Section 6(d).
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(ii) | Issuance and Delivery of Shares. Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may be evidenced in such manner as the Committee may deem appropriate, including book‑entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company or held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Plan. Shares representing Restricted Stock that are no longer subject to restrictions shall be delivered (including by updating the book‑entry registration) to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holder of the Restricted Stock Units.
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(d)Dividend Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. Notwithstanding the foregoing, (i) the Committee may not grant Dividend Equivalents to Eligible Persons in connection with grants of Options, Stock Appreciation Rights or other Awards the value of which is based solely on an increase in
the value of the Shares after the grant of such Award, and (ii) dividend and Dividend Equivalent amounts with respect to any Share underlying an Award may be accrued but not paid to a Participant until all conditions or restrictions relating to such Share have been satisfied or lapsed.
(e)Other Stock‑Based Awards. The Committee is hereby authorized to grant to Eligible Persons such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. The Committee shall determine the terms and conditions of such Awards, subject to the terms of the Plan and any applicable Award Agreement. No Award issued under this Section 6(e) shall contain a purchase right or an option‑like exercise feature.
(f)General.
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(i) | Consideration for Awards. Awards may be granted for no cash consideration or for any cash or other consideration as may be determined by the Committee or required by applicable law.
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(ii) | Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
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(iii) | Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities (but excluding promissory notes), other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee.
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(iv) | Limits on Transfer of Awards. No Award (other than fully vested and unrestricted Shares issued pursuant to any Award) and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution, and no Award (other than fully vested and unrestricted Shares issued pursuant to any Award) or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. Notwithstanding the foregoing, the Committee may permit the transfer of an Award to family members if such transfer is for no value and in accordance with the rules of Form S‑8. The Committee may also establish procedures as it deems appropriate for a Participant to designate a person or persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death.
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(v) | Restrictions; Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may cause appropriate entries to be made with respect to, or legends to be placed on the certificates for, such Shares or other securities to reflect such restrictions. The Company shall not be required
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to deliver any Shares or other securities covered by an Award unless and until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.
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(vi) | Prohibition on Option and Stock Appreciation Right Repricing. Except as provided in Section 4(c) hereof, the Committee may not, without prior approval of the Company’s stockholders, seek to effect any re pricing of any previously granted, “underwater” Option or Stock Appreciation Right by: (i) amending or modifying the terms of the Option or Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Option or Stock Appreciation Right and granting either (A) replacement Options or Stock Appreciation Rights having a lower exercise price; or (B) Restricted Stock, Restricted Stock Units or Other Stock Based Award in exchange; or (iii) cancelling or repurchasing the underwater Option or Stock Appreciation Right for cash or other securities. An Option or Stock Appreciation Right will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Option or Stock Appreciation Right is less than the exercise price.
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(vii) | Minimum Vesting. No Award shall be granted with terms providing for any right of exercise or lapse of any vesting obligations earlier than a date that is at least one year following the date of grant (or, in the case of vesting based upon performance‑based objectives, exercise and vesting restrictions cannot lapse earlier than the one‑year anniversary measured from the commencement of the period over which performance is evaluated); provided, however, that the Award Agreement by its terms may permit acceleration or waiver of the minimum restrictions upon a Change in Control or upon the Participant’s death, Disability or Retirement (or attainment of Retirement Age). Notwithstanding the foregoing:
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(A) | A maximum of five percent (5%) of the aggregate number of Shares available for issuance under this Plan may be issued as Awards that do not comply with the applicable one year minimum exercise and vesting requirements and limited exceptions set forth above. For purposes of counting Shares against the five percent (5%) limitation, the Share counting rules under Section 4 of this Plan apply. |
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(B) | Nothing in this Section 6 shall limit the authority of the Committee to amend or modify any Award to accelerate the vesting or the exercisability of any Award or the lapse of any restrictions relating to any Award (except where expressly limited in Section 6(f)(viii)). |
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(viii) | Limits on Acceleration or Waiver of Restrictions Upon Change in Control. No Award Agreement shall, either by operation of its terms or by action of the Committee, accelerate the exercisability of any Award or the lapse of restrictions relating to any Award in connection with a reorganization, merger or consolidation of, or sale or other disposition of all or substantially all of the assets of, the Company unless such transaction constitutes a Change in Control and unless such acceleration occurs upon the consummation of (or effective immediately prior to the consummation of, provided that the consummation subsequently occurs) the Change in Control. Nothing in this paragraph shall limit the Committee’s authority to accelerate the exercisability of any Award or the lapse of restrictions relating to any Award for reasons other than a Change in Control (e.g., due to death, Disability or Retirement).
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(ix) | Section 409A Provisions. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit that constitutes “deferred compensation” to a Participant under Section 409A and applicable guidance thereunder is
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otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a Change in Control or due to the Participant’s Disability or “separation from service” (as such term is defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such Change in Control, disability or separation from service meet the definition of a change in control event, disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short‑term deferral exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six months after the date of the Specified Employee’s separation from service (or if earlier, upon the Specified Employee’s death) unless the payment or distribution is exempt from the application of Section 409A by reason of the short‑term deferral exemption or otherwise.
Section 7.Amendment and Termination; Corrections
(a)Amendments to the Plan and Awards. The Board may from time to time amend, suspend or terminate this Plan, and the Committee may amend the terms of any previously granted Award, provided that no amendment to the terms of any previously granted Award may (except as expressly provided in the Plan) adversely alter or impair the terms or conditions of the Award previously granted to a Participant under this Plan without the written consent of the Participant or holder thereof. Any amendment to this Plan, or to the terms of any Award previously granted, is subject to compliance with all applicable laws, rules, regulations and policies of any applicable governmental entity or securities exchange, including receipt of any required approval from the governmental entity or stock exchange. For greater certainty and without limiting the foregoing, the Board may amend, suspend, terminate or discontinue the Plan, and the Committee may amend or alter any previously granted Award, as applicable, without obtaining the approval of stockholders of the Company in order to:
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(i) | amend the eligibility for, and limitations or conditions imposed upon, participation in the Plan; |
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(ii) | subject to the limitations in Section 6, amend any terms relating to the granting or exercise of Awards, including but not limited to terms relating to the amount and payment of the exercise price, or the vesting, expiry, assignment or adjustment of Awards, or otherwise waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively; |
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(iii) | make changes that are necessary or desirable to comply with applicable laws, rules, regulations and policies of any applicable governmental entity or stock exchange (including amendments to Awards necessary or desirable to maximize any available tax deduction or to avoid any adverse tax results, and no action taken to comply with such laws, rules, regulations and policies shall be deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof); or |
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(iv) | amend any terms relating to the administration of the Plan, including the terms of any administrative guidelines or other rules related to the Plan. |
For greater certainty and except as provided in Section 4(c), prior approval of the stockholders of the Company shall be required for any amendment to the Plan or an Award that would:
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(I) | require stockholder approval under the rules or regulations of the Securities and Exchange Commission, the New York Stock Exchange or any other securities exchange that are applicable to the Company; |
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(II) | increase the number of shares authorized under the Plan as specified in Section 4(a) of the Plan; |
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(III) | permit repricing of Options or Stock Appreciation Rights, which is currently prohibited by Section 6 of the Plan; |
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(IV) | permit the award of Options or Stock Appreciation Rights at a price less than one‑hundred percent (100%) of the Fair Market Value of a Share on the date of grant of such Option or Stock Appreciation Right, contrary to the provisions of Section 6(a)(i) and Section 6(b) of the Plan; |
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(V) | increase the maximum term permitted for Options and Stock Appreciation Rights as specified in Section 6(a) and Section 6(b); or |
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(VI) | increase the number of shares subject to the annual limitations contained in Section 4(d) of the Plan. |
(b)Corporate Transactions. In the event of any reorganization, merger, consolidation, split‑up, spin‑off, combination, plan of arrangement, take‑over bid or tender offer, repurchase or exchange of Shares or other securities of the Company or any other similar corporate transaction or event involving the Company (or the Company shall enter into a written agreement to undergo such a transaction or event), the Committee or the Board may, in its sole discretion but subject to the limitations in Section 6 (e.g., limitations on re‑pricing and waiver of vesting restrictions), provide for any of the following to be effective upon the consummation of the event (or effective immediately prior to the consummation of the event, provided that the consummation of the event subsequently occurs), and no action taken under this Section 7(b) shall be deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof:
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(i) | either (A) termination of any Award, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of the vested portion of the Award or realization of the Participant’s vested rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the transaction or event described in this Section 7(b)(i)(A), the Committee or the Board determines in good faith that no amount would have been attained upon the exercise of the Award or realization of the Participant’s rights, then the Award may be terminated by the Company without any payment) or (B) the replacement of the Award with other rights or property selected by the Committee or the Board, in its sole discretion; |
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(ii) | that the Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; |
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(iii) | that the Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the applicable Award Agreement; or |
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(iv) | that the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of the event. |
(c)Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan. The Company shall not be liable or responsible for any error in the computation of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant, directly or indirectly, to the Committee, and used by the Committee in determining the benefit.
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Section 8. | Income Tax Withholding |
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. Without limiting the foregoing, for avoidance of doubt, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes (subject to any limitations required by ASC Topic 718 to avoid adverse accounting treatment); (b) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (c) by any other means set forth in the applicable Award Agreement..
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Section 9. | General Provisions |
(a)No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
(b)Award Agreements. No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement shall have been signed by the Participant (if requested by the Company), or until such Award Agreement is delivered and accepted through an electronic medium in accordance with procedures established by the Company. An Award Agreement need not be signed by a representative of the Company unless required by the Committee. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
(c)Plan Provisions Control. In the event that any provision of an Award Agreement conflicts with or is inconsistent in any respect with the terms of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control.
(d)No Rights of Stockholders. Except with respect to Shares issued under Awards (and subject to such conditions as the Committee may impose on such Awards pursuant to Section 6(c)(i) or Section 6(d)), neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a stockholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until such Shares have been issued.
(e)No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or arrangements, and such plans or arrangements may be either generally applicable or applicable only in specific cases.
(f)No Right to Employment or Directorship. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, or the right to be retained as a Director, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant’s
employment at any time, with or without cause, or remove a Director in accordance with applicable law. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or remove a Director who is a Participant, free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. Nothing in this Plan shall confer on any person any legal or equitable right against the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. Under no circumstances shall any person ceasing to be an employee or Director of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Plan which such employee or Director might otherwise have enjoyed but for termination of employment or directorship, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(g)Governing Law. The internal law, and not the law of conflicts, of the State of Delaware shall govern all questions concerning the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
(h)Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
(i)No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(j)Other Benefits. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant’s compensation or benefits under any pension, retirement, savings, profit sharing, group insurance, disability, severance, termination pay, welfare or other benefit plan of the Company, unless required by law or otherwise provided by such other plan.
(k)No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be canceled, terminated or otherwise eliminated.
(l)Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
(m)Forfeiture. All Awards under this Plan shall be subject to forfeiture and/or penalty conditions or provisions as determined by the Committee and set forth in the applicable Award Agreement.
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Section 10. | Clawback or Recoupment |
In addition to such forfeiture and/or penalty conditions as specified in any Award Agreement, Awards under this Plan shall be subject to forfeiture or other penalties pursuant to the Executive Incentive Compensation Clawback Policy as amended from time to time.
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Section 11. | Effective Date of the Plan |
The Plan was adopted by the Board on September 27, 2019. The Plan shall be subject to approval by the stockholders of the Company at the annual meeting of stockholders of the Company to be held on November 22,
2019 and the Plan shall be effective as of the date of such stockholder approval. On and after stockholder approval of the Plan, no awards shall be granted under the Prior Plan, but all outstanding awards previously granted under the Prior Plan shall remain outstanding and subject to the terms of the Prior Plan.
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Section 12. | Term of the Plan |
No Award shall be granted under the Plan, and the Plan shall terminate, on September 27, 2029 or any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such dates, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the termination of the Plan.
Donaldson Company, Inc.
Annual Meeting of Stockholders
Friday, November 22, 2019,18, 2022, at 1:00 p.m. CST
Virtual meeting held online through
www.virtualshareholdermeeting.com/DCI2019
DCI2022