•Discretionary items - The ratification of the selection of the independent registered public accounting firm (Proposal 3) is a discretionary item. Generally, brokers, banks and other nominees that do not receive instructions from beneficial owners may vote on this proposal in their discretion.
•Non-discretionary items - The election of directors (Proposal 1), approval of the adoption of the Amended and Restated 2017 Equity Incentive Plan (Proposal 2) and the advisory resolution to approve executive compensation (Proposal 4) are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received voting instructions from beneficial owners (referred to as “broker non-votes”).
GENERAL INFORMATION REGARDING CORPORATE GOVERNANCE
Board of Directors
The Board of Directors (sometimes referred to throughout the remainder of this Proxy Statement as the “Board”) is the ultimate governing body of the Company. As such, it functions within a framework of duties and requirements established by Pennsylvania statute, government regulations, court decisions and the Company’s organizational documents. Generally, the Board of Directors reviews and confirms the basic objectives and broad policies of the Company, approves various important transactions, appoints the officers of the Company and monitors Companythe Company's performance in key results areas. The Board also has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. The full Board regularly reviews enterprise-wide risk management, which includes relationships with significant customers, volatility of commodity costs, changesrisks in the markets in which the Company operatesareas of compliance, operations, strategy, reporting, treasury, enterprise value, and existing and potential competitors.insurable risks. In addition, each Board committee plays a significant role in carrying out the risk oversight function. The Executive Committeeexecutive committee of the Board (the "Executive Committee") assists in monitoring and assessing relevant risks between the times at which the full Board convenes. The Nominatingnominating and corporate governance committee of the Board (the "Nominating and Corporate Governance CommitteeCommittee" or "Corporate Governance Committee") oversees risks related to corporate governance and ethics. The Audit Committeeaudit committee of the Board (the "Audit Committee") oversees risks related to financial reporting and control; environmental, health and sustainability matters; management policies and guidelines; legal claims and issues; and information technology. The Finance Committeefinance committee of the Board (the "Finance Committee") oversees the Company’s financial policies, strategies and capital structure. The Compensation Committeecompensation committee of the Board (the "Compensation Committee") oversees risks related to human resources, succession planning and compensation. The Special Committeespecial committee of the Board (the "Special Committee") provides oversight of integration planning and implementation of the Company's significant acquisitions.acquisitions on an as-needed basis.
Board Composition
The Articles of Incorporation of the Company provide that the Board of Directors has the power to set the number of directors constituting the full Board, provided that such number shall not be less than five or more than fifteen. Until further action,In connection with the retirement of John D. Turner as Chairman of the Board and a director of the Company pursuant to the Company’s Bylaws and Corporate Governance Guidelines, effective February 17, 2022, the Board has decreased the number of directors from eleven to ten. Following the Annual Meeting, subject to the re-election of each of the Board nominees, the Board will be comprised of ten members, two of whom are female and one of whom is Hispanic. Pursuant to the Company’s Articles of Incorporation, the Board of Directors has fixed the number of directors constituting the full Board at ten,is divided into three classes. The terms of office of the three classes of directors end in successive years.
After reviewing the independence standards contained in the NASDAQNasdaq listing requirements, the Board of Directors has determined that each of its directors is independent under these standards, other than Joseph C. Bartolacci, the Company’s President and Chief Executive Officer; David A. Schawk, retired Group President of the Company’s SGK Brand Solutions segment;segment effective as of November 1, 2019; and Gregory S. Babe, the Company’s Chief Technology Officer.
In the event a nominee does not receive a majority of votes cast, such director is required under the Company’s Corporate Governance Guidelines to conditionally resign from the Board of Directors.Board. Acceptance of such resignation is at the discretion of the Board of Directors.Board.
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The Company’s Corporate Governance Guidelines provide that an employee member must offer to submit his or her letter of resignation as a director upon his or her retirement or termination of employment, and if such offer is accepted, such employee member can remain on the Board for a period of no longer than one year following retirement from, or termination of, employment with the Company. Additionally, the Company's Corporate Governance Guidelines provide that any director must offer to submit his or her letter of resignation as a director upon a change in principal occupation that differs from that which they were engaged and elected to the Board. Further, the Company’s By-lawsBylaws and Corporate Governance Guidelines provide that no person may be eligible for nomination, nor elected to fill a vacancy on the Board of Directors after attaining 75 years of age, and any director that, if nominated would attain 75 years of age during such term as a director, shall retire from the Board of Directors immediately prior to the next annual meeting of the shareholders following such director attaining 75 years of age.
John D. Turner, the Company’s current Chairman of the Board, has attained the mandatory retirement age and will retire from the Board at the Annual Meeting. The Board of Directors and management of the Company express their sincerest gratitude to Mr. Turner for his service on the Board of Directors and as Chairman of the Board. Mr. Turner’s expertise and leadership have been invaluable to the Company during his tenure as a director and Chairman of the Board.
The Board has currently determined that an independent, non-employee member should be appointed to serve as Chairman of the Board. The Board believes that separation of the positions of Chairman of the Board and Chief Executive Officer, with the appointment of an independent, non-employee director as Chairman of the Board, strengthens the Company’s corporate governance. John D.Mr. Turner is the Company’s current independent, non-employee Chairman of the Board. Subject to, and in anticipation of, the re-election of Alvaro Garcia-Tunon to the Board, the Board has elected Mr. Garcia-Tunon to assume the office of Chairman of the Board upon Mr. Turner’s retirement at the Annual Meeting. Upon his election as Chairman of the Board, Mr. Garcia-Tunon will resign from each of the committees other than the Executive Committee.
During fiscal 2017,2021, there were sixfive (5) regularly scheduled meetings and no special Board meetings.
Board Committees
There are six (6) standing committees appointed by the Board of Directors -- the Executive Committee, the Nominating and Corporate Governance Committee, the Audit Committee, the Finance Committee, the Compensation Committee and the Special Committee.
Each Committee has the same power as the Board of Directors to employ the services of outside consultants and to have discussions and interviews with personnel of the Company and others.
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The principal functions of the six standing Committees are summarized as follows:
Executive Committee
The Executive Committee is appointed by the Board of Directors to have and exercise during periods between Board meetings all of the powers of the Board, of Directors, except that the Executive Committee may not elect directors, change the membership of or fill vacancies on the Executive Committee, change the By‑laws of the Company or exercise any authority specifically reserved by the Board of Directors.Board. Among the functions customarily performed by the Executive Committee during periods between Board meetings are the approval, within limitations previously established by the Board, of Directors, of the principal terms involved in sales of securities of the Company, and such reviews as may be necessary of significant developments in major events and litigation involving the Company. In addition, the Executive Committee is called upon periodically to provide advice and counsel in the formulation of corporate policy changes and, where it deems advisable, make recommendations to the Board of Directors.Board.
The members of the Executive Committee are currently John D. Turner (Chairperson), Katherine E. Dietze, Alvaro Garcia-Tunon, Morgan K. O’Brien and Jerry R. Whitaker. Upon Mr. Turner’s retirement from the Board at the Annual Meeting and subject to the anticipated re-election of Mr. Garcia-Tunon to the Board, Mr. Garcia-Tunon shall become the Chairperson of the Executive Committee. The Executive Committee holds meetings at such times as are required. The Executive Committee did not meet in fiscal 2017.2021.
Nominating and Corporate Governance Committee
The principal functions of the Nominating and Corporate Governance Committee are toto: (1) identify individuals qualified to become members of the Board of Directors; (2) review the qualifications of directors and the composition of the Board of Directors, (2)and recommend to the Board of Directors the director nominees for the next annual meeting of shareholders,the shareholders; (3) monitor and recommend to the Board of Directors changes, as necessary, to the Company’s Corporate Governance Guidelines,Guidelines; (4) lead the Board of Directors in complying with its Corporate Governance GuidelinesGuidelines; (5) review and make recommendations to the Board of Directors concerning director compensationcompensation; and (6) review and approve related person transactions pursuant to the Company’s Code of Conduct.Business Conduct and Ethics (the "Code of Conduct"). The Nominating and Corporate Governance Committee is also responsible for the annual evaluations of the performance of the Board of Directors and the Committees of the Board, including individual directors. The Committee is committed to ensuring thatthat: (i) the nominees for membership on the Board of Directors are of the highest possible caliber and are able to provide insightful, intelligent and effective guidance to the management of the CompanyCompany; and (ii) the governance of the Company is in full compliance with applicable law, reflects generally accepted principles of good corporate governance, encourages flexible and dynamic management without undue burdens and effectively manages the risks of the business and operations of the Company. From time to time, the Nominating and Corporate Governance Committee has retained the services of a third-party search firm to assist in the identification and evaluation of potential nominees for the Board of Directors. The Nominating and Corporate Governance Committee operates pursuant to a Chartercharter and the Company’s Corporate Governance Guidelines, which are available for viewing on the Company’s investor relations website at www.matw.comwww.matw.com/investors under the “Corporate”“Governance Documents” tab in the section entitled “Corporate Governance”“Governance”. The Board has determined that all members of the Nominating and Corporate Governance Committee are independent in accordance with the listing standards of NASDAQ.Nasdaq. The Nominating and Corporate Governance Committee met four (4) times during fiscal 2017.2021. The current members of the Nominating and Corporate Governance Committee are Jerry R. Whitaker (Chairperson), Katherine E. Dietze and Terry L. Dunlap.
Audit Committee
The principal functions of the Audit Committee are to provide oversight ofof: (1) the integrity of the Company's financial statements, reports on internal controls and other of the Company's financial information provided by the Company,information; (2) the Company's compliance with legal and regulatory requirements,requirements; (3) the qualifications and independence of the Company's independent registered public accounting firmfirm; and (4) the performance of the Company's internal audit function (including disclosure controls and procedures for internal controls over financial reporting) and independent registered public accounting firm. The Audit Committee serves as a vehicle to provide an open avenue of communication between the full Board of Directors and the Company’s financial management team and internal audit department, and the independent registered public accounting firm. The Audit Committee is responsible for appointing the Company's independent registered public accounting firm. The Audit Committee operates pursuant to a Charter,charter, which is available for viewing on the Company’s investor relations website at www.matw.comwww.matw.com/investors under the “Governance Documents” tab in the section entitled “Corporate Governance”"Governance".
All of the Audit Committee members, Alvaro Garcia-Tunon (Chairperson), Terry L. Dunlap andLillian D. Etzkorn, Morgan K. O’Brien and Jerry R. Whitaker, have been determined in the Board’s business judgment to be independent from the Company and its management within the meaning of SEC regulations of the U.S. Securities and Exchange Commission (the "SEC") relating to audit committee independence, NASDAQ regulationNasdaq regulations and the Company’s Corporate Governance Guidelines. All of the Audit Committee members are financial experts, as determined by SEC regulations, and, as such Mr. Garcia-Tunon, Mr. Dunlap and Mr. O'Brien arehowever Ms. Etzkorn has been designated as the ranking Audit Committee financial experts.expert. During fiscal 2017,2021, the Audit Committee met six (6) times. Subject to, and in anticipation of, the election of Mr. Garcia-Tunon to the office of Chairman of the Board and his resignation from the Audit Committee, Ms. Etzkorn will assume the office of Chairperson of the Audit Committee.
Finance Committee
The Finance Committee provides oversight of the Company’s financial policies, strategies and capital structure. The Committee’s principal responsibilities include reviewreviewing and monitoring of the Company’sCompany’s: (1) significant capital expenditures,expenditures; (2) mergers, acquisitions and divestitures,divestitures; (3) capital structure, debt and equity offerings,offerings; (4) the dividend policy and share repurchase program,program; (5) risk management programsprograms; and (6) investor relations program. The Committee also provides oversight to the Pension Board on employee benefit plan matters and related plan investment management. MembersMs. Katherine E. Dietze is Chairperson of the Finance Committee. The other members of the Finance Committee are Katherine E. Dietze (Chairperson), Gregory S. Babe, Don W. Quigley, Jr., David A. Schawk and Jerry R. Whitaker.Lillian D. Etzkorn. The Finance Committee met fivesix (6) times in fiscal 2017.2021.
Compensation Committee
The principal functions of the Compensation Committee, the members of which are Morgan K. O’Brien (Chairperson), Terry L. Dunlap, Alvaro Garcia-Tunon and Don W. Quigley, Jr., are to review periodically the suitability of the remuneration arrangements (including benefits) for the principal executivesCompany's Chief Executive Officer and other members of management of the Company, and to prepare an annual report on executive compensation for inclusion in the Company’s Proxy Statement. The Committee also reviews, at least annually, succession plans for the position of Chief Executive Officer and other senior executive positions of the Company. The Compensation Committee operates pursuant to a Charter,charter, which is available for viewing on the Company’s investor relations website at www.matw.comwww.matw.com/investors under the “Governance Documents” tab in the section entitled “Corporate Governance”"Governance". The Board has determined that all members of the Compensation Committee are independent in accordance with the listing standards of NASDAQ.Nasdaq. During fiscal 2017,2021, the Compensation Committee met threefour (4) times.
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Special Committee
The Special Committee was initially established in 2014 to provide oversight of integration planning and implementation for the Company’s significant acquisitions, including Schawk, Inc. (“Schawk”) that was completed on July 29, 2014 and Aurora Casket Products Group, LLC (“Aurora”) that was completed on August 19, 2015.acquisitions. The members of the Special Committee arewere Alvaro Garcia-Tunon (Chairperson), Gregory S. Babe, Joseph C. Bartolacci, and Terry L. Dunlap. The Committee met fourtimesdid not meet in fiscal 2017.2021. Subject to, and in anticipation of, the election of Mr. Garcia-Tunon to the office of Chairman of the Board, Mr. Garcia-Tunon shall resign from the Special Committee and the Board shall identify a new Chairperson of the Special Committee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Mr. O’Brien, Mr. Dunlap, Mr. Garcia-Tunon and Mr. Quigley. None of thesethe members of the Compensation Committee members hashave ever been an officer or employee of the Company or any of its subsidiaries. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.
Meeting Attendance
During fiscal 2017,2021, all directors attended at least 75% of Board and respective Committee meetings.
Although the Company does not have a formal policy with regard to Board members attending the Annual Meeting of the Shareholders, it is customary for the Board members to do so, and in general all or most of the Board members have attended annual meetings in the recent past.
Compensation of Directors
Director compensation is determined and administered by the Nominating and Corporate Governance Committee. In performing its duties, the Corporate Governance Committee consults with various independent third-party advisors. In fiscal 2017,2021, the Corporate Governance Committee consulted with Pay Governance, LLC, (“Pay Governance”), an independent human resourcesexecutive compensation consulting firm.
Under the Company’s Amended and Restated 20142019 Director Fee Plan, ("2014 Director Plan"), for fiscal 20172021 each eligible independentnon-employee director received an annual retainer valued at $85,000, which was payable either in cash or in shares of the Company’s Common Stock,common stock, as determined by the Nominating and Corporate Governance Committee. If payable in cash, a director may elect to receive the annual retainer in shares of Company Common Stock or Common Stock credited to a deferred stock account as phantom stock. If the annual retainer is paid in shares of Company Common Stock, a director may defer the receipt of such Common Stock into a deferred stock account as phantom stock.
Each independentnon-employee director is also receiveseligible to receive an annual stock-based grant (non-statutoryin the form of either non-statutory stock options, stock appreciation rights, and/restricted shares or restricted shares)share units ("RSUs"). The form and value of the awards are determined by the Nominating and Corporate Governance Committee. The value of the annual grants awarded for fiscal 20172021 was $125,000, issued in the form of restricted stock,RSUs, which vestsvest on the second anniversary of the date of the grant. At December 31, 2017,2021, there were 85,343132,643 shares available for future grantissuance under the Amended2019 Director Fee Plan, including 74,639 RSUs that have been granted and Restated 201415,966 share units that have been deferred under the 2019 Director Fee Plan.
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The non-employee Chairman of the Board received an additional annual retainer fee of $100,000 in fiscal 2017,2021, which was paid in cash. In fiscal 20172021, each Committee chairperson of a committee of the Board received an additional $10,000 retainer fee for their services as a Committee chairperson ($15,000 in the case of the Audit Committee chairperson). for their services as a committee chairperson. In addition, in fiscal 2017, Mr. Garcia-Tunon and Mr. Dunlap, the non-employee members of2021, the Special Committee did not meet and therefore its chairperson did not receive any additional retainer fee. Directors received $1,500 per day of service on the Committee. Other than this daily fee with respect to the Special Committee, directors receive no other meeting fees.fees in fiscal 2021.
The Company does not provide any retirement benefits or perquisites to any of its non-employee directors.
The following table summarizes the director compensation earned by the non-employee directors of the Company for fiscal 2017.2021.
Non-Employee Director Compensation Table
| Name | Fees Earned or Paid in Cash | Stock Awards (2) | Total | ||||||||
| J.D. Turner | $ | 185,000 | $ | 125,000 | $ | 310,000 | |||||
| K.E. Dietze | 95,000 | 125,000 | 220,000 | ||||||||
| T.L. Dunlap | 85,000 | 125,000 | 210,000 | ||||||||
L.D. Etzkorn (1) | 127,500 | 183,418 | 310,918 | ||||||||
| A. Garcia-Tunon | 100,000 | 125,000 | 225,000 | ||||||||
| M.K. O’Brien | 95,000 | 125,000 | 220,000 | ||||||||
| D.W. Quigley, Jr. | 85,000 | 125,000 | 210,000 | ||||||||
| D.A. Schawk | 85,000 | 125,000 | 210,000 | ||||||||
| J.R. Whitaker | 95,000 | 125,000 | 220,000 | ||||||||
| Name | Fees Earned or Paid in Cash (2) | Stock Awards (1) (3) | Total | ||||||
| J.D. Turner | $ | 185,000 | $ | 125,000 | $ | 310,000 | |||
| K.E. Dietze | 95,000 | 125,000 | 220,000 | ||||||
| T.L. Dunlap | 89,500 | 125,000 | 214,500 | ||||||
| A. Garcia-Tunon | 117,500 | 158,700 | 276,200 | ||||||
| M.K. O’Brien | 95,000 | 125,000 | 220,000 | ||||||
| D.W. Quigley, Jr. | 85,000 | 125,000 | 210,000 | ||||||
| J.R. Whitaker | 95,000 | 125,000 | 220,000 | ||||||
(1)Ms. Etzkorn was appointed to the Board of Directors on October 1, 2020 (Fiscal 2021). Cash payments reflect a pro-rata retainer fee payment of $42,500 in October 2020 and an annual retainer fee payment in March 2021 of $85,000. Stock awards reflect a pro-rata award of $58,418 in October 2020 and an annual award in March 2021 of $125,000.
(2)Amounts in this column reflect the grant date fair value of awards of restricted share units of the Company’s Common Stock granted during fiscal 2021 computed in accordance with Financial Accounting Standards Board ASC Topic 718; however, the estimates of forfeitures related to service-based vesting conditions are disregarded for purposes of this valuation. There were no forfeitures of restricted awards by any of the directors during fiscal 2021. On March 11, 2021, each of the non-employee directors were awarded 2,988 restricted share units with a grant date fair value of $125,000.
Access to Directors
The security holders of the Company may communicate in writing to the Board of Directors by sending such communication to the Board or a particular director in care of Steven F. Nicola, Chief Financial Officer and Secretary, at the Company’s principleprincipal executive offices. At present, such communications will be directly forwarded to the Board or such particular director, as applicable.
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PROPOSAL 1
ELECTION OF DIRECTORS
Nominations for election to the Board of Directors may be made by the Nominating and Corporate Governance Committee or by the shareholders.shareholders pursuant to the provisions set forth in the Company’s Restated Articles of Incorporation and Bylaws.
Shareholder nominations for directors to be elected at the 20192023 Annual Meeting must be submitted to the Company in writing no earlier than 120 days prior to the anniversary date of the 2022 Annual Meeting, or October 20, 2022, and no later than 75 days prior to the anniversary date of the 20182022 Annual Meeting, or December 2, 2018.4, 2022. Such nominations must be in writing in accordance with Section 6.1 of the Company’s Restated Articles of Incorporation, and must include (1) the name and address of the shareholder who intends to make the nomination and of the person(s) to be nominated; (2) a representation that the shareholder is a holder of record of stockCommon Stock of the Company entitled to vote at such meeting and intends to appear in person"in person" or by proxy at the meeting to nominate the person(s) specified in the notice; (3) a description of all arrangements or understandings between the shareholder and each nominee and any other person(s) (naming such person(s)) pursuant to which the nomination or nominations are to be made by the shareholder; (4) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated by the Board of Directors; and (5) the consent of each nominee to serve as a director of the Company if so elected. The Nominating and Corporate Governance Committee and Board will consider any candidate for nominee as a director that is properly submitted by a shareholder in accordance with the Company’s Articles of Incorporation and Bylaws.Bylaws and does not maintain a policy with regard to such nominations distinct from such requirements. No such nominations have been received with respect to the 20182022 Annual Meeting.
The Company’s process for filling director vacancies includes determination of the professional skills and background desired to serve the best interests and current needs of the Company and its shareholders, possible retention of a third-party search firm to assist in the identification and evaluation of director candidates, consideration of candidates nominated by shareholders (if any), evaluation of a candidate’s credentials and experience by the Nominating and Corporate Governance Committee (including personal interviews with selected candidates), and a formal recommendation by the Nominating and Corporate Governance Committee to the Board of Directors regarding the candidate considered to be the most qualified to fill the director vacancy.
The Corporate Governance Committee assesses a candidate’s background, skills, diversity, personal characteristics and business experience and applies the following criteria and qualifications: candidates are to be of the highest ethical character, share the values of the Company, have reputations, both personal and professional, consistent with the image and reputation of the Company, be highly accomplished in their respective field, with superior credentials and recognition, and provide the relevant expertise and experience necessary to assist the Board and the Company to increase shareholder value. The Board may prioritize the foregoing criteria depending on the current needs of the Board and the Company. The Board does not have a formal diversity policy for selecting directors, but considers diversity of race, gender and national origin to be relevant factors that are weighed with other criteria in recommending and nominating directors for election to the Board of Directors of Matthews.
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Under the Company’s Corporate Governance Guidelines, any director who experiences a change in principal occupation or primary business affiliation while serving as a director, must promptly offer to submit a letter of resignation as a director to the Chief Executive Officer and to the Nominating and Corporate Governance Committee. The Board, with input from the Nominating and Corporate Governance Committee and the Chief Executive Officer, will consider whether to accept such offer.
The Board of Directors has no reason to believe that any of the current nominees for director will become unavailable for election. However, if any nominee should become unavailable prior to the Annual Meeting, the accompanying proxy will be voted for the election in the nominee's place of such other person as the Board of Directors may recommend in the nominee’s place.
Only affirmative votes are counted in the election of directors. The nominees for election as directors of the Class of 2021 who receive the highest number of votes cast for the election of directors at the Annual Meeting by the holders of the Company’s Common Stock present in person"in person" or voting by proxy, a quorum being present, will be elected as directors. Abstentions, broker non-votes and instructions to withhold authority to vote for one or more of the nominees will result in those nominees receiving fewer votes but will not count as votes against the nominee.
The Board of Directors has implemented a director resignation policy under the Company’s Corporate Governance Guidelines. The director resignation policy requires each nominee to the Board of Directors, prior to any election of directors, to submit a conditional resignation to the Board of Directors in connection with such nominee’s nomination. In the event a nominee fails to receive the vote of at least a majority of the votes cast, the Nominating and Corporate Governance Committee will make a recommendation to the Board whether to accept or reject the tendered conditional resignation. The Board of Directors must act on the tendered resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, within 90ninety (90) days from the date of the certification of the election results. The Board shall promptly disclose its decision regarding the tendered resignation by furnishing a Current Report on Form 8-K to the Securities and Exchange Commission (“SEC”),SEC, including its rationale for accepting or rejecting the tendered resignation. In making their recommendation and decision, the Nominating and Governance Committee and Board may consider the following factors or other information that it considers appropriate and relevant: (i) the stated reasons, if any, why shareholders withheld their votes,votes; (ii) possible alternativealternatives for curing the underlying cause of the withheld votes,votes; (iii) the director’s qualifications in light of the overall composition of the Board,Board; (iv) the director’s past and expected future contributions to the Company,Company; (v) potential adverse consequences of accepting the resignation, including failure to comply with any applicable rule or regulationregulation; and (vi) the best interests of the Company and its shareholders. If the Board accepts a director’s tendered resignation, the Board, in its sole discretion, may fill any resulting vacancy or decrease the size of the Board, pursuant to the Bylaws of the Company. If a director’s resignation is not accepted by the Board, such director will continue to serve in accordance with existing Company regulations. Any director whose tendered resignation is being considered shall not participate in the deliberations conducted by the Nominating and Corporate Governance Committee or the Board.
The Board of Directors recommends that you vote FOR the election of the nominated directors.
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The following information is furnished with respect to the persons nominated by the Board of Directors of the Company for election as directors and with respect to the continuing directors.
Nominees
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Continuing Directors
Joseph C. Bartolacci, age 61, was appointed Chief Executive Officer of the Company in 2006, and has served on the Board of Directors since 2005. Prior to his appointment as Chief Executive Officer, he was President and Chief Operating Officer of the Company since 2005. Prior thereto, he held various positions within Matthews, including President, Casket Division; Executive Vice President of Matthews; President, Matthews Europe; President, Caggiati, S.p.A. (a wholly-owned subsidiary of Matthews) and General Counsel of Matthews. Mr. Bartolacci provides management’s perspective in Board decisions about the business and strategic direction of the Company. He has firsthand operating experience in many of the Company’s diverse global businesses and brings a well-developed understanding of the industries in which the Company operates, as well as the opportunities within those industries to drive shareholder value. Mr. Bartolacci received a Bachelor of Science degree in Accounting from Saint Vincent College and a Juris Doctor from the University of Pittsburgh. Mr. Bartolacci serves on the Special Committee of the Board. He also serves on the Company’s Pension Board and on the boards of various subsidiaries of Matthews. Other than the Company, Mr. Bartolacci serves on the board of Federated Hermes, a global investment management company and publicly-traded company.
Gregory S. Babe, age 60,64, has served on the Board of Directors since November 2010. Mr. Babe has served as the Company’s Chief Technology Officer since November 2015, and prior to that served as the Company’s Executive Vice President, Global Information Technology and Integration starting in November 2014. Mr. Babe also serves as President and Chief Executive Officer of Liquid X Printed Metals, Inc., a Carnegie Mellon University spin out. From July 2012 to June 2013, Mr. Babe served as Chief Executive Officer of Orbital Engineering, Inc., a privately held engineering services company. Mr. Babe retired as President and Chief Executive Officer of Bayer Corporation and Bayer MaterialScience LLC in June 2012. Mr. Babe was appointed President and Chief Executive Officer of Bayer Corporation and Senior Bayer Representative for the United States and Canada in October 2008. Mr. Babe was responsible for the North American activities of the worldwide Bayer Group, an international health care, nutrition and high-tech materials group based in Leverkusen, Germany. In addition, he held the position of President and Chief Executive Officer of Bayer MaterialScience LLC, a producer of polymers and high-performance plastics in North America, from July 2004 until June 2012. Mr. Babe is considered well-qualified to serve on the Company’s Board of Directors based on his experience as a Chief Executive Officer of a multinational manufacturing company. He possesses a strong background in manufacturing and regulatory and government affairs. Mr. Babe is a member of the Finance and Special Committees. He serves on the Boardboard of the Benedum Foundation, where he is a member of the Audit Committee.investment committee. Mr. Babe holds a Bachelor of Science degree in mechanical engineering from West Virginia University.
Katherine E. Dietze, age 58,64, has served on the Board of Directors of the Company since February 2015. Mr. Dunlap currently serves as the principalJuly 2008. Ms. Dietze was Global Chief Operating Officer, Investment Banking Division of Sweetwater LLC,Credit Suisse First Boston, a consulting and investing firm with a focus on manufacturing and technology. Prior thereto, Mr. Dunlap spent 31 years with Allegheny Technologies, where he served as Executive Vice President, Flat-Rolled Products from May 2011financial services company, until hisher retirement in December 2014, President, ATI Allegheny Ludlum from 20022005. She had also held the position of Managing Director, Investment Banking. Prior to 2014,joining Credit Suisse First Boston, Ms. Dietze was a Managing Director for Salomon Brothers Inc., a financial services company. Ms. Dietze brings a strong background in global investment and Group President, ATI Flat-Rolled Products from 2008 to May 2011. Mr. Dunlap’s experiencefinancial matters. With her background in investment banking, Ms. Dietze provides a unique and knowledge in thevaluable perspective on global manufacturing industry are valuable resources to the Board of Directors. Mr. Dunlapfinancial markets, investments and financial transactions. Ms. Dietze received a Bachelor of ScienceArts degree from Brown University and graduated from Columbia University with a Masters in Marketing from Indiana UniversityBusiness Administration in Finance and Marketing. Ms. Dietze serves as Chairperson of Pennsylvaniathe Finance Committee and attended the Loyola University of Chicago MBA program. Mr. Dunlap is a member of the Audit, NominatingExecutive Committee. She is also a director and Corporate Governance, and Special Committeeschairperson of the Board. Mr. Dunlap servesaudit committee of Cowen Group, Inc., a financial services firm. She previously served as chairperson of the audit committee and member of both the governance and compensation committees for LaBranche, LLC, a financial services firm purchased by the Cowen Group in June 2011. Ms. Dietze served as a Trustee on the Liberty Property Trust board from January, 2011 to March, 2020.
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Lillian D. Etzkorn, age 52, was appointed to the Board of Directors Compensation and Audit Committees of TimkenSteel Corp., a specialty steel producer, and is a director and Chairman of the Compensation Committee of Elliot Group/EBARA Corp., a global producer of turbomachinery, compressors and turbines. He alsoon October 1, 2020. Ms. Etzkorn currently serves as the Vice President of the Indiana University of Pennsylvania Foundation Board.
Morgan K. O’Brien, age 61, has served on the Board of Directors of the Company since 2003.July 2011. Mr. O’Brien served as the President and Chief Executive Officer of Peoples Natural Gas Company LLC, a utility serving the southwestern Pennsylvania market, from February 2010 until March 16, 2020. Prior thereto, Mr. O’Brien served as President and Chief Executive Officer of Duquesne Light Holdings, an electric utility company serving western Pennsylvania, since 2001. He held various senior executive positions at Duquesne Light Holdings since 1991. Prior to joining Duquesne Light Holdings, Mr. O’Brien served in various management positions at PNC Bank and at major accounting firms. Having served as thea Chief FinancialExecutive Officer of a public companyand with global operations,more than 10 years experience in that role, Mr. Garcia-Tunon hasO’Brien brings significant leadership skills to the Board of Directors. With his experience in international business, corporate governancethe areas of accounting and risk management. As a Certified Public Accountant,taxation, he also provides the Board and the Audit Committee, of which he is a Chairman, themember, with strong financial and accounting skills required to be considered a financial expert.skills. Mr. Garcia-TunonO’Brien is also Chairman of the SpecialCompensation Committee and is a member of the Executive Committee. Mr. O’Brien received a Bachelor’s degree in Business Administration and Compensation Committees.a Masters degree in taxation from Robert Morris University. Mr. Garcia-Tunon currently is serving on the Board of Directors of MSA Safety, Inc., a global leader in the development, manufacture and supply of safety products that protect people and facility infrastructures, since 2012, andO’Brien serves on the Audit, Legal and Finance Committeesboard of that Board.trustees of Robert Morris University. He also serves as a memberon the boards of the Board of Directorsseveral civic and Audit Committee of Allison Transmission Holdings, Inc., a global provider of commercial-duty automatic transmissions and hybrid propulsion systems. Mr.charitable organizations in Western Pennsylvania.
Don W. Quigley, Jr., age 62,66, has served on the Board of Directors of the Company since September 2015. Mr. Quigley is currently a Senior Advisor for the Boston Consulting Group, a global management consulting firm. Mr. Quigley served as President of U.S. Sales of Mondelez International, Inc., a global provider of snack food and beverage products to consumers from 2012 until his retirement in March 2015. Prior thereto, he served as President, Global Consumer Sales of Kimberley-ClarkKimberly-Clark Corporation from 2004 to 2012, and Vice President of Sales for PepsiCo from 1998 to 2004. Mr. Quigley’s experience and knowledge as a senior sales and marketing executive at consumer products companies is a valuable resource to the Company. Mr. Quigley is a member of the Compensation and Finance Committees. Mr. Quigley received a Bachelor of Science degree in Business from the Kelley School at Indiana University, where he serves on the Dean’s Advisory Council.University. He currently serves on the Boardboard of Directorsdirectors of Gold Eagle Company, a family-owned provider of automotive fluids and additives.
David A. Schawk, age 62, was named66, has served on the Board of Directors of the Company since the Company's acquisition of Schawk Inc. ("Schawk") on July 29, 2014. Effective November 1, 2019, Mr. Schawk retired from his role as Group President, SGK Brand Solutions and elected toas an officer of the Company’s Board of Directors effective upon the Company’s acquisition of Schawk onCompany, which he held from July 29, 2014. Mr. Schawk previously served as Schawk’s Chief Executive Officer from July 2012,since 1992, and Chief Executive Officer and President for more than five years prior thereto. He also served on the Schawk Board of Directors since 1992. Mr. Schawk is considered well-qualified to serve on the Company’s Board of Directors based on his experience as a Chief Executive Officer and director of a multinational brand development and brand management company.
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The term for each nominee and director is listed below:
Nominees: | Term to expire at Annual Meeting of Shareholders in: | ||||
Continuing Directors: | |||||
| Gregory S. Babe | |||||
| Don W. Quigley, Jr. | |||||
| David A. Schawk | |||||
| Joseph C. Bartolacci | 2024 | ||||
| Katherine E. Dietze | 2024 | ||||
| Lillian D. Etzkorn | 2024 | ||||
| Morgan K. O’Brien | 2024 | ||||
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PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE
AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN
On November 16, 201717, 2021 (the “Adoption Date”), the Board approved, subject to shareholder approval, the adoption of the Company’s Amended and Restated 2017 Equity Incentive Plan (the “2017 Equity“Restated Plan”). If the Restated Plan is approved by our shareholders, it will authorize the issuance of 1,750,000 additional shares of the Company’s Common Stock. Following such approval, the aggregate number of shares of the Company’s Common Stock authorized for issuance under the Restated Plan would increase to 3,450,000. The Restated Plan will amend and restate the Matthews International Corporation 2017 Equity Incentive Plan (the “Initial Plan”).
The affirmative vote of a majority of the votes cast in person or by proxy at a meeting held prior to the anniversary of the Adoption Date in which the holders of at least a majority of the outstanding shares of the Company’s Common Stock are present (in person or by proxy) and voting is required for approval of adoption of the 2017 EquityRestated Plan. If the shareholders of the Company do not approve the 2017 EquityRestated Plan as proposed in this proxy statement, the 2017 EquityRestated Plan will not be used by the Company. Upon approval of the 2017 Equity Plan, there will be no further grants under the existing 2012 Equity Incentive Plan, as amended (the “2012 Equity Plan”).
The 2017 EquityRestated Plan is being adopted to maintain alignment of executive compensation with shareholder interests and upon discontinuation of the existing 2012 Equity Plan, maintain a sufficient share reserve to facilitate equity grants as determined by the Compensation Committee. Through the various awards under the 2017 EquityRestated Plan, employees may acquire shares based on the achievement of certain goals.
In order to determine the number of shares of Common Stock to be authorized under the 2017 EquityRestated Plan, the Compensation Committee and the Board considered the needs by the Company for the shares and the potential dilution that awarding the requested shares may have on the existing shareholders. As set forth in the Compensation Discussion and Analysis, the Compensation Committee consulted Pay Governance LLC as an independent compensation advisor to assist in this regard. The compensation advisor examined a number of factors, including the Company’s burn rate and an overhang analysis, which the Compensation Committee considered. As a result, the Compensation Committee recommended to the Board that 1,700,0001,750,000 additional shares be authorized under the 2017 EquityRestated Plan.
As of December 29, 2017,31, 2021, approximately 121,038776,472 shares of Common Stock remained available for future grant under the current 2012 Equityshare counting provisions of the Initial Plan. IfPursuant to the 2017 Equityterms of the Initial Plan is approved, no further grants will be made under the 2012 Equity Plan, and the 121,038 shares referred to above would no longer beremaining available for future grant do not give effect to shares subject to outstanding performance unit awards. Under the Restated Plan, performance unit awards are included in share counting upon grant, assuming the performance goals are satisfied (and will be adjusted at the end of the performance period based on the actual number of shares issued). If the share counting terms under the Restated Plan were in effect as of December 31, 2021, only approximately 8,887 shares would have remained available for future grant.
| Initial Plan share authorization | 1,700,000 | ||||
| Common stock issued | (211,788) | ||||
| Outstanding time-based restricted awards | (711,740) | ||||
Shares available for issuance under the Initial Plan (1) | 776,472 | ||||
| Outstanding performance-based restricted awards (at target) | (767,585) | ||||
Shares available for issuance under the Restated Plan (2) | 8,887 | ||||
(1) Share counting provisions under the Initial Plan do not count shares subject to performance unit awards until the time of vesting.
(2) Share counting provisions under the Restated Plan count performance unit awards at target level performance at time of grant.
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In addition to the shares available for grant as of December 31, 2021, shares subject to any award that is forfeited, or any option or stock appreciation right, or SARs, that expires or lapses without being exercised, or any award that is settled for cash, in each case whether issued under the Initial Plan or the Restated Plan will become available for future grant. The Board is seeking shareholder approval for the 2017 EquityRestated Plan and the pool of shares available under the 2017 EquityRestated Plan, which it expects is sufficient for approximately five years of awards based upon the historic rates of awards by the Compensation Committee under the predecessor plans.
The Compensation Committee and the Board also considered the burn rate with respect to Company equity awards. The burn rate is the total equity awards granted by the Company in a fiscal year divided by the total Common Stock outstanding at the beginning of the year.
In fiscal 2015, 20162019, 2020 and 2017,2021, the Company made the following equity awards:
| Year | Number of Full-Value Shares Granted to Employees (A) | Number of Full-Value Shares Granted to Non-Employee Directors (B) | Total Number of Full-Value Shares Granted (A+B) | Total Number of Stock Options Granted (C) | ||||
| 2017 | 216,655 | 9,434 | 226,089 | — | ||||
| 2016 | 227,125 | 15,722 | 242,847 | — | ||||
| 2015 | 215,370 | 16,065 | 231,435 | — | ||||
| Fiscal Year | Number of Full-Value Shares Granted to Employees (A) | Number of Full-Value Shares Granted to Non-Employee Directors (B) | Total Number of Full-Value Shares Granted (A+B) | Total Number of Stock Options Granted (C) | |||||||||||||||||||
| 2021 | 499,050 | 30,429 | 529,479 | 75,000 | |||||||||||||||||||
| 2020 | 303,660 | 45,112 | 348,772 | - | |||||||||||||||||||
| 2019 | 262,200 | 23,037 | 285,237 | - | |||||||||||||||||||
Using the ISS Proxy Advisory Services methodology for calculating burn rate, which applies a multiplier of 3.02.0 to any full value awards (like the(such as restricted shares and performance restricted shares for which the participant does not pay for the shares) awardedgranted by the Company, the Company’s three-year average (ISS adjusted) burn rate for equity grants made in fiscal 2015, 20162019, 2020 and 20172021 was 2.15%2.54%, which was below the Commercial & Professional Services (GICS 2020) industry benchmark of 4.24%3.57%, based on the Company’s industry group and volatility. If the burn rate was not adjusted in accordance with ISS policy, the burn rate would decrease to 0.72%1.31%. The Compensation Committee and the Board were satisfied that the Company’s burn rate over the past three years was an acceptable level and well below limits established by ISS.
An additional metric that the Compensation Committee and the Board used to measure the cumulative dilutive impact of the equity program is overhang. Overhang is defined as:
•outstanding stock options, plus
•outstanding full value awards, plus
•deferred full value awards under the Company's director fee plans, plus
•the number of shares available forof future grant under the Company’s 2014Company's 2019 Director Fee Plan and the proposed 2017 EquityRestated Plan (disregarding(including the remaining 2012 Equity Plan shares because no future grants would be made ifavailable under the 2017 Equity Plan is approved)Initial Plan),
•collectively divided by the total outstanding shares of Common Stock as of the record date.dates.
As of December 29, 2017,31, 2021, the record date for shareholders entitled to vote at the Annual Meeting, the Company had no75,000 outstanding stock options 21,494(with a weighted average exercise price of $41.70 and weighted average remaining term of 4.3 years), 1,404,325 restricted stockshare units (issuable as full value shares upon settlement of such restricted stockshare units) under the 2012 EquityInitial Plan; plus no outstanding stock options, 6,03415,966 deferred stockshare units (issuable as full value shares upon settlement of such deferred stockshare units), 74,639 restricted share units (issuable as full value shares upon settlement of such restricted share units), and 85,39242,038 shares available for future grant under the Company’s 20142019 Director Plan; plus no outstanding stock options, 10,10512,761 deferred stockshare units (issuable as full value shares upon settlement of such deferred share units), and no shares available for future grant under the Company’s Amended and
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Restated 2014 Director Plan; plus no outstanding stock options, 10,104 deferred share units (issuable as full value shares upon settlement of such deferred share units), and no shares available for future grant under the Company’s 1994 Director Fee Plan; plus 1,700,0001,758,887 shares available for future grant under the proposed 2017 EquityRestated Plan. As of that date, the Company had 32,291,57131,550,416 outstanding shares of Common Stock. This results in an overhang of 5.6%10.8%.
The need for and value of such long termlong-term equity grants within the Company’s overall compensation structure is also discussed in the “Long Term Incentive Compensation” section in the Compensation Discussion and Analysis.
Shareholder approval of the Restated Plan will also enable the Company to grant awards under the Restated Plan that are being askeddesigned to approve the 2017 Equity Planqualify for purposes ofspecial tax treatment under Section 162(m)422 of the Internal Revenue Code of 1986, as amended. Section 162(m)amended (the “Code”).
Key Features
The following features of the Restated Plan will continue to protect the interests of our shareholders:
•No liberal share counting.The Restated Plan prohibits the Company from re-using shares that are tendered or surrendered to pay the exercise cost or tax obligation of grants (such a practice is an example of a “liberal share counting” provision that is disfavored by many institutional investors). The only shares that are re-used in the Restated Plan are for awards that have been canceled, forfeited, expired or for awards settled in cash.
•Limitation on terms of stock options and stock appreciation rights.The maximum term of each stock option and SARs is ten years.
•No repricing or grant of discounted stock options.The Restated Plan does not permit the repricing of options or stock appreciation rights either by amending an existing award or by substituting a new award at a lower price unless such action is approved by the Company’s shareholders. The Restated Plan prohibits the granting of stock options or stock appreciation rights with an exercise price less than the fair market value of the Common Stock on the date of grant.
•Clawback.Awards granted under the Restated Plan are subject to recovery or clawback in the event the participant engages in certain proscribed activities.
•Minimum Vesting Requirement. The Restated Plan generally provides that the Company mayfor a minimum vesting requirement of not take a federal income tax deductionless than one year for compensation in excess of $1,000,000 paid to certain executive officers in any one year. Performance based compensation may be exempt from this limit where compensation satisfies a number of technical tax related requirements. Among other requirements, Section 162(m) requires that shareholders re-approve certain executive compensation plans every fiveall award types and three years for compensation awarded underrestricted stock, restricted stock units, performance units and certain other stock-based awards.
•Dividends.We do not pay dividends or dividend equivalents on stock options, stock appreciation rights or unearned performance shares subject to vesting requirements or the achievement of performance criteria before such plans to be eligible to qualify as exempt performance-based compensation. The Company is asking shareholders to approve the 2017 Equity Plan to satisfy this requirement so that future awards under the 2017 Equity Plan may qualify as exempt performance-based compensation under Section 162(m).award has become earned and payable.
Description of Equity Incentive Plan
The full text of the 2017 EquityRestated Plan is set forth as Exhibit A to this Proxy Statement. The following description of the 2017 EquityRestated Plan is qualified in its entirety by reference to Exhibit A.
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General. The purposes of the 2017 EquityRestated Plan are to encourage eligible employees of the Company and its subsidiaries to increase their efforts to make the Company and each subsidiary more successful, to provide an additional inducement for such employees to remain with the Company or a subsidiary, to reward such employees by providing an opportunity to acquire shares of the Company’s Class A Common Stock, par value $1.00 per share, on favorable terms and to provide a means through which the Company may attract able persons to enter the employ of the Company or one of its subsidiaries. The eligible employees are those employees of the Company or any subsidiary who share responsibility for the management, growth or protection of the business of the Company or any subsidiary, as determined by the Committee. As of September 30, 20172021, there were approximately 11,000 employees in the Company.
Under the 2017 EquityRestated Plan, the maximum number of shares available for grants or awards is an aggregate of 3,450,000 shares, including 1,700,000 shares. The 2017 Equityshares that were reserved for issuance under the Initial Plan. Restated Plan also includes a fixed sub-limit for the granting of incentive stock options. In general, without further shareholder approval, the maximum number of shares for which incentive stock options may be granted is 1,000,000 shares.
The 2017 EquityRestated Plan provides for (i) the grant of incentive stock options under Section 422 of the Internal Revenue Code, (ii) the grant of nonstatutory stock options, (iii) the grant of stock appreciation rights, either granted in conjunction with stock options (i.e., tandem stock appreciation rights) or not in conjunction with options (i.e., freestanding stock appreciation rights), (iv) restricted share awards, (v) restricted stock units, (vi) performance units and (vii) other stock based awards. Although the 2017 EquityRestated Plan permits the grant of incentive stock options, the Company has not granted incentive stock options under the 2012 EquityInitial Plan or its prior equity incentive plans.
The maximum number of shares as to which awards other than performance units or “other stock-based awards” may be made under the 2017 EquityRestated Plan to any one employee in any one calendar year is 250,000 shares. The maximum value of the property, including cash, that may be paid or distributed to any participant pursuant to a grant of performance units in any one calendar year is $5,000,000, and the maximum value of Common Stock and other property, including cash, that may be paid or distributed to any participant with respect to “other stock based awards” in any one calendar year is also $5,000,000.
Share Counting. For purposes of the limit on the number of shares available under the 2017 EquityRestated Plan and available for the sub-limit on incentive stock options (but not for the individual limit on shares that can be granted), each share of Common Stock which is subject to an award other than a stock option or a stock appreciation right is counted as one share, except that in case of performance units, shares of Common Stock are counted as one share shall be counted for each actual share issued onlyperformance unit subject to an award, assuming the applicable performance goals are satisfied at target levels (as described in the time, if any, of the actualapplicable award agreement) (the “Target Level”), provided, however, that upon issuance of shares pursuant to the performance unit award.award, (x) if greater than 100% of the performance goals are satisfied, one additional share shall be counted for each share actually issued in excess of the number of shares that would have been issued at Target Level and (y) if less than 100% of the performance goals are satisfied, such number of shares shall be forfeited equal to the difference between (a) the number of shares that would have been issued at 100% of Target Level and (b) the number of shares actually issued, and become eligible for reissuance under the Restated Plan.
Except in the case of performance unit awards (where shares of Common Stock(which are counted only upon actual issuance of the shares)described above), to the extent that any award is forfeited, or any option and tandem stock appreciation right (if any) or any free-standing stock appreciation right terminates, expires or lapses without being exercised, or any award is settled for cash, the shares of Common Stock subject to such awards will again be available for awards under the 2017 EquityRestated Plan. However, shares of Common Stock subject to such awards will continue to be counted for purposes of the individual limits on shares that can be granted.
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If the exercise price of any stock option and/or the tax withholding obligations relating to any awards are satisfied by delivering shares or withholding shares relating to such award, the gross number of shares subject to the award will nonetheless be deemed to have been granted for purposes of the 2017 EquityRestated Plan and any shares which are delivered back to the Company will not be added to the aggregate number of shares for which awards may be made under the 2017 EquityRestated Plan. If shares of Common Stock are issued upon the exercise of a stock appreciation right, all shares subject to the stock appreciation right are counted regardless of the number of shares issued upon exercise. Additionally, if any shares of Common Stock are repurchased on the open market with the proceeds of a stock option exercise, each such repurchased share of Common Stock is deemed to have been granted for purposes of the 2017 EquityRestated Plan and any shares of Common Stock so repurchased will not be added to the aggregate number of shares for which Awards may be made under the 2017 EquityRestated Plan.
Administration. The 2017 EquityRestated Plan will be administered by a Committee appointed by the Board of Directors. At present, this is the Compensation Committee. None of the members of such Committee are eligible to participate in the 2017 EquityRestated Plan.
Subject to the provisions of the 2017 EquityRestated Plan, the Committee has full and final authority, in its discretion, to make awards under the 2017 EquityRestated Plan, and to determine the employees to whom each award is made and the number of shares covered thereby. In determining the eligibility of any employee, as well as in determining the number of shares covered by each award, the Committee considers the position and responsibilities of the employee being considered, the nature and value to the Company or a subsidiary of his or her services, his or her present and/or potential contribution to the success of the Company or a subsidiary and such other factors as the Committee may deem relevant.
The Committee also has the power to interpret the 2017 EquityRestated Plan and to prescribe such rules, regulations and procedures in connection with the operations of the 2017 EquityRestated Plan as it deems necessary and advisable in its administration of the 2017 EquityRestated Plan.
Terms of Stock Options. The option price for each stock option may not be less than 100% of the fair market value of the Company’s Common Stock on the date of grant of the stock option except that, in the case of an incentive stock option granted to an employee who owns actually or constructively pursuant to the rules contained in Section 424(d) of the Internal Revenue Code more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary (a “Ten Percent Employee”), the option price may not be less than 110% of such fair market value. Fair market value of the Common Stock for all purposes under the 2017 EquityRestated Plan is the mean between the publicly reported highest and lowest sales prices per share of Class A Common Stock of the Company as quoted on the NASDAQNasdaq Exchange on the date as of which fair market value is determined. As of December 29, 2017,31, 2021, the fair market value of the Common Stock of the Company as determined by the above-stated formula was $53.07$36.63 per share.
No stock option may be exercised after the expiration of ten years from the date of grant (five years in the case of an incentive stock option granted to a Ten Percent Employee). Unless the Committee, in its discretion, otherwise determines, an exercisable stock option may be exercised in whole or in part. Otherwise stock options may be exercised at such times, in such amounts and subject to such restrictions as are determined in its discretion by the Committee.
The option price for each stock option is payable in full in cash at the time of exercise; however, in lieu of cash the person exercising the stock option may, if authorized by the Committee at the time of grant in the case of an incentive stock option or at any time in the case of a nonstatutory stock option, pay the option price in whole or in part by delivering to the Company shares of Common Stock having a fair market value on the date of exercise of the stock option equal to the option price for the shares being purchased, except that any portion of the option price representing a fraction of a share must be paid in cash.
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If the person exercising a stock option participates in a broker or other agent-sponsored exercise or financing program, the Company may cooperate with all reasonable procedures of the broker or other agent to permit participation by the person exercising the stock option in the exercise or financing program, but the exercise of the stock option shall not be deemed to occur and no shares of the Common Stock will be issued until the Company has received full payment in cash for the option price from the broker or other agent.
The aggregate fair market value (determined as of the time the incentive stock options are granted) of the shares of Common Stock with respect to which incentive stock options are exercisable for the first time by a participant in the 2017 EquityRestated Plan during any calendar year may not exceed $100,000. If the date on which any incentive stock options may first be exercised would be accelerated pursuant to any provision of the 2017 EquityRestated Plan or any stock option agreement, or amendment thereto, and the acceleration of such exercise date would result in a violation of this $100,000 restriction, then, notwithstanding any such provision, but subject to the authorization provided for in the following sentence, the exercise dates of such incentive stock options will be accelerated only to the date or dates, if any, that do not result in a violation of the $100,000 restriction, and in such event the exercise dates of the incentive stock options with the lowest option prices would be accelerated to the earliest such dates. The Committee may, in its discretion, authorize the acceleration of the exercise date of one or more incentive stock options even if such acceleration would violate the $100,000 restriction and one or more incentive stock options would thereby be converted in whole or in part to nonstatutory stock options.
Stock Appreciation Rights. A stock appreciation right (“SAR”) entitles the holder to receive, on exercise, the excess of the fair market value of the Common Stock on the exercise date over the SAR grant price. The Committee may grant SAR awards as stand-alone awards or in tandem with a related option award under the 2017 EquityRestated Plan. The SAR grant price is set by the Committee and may not be less than the fair market value of the Common Stock on the date of the grant. Payment upon exercise will be in cash, shares of Common Stock, or both. Unless otherwise determined by the Committee, any related option will no longer be exercisable to the extent a tandem SAR has been exercised, and the exercise of an option will cancel the related tandem SAR.
Repricing Prohibited. The 2017 EquityRestated Plan prohibits repricing of options or SARs without further shareholder approval. Repricing means the grant of a new option or SAR in return for the cancellation, exchange or forfeiture of an award that has a higher grant price than the new award, the amendment of an outstanding award to reduce the grant price, the cancellation or repurchase of an option or SAR at a time when grant price is greater than the fair market value of the Common Stock or any action that would be treated, for accounting purposes, as a repricing. The grant of a substitute award under the anti-dilution and anti-enlargement provisions explained under “Miscellaneous,” below, is not a repricing.
Other Terms of Options and SARS. Unless the Committee determines otherwise, the following provisions of this paragraph will apply in the event of any termination of employment, except that the third preceding paragraph will apply in any event if the exercise date of any incentive stock option is accelerated. If the employment of a participant who is not a Disabled Participant (as defined in the 2017 EquityRestated Plan) is voluntarily terminated with the consent of the Company or a subsidiary or a participant retires under any retirement plan of the Company or a subsidiary (i) any then outstanding incentive stock option held by the participant is exercisable (but only to the extent the stock option was exercisable immediately prior to the termination of employment) at any time prior to the expiration of the stock option or within three months after the date of termination of employment, whichever is the shorter period, and (ii) any nonstatutory stock option or SAR held by the participant is exercisable (but only to the extent the stock option or SAR was exercisable immediately prior to the termination of employment of the participant) at any time prior to the expiration of the stock option or SAR or within one year after the date of termination of employment, whichever is the shorter period. If the employment of any participant is voluntarily terminated with such
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consent and such
termination occurs because the participant is a Disabled Participant, any then outstanding stock option or SAR held by the participant is exercisable in full (whether or not so exercisable immediately prior to the termination of employment) at any time prior to the expiration of the stock option or SAR or within one year after the date of termination of employment, whichever is the shorter period. In the event of the death of a participant during employment, any then outstanding stock option or SAR is exercisable in full (whether or not so exercisable immediately prior to the death of the participant) by the person or persons entitled to do so under the will of the participant or, if the participant shall fail to make testamentary disposition of the stock option or SAR or shall die intestate, by the legal representative of the participant, in either case at any time prior to the expiration of the stock option or SAR or within one year after the date of death, whichever is the shorter period. In the event of the death of a participant after termination of employment during a period when a stock option or SAR is exercisable, any outstanding stock option or SAR held by the participant at the time of death is exercisable by the person or persons entitled to do so under the will of the participant or by the legal representative of the participant (but only to the extent the stock option or SAR was exercisable immediately prior to the death of the participant) at any time prior to the expiration of the stock option or SAR within one year after the date of death, whichever is the shorter period.
If the employment of any participant terminates for any other reason, unless the exercise period of a stock option or SAR following termination of employment has been extended upon the occurrence of one or more of the events described under “Additional Rights in Certain Events” below, the rights of the participant under any then outstanding stock option or SAR terminate at the time of such termination of employment.
Unless the Committee, in its discretion, otherwise determines, no stock option or SAR granted under the 2017 EquityRestated Plan is transferable other than by will or by the laws of descent and distribution, and a stock option or SAR may be exercised during a participant’s lifetime only by the participant. If the Committee determines that an award is transferable, it may do so only to the extent that such transfer is made without the payment of value or consideration to the participant.
Each grant of a stock option or SAR must be confirmed by an agreement between the Company and the participant which sets forth the terms of the stock option or SAR.
Performance Goals. The Committee may establish performance goals (“Performance Goals”) in connection with the grant of restricted stock, restricted stock units, performance units or “other stock-based awards.” In the case of awards to participants who may be covered employees under Section 162(m) of the Internal Revenue Code where the Committee wishes to qualify the award for the performance-based exception to the limitations on compensation deductions under Section 162(m) of the Internal Revenue Code, the Committee may designate the award as a “Qualified Performance-Based Award” and must certify in writing when the Performance Goals have been achieved. In such cases, the Performance Goals will be based on one or more of the following:
Restricted Stock. Restricted stock awards are actual shares of Common Stock issued to a participant subject to such restrictions (including restrictions on the right of the participant to sell, assign, transfer, pledge or otherwise encumber the shares awarded while such shares are subject to restrictions) as the Committee may impose thereon. Except as otherwise determined by the Committee, the participant shall have, with respect to the shares of the restricted stock, all the rights of a shareholder of the Company, including the right to vote the shares and receive cash dividends, provided that such cash dividends will not be paid to such participant unless and until the shares of Common Stock subject to the restricted stock award become vested. Prior to or at the time of grant, the Committee shall condition the award on the continued employment by the participant, Performance Goals as set by the Committee, or both. Except in the case of a Qualified Performance-Based Award,certain qualified performance-based awards, the Committee may modify or waive any restrictions it imposes.
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Following a restricted stock award and prior to the lapse of the applicable restrictions, to the extent that share certificates representing the restricted shares are issued, such certificates will either bear a legend referencing the restrictions or will be held by the Company in escrow. Upon the lapse of the applicable restrictions (and not before such time), any share certificates representing the restricted shares and unpaid dividends, if any, will be delivered to the participant, or any shares evidenced by book-entry will be marked unrestricted. If the restrictions applicable to the restricted stock award are not satisfied within the applicable period, the shares subject to the award will be forfeited, any certificates returned to the Company and any book entries changed to evidence transfer of the shares to the Company.
Restricted Stock Unit Awards. Restricted stock units are awards denominated in shares of Common Stock that will be settled, subject to the terms and conditions of the restricted stock units and at the sole discretion of the Committee, in an amount of cash, shares of Common Stock, or both, based upon the fair market value of a specified number of shares of Common Stock. The vesting of such units will be conditioned upon the continued service of the participant, the attainment of Performance Goals as set by the Committee, or both. Except in the case of a Qualified Performance-Based Award,certain qualified performance-based awards, the Committee may modify or waive any of the conditions applicable to restricted stock units. Restricted stock units generally may not be transferred by a participant. Participants granted restricted stock units will not be entitled to any dividends payable on the Common Stock unless the agreement relating to the award provides otherwise and shall not have any voting rights with respect to such units.
Performance Units. Performance units may be granted by the Committee either alone or in addition to other awards under the 2017 EquityRestated Plan and subject to the satisfaction of Performance Goals specified by the Committee. The Committee may select periods during which the Performance Goals chosen by the Committee are measured for the purpose of determining the extent to which a performance unit has been earned. The Committee decides whether the Performance Goals have been achieved, what amount of the award will be paid and the form of payment, which may be cash, shares of Common Stock or other property or any combination. Performance units will not have any voting rights and holders of performance units will not be shareholders of the Company unless and until shares of Common Stock are issued. Performance units generally may not be transferred by a participant.
Other Awards. The Committee may award Common Stock and other awards that are valued in whole or in part by reference to, or are otherwise based upon, Common Stock, including but not limited to, unrestricted stock or dividend equivalents. Any such award shall be subject to such terms and conditions as established by the Committee.
Certain Restrictions on Certain Awards. Except as otherwise provided in the 2017 EquityRestated Plan, and subject to certain exceptions set forth in the 2017 EquityRestated Plan, awards of restricted stock, restricted stock units, performance units, or other stock-based awards are generally subject to vesting during a restriction period of at least three years following the date of grant. However, a restriction period of only at least one year following the date of grant may be used if vesting is conditional, in whole or in part, upon the achievement of performance goals. Awards with restriction periods of at least three years may first vest upon completion of one year of service measured from the vesting commencement date of the award and thereafter on a pro rata basis over the remainder of any such restriction period.In addition, except as otherwise provided in the Restated Plan, and subject to certain exceptions set forth in the Restated Plan, awards of stock options and SARS are generally subject to vesting during a restriction period of at least one year following the date of grant. The Committee may grant or accelerate awards without regard to the foregoing requirements for up to, collectively for all such awards, five percent (5%) of the shares available for award under the 2017 EquityRestated Plan.
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Additional Rights in Certain Events. The 2017 EquityRestated Plan provides for acceleration of the exercisability and extension of the expiration date of stock options and SARs, for the lapse of the restrictions on restricted share awards, and for the vesting of restricted stock units and performance units upon the occurrence of one or more events described in Section 11 of the 2017 EquityRestated Plan (“Section 11 Events”). Such an event is deemed to have occurred when (i) the Company acquires actual knowledge that any person (other than the Company, a subsidiary or any employee benefit plan sponsored by the Company) has acquired beneficial ownership, directly or indirectly, of securities representing 20% or more of the voting power of the Company, (ii) during any period of two consecutive years less than a majority of the total number of authorized members of the Board of Directors (excluding vacant seats) are persons who were either directors at the beginning of such period and individuals whose election by the Company’s security holders, or nomination for election, was approved by a vote of at least a majority of the members of the Nominating and Corporate Governance Committee (consisting of directors then still in office who were directors at the beginning of such period or who were approved for election or nomination in accordance with Section 11 of the 2017 EquityRestated Plan) or at least two-thirds of the directors then still in office who were directors on the Adoption Date or who were so approved (other than individuals whose initial assumption of office is in connection with an election or proxy contest), provided that for purposes of determining whether a Section 11 Event has occurred, each Board then-authorized seat shall count once, (iii) the consummation of a merger, consolidation, share exchange, division or sale or other disposition of assets of the Company as a result of which the shareholders of the Company immediately prior to such transaction do not hold, directly or indirectly, immediately following such transaction, a majority of the voting power of (x) in the case of a merger or consolidation, the surviving or resulting corporation, (y) in the case of a share exchange, the acquiring corporation or (z) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 30% of the consolidated assets of the Company immediately prior to the transaction or (iv) the commencement of any liquidation or dissolution of the Company (other than pursuant to any transfer of 70% or more of the consolidated assets of the Company to an entity or entities controlled by the Company and/or its shareholders following such liquidation or dissolution).
Unless the agreement or an amendment thereto otherwise provides, but subject to the $100,000 restriction described above for incentive stock options and exceptions for certain participants described in Section 11 of the 2017 EquityRestated Plan, notwithstanding any other provision contained in the 2017 EquityRestated Plan, upon the occurrence of any Section 11 Event (i) all outstanding stock options and SARs become immediately and fully exercisable whether or not otherwise exercisable by their terms, (ii) all stock options and SARs held by a participant whose employment with the Company or a subsidiary terminates within one year of any Section 11 Event for any reason other than voluntary termination with the consent of the Company or a subsidiary,
retirement under any retirement plan of the Company or a subsidiary or death are exercisable for a period of three months from the date of such termination of employment, but in no event after the expiration date of the stock option or SARs, (iii) all restrictions applicable to restricted stock awards under the 2017 EquityRestated Plan which have not previously lapsed will lapse regardless of the scheduled lapse of such restrictions and (iv) all restricted stock units and performance units are considered to be earned and payable in full, any vesting conditions are considered to have been satisfied, and such restricted stock units and performance units will be settled in cash as promptly as is practicable after the Section 11 Event. None of the provisions (i) to (iv) above in this paragraph will apply to a participant whose securities are included in those determining the beneficial ownership of a person referred to in subsection (i) of the Section 11 Events above.
Miscellaneous. The Board of Directors may alter or amend the 2017 EquityRestated Plan at any time except that, without approval of the shareholders of the Company, no alteration or amendment may (i) increase the maximum aggregate number of shares of Common Stock for which awards may be made under the 2017 EquityRestated Plan, (ii) increase the maximum aggregate number of shares as to which incentive stock options may be granted pursuant to the sub-limit under the 2017 EquityRestated Plan, (iii) make any changes in the class of
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employees eligible to be granted awards under the 2017 EquityRestated Plan, (iv) change the maximum number of shares as to which awards may be made to any participant under the 2017 EquityRestated Plan, (v) change the maximum amount that may be paid or distributed to any participant in any one calendar year under the 2017 EquityRestated Plan pursuant to a grant of performance units or other stock-based awards, (vi) change the restrictions regarding repricing explained above, (vii) change the option price or base price of any SAR permitted under the 2017 EquityRestated Plan, (viii) be made if shareholder approval of the amendment is at the time required for awards under the 2017 EquityRestated Plan to qualify for the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by the rules of the NASDAQNasdaq Exchange or any other stock exchange on which the Common Stock may then be listed or (ix) be made to the extent such approval is needed for Qualified Performance-Based Awardscertain qualified performance-based awards to qualify for an exemption under Section 162(m) of the Internal Revenue Code. In addition, no alteration or amendment of the 2017 EquityRestated Plan may, without the written consent of the holder of any award theretofore granted under the 2017 EquityRestated Plan, adversely affect the rights of such holder with respect thereto.
The Board of Directors may also terminate the 2017 EquityRestated Plan at any time, but termination of the 2017 EquityRestated Plan would not terminate any outstanding awards granted under the 2017 EquityRestated Plan or cause a revocation or forfeiture of any restricted stock award under the 2017 EquityRestated Plan.
The 2017 EquityRestated Plan contains anti-dilution and anti-enlargement provisions providing for adjustment or substitution in the shares available for awards under the 2017 EquityRestated Plan, in the various maximum limitations on awards under the 2017 EquityRestated Plan, in the number of shares covered by outstanding awards under the 2017 EquityRestated Plan and in the exercise price of outstanding awards in certain events, including mergers, consolidations, acquisitions of shares, stock rights offering, liquidation, separation, spinoff, disaffiliation of a subsidiary, extraordinary dividend, stock dividend, stock split, revenue stock split, reorganization, share combination or recapitalization.
Awards to a participant may, in the Committee’s sole discretion at any time between the date of grant and the third anniversary of any exercise, payment or vesting of such awards, be cancelled, suspended or required to be repaid to the Company if the participant (i) competes with the Company or its subsidiaries, (ii) induces or attempts to induce any customer, supplier, licensee or certain others to cease doing business with the Company or its subsidiaries, or interferes with the Company’s or any of its subsidiaries’ relationships with such customer, supplier, licensee or other person, (iii) solicits employees to leave the employment of the Company or its subsidiaries or interferes with their employment relationship, or (iv) defames or disparages the Company, its subsidiaries or certain related persons. Unless the agreement related to an award or an amendment otherwise provides, these provisions do not apply following the occurrence of one or more of the events described under “Additional Rights in Certain Events” above.
All awards under the 2017 EquityRestated Plan constitute a special incentive payment to the participant and are not taken into account in computing the amount of salary or compensation of the participant for the purpose of determining benefits under any other benefit plan or under any agreement between the Company and the participant, unless such plan or agreement specifically provides otherwise.
The 2017 EquityRestated Plan has indemnification provisions providing indemnity for actions taken under the 2017 EquityRestated Plan by members of the Company’s Board and the Company’s officers.
The 2017 EquityRestated Plan contains provisions intended to comply with both Section 409A of the Internal Revenue Code (related to deferred compensation) and, as discussed above under Performance Goals, Section 162(m) of the Internal Revenue Code (related to performance-based awards). The Committee may establish procedures allowing payment of an award to be deferred, provided any deferral is consistent with Section 409A of the Internal Revenue Code. In such cases of deferral, the participant may be entitled to receive interest or dividends, or dividend equivalents, with respect to shares covered by the award, but in no event will any of the same be paid on any unearned performance units or performance share units until such units vest.
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Possible Anti-takeover Effect
The provisions of the 2017 EquityRestated Plan providing for the acceleration of the exercise date of outstanding stock options and SARs upon the occurrence of a Section 11 Event, the extension of the period during which outstanding stock options and SARs may be exercised upon termination of employment following a Section 11 Event, the lapse of restrictions applicable to restricted stock and other awards, and accelerated vesting of restricted stock units and performance units upon the occurrence of a Section 11 Event may be considered as having an anti-takeover effect.
Awards to Named Officers and Other Employees
Awards under the 2017 EquityRestated Plan will be granted in such amounts and to such individuals entitled to participate in the namedRestated Plan, as determined by the Committee in its sole discretion. Therefore, the benefits or amounts that will be received by employees, officers, or other participants ordirectors and consultants under the number of shares that the awards will cover.Restated Plan are currently not determinable.
Share Repurchases May Prevent Dilution
For a number of years, the Company has had and the Company currently has in place an active share repurchase program. The Company has no specific policy or practice with respect to the repurchase of shares under such program in order to offset grants of shares under its equity plans. However, the effect of any such share repurchase program will be to prevent or minimize the dilutive effect of stock-based compensation plans.
Federal Income Tax Consequences
The following is a brief summary of certain of the Federal income tax consequences of awards under the 2017 EquityRestated Plan. It is intended for the information of shareholders considering how to vote at the meeting and not as tax guidance to participants in the 2017 EquityRestated Plan. This summary is not intended to be exhaustive, is based on U.S. federal income tax law currently in effect, does not constitute tax advice and, among other things, does not address possible state, local or foreign tax consequences under present law nor does it describe consequences based on particular circumstances.
Incentive Stock Options. A participant does not recognize any taxable income upon receipt of an incentive stock option or generally, at the time of exercise of an incentive stock option, whether cash or shares are used to pay the exercise price. The exercise of an incentive stock option, however, generally does result in an increase in a participant’s taxable income for alternative minimum tax purposes.
If a participant exercises an incentive stock option and does not dispose of the shares received in a subsequent “disqualifying disposition” (generally, a sale, gift or other transfer within two years after the date of grant of the incentive stock option or within one year after the shares are transferred to a participant), upon disposition of the shares any amount realized in excess of the participant’s tax basis in the shares disposed of is treated as a long-term capital gain, and any loss is treated as a long-term capital loss. In the event of a “disqualifying disposition”, the difference between the fair market value of the shares received on the date of exercise and the option price (limited, in the case of a taxable sale or exchange, to the excess of the amount realized upon disposition over the participant’s tax basis in the shares) is treated as compensation income received by the participant in the year of disposition. Any additional gain is taxable as a capital gain and any loss as a capital loss, which is long-term or short-term depending on whether the shares were held for more than one year. Special rules apply in determining the compensation income recognized upon a disqualifying disposition if the option price of the incentive stock option is paid with shares of Common Stock. If shares of Common Stock received upon the prior exercise
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of an incentive stock option are transferred to the Company in payment of the option price of an incentive stock option within either of the periods referred to above, the transfer is considered a “disqualifying disposition” of the shares transferred, but only compensation income determined as stated above, and no capital gain or loss, is recognized.
Neither the Company nor any of its subsidiaries is entitled to a deduction with respect to shares received by a participant upon exercise of an incentive stock option and not disposed of in a “disqualifying disposition.” If an amount is treated as compensation received by a participant because of a “disqualifying disposition,” the Company or one of its subsidiaries generally is entitled to a deduction in the same amount for compensation paid, subject to the “Limits on Deductions/Other Tax Matters” below.
Nonstatutory Stock Options. A participant generally does not recognize any taxable income upon receipt of a nonstatutory stock option. Upon the exercise of a nonstatutory stock option the amount by which the fair market value of the shares received, determined as of the date of exercise, exceeds the option price is treated as compensation income received by the participant in the year of exercise. If the option price of a nonstatutory stock option is paid in whole or in part in shares, no income, gain or loss is recognized by a participant on the receipt of shares equal in value on the date of exercise to shares delivered in payment of the option price. The fair market value of the remainder of the shares received upon exercise of the nonstatutory stock option, determined as of the date of exercise, less the amount of cash, if any, paid upon exercise is treated as compensation income received by the participant on the date of exercise of the stock option.
The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid in the same amount that is treated as compensation received by the participant upon exercise of a nonstatutory stock option, subject to the “Limits on Deductions/Other Tax Matters” below.
Stock Appreciation Rights. A participant generally does not recognize any taxable income upon receipt of a SAR (whether as a stand-alone award or in tandem with a related option award). Upon the exercise of a SAR the amount by which the fair market value of the Common Stock subject to the SAR on the exercise date exceeds the SAR grant price is treated as compensation income received by the participant in the year of exercise, whether received in cash, shares of Common Stock or both. The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid in the same amount that is treated as compensation received by the participant upon exercise of the SAR, subject to the “Limits on Deductions/Other Tax Matters” below.
Restricted Stock. A participant does not recognize any taxable income upon the grant of the award, provided the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture). However, the participant may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the participant does not make a Section 83(b) election, the fair market value of the shares on the date the restrictions lapse is treated as compensation income to the participant and is taxable in the year the restrictions lapse. If the participant does not make a Section 83(b) election, dividends paid to the participant on the shares prior to the date the restrictions lapse will be treated as compensation income. The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid in the same amount that is treated as compensation income to the participant, subject to the “Limits on Deductions/Other Tax Matters” below.
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Restricted Stock Units. A participant generally does not recognize any taxable income upon receipt of restricted stock units. Any cash and the fair market value of any shares of Common Stock received by a participant upon the vesting of restricted stock units are treated as compensation income received by the participant in the year of receipt. The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid in the same amount that is treated as compensation income received by the participant upon vesting of the restricted stock units, subject to the “Limits on Deductions/Other Tax Matters” below.
Performance Units. A participant generally does not recognize any taxable income upon receipt of performance units. Any cash and the fair market value of any shares of Common Stock and other property received by a participant when performance units are earned are treated as compensation income received by the participant in the year of receipt. The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid in the same amount that is treated as compensation income received by the participant upon the earning of performance units, subject to the “Limits on Deductions/Other Tax Matters” below.
Other Awards. The tax consequences to the participant and the Company of awards of Common Stock and other awards that are valued by reference to or otherwise based upon Common Stock will be dependent upon the nature and structure of the award.
Deferred Compensation. While the Committee may establish procedures allowing payment of an award to be deferred, any deferral under the 2017 EquityRestated Plan is intended to comply with Section 409A of the Internal Revenue Code so as to avoid additional taxes under Section 409A of the Internal Revenue Code being imposed on the participant.
Limits on Deductions/Other Tax Matters. Certain events described above under “Additional Rights in Certain Events” may result in (i) a 20% Federal excise tax (in addition to Federal income tax) to a participant on certain compensation resulting from awards previously received under the 2017 EquityRestated Plan and (ii) the loss of a compensation deduction which would otherwise be allowable to the Company or one of its subsidiaries as explained above.
The Company or one of its subsidiaries generally is entitled to a deduction for compensation paid provided the compensation is reasonable. However, Section 162(m) of the Internal Revenue Code disallows a compensation deduction for compensation paid to the principal executive officer and any of the other three highest compensated officers (other than the principal financial officer) of the Company in excess of $1 million$1,000,000 each in any taxable year of the Company, except that compensation that is performance-based may be excluded from this deduction limitation. (The $1 million$1,000,000 deduction limit is reduced by the amount of any compensation deduction disallowed under the immediately preceding paragraph.) The 2017 EquityRestated Plan has beenis intended to be structured so that compensation arising from the exercise of nonstatutory stock options, SARs or the disqualifying disposition of shares acquired upon exercise of incentive stock optionscertain grand-fathered awards should be performance-based within the meaning of Section 162(m) of the Internal Revenue Code. As indicated above, the 2017 Equity Plan also permits the Committee to designate awards other than options and SARs as Qualified Performance-Based Awards with the objective of qualifying such awards as performance-based within the meaning of Section 162(m) of the Internal Revenue Code. Nevertheless, it is possible that such awards may be made which may be subject to the limits of Section 162(m) of the Internal Revenue Code.
In addition to the 2017 EquityRestated Plan, the Company also has a Director Fee Plan. The Director Fee Plan is more fully described in the “Compensation of Directors” section of this Proxy Statement.
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Equity Plan Information
The following table provides information about grants under the Company’sCompany's equity compensation plans as of September 30, 2017:2021:
| Equity Compensation Plan Information | ||||||||||||||||||||
| 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) | ||||||||||||||||||
| Equity compensation plans approved by security holders | 113,657 | (1) | $ | 41.70 | (2) | 3,185,283 | (3) | |||||||||||||
| Equity compensation plans not approved by security holders | None | None | None | |||||||||||||||||
| Total | 113,657 | $ | 41.70 | 3,185,283 | ||||||||||||||||
| Equity Compensation Plan Information | |||||||||
| 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) | |||||||
| Plan category | (a) | (b) | (c) | ||||||
| Equity compensation plans approved by security holders | 27,504 | (1) | — | 2,206,197 | (2) | ||||
| Equity compensation plans not approved by security holders | None | None | None | ||||||
| Total | 27,504 | (1) | $ | — | 2,206,197 | (2) | |||
| (1) - Includes 10,105 deferred stock units (issuable as full value shares upon settlement of such deferred stock units) granted under the 1994 Director Fee Plan, 6,034 deferred stock units (issuable as full value shares upon settlement of such deferred stock units) granted under the Amended and Restated 2014 Director Fee Plan, and 11,365 restricted stock units (issuable as full value shares upon settlement of such restricted stock units) granted under the 2012 Equity Plan. As of December 29, 2017, deferred stock units under the Amended and Restated 2014 Director Fee Plan were 6,034, deferred stock units under the 1994 Director Fee Plan were 10,105, and restricted stock units under the 2012 Equity Plan were 21,494 representing a total number of securities to be issued upon exercise of outstanding options, warrants and rights of 37,633. | |||||||||
| (2) - Includes 1,531,567 shares authorized for issuance under the Employee Stock Purchase Plan, 85,392 shares authorized for issuance under the Amended and Restated 2014 Director Fee Plan, and 589,238 shares authorized for issuance under the 2012 Equity Plan. As of December 29, 2017, approximately 121,038 shares remain available for future grant under the 2012 Equity Plan. If the 2017 Equity Plan is approved, no further grants will be made under the 2012 Equity Plan and the 121,038 shares will no longer be available for future awards. | |||||||||
(2) Weighted-average exercise price of outstanding stock options included in column (a).
(3) Includes (1) shares reserved under the 2017 Equity Incentive Plan, which provides for the grant or award of stock options, restricted shares, stock-based performance units and certain other types of stock based awards; (2) shares reserved under the 2019 Director Fee Plan, which provides for the grant, award or deferral of stock options, restricted shares, stock-based performance units and certain other types of stock based awards and compensation; and (3) the shares purchased under the Employee Stock Purchase Plan which are purchased in the open market by employees at the fair market value of the Company's stock. The Company provides a matching contribution of 10% of such purchases subject to certain limitations under the Employee Stock Purchase Plan. As the Employee Stock Purchase Plan is an open market purchase plan, it does not have a dilutive effect.
Vote Required
The vote required for approval of Proposal 2 is the affirmative vote of a majority of the votes cast by all the shareholders entitled to vote thereon. The Board of Directors recommends that you vote FOR approval of Proposal 2. The proxy holders will vote your proxy FOR this item unless you give instructions to the contrary on the proxy.
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PROPOSAL 3
SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Company's Board of Directors has appointed Ernst & Young LLP as the independent registered public accounting firm to audit the records of the Company for the year ending September 30, 2018.2022.
The Audit Committee has determined that it would be desirable as a matter of good corporate practice to request an expression of opinion from the shareholders on the appointment. Ratification of the appointment of Ernst & Young LLP requires the affirmative vote of a majority of the shares represented at the meeting and entitled to vote, a quorum being present. Abstentions and non-broker votes will have the effect of a vote cast “against” the proposal.
If the shareholders do not ratify the selection of Ernst & Young LLP, the selection of an alternative independent registered public accounting firm will be considered by the Audit Committee; provided, further, however, even if the shareholders do ratify the selection of Ernst & Young LLP, as requested in this Proxy Statement, the Audit Committee reserves the right, at any time, to re-designate and retain a different independent registered public accounting firm to audit the records of the Company for the year ending September 30, 2018.2022.
It is not expected that any representative of Ernst & Young LLP will be present at the Annual Meeting of the Shareholders.
The Board of Directors recommends that you vote FOR Proposal 3.
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PROPOSAL 4
ADVISORY (NON-BINDING) VOTE ON THE EXECUTIVE COMPENSATION
OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
As described in the Compensation Discussion and Analysis in this Proxy Statement, and summarized in the “Executive Summary” thereto, the Compensation Committee of the Board has developed an executive compensation program designed to pay for performance and to align the long-term interests of our named executive officers with the long-term interests of our shareholders. The Company presents a proposal for an advisory (non-binding) vote on the executive compensation of the Company’s named executive officers on an annual basis. Accordingly, the Company is presenting the following proposal, which gives our shareholders the opportunity to endorse or not endorse our pay program for named executive officers by voting for or against the resolution set forth below. This resolution is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Approval of the compensation paid to our named executive officers, as disclosed in this Proxy Statement, will be approved (on a non-binding basis) if the proposal receives the affirmative vote of at least a majority of the shares represented, in person"in person" or by proxy, at the meeting and entitled to vote, a quorum being present. Abstentions and broker non-votes will have the effect of a vote cast “against” the proposal. Because the vote is advisory, it will not be binding on the Board. However, the Board and the Compensation Committee will review the voting results and take into account the outcome when considering future executive compensation arrangements. The Board and management are committed to our shareholders and understand that it is useful and appropriate to obtain the views of our shareholders when considering the design and implementation of executive compensation programs.
RESOLVED, that the shareholders approve (on a non-binding basis) the compensation of the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the Proxy Statement set forth under the caption “Executive Compensation and Retirement Benefits.”
The Board of Directors recommends that you vote FOR approval (on a non-binding basis) of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in this Proxy Statement set forth under the caption “Executive Compensation and Retirement Benefits” of this Proxy Statement. Proxies will be voted FOR approval of the proposal unless otherwise specified.
The Board of Directors recommends that you vote FOR Proposal 4.
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STOCK OWNERSHIP
The Company's Articles of Incorporation divide its voting stock into three (3) classes: Preferred Stock, and Class A and Class B Common Stock. At the present time, no shares of Preferred Stock or Class B Common Stock isare issued or outstanding. The following information is furnished with respect to persons who the Company believes, based on its records and filings made with the Securities and Exchange Commission,SEC, beneficially own five percent or more of the outstanding shares of Common Stock of the Company, and with respect to directors, officers and executive management. Those individuals with more than five percent of the Company's Common Stock could be deemed to be "control persons" of the Company.
This information presented is as of November 30, 2017,2021, except as otherwise noted.
Name of Beneficial Owner (1) | Number of Class A Shares Beneficially Owned (1)(2) | Percent of Class | Deferred Stock Compensation Shares (9) | ||||||||||||||
| Directors, Officers and Executive Management: | |||||||||||||||||
| J.C. Bartolacci | 324,885 | (3) | 1.0 | — | |||||||||||||
| G.S. Babe | 36,564 | (3) | * | 5,798 | |||||||||||||
| K.E. Dietze | 27,768 | * | — | ||||||||||||||
| T.L. Dunlap | 12,020 | * | — | ||||||||||||||
| B.J. Dunn | 49,504 | (3) | * | — | |||||||||||||
| L.D. Etzkorn | — | * | — | ||||||||||||||
| S.D. Gackenbach | 57,522 | (3) | * | — | |||||||||||||
| A. Garcia-Tunon | 27,259 | * | 20,414 | ||||||||||||||
| G.R. Kohl | 15,088 | (3) | * | — | |||||||||||||
| S.F. Nicola | 126,444 | (3) | * | — | |||||||||||||
| M.K. O’Brien | 19,960 | * | — | ||||||||||||||
| D.W. Quigley, Jr. | 9,725 | * | — | ||||||||||||||
| D.A. Schawk | 200,819 | (3)(4) | * | — | |||||||||||||
| J.D. Turner | 35,768 | * | 4,307 | ||||||||||||||
| J.R. Whitaker | 13,331 | * | 8,313 | ||||||||||||||
All directors, officers and executive management as a group (19 persons) | 999,956 | (5) | 3.2 | 38,832 | |||||||||||||
| Others: | |||||||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10005 | 5,291,699 | (6)** | 16.9 | ||||||||||||||
The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355-2331 | 3,179,063 | (7)** | 10.2 | ||||||||||||||
Dimensional Fund Advisors, L.P. 6300 Bee Cave Road Austin, TX 78746 | 1,622,331 | (8)** | 5.2 | ||||||||||||||
| * Less than 1%. | |||||||||||||||||
| ** Information as of September 30, 2021, derived from Schedule 13D or 13G filings filed by the beneficial owner. | |||||||||||||||||
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| Name of Beneficial Owner (1) | Number of Class A Shares Beneficially Owned (1)(2) | Percent of Class | Deferred Stock Compensation Shares (7) | ||||
| Directors, Officers and Executive Management: | |||||||
| J.C. Bartolacci | 385,211 | (3) | 1.2 | — | |||
| G.S. Babe | 40,808 | (3) | 0.1 | 5,798 | |||
| K.E. Dietze | 22,176 | (4) | 0.1 | — | |||
| T.L. Dunlap | 6,428 | (4) | * | — | |||
| S.D. Gackenbach | 62,268 | (3) | 0.2 | — | |||
| A. Garcia-Tunon | 21,759 | (4) | 0.1 | 4,132 | |||
| S.F. Nicola | 151,704 | (3) | 0.5 | — | |||
| M.K. O’Brien | 14,368 | (4) | * | — | |||
| D.W. Quigley, Jr. | 4,133 | (4) | * | — | |||
| D.A. Schawk | 208,088 | (3)(5) | 0.6 | — | |||
| J.D. Turner | 30,176 | (4) | 0.1 | 4,307 | |||
| B.D. Walters | 43,314 | (3) | 0.1 | — | |||
| J.R. Whitaker | 13,331 | (4) | * | 1,902 | |||
All directors, officers and executive management as a group (19 persons) | 1,220,028 | (6) | 3.8 | 16,139 | |||
| Others: | |||||||
BlackRock Institutional Trust Company, N.A. 525 Washington Boulevard, Suite 1405 Jersey, NJ 07310 | 3,864,137 | ** | 12.0 | ||||
The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355-2331 | 3,162,328 | ** | 9.8 | ||||
Franklin Advisory Services LLC 55 Challenger Road, Suite 501 Ridgefield Park, NJ 07660 | 2,955,117 | ** | 9.2 | ||||
| * Less than 0.1%. | |||||||
| ** Information as of September 30, 2017, derived from Schedule 13D or 13G filings filed by the beneficial owner. | |||||||
(1)Any shares that may be beneficially owned within 60 days of November 30, 2021 are included in beneficial ownership. Unless otherwise noted, the mailing address of each beneficial owner is the same as that of the Company.
(2)To the best of the Company’s knowledge, the nature of the beneficial ownership for all shares is sole voting and investment power, except as otherwise noted in the footnotes to the table.
(3)Includes restricted shares with performance provisions as follows: Mr. Bartolacci, 11,250 shares; Mr. Babe, 1,850; Mr. Dunn, 1,300 shares; Mr. Gackenbach, 1,700 shares; Mr. Kohl, 600 shares; Mr. Nicola, 3,100 shares; and Mr. Schawk 1,850.
(4)Includes 35,548 shares held in the Teryl Alyson Schawk 1998 Trust; 51,514 shares held in trusts for the benefit of Mr. Schawk’s children for which Mr. Schawk or his spouse serves as trustee; 110,357 shares held in the David A. Schawk 1998 Trust for which Mr. Schawk serves as trustee with voting and investment power over such shares; 77,395 shares held in trust for the benefit of Mr. Schawk’s niece for which Mr. Schawk serves as custodian with voting and investment power but no pecuniary interest; and 97 shares held as custodian.
(5)Includes 23,777 restricted shares with performance vesting provisions.
(6)Pursuant to Schedule 13G filed January 25, 2021 by BlackRock, Inc., as parent holding company or control person for certain of its subsidiaries (collectively, the “BlackRock Entities”), the BlackRock Entities have (i) sole voting power with respect to 5,181,923 shares of Class A Common Stock and (ii) sole dispositive power with respect to 5,291,699 shares of Class A Common Stock.
(7)Pursuant to that certain Amendment No. 10 to Schedule 13G filed February 10, 2021 by The Vanguard Group, Inc., as beneficial owner and parent holding company or control person for certain of its subsidiaries (collectively, the “Vanguard Entities”), the Vanguard Entities have (i) shared voting power with respect to 31,537 shares of Class A Common Stock, (ii) sole dispositive power with respect to 3,118,251 shares of Class A Common Stock, and (iii) shared dispositive power with respect to 60,812 shares of Class A Common Stock.
(8)Pursuant to that certain Amendment No. 2 Schedule 13G filed February 12, 2021 by Dimensional Fund Advisors LP (“Dimensional”), Dimensional has (i) sole voting power with respect to 1,562,111 shares of Class A Common Stock and (ii) sole dispositive power with respect to 1,622,331 shares of Class A Common Stock. Such Schedule 13G indicates that Dimensional, acts as an investment adviser to four registered investment companies, and as investment manager to certain other commingled group trusts and separate accounts (such investment companies, trusts and accounts, collectively, the “Dimensional Funds”), and in certain cases, subsidiaries of Dimensional may act as an adviser or sub-adviser to certain Dimensional Funds. Such Schedule 13G indicates that in its role as investment advisor, sub-adviser and/or manager, neither Dimensional or its subsidiaries possess voting and/or investment power over the shares of Class A Common Stock owned by the Dimensional Funds, and may be deemed to be the beneficial owner of the shares of Class A Common Stock held by the Dimensional Funds. Such Schedule 13G indicates that all shares of Class A Common Stock reported on such Schedule 13G are owned by the Dimensional Funds.
(9)Represents shares of Common Stock held in a deferred stock compensation account for the benefit of the director under the Company’s Director Fee Plans, which are excluded from the Number of Class A Shares Beneficially Owned. See the information provided under “General Information Regarding Corporate Governance--Compensation of Directors” in this Proxy Statement.
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Stock Ownership Guidelines
The Company has established guidelines for stock ownership by management, which are intended to promote the alignment of the interests of management with the Company’s shareholders. As more fully described under “Compensation Discussion and Analysis” of this Proxy Statement, the guidelines provide for ownership by management of shares of the Company’s Common Stock with a minimum market value ranging up to fivesix times base salary depending upon the individual’s position with the Company. Individuals are expected to achieve compliance with these guidelines within a reasonable period of time after appointment to their respective positions.
For purposes of these guidelines, stock ownership includes all shares directly owned (including shares held under the Employee Stock Purchase Plan and time-vesting restricted share units or shares), but does not include outstanding stock options or unvested performance-based restricted share units or shares. Immediate compliance with these guidelines is not mandatory; however, individuals are expected to undertake a program to achieve compliance within five years of their hire date or promotion to their respective position. The ownership policy mandates that at least 50% of the after-tax shares realized upon an option exercise or vesting of restricted stock or restricted share units must be retained until the ownership guideline is met. Compliance with these ownership guidelines is one of the factors considered by the Compensation Committee in determining eligibility for participation in the Company’s equity compensation programs. As of November 30, 2017,2021, all of the Named Executive Officers hadNEOs (as defined below) exceeded the Company’s stock ownership guidelines.
The Company has also adopted guidelines for stock ownership by non-employee directors, which require that each director maintain ownership of shares of the Company’s Common Stock (either directly, through restricted shares or restricted share units issued under the Company’s Director Fee Plan or through shares held in a deferred stock compensation account for the benefit of the director under the Company’s Director Fee Plan) with a market value approximating five times the current annual retainer ($85,000). Directors are expected to achieve compliance with these guidelines within a reasonable period of time after becoming a director. As of November 30, 2017,2021, all of the directors had met or exceeded the Company’s stock ownership guidelines or are within the reasonable time period for compliance.
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EXECUTIVE COMPENSATION AND RETIREMENT BENEFITS
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with the Company’s management. Based upon such review and discussion, the Compensation Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 20182022 Proxy Statement, and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended September 30, 2017.2021.
Submitted by:
The Compensation Committee of the Board of
Directors of Matthews International Corporation
M.K. O’Brien, Chairperson
T.L. Dunlap
A. Garcia-Tunon
D.W. Quigley, Jr.
COMPENSATION DISCUSSION AND ANALYSIS
Matthews International Corporation’s Named Executive Officers in Fiscal 2021
| Joseph C. Bartolacci | President & Chief Executive Officer | ||||
| Brian J. Dunn | Executive Vice President, Strategy & Corporate Development | ||||
| Steven D. Gackenbach | Group President, Memorialization | ||||
| Gary R. Kohl | Group President, SGK Brand Solutions | ||||
| Steven F. Nicola | Chief Financial Officer & Secretary | ||||
The Company's executive compensation policies are administered by the Compensation DiscussionCommittee of the Board of Directors. The Compensation Committee consists of four independent directors: Mr. O’Brien (Chairperson), Mr. Dunlap, Mr. Garcia-Tunon and AnalysisMr. Quigley. Compensation for the Company's CEO, Chief Financial Officer, and the three other most highly compensated executives is presented in the Summary Compensation Table.
Executive Summary
| Compensation Philosophy and Objectives | ||
Continuous improvement in operating results and the creation of shareholder value are key elements of the compensation philosophy of Matthews International Corporation. Matthews.This philosophy serves as the framework for the Company’s executive compensation program.Our program is designed to provide incentive arrangements that reward executives for improvement in the Company’s operating results and appreciation in our stock value.
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To underscore the importance of “pay-for-performance” in our compensation philosophy and our Company’s culture, our Compensation Committee (referred to throughout this section as the Committee) has developed incentive arrangements based on rigorous performance standards. Our annual incentive compensation plan rewards executives for the achievementattainment of operating profitadjusted earnings before interest, income taxes, depreciation and amortization ("EBITDA"), economic value added, targets set by the Committee at the beginningand adjusted operating cash flow targets. Adjusted net income is utilized instead of the fiscal year. These targets are based upon the Company’s business plan. Accordingly,adjusted EBITDA for Corporate participants. For purposes of our annual incentive compensation plan, is designed to motivate management to maintain and, more importantly, achieve higher levels of profits and economic value added for the Company and its shareholders. “Economic“economic value added” is the measure of operating profitadjusted EBITDA (or adjusted net income for Corporate participants) compared to the cost of the capital utilized to generate this profit.
income. Adjusted operating cash flow is defined as adjusted EBITDA less capital expenditures plus/minus changes in working capital. Our long-term incentive program providesplan in fiscal 2021 rewards participants for grantsthe achievement of shares of restricted stock with one-halfprice appreciation targets and return on invested capital ("ROIC").
The principal objectives of the shares vestingCompany’s executive compensation program for the Company’s named executive officers ("NEOs") and other executive officers, are to:
•Attract, retain and motivate highly qualified executives;
•Reward continuous improvement in operating results and the creation of shareholder value; and
•Align the interests of the Company’s executives with our shareholders.
The Company seeks to accomplish these objectives by maintaining a compensation philosophy that emphasizes rigorous performance-based programs. The foundation of its philosophy is to:
•Emphasize rigorous performance-based compensation elements in our pay mix while providing total compensation opportunities commensurate with market levels;
•Provide retirement and health benefits that are competitive with market levels; and
•De-emphasize the use of perquisites except for business purposes.
Our compensation philosophy targets the market median for all elements of compensation.
| Response to 2021 Say on Pay Vote and Investor Engagement Efforts | ||
At the Company’s annual meeting held in February 2021, approximately 94% of votes cast were in support of the compensation of our NEOs. Given this level of support, the Committee is satisfied that the Company’s executive compensation programs appropriately link our executive compensation to the performance of the Company and reflect contemporary practices. The Committee remains committed to routinely reviewing and updating our executive compensation program as appropriate.
In addition, the Committee routinely evaluates responses from the Company’s ongoing outreach efforts with its largest shareholders and, consistent with fiscal 2020, deemed that the current executive compensation design aligns with the expectations of our shareholders. Therefore, based on the achievementresults of our latest Say-on-Pay vote and feedback from investors, the Committee maintained its core executive compensation design. A summary of our executive compensation program for fiscal 2021 is included in the table below.
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| Executive Compensation Elements for Fiscal 2021 | ||
Our executive compensation program is comprised of the following key elements. Each is designed to meet the objectives of our executive compensation program as established by the Committee:
| Compensation Element | Form and Key Characteristics | Description and Performance Metrics | ||||||
| Base Salary | - Fixed cash component - Reviewed annually and adjusted as appropriate | - Positioned competitively to attract and retain executive talent - Considers scope and complexity of the role as well as individual performance and experience | ||||||
| Annual Incentive Compensation | - Variable cash compensation component - Performance-based opportunity | '- Executives other than SGK Brand Solutions: - 40% weighting assigned to adjusted net income (corporate executives) or adjusted EBITDA (business unit executives) - 40% weighting assigned to economic value added (improvement in adjusted EBITDA greater than the cost of the capital utilized to generate this adjusted EBITDA) - 20% weighting assigned to adjusted operating cash flow - SGK Brand Solutions executives: 80% weighting assigned to adjusted EBITDA and 20% weighting assigned to adjusted operating cash flow | ||||||
| Long-Term Incentive Compensation | - Variable equity-based compensation component - 50% performance units - 50% time-based units | '- Performance units earned at the end of the three-year performance period: - Upon the attainment of pre-established stock price appreciation - Upon the attainment of ROIC Goals - Time-based units vest 100% on the third anniversary of the grant | ||||||
| Change in Control Severance Policy | - Compensation and benefit continuation in the event of involuntary or good reason termination and a change in control of the Company | - Cash severance equal to 2 times base salary and target bonus - Acceleration of unvested or unearned equity awards (“double trigger”) - Health care benefit continuation over the severance period (2 years) | ||||||
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| Executive Compensation Governance Practices | ||
The following executive compensation practices and policies have been adopted by the Committee to ensure sound corporate governance and alignment of the interests of executives and the Company’s shareholders.Many of these policies and practices have been adopted to discourage excessive risk-taking by our executive team.
What We Do:
| ü | Designate a non-executive board chair to provide effective independent board leadership and oversight of management | ||||
| ü | Review risks associated with our compensation arrangements and adopt mitigating features, practices, and policies | ||||
| ü | Engage in a rigorous CEO performance evaluation process | ||||
| ü | Employ shareholder-value creating metrics and challenging targets such as adjusted EBITDA, adjusted net income, economic value added and operating cash flow in our annual incentive plan, and earnings per share and return on invested capital within our long-term incentive plan | ||||
| ü | Cap annual and long-term incentive payouts | ||||
| ü | Maintain significant stock ownership guidelines for both executives and directors | ||||
| ü | Require both a qualified change in control and termination of employment (“Double Trigger”) in order to receive cash severance benefits and for unvested equity awards to accelerate | ||||
| ü | Maintain a “clawback” policy that provides for the recoupment of incentive awards under certain conditions in the event of a financial restatement | ||||
| ü | Retain an independent compensation consultant who regularly provides advise to the compensation committee on matters pertaining to executive compensation | ||||
What We Don’t Do:
| û | Enter into individual employment contracts with our executives, except in an instance where an agreement is assumed, or is necessary, as part of an acquisition | ||||
| û | Allow hedging or pledging of the Company's common stock | ||||
| û | Provide excise tax gross-ups related to change in control terminations | ||||
| û | Allow repricing or exchanging of stock options or other equity awards without shareholder approval | ||||
| û | Provide excessive perquisites and tax gross-up perquisites | ||||
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| Response to COVID-19 | ||
The Committee made no significant changes to the base salary and annual incentive plan components of executive compensation for fiscal 2021 as a result of COVID-19.
With respect to the Company’s long-term incentive plan, the Committee did not make any changes to its methodology in determining target awards to plan participants. Target amounts for the November 2020 annual awards were maintained at market median levels. The allocation of restricted share units was set at 50% performance units and 50% time-based units. This allocation between time and performance vesting was only intended for fiscal 2021 in consideration of the pandemic. For fiscal 2022 awards, the allocation of restricted share units was restored to 60% performance units and 40% time-based units.
In addition, for fiscal 2021 awards, the three-year performance targets and the remaining one-half based on the continued employment of a named executive officer (“NEO”) over a three-year period. For the fiscal 2017 grant, the Companywere established two criteria for the performance-vesting shares, with each criteria further containing three separate, pro-rated performance requirements:as follows:
•One-half (50%) of the performance-vesting shares vestunits (i.e., 25% of the overall award) are based upon the attainment of non-GAAP annual earnings per sharegrowth in the Company’s stock price of $3.65, $3.9440%, 20%, and $4.26,60%, respectively, to earn 100%, 50% and 200% of the award; and
•One-half (50%) of the performance-vesting shares vestunits (i.e., 25% of the overall award) are based upon the attainment of 5%return on invested capital of 12%, 15%10%, and 25% appreciation in the Company’s stock price.
The utilization of grant or the stock price appreciation hurdles within five yearsas a performance goal was temporary in consideration of the date of grant will result in forfeiture of the applicable portions of the respective awards. Vested shares are subjectpandemic and was intended to the Company’s stock ownership guidelines which require each executive to own shares the value of which equals a multiple of the executive’s base salary.
•One-half (50%) of the shares.
| CEO Compensation Decisions for Fiscal 2021 | ||
Despite the challenging conditions of the pandemic, the Committee emphasized the importance of remaining consistent with the Company’s executive compensation philosophies, which target base salaries at market median levels and reward executives for performance against pre-established targets and creation of shareholder value. As noted in the pie chart on page 39, variable, at-risk compensation accounted for 83% of our CEO’s target compensation. Key performance considerations in determining Mr. Bartolacci’s compensation for fiscal 2021 were as follows:
•The Company reported record consolidated sales in fiscal year 2021;
•The Company generated record operating cash flow in fiscal year 2020;
•Adjusted EBITDA significantly increased in fiscal year 2021, which also exceeded fiscal year 2019 (pre-pandemic);
•Outstanding debt was reduced in excess of $200 million since inception of the pandemic (fiscal year 2020 second quarter);
•The Company’s net leverage ratio was reduced from 4.3 to 3.1 since the inception of the pandemic; and
•The Company’s stock awards as includedprice increased over 50% during fiscal year 2021.
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In consideration of the Committee’s executive compensation philosophy and these performance factors, the Committee approved the following compensation changes. Mr. Bartolacci’s total compensation shown in the Summary Compensation Table have actually been earned by our CEOincreased 3.6% in fiscal 2021.
•Base Salary: Mr. Bartolacci’s base salary for calendar 2021 was increased 2% to approximate the market median.
•Annual Incentive Compensation: Target annual incentive compensation for Mr. Bartolacci was set at the market median. Based on the Company’s fiscal 2021 operating results (as noted above), Mr. Bartolacci achieved 191% of target annual incentive compensation based upon performance against pre-established adjusted net income, economic value added and operating cash flow performance goals (see table under “Pay-For-Performance Alignment”Annual Incentive Compensation below).
•Long-Term Incentive Compensation: Mr. Bartolacci received an annual equity award for fiscal year 2021 equal to $3,639,530 to approximate the market median.
•Change in Pension Value: In fiscal 2021, the Company approved the termination of its non-qualified Supplemental Retirement Plan ("SERP") asin which Mr. Bartolacci is a participant. As a result, ofhis Change in Pension Value shown in the Company’s performance.
In addition, as such,shown in the table on page 43, Mr. Bartolacci did not have a significant changeforfeited equity awards in his defined benefits underNovember 2021 and November 2020 with original grant date values of $1,650,444 and $641,813, respectively. As further emphasis on the plans.Committee’s philosophy to align long-term incentive compensation with the Company’s performance, the actual realized portion of the performance-based long-term incentive compensation awards that were granted over the past five years for the Company's CEO was 49.0% (see table on page 43).
| Fiscal 2021 Target Compensation Mix | ||
The pie charts below show the mix of target compensation provided to our CEO and other NEOs in fiscal 2021. Variable, at-risk compensation accounted for 83% of our CEO’s target compensation and 68% of our other NEOs compensation on average.
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Compensation Committee Administration
The principal function of the Compensation Committee is to review the Company’s compensation and benefit programs, including executive compensation and benefits, to ensure that total compensation is appropriate, competitive and consistent with the Company’s compensation philosophy. In performing its duties, the Compensation Committee consults with the Company’s CEO, the Company’s Vice President, Human Resources Leadership and various independent external advisors. In fiscal 2017,2021, the Compensation Committee consulted principally with Pay Governance, LLC, an independent executive compensation consulting firm. Pay Governance, LLC does nonot perform any other workservices for the Company and reports directly to the Compensation Committee. The Compensation Committee has full authority to retain external advisors, consultants and agents, as necessary, in the fulfillment of its responsibilities. The Compensation Committee reviews the performance and the fees of the independent consultant each year and determines whether to retain such consultant for the upcoming year.
Among its other duties, the Compensation Committee has responsibility for setting executive base salary levels and administering the terms and policies of the following key executive benefit plans:
•2015 Incentive Compensation PlanPlan;
•Officers Retirement Restoration Plan (“ORRP”("ORRP").
In general, the Compensation Committee’s desire to align ourthe Company's executive compensation program with the market levels drives the allocation between short-term and long-term compensation, as well as cash and equity components. The Compensation Committee believes that the level of compensation provided to an executive should be based on success against pre-established performance goals that drive the creation of shareholder value. To achieve this objective, the Company has built its current annual cash incentive plan based on achievement of adjusted EBITDA, economic value-added and operating profit and economic value addedcash flow targets. OverFor the long-term plan, the Compensation Committee believes thatprovided equity awards in fiscal 2021 (November 2020) with vesting provisions dependent on time and service (50%) and the achievement of stock price growth is one ofappreciation (25%) and return on invested capital (25%) targets. For fiscal 2022 (November 2021), the best indicators of the creation of shareholder value. Therefore, theCompensation Committee providesprovided equity awards with a level of value and rate of vesting that areprovisions dependent on time and service (40%) and the achievement of earnings per share (30%) and stock price hurdles.return on invested capital (30%) targets. The Company has no formal policy regarding the allocation of variable and fixed compensation for its NEOs.
The Compensation Committee has considered whether its executive compensation program promotes risk taking at levels that are unacceptable to the Company. The Compensation Committee considered the following factors related to risk:
•Compensation philosophy that targets salaries and incentives at the market median and incentives modestly above medianmedian;
•Annual incentive design that caps maximum awards for the achievement of operating profitadjusted EBITDA and economic value addedvalue-added targets reflective of the Company’s business planplan;
•Long-term incentives with performance and time-based vesting criteriacriteria;
•Stock ownership guidelinesguidelines; and
•Incentive compensation recoupment policypolicy.
The Compensation Committee believes that the above factors as well as the overall executive compensation design, policies and mix of compensation serve to manage risk in a manner that is acceptable to the Company and its shareholders.
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The Compensation Committee makes decisions regarding executive compensation with input from its independent consultant. When making decisions regarding compensation for the CEO, the Compensation Committee has a process in which it considers comparative market data provided by its independent consultant and the CEO’s performance assessment prepared by the Company’s Board of Directors. When making decisions regarding compensation for executives other than the CEO, the Compensation Committee considers comparative market data and seeks input and evaluates recommendations from the CEO. In order to obtain comparative market data for evaluating executive compensation, the Company, through its independent consultant, utilizes compensation data published by Willis Towers Watson. This survey contains hundreds of company participants, although the number of participants and the names of the companies that provided data for each position varies by position and is not provided by the survey publisher for confidentiality purposes. The Company targets industrial /and manufacturing companies of similar size, complexity, employment region and performance in developing this set of comparative data. Because data sample sizes for these types of companies may not be sufficient, the Company supplements such data with broader and more general industry data to develop its market data.
In evaluating compensation for 2017,fiscal 2021, the Compensation Committee’s independent consultant developed a group of peer companies to make assessments of market compensation and to determine the alignment of compensation earned relative to Company and peer performance. The peer group targeted industrial/manufacturing companies of similar size, complexity, employment region and performance. The peer group of companies used in evaluating compensation (“Peer Group”) for 20172021 was:
| Barnes Group Inc. | EnPro Industries Inc. | |||||||||||
| Graco Inc. | Hillenbrand Inc. | |||||||||||
| ICF International, Inc. | ||||||||||||
| John Wiley & Sons, Inc. | ||||||||||||
| Kaman Corporation | ||||||||||||
| MDC Partners, Inc. | Meredith Corporation | |||||||||||
| Minerals Technologies Inc. | ||||||||||||
| MSA Safety Incorporated | Moog, Inc. | |||||||||||
| Schweitzer-Mauduit Intl. | ||||||||||||
| Service Corp. International | Standex International Corp. | |||||||||||
| Teledyne Technologies, Inc. | ||||||||||||
| TriMas Corporation | Viad Corporation | Woodward, Inc. | ||||||||||
For calendar 2018,2022, the Committee approved the removalremovals of CLARCORInnerWorkings, Inc. (acquired)(acquisition) and Viad Corporation (size).
The Compensation Committee does not consider amounts from prior performance-based compensation, such as prior bonus awards or realized or unrealized equity compensation gains, in its decisions to increase or decrease compensation in the current year. The Compensation Committee believes that this would not be in the best interest of retaining and motivating the executive.
Pay-for-Performance Alignment
The Compensation Committee believes there are different ways of assessing whether compensation paid to executives aligns with the performance of the Company. For the Compensation Committee’s consideration in understanding the Company’s pay-for-performance alignment, the Compensation Committee’s compensation consultant examined the relationship of ourthe Company's CEO’s realizable compensation and the Company’s performance relative to the CEO compensation and performance of the Peer Group. Performance was defined as the relative ranking of the following four performance metrics:
•Net sales growthgrowth;
•Return on invested capitalcapital;
•Growth in earnings before interest, taxes, depreciation and amortization (EBITDA); and
•Total shareholder return (stock price appreciation plus dividends).
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The consultant evaluated each performance metric independently relative to the Peer Group for the year 2016, the three-year period 20142018 through 2016,2020, and the five-year period 20122016 through 2016.2020. The relative ranking of each performance metric was averaged to form a composite ranking. The Company’s relative composite performance ranking was aligned with the Peer Group as follows:
•2018 through 2020: 28th percentile |
For the three-year period 20142018 through 2016,2020, the CEO’s three-year realizable compensation relative to the Peer Group ranked at the 6828th percentile while the Company’s performance composite ranked at the 7324rdth percentile of the Peer Group. Realizable compensation includes base salary, actual bonuses paid, the intrinsic value of equity awards at the fiscal year-end 20162020 stock price and performance shares earned or expected to be earned.
For the five-year period 20122016 through 2016,2020, the CEO’s five-year realizable compensation relative to Peer Group ranked at the 5125stth percentile while the Company’s performance composite ranked at the 5726th percentile of the Peer Group.
The Compensation Committee evaluated this information and concluded that the Company’s relative performance was aligned with the relative realizable value of compensation paid to the CEO on a one-year, three-year and five-year basis.
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As further emphasis on the Compensation Committee’s philosophy to align long-term incentive compensation with the Company’s performance, below is a table which reflects, the actual realized portion as of September 30, 20172021, the actual realized portion of the performance-based long-term incentive compensation awards that were granted over the past five fiscal years for ourthe Company's CEO:
| Grant Date (Fiscal Year) | Performance Measure | Grant Value | Grant Date Stock Price | Vesting Thresholds | Percent of Shares Earned | Expiration Date | Forfeited Share Value (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | Non-GAAP EPS | $ | 985,295 | $ | 66.610 | $ | 3.65 | $ | 3.94 | $ | 4.26 | 66.7 | % | 2020 | $394,065 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | Stock Price | $ | 912,594 | $ | 66.610 | $ | 69.91 | $ | 76.61 | $ | 83.27 | 33.3 | % | 2022 | $788,196 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | Non-GAAP EPS | $ | 802,265 | $ | 57.050 | $ | 3.89 | $ | 4.20 | $ | 4.54 | 33.3 | % | 2021 | $641,813 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | Stock Price | $ | 751,220 | $ | 57.050 | $ | 59.91 | $ | 65.61 | $ | 71.32 | 33.3 | % | 2023 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | Non-GAAP EPS | $ | 862,248 | $ | 42.205 | $ | 4.33 | $ | 4.72 | $ | 5.42 | — | % | 2022 | $862,248 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | ROIC | $ | 862,248 | $ | 42.205 | 12 | % | 14 | % | 16 | % | 114.7 | % | 2022 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | Non-GAAP EPS | $ | 925,586 | $ | 35.290 | $ | 3.62 | $ | 3.94 | $ | 4.53 | — | % | 2023 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | ROIC | $ | 925,551 | $ | 35.290 | 12 | % | 14 | % | 16 | % | — | % | 2023 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | Stock Price | $ | 909,883 | $ | 26.860 | 20 | % | 40 | % | 60 | % | 200.0 | % | 2024 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | ROIC | $ | 909,883 | $ | 26.860 | 10 | % | 12 | % | 14 | % | — | % | 2024 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 49.0 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) The forfeited share value represents the number of shares/RSUs forfeited multiplied by the grant date stock price.The fiscal 2017 EPS shares were forfeited on November 21, 2019.The fiscal 2018 EPS shares were forfeited on November 19, 2020.The fiscal 2019 EPS RSUs and fiscal 2017 stock price shares were forfeited on November 18, 2021.
| Grant | Performance Measure | Grant Value | Grant Date Stock Price | Vesting Thresholds | Percent of Shares Earned | Forfeiture Date | |||||||||||||
| 2013 | Non-GAAP EPS | $ | 354,875 | $ | 28.39 | $ | 2.57 | $ | 2.83 | $ | 3.11 | 100.0 | % | 2016 | |||||
| 2013 | Stock Price | 439,875 | 28.39 | 29.81 | 32.65 | 35.49 | 100.0 | % | 2018 | ||||||||||
| 2014 | Non-GAAP EPS | 427,770 | 40.74 | 2.69 | 2.94 | 3.14 | 100.0 | % | 2017 | ||||||||||
| 2014 | Stock Price | 558,810 | 40.74 | 42.78 | 46.85 | 50.93 | 100.0 | % | 2019 | ||||||||||
| 2015 | Non-GAAP EPS | 499,200 | 46.08 | 2.88 | 3.11 | 3.36 | 100.0 | % | 2018 | ||||||||||
| 2015 | Stock Price | 591,012 | 46.08 | 48.39 | 53.00 | 57.60 | 100.0 | % | 2020 | ||||||||||
| 2016 | Non-GAAP EPS | 850,403 | 57.50 | 3.25 | 3.51 | 3.79 | 66.7 | % | 2019 | ||||||||||
| 2016 | Stock Price | 790,585 | 57.50 | 60.38 | 66.13 | 71.88 | 100.0 | % | 2021 | ||||||||||
| 2017 | Non-GAAP EPS | 985,295 | 66.61 | 3.65 | 3.94 | 4.26 | 0.0 | % | 2020 | ||||||||||
| 2017 | Stock Price | 912,594 | 66.61 | 60.38 | 76.61 | 83.27 | 0.0 | % | 2022 | ||||||||||
| Total | 66.0 | % | |||||||||||||||||
The unvested restricted shares/RSUs awarded in fiscal 2017, fiscal 2018 and fiscal 2019 subject to the non-GAAP EPS performance measure and the unvested restricted shares awarded in fiscal 2017 subject to the stock price performance measure have expired and, accordingly, were forfeited.
Base Salaries
The Compensation Committee determines and approves the base salaries of the Company’s executives, including the CEO, and considers recommendations from the CEO with respect to the other executives. The Compensation Committee employs the same principles that are applied in developing the base salaries of all employees. Base salary ranges are determined for each executive position based on their level, responsibilities and complexity using the 50th percentile survey data for similar positions at comparable companies. A base salary market median amount is determined for each position based on this competitive data and ranges are established to provide that the Company’s salary levels are managed between 80% and 120% of such market median.
In determining base salary adjustments for each executive, the Compensation Committee considers the individual’s performance evaluation, the level of responsibility for the position, an individual’s current base salary in relation to market median and industry competition for executive talent. As discussed earlier, the Compensation Committee’s philosophy is to target fixed base salaries at the median of the market.market levels. On this basis, base salaries were increased for calendar 20172021 as follows:
| NEO | Percent Increase | ||||
| Mr. Bartolacci | |||||
| Mr. | |||||
| Mr. Gackenbach | |||||
| Mr. Kohl | 2.0% | ||||
| Mr. Nicola | |||||
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As a result of these adjustments, the calendar 20172021 base salaries of each named executive officerNEO approximated market median.
Executives are also subject to an annual individual performance evaluation. The evaluations are designed to rate each executive on various criteria, both objective and subjective, including the areas of leadership, technical expertise, initiative, judgment and personal development. An overall rating is assessed to each individual from these evaluations and is an important element in determining annual adjustments to base salaries. The rating levels include: DistinguishedSurpassed (highest rating), Commendable, Competent, AdequateAchieved, and ProvisionalProgressed/Missed (lowest rating). The Compensation Committee conducts an evaluation of the CEO’s performance and the CEO conducts an evaluation of each executive officer’s performance. Each of the NEOs was rated at either the CommendableSurpassed or Distinguished levels.Achieved level.
Annual Incentive Compensation
The Company’s 2015 Incentive Compensation Plan (the “2015 Incentive Plan”) covers the annual incentive compensation to be paid to key managers of the Company, including the NEOs. The 2015 Incentive Plan provides an incentive arrangement based on the establishment and achievement of annual goals reflective of the Company’s business plan. The objective of the program is to promote the Company’s goal of increasing shareholder value. The Company believes that twothree of the key elements in the creation of shareholder value are:
•growth in operating profit (or EBITDA); andadjusted EBITDA;
•improvement in operating profitadjusted EBITDA greater than the cost of the capital utilized to generate this profitadjusted EBITDA (referred to as “economic value added”).; and
•strong operating cash flow generation.
Accordingly, the 2015 Incentive Planannual incentive plan for fiscal 2021 was designed to motivate management to achieve levels of operating profit (or EBITDA) andadjusted EBITDA, economic value added, and operating cash flow reflective of the Company’s business plan.
Designated managers within each of the Company’s business segments participate in the incentive program for their respective business unit. IncentiveFor fiscal 2021, incentive compensation for these participants (except the SGK Brand Solutions segment) iswas calculated based on the achievement of operating profit andadjusted EBITDA, economic value added, and operating cash flow targets established for their individual business unit. Economic value added for business units is defined as the unit’s operating profitadjusted EBITDA less its cost of capital (cost of capital is determined based on a pre-tax rate of 12% timesmultiplied by net controllable assets, which is estimated to beexceed the Company’sCompany's weighted average pre-tax cost of capital). Operating cash flow for business units for the purposes of incentive compensation is defined as adjusted EBITDA less capital expenditures plus/minus changes in working capital. Incentive compensation for SGK Brand Solutions participants iswas calculated based on the achievement of adjusted EBITDA and operating cash flow targets established for this business unit.
Incentive compensation for corporate executives iswas calculated based on the achievement of pre-established targets for adjusted net income, and economic value added, and operating cash flow performance of the Company on a consolidated basis. Corporate economic value added is defined as the Company’s adjusted net income less its after-tax cost of capital (with cost of capital based on an after-tax rate of 8%, which is estimated to beapproximate the Company’s weighted average after-tax cost of capital).
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Adjusted EBITDA (adjusted net income andfor Corporate participants), economic value added, and operating cash flow targets are established at the beginning of the fiscal year by the Compensation Committee. In determining these targets for fiscal 2017,2021, the Committee considered the long-term growth objectives of the Company; fiscal 20172021 operating budgets approved by the Company’s Board of Directors; and current economic, industry and competitive market conditions.
No adjustments were made to the annual incentive compensation program for fiscal 2021 as a result of COVID-19. Fiscal 20172021 performance targets established for the respective business units of the NEO’s were as follows:
| Adjusted Net Income/EBITDA | Economic Value Added | Operating Cash Flow | ||||||||||||||||||||||||
| Corporate | $ | 85,470 | $ | 36,320 | $ | 188,995 | ||||||||||||||||||||
| Industrial Technologies/Environmental Solutions | 35,478 | 13,302 | 32,853 | |||||||||||||||||||||||
| Memorialization (excl. Environmental Solutions) | 130,994 | 60,257 | 127,527 | |||||||||||||||||||||||
| SGK Brand Solutions (brand packaging only) | 78,315 | n/a | 83,812 | |||||||||||||||||||||||
| Net Income | Economic Value Added | Relative Incentive % | ||||||
| Target | $ | 74,890 | $ | 16,100 | 100 | % | ||
| Minimum | 67,401 | 12,075 | 50 | % | ||||
| Maximum | 82,379 | 20,125 | 200 | % | ||||
| Operating Profit | Economic Value Added | Relative Incentive % | ||||||
| Target | $ | 104,503 | $ | 25,094 | 100 | % | ||
| Minimum | 94,053 | 18,821 | 50 | % | ||||
| Maximum | 114,953 | 31,368 | 200 | % | ||||
Corporate amounts (Mr. Bartolacci and Mr. Nicola are participants) were based on consolidated adjusted net income, and economic value added, and operating cash flow of the Company. The adjusted net income target was calculated based on the Company’s adjusted EBITDA target of $202.4 million for fiscal year 2021, which was relatively consistent with the Company’s adjusted EBITDA for fiscal year 2020. Although the Company expected a significant reduction in Memorialization segment sales volume with the anticipated subsidence of the pandemic, the Committee determined that target Corporate annual incentive compensation for fiscal year 2021 should generally be based on profitability levels not less than the previous year.
Industrial Technologies / Environmental Solutions amounts (Mr. Dunn) were based on the combined adjusted EBITDA, economic value added, and operating cash flow for these businesses. Memorialization amounts do not include(Mr. Gackenbach) were based on the resultsadjusted EBITDA, economic value added and operating cash flow of this segment excluding Environmental Solutions. SGK Brand Solutions amounts (Mr. Kohl) were based on the adjusted EBITDA, economic value added and operating cash flow of the Environmental Solutions division ofbrand packaging portion this segment.
The attainment of target performance levels resultresults in an earned incentive equivalent to the participant’s target incentive amount (discussed below). No incentive amounts are earned for operating results that do not achieve the defined minimum performance levels. Incentive amounts cannot exceed the defined maximum percentage of the participant’s target incentive amount. Earned incentive percentages are interpolated within the ranges.
For the NEOs for fiscal 2017, one-half2021, 40% of the participant’s target annual incentive compensation opportunity was based on the achievement of operating profitadjusted EBITDA targets (net(adjusted net income in the case offor Corporate participants), with the remaining portion40% was based on the achievement of economic value added targets, and the remaining 20% was based on the achievement of operating cash flow targets. To better align business unit performance with the Company’s consolidated objectives, 25% of the annual incentive compensation opportunityopportunities for Mr. Dunn, Mr. Gackenbach wasand Mr. Kohl were based on the achievement of the Company’s consolidated results.
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The target incentive amount is expressed as a percentage of the participant’s base salary and based upon the executive’s position and the industry recommended percentage target for the position as provided to the Company by Pay Governance, LLC. Target, minimum and maximum incentive award opportunities for the CEO and other NEOs are included in the table below.
| Named Executive Officer | Target Incentive Award as a Percent of Base Salary | Minimum Incentive Award as a Percent of Base Salary | Maximum Incentive Award as a Percent of Base Salary | ||||||||
| J.C. Bartolacci | 100% | 50% | 200% | ||||||||
| B.J. Dunn | 55% | 27.5% | 110% | ||||||||
| S.D. Gackenbach | 55% | 27.5% | 110% | ||||||||
| G.R. Kohl | 55% | 27.5% | 110% | ||||||||
| S.F. Nicola | 70% | 35% | 140% | ||||||||
| Named Executive Officer | Target Incentive Award as a Percent of Base Salary | Minimum Incentive Award as a Percent of Base Salary | Maximum Incentive Award as a Percent of Base Salary |
| J.C. Bartolacci | 100% | 50% | 200% |
| G.S. Babe | 50% | 25% | 100% |
| S.D. Gackenbach | 55% | 27.5% | 110% |
| S.F. Nicola | 70% | 35% | 140% |
| B.D. Walters | 45% | 22.5% | 90% |
Actual results for fiscal 20172021 compared to target levels were as follows. ActualAdjusted EBITDA and adjusted net income amounts reflectreflected the following adjustments as pre-approved by the Compensation Committee: acquisition-related costs, restructuring costs, asset impairments, ERP implementation costs, specified research and development costs,intangible amortization expense, and certain other non-GAAP adjustments as presented in the Company’s quarterly and annual earnings reports.
Corporate
| Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||||||||||||||||||||||||||||
| Adjusted net income | $ | 104,913 | $ | 85,470 | 200 | % | 40 | % | 80 | % | ||||||||||||||||||||||||||||
| Economic value added | 55,063 | 36,320 | 200 | % | 40 | % | 80 | % | ||||||||||||||||||||||||||||||
| Operating cash flow | 210,553 | 188,995 | 157 | % | 20 | % | 31 | % | ||||||||||||||||||||||||||||||
| Total | 191 | % | ||||||||||||||||||||||||||||||||||||
Industrial Technologies / Environmental Solutions
| Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 31,829 | $ | 35,478 | 58 | % | 40 | % | 23 | % | ||||||||||||||||||||||||||||
| Economic value added | 10,687 | 13,302 | 73 | % | 40 | % | 29 | % | ||||||||||||||||||||||||||||||
| Operating cash flow | 40,712 | 32,853 | 168 | % | 20 | % | 34 | % | ||||||||||||||||||||||||||||||
| Total | 86 | % | ||||||||||||||||||||||||||||||||||||
Memorialization (excluding Environmental Solutions)
| Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 162,034 | $ | 130,994 | 200 | % | 40 | % | 80 | % | ||||||||||||||||||||||||||||
| Economic value added | 90,307 | 60,257 | 200 | % | 40 | % | 80 | % | ||||||||||||||||||||||||||||||
| Operating cash flow | 155,960 | 127,527 | 200 | % | 20 | % | 40 | % | ||||||||||||||||||||||||||||||
| Total | 200 | % | ||||||||||||||||||||||||||||||||||||
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Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||
| Net income | $ | 76,800 | $ | 74,890 | 126 | % | 50 | % | 63 | % | ||
| Economic value added | 18,331 | 16,100 | 155 | % | 50 | % | 77 | % | ||||
| Total | 140 | % | ||||||||||
| Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 78,870 | $ | 78,315 | 104 | % | 80 | % | 83 | % | ||||||||||||||||||||||||||||
| Operating cash flow | 78,621 | 83,812 | 69 | % | 20 | % | 14 | % | ||||||||||||||||||||||||||||||
| Total | 97 | % | ||||||||||||||||||||||||||||||||||||
Actual | Target | Relative Incentive % | Allocation | Incentive Earned | ||||||||
| Operating profit | $ | 105,352 | $ | 104,503 | 108 | % | 50 | % | 54 | % | ||
| Economic value added | 26,756 | 25,094 | 126 | % | 50 | % | 63 | % | ||||
| Total | 117 | % | ||||||||||
Based on actual results, the calculationcalculations of the earned incentive amounts were as follows:
| Named Executive Officer | Base Salary | Target Incentive | Target Incentive Amount | Earned Incentive | Earned Incentive Amount | ||||||||||||||||||||||||||||||||||||
| J.C. Bartolacci | $ | 948,600 | 100 | % | $ | 948,600 | 191 | % | $ | 1,815,715 | |||||||||||||||||||||||||||||||
| B.J. Dunn | 439,000 | 55 | % | 241,450 | 86 | % | 322,984 | ||||||||||||||||||||||||||||||||||
| S.D. Gackenbach | 440,000 | 55 | % | 242,000 | 200 | % | 478,803 | ||||||||||||||||||||||||||||||||||
| G.R. Kohl | 445,500 | 55 | % | 245,025 | 97 | % | 294,845 | ||||||||||||||||||||||||||||||||||
| S.F. Nicola | 562,500 | 70 | % | 393,750 | 191 | % | 753,677 | ||||||||||||||||||||||||||||||||||
Note: 25% of the target incentive amounts for Mr. Dunn, Mr. Gackenbach and Mr. Kohl were based on the achievement of the Corporate results.
| Named Executive Officer | Base Salary | Target Incentive | Target Incentive Amount | Earned Incentive | Earned Incentive Amount | ||||||||
| J.C. Bartolacci | $ | 846,450 | 100 | % | $ | 846,450 | 140 | % | $ | 1,189,008 | |||
| G.S. Babe | 406,000 | 50 | % | 203,000 | 140 | % | 285,154 | ||||||
| S.D. Gackenbach | 399,000 | 55 | % | 219,450 | 123 | % | 270,143 | ||||||
| S.F. Nicola | 502,000 | 70 | % | 351,400 | 140 | % | 493,612 | ||||||
| B.D. Walters | 355,000 | 45 | % | 159,750 | 140 | % | 224,401 | ||||||
Incentive amounts are subject to reduction at the discretion of the Compensation Committee based on the performance of the NEO relative to pre-established, quantifiable personal goals. Each incentive compensation plan participant develops personal goals, which are subject to review and approval by the business unit President or CEO, as appropriate. The personal goals of the CEO are reviewed and approved by the Compensation Committee. The Compensation Committee may use discretion to decrease calculated awards based on the participant’s performance relative to the quantifiable individual goals. No such adjustments were made in fiscal 2017.2021.
Long-Term Incentive Compensation
The 20122017 Equity Plan is an equity compensation plan designed to directly align the interests of employees with the Company’s shareholders. The 2012 Equity Planplan is intended to encourage eligible employees to increase their efforts to make the Company more successful, to provide an additional inducement for such employees to remain with the Company, to reward such employees by providing an opportunity to acquire shares of the Company’s common stock on favorable terms and to provide a means through which the Company may attract able persons to enter the employ of the Company. The eligible employees are those employees of the Company or any subsidiary who share responsibility for the management, growth or protection of the business of the Company.
Under the 20122017 Equity Plan, equity grants can be made in the form of:
•Stock options;
•Restricted share awards;
•Restricted stock units;share units (including performance-based share units);
•Stock appreciation rights; and
•Other stock-based awards.
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The Committee considers growth in stock price as the best means of measuring shareholder value creation over the long-term. For this reason, theCompensation Committee believes that the use of stock-based compensation has providedprovides a strong link to meeting this objective.in aligning the interests of management with the Company’s shareholders by incentivizing shareholder value creation. In keeping with the Compensation Committee’s philosophy of providing performance-based incentives, the restricted sharesshare units awarded in fiscal 2017November 2020 generally contained performance-vesting provisions for one-half50% of the sharesunits granted. Further, in order to enhance the Company’s retention objectives, the remaining one-half50% of the sharesunits granted contain a time-vesting feature in which such sharesunits vest three years from the grant date subject to continued employment of the executive by the Company.
For the fiscal 2017November 2020 grant, the Company established the following two criteria for the performance-vesting shares, with each criteria further containingunits, to be measured three separate, pro-rated performance requirements:years following the grant of the award:
•One-half (50%) of the performance-vesting sharesunits (i.e., 25% of the overall award) vestare based upon the attainment of non-GAAP annual earnings per sharegrowth in the Company’s stock price of $3.65, $3.9440%, 20%, and $4.26;60%, respectively, to earn 100%, 50% and 200% of the award; and
•One-half (50%) of the performance-vesting sharesunits (i.e., 25% of the overall award) vestare based upon the attainment of 5%return on invested capital of 12%, 15%10%, and 25% appreciation14%, respectively, to earn 100%, 50% and 200% of the award. For this measurement, return on invested capital is determined based on consolidated adjusted EBITDA divided by average invested capital (net debt plus shareholders' equity) of the Company.
The utilization of stock price as a performance goal was temporary in consideration of the pandemic and was intended to better align the interests of participants with the Company’s stock price.shareholders. Additionally, at the time performance-goals were approved, the Committee and management were uncertain of the speed of the economic recovery and its impact on company operating and financial performance. The Committee established the minimum threshold ROIC goal of 10% to exceed the Company’s estimated cost of capital.
•One-half (50%) of the performance-vesting units (i.e., 30% of the overall award) are based upon the attainment of annual growth in consolidated adjusted earnings per share targets within three yearsof 9%, 6.5%, and 12%, respectively, based on the fiscal 2022 budget, to earn 100%, 50% and 200% of the date of grant or the stock price hurdles within five yearsaward; and
•One-half (50%) of the date of grant will result in forfeitureperformance-vesting units (i.e., 30% of the applicable portionoverall award) are based upon the attainment of return on invested capital of 12%, 10%, and 14%, respectively, to earn 100%, 50% and 200% of the respective awards.
award.
Every year, the Compensation Committee determines individual grant levels through consultation with the independent compensation advisor. The Compensation Committee is provided grant guidelines by Pay Governance, LLC, which provide recommended grant award ranges based on current market thresholds.
For the November 2020 awards, the target level of grants represented the market median (50th percentile). The relative recommended ranges provide a minimum, maximum and target grant award for each position / salary level. The grant ranges arehave been developed such that the minimum of the range aligns withis set at 20% below the market 50th percentile,median and the maximum of the range aligns withis set at 20% above the market 75th percentile and the target level in the range represents the average of the market 50th and 75th percentile opportunity. The Committee has chosen this approach since a portion of the grants contain performance-vesting criteria and to align with its philosophy of providing modestly above market variable compensation opportunities. Additionally, the design of our performance-based awards requires the achievement of all six performance targets to fully vest in the target number of shares. Our performance-vesting share design caps award payouts at the target level and does not provide for awards to vest in an amount above the target number of shares granted. Actual grants within this range are determined based on the individual performance assessments of each executive during the past fiscal year. Grants made to the NEOs in November 2016 were within the above range.median.
Grant recommendations are developed using a valuation model consistent with accounting policies for stock-based compensation and is based on the fair market value of the Company’s common stock on the dates of grant. Grants to executive officers are generally made only once a year in the Company’s first fiscal quarter (usually at the November meeting of the Compensation Committee), except for new hires and promotions. The Company does not time the release of material non-public information around the granting of equity compensation awards.
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The minimum vesting period, in general, for all restricted share units (time and performance-based) is three years. Restricted sharesshare units may also vest under certain change-in-control circumstances, subject to double-trigger change-in-control provisions which require a change in control circumstances. Performance-based restricted shares cannot vest earlier than one year from the date of grant and expire on the earlier of threeinvoluntary or five years (depending on the vesting criteria) from the date of grant, upongood reason employment termination or within specified time limits following voluntary employment termination (with consent of the Company), retirement or death. (see “Employment and Severance Agreements” below).
The minimum holding periods for vested restricted share awards are governed by the Company’s stock ownership guidelines, which provides that at least 50% of the after-tax shares realized upon vesting of restricted stock must be retained until the ownership guideline is met.
Dividends are not paid on unvested restricted shares. Dividends associated with unvested restricted shares only become payable if and upon the vesting of the restricted shares. Accordingly, dividends will not be paid if the restricted shares do not become vested and are instead forfeited.
Adjustments or Recovery of Prior Compensation
The Sarbanes-Oxley Act of 2002 requires the CEO and Chief Financial Officer to reimburse the Company for any awards received following the release of financial results that subsequently require an accounting restatement due to noncompliance with a material financial reporting requirement as a result of misconduct.
Additionally, the Company's equity- and cash-based compensation plans permit it to clawback compensation paid by the Company to participants, including executive officers and directors, if they engage in specified activities. For example, our 2015 Incentive Plan has a recoupment provision under which the Compensation Committee has the discretion to adjust for the recovery of previously paid awards from any participant, where appropriate, in the event of restatement of prior financial statements. No such adjustments have been necessary under these provisions.
The 2015 Incentive Plan and the 20122017 Equity Plan also provide the Compensation Committee with the discretion over the three-year period following the grant of awards to cancel, suspend or require repayment to the Company of outstanding awards if the participant (i) competes with the Company or its subsidiaries, (ii) violates solicitation provisions with customers or employees, or (iii) defames or disparages the Company, its subsidiaries or certain related persons.
Stock Ownership Guidelines
The Company has established stock ownership guidelines for executive officers and business unit management in order to support a culture of ownership among the management team. The Compensation Committee believes significant ownership levels will provide additional motivation to executives to perform in accordance with the interests of the Company’s shareholders. The ownership guidelines are expressed as a multiple of base salary and are as follows:
| Position | Minimum Equivalent Stock Value | ||||
| Chief Executive Officer | 6 times base salary | ||||
| Chief Financial Officer | 5 times base salary | ||||
| Group Presidents | 4 times base salary | ||||
| 3 times base salary | |||||
| 2 times base salary | |||||
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For purposes of these guidelines, stock ownership includes all shares directly owned (including shares held under the Company's Employee Stock Purchase Plan and time-vesting restricted share units or shares), but does not include outstanding stock options or unvested performance-based restricted share units or shares. Immediate compliance with these guidelines is not mandatory; however, individuals are expected to undertake a program to achieve compliance within five years of their hire date or promotion to their respective position. The ownership policy mandates that at least 50% of the after-tax shares realized upon an option exercise or vesting of restricted stock or restricted share units must be retained until the ownership guideline is met. Compliance with these ownership guidelines is one of the factors considered by the Compensation Committee in determining eligibility for participation in the Company’s equity compensation programs.
As of November 30, 2017,2021, all NEOs exceeded the Company’s stock ownership guidelines.
Anti-Hedging Policy
The Company has a policy that prohibits its directors, executive officers and employees from hedging its ownership of the Company’s stock.stock, including the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds related to Company stock or debt. Directors, executive officers and employees are prohibited from purchasing the Company’s stock on margin, borrowing against the Company’s stock held in a margin account, or pledging the Company’s stock as collateral for a loan.
Retirement Benefits
Retirement benefits arewere generally provided to executives under the Company’s principal retirement planDB Plan and in some cases, the SERP or ORRP.In fiscal 2021, the Board of Directors approved the terminations of the Company’s DB Plan, the SERP, and the defined benefit portion of the ORRP.Of the NEOs, Mr. Bartolacci, Mr. Dunn and Mr. Nicola participated in the Company's DB Plan and SERP.Mr. Gackenbach was a supplemental retirement plan. The purposeparticipant in the Company's DB Plan and defined benefit portion of both these plans isthe ORRP.
Beginning October 1, 2021, all executives, in addition to provide post-retirement compensation and stability to executives. The Committee’s goal is to provide a benefit that is competitive with plans which would be available to executives of similar companies. The Committee believes this philosophy will allowparticipation in the Company to effectively attract and retain talented executives.
Other Compensation
The Company generally provides all domestic employees with the following:
•401(k) plan;
•Employee stock purchase plan;
•Health and dental coverage;
•Company-paid term life insurance;
•Disability insurance;
•Educational assistance; and
•Paid time off (vacations and holidays).
These benefits are designed to be competitive with overall market practices. Educational assistance for dependent children is also provided to any employee of the Company whose child meets the scholastic eligibility criteria and is attending an eligible college or university. Educational assistance is limited to $1,200 for each semester and $2,400 annually.
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The Company provides executives with other benefits, reflected in the “All Other Compensation” column in the Summary Compensation Table, which the Committee considers reasonable, competitive and consistent with the Company’s compensation philosophy. These benefits include supplemental life insurance coverage, costs associated with personal use of a vehicle and, in certain circumstances, club dues and financial counseling and tax preparation services.dues.
Employment and Severance Agreements
None of the NEOs have employment severance or change-of-controlseverance agreements.
Tax Policy
Section 162(m) of the Internal Revenue Code of 1986, as amended, (“Section 162(m)”) disallows federal income tax deductions for compensation paid to the Chief Executive Officer, andChief Financial Officer, any of the other four highestthree most highly compensated executives and certain former NEOs in excess of $1 million in any taxable year, subject to certain exceptions. One exception involves compensation paid pursuant to shareholder-approved compensation plans that are performance-based. Certain of the provisions in the 2015 Incentive Plan are intended to cause awards earned under such plan to be eligible for this exception (so that compensation related to such awards should be deductible under the Internal Revenue Code). In addition, certain of the provisions in the 2012 Equity Plan are intended to cause grants of performance-based stock compensation under such plan to be eligible for this exception (so that compensation related to the vesting or exercise of such shares should be deductible under the Internal Revenue Code). Payments of cash compensation to executives (except annual incentive compensation awards earned under the 2015 Incentive Plan) and time-based grants of restricted shares under the 2012 Equity Plan are not at present eligible for this performance-based exception. The Committee has taken and intends to continue to take actions, as appropriate, to attempt to minimize, if not eliminate, the Company's non-deductible compensation expense within the context of maintaining the flexibility which the Committee believes to be an important element of the Company's executive compensation program.
Section 162(m) of the Internal Revenue Code was amended on December 22, 2017 by an Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (the “Tax Cuts and Jobs Act”). Under the Tax Cuts and Jobs Act, Section 162(m) would apply to each employee who serves as the Company’s principal executive officer or principal financial officer during the taxable year, each other employee for the Company who is among the three most highly compensated officers during such taxable year, and any other employee who was a covered employee of the Company for any preceding taxable year beginning after December 31, 2016. In addition, the exception under Section 162(m) for performance-based compensation wouldis no longer be available. The amendment to Section 162(m) applies to remuneration paid by the Company in taxable years beginning after December 31, 2017, except for remuneration which is provided pursuant to a written binding contract that was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. The Committee is taking actions to assess the impact of the amendment to Section 162(m) and other changes contained in the Tax Cuts and Jobs Act on the Company’s executive compensation program.
Annual Compensation of the Named Executive Officers
The table below summarizes the compensation for fiscal 2017, 20162021, 2020 and 20152019 earned by the Company’s Chief Executive Officer, Chief Financial Officer, and each of the three other most highly paid executive officers who were serving as executive officers atas of September 30, 2017.2021. These individuals are sometimes referred to in this Proxy Statement as the “named executive officers”, or the “NEOs”.
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Summary Compensation Table
Name and Principal Position | Year (1) | Salary | Bonus | Stock Awards (2) | Option Awards | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Plan Compensation (4) | All Other Compensation (5) | Total | ||||||||||||||||
Joseph C. Bartolacci Director, President and Chief Executive Officer | 2017 | $ | 836,637 | $ | — | $ | 4,262,545 | $ | — | $ | 1,189,008 | $ | 633,643 | $ | 114,175 | $ | 7,036,008 | ||||||||
| 2016 | 800,267 | — | 3,682,263 | — | 1,243,755 | 1,836,921 | 127,315 | 7,690,521 | |||||||||||||||||
| 2015 | 765,346 | — | 2,837,417 | — | 1,547,700 | 886,052 | 80,584 | 6,117,099 | |||||||||||||||||
Gregory S. Babe Director and Chief Technology Officer | 2017 | 401,692 | — | 522,308 | — | 285,154 | — | 31,350 | 1,240,504 | ||||||||||||||||
Steven D. Gackenbach Group President, Memorialization | 2017 | 395,231 | — | 666,393 | — | 270,143 | 248,465 | 46,517 | 1,626,749 | ||||||||||||||||
| 2016 | 380,827 | — | 648,307 | — | 302,623 | 53,268 | 42,602 | 1,427,627 | |||||||||||||||||
| 2015 | 366,615 | — | 436,520 | — | 369,500 | 28,643 | 29,507 | 1,230,785 | |||||||||||||||||
| Steven F. Nicola Chief Financial Officer and Secretary | 2017 | 496,077 | — | 1,116,659 | — | 493,612 | 338,156 | 48,525 | 2,493,029 | ||||||||||||||||
| 2016 | 475,692 | — | 898,233 | — | 515,928 | 1,059,040 | 50,896 | 2,999,789 | |||||||||||||||||
| 2015 | 459,385 | — | 984,800 | — | 649,600 | 570,508 | 35,480 | 2,699,773 | |||||||||||||||||
Brian D. Walters Vice President and General Counsel | 2017 | 350,692 | — | 540,319 | — | 224,401 | 60,956 | 24,977 | 1,201,345 | ||||||||||||||||
| 2016 | 334,692 | — | 472,986 | — | 208,214 | 178,546 | 27,413 | 1,221,851 | |||||||||||||||||
| 2015 | 319,377 | — | 528,190 | — | 258,400 | 80,827 | 21,867 | 1,208,661 | |||||||||||||||||
| Name and Principal Position | Year (1) | Salary | Bonus | Stock Awards (2) | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Plan Compensation (4) | All Other Compensation (5) | Total | ||||||||||||||||||
| Joseph C. Bartolacci Director, President and Chief Executive Officer | 2021 | $ | 943,592 | $ | — | $ | 3,639,530 | $ | 1,815,715 | $ | 284,123 | $ | 130,344 | $ | 6,813,304 | |||||||||||
| 2020 | 921,600 | — | 2,847,903 | 747,255 | 1,864,250 | 196,859 | 6,577,867 | |||||||||||||||||||
| 2019 | 892,223 | — | 2,874,161 | — | 3,008,481 | 144,664 | 6,919,529 | |||||||||||||||||||
| Brian J. Dunn Executive Vice President, Strategy and Corporate Development | 2021 | 436,712 | — | 577,490 | 322,984 | 148,829 | 32,501 | 1,518,516 | ||||||||||||||||||
| 2020 | 426,654 | — | 458,770 | 118,388 | 480,824 | 55,659 | 1,540,295 | |||||||||||||||||||
| 2019 | 415,846 | — | 443,153 | — | 833,335 | 24,304 | 1,716,638 | |||||||||||||||||||
| Steven D. Gackenbach Group President, Memorialization | 2021 | 437,712 | — | 577,490 | 478,803 | 49,290 | 43,471 | 1,586,766 | ||||||||||||||||||
| 2020 | 427,654 | — | 458,770 | 340,811 | 228,493 | 72,139 | 1,527,867 | |||||||||||||||||||
| 2019 | 416,846 | — | 443,153 | 91,448 | 236,965 | 47,029 | 1,235,441 | |||||||||||||||||||
| Gary R. Kohl President, SGK Brand Solutions | 2021 | 443,212 | — | 797,742 | 294,845 | — | 26,948 | 1,562,747 | ||||||||||||||||||
| 2020 | 432,423 | — | 564,640 | 197,591 | — | 24,868 | 1,219,522 | |||||||||||||||||||
| 2019 | 409,769 | — | 443,153 | — | — | 22,767 | 875,689 | |||||||||||||||||||
| Steven F. Nicola Chief Financial Officer and Secretary | 2021 | 559,539 | — | 1,017,994 | 753,677 | 179,650 | 56,972 | 2,567,832 | ||||||||||||||||||
| 2020 | 546,577 | — | 868,135 | 310,191 | 1,009,743 | 103,729 | 2,838,375 | |||||||||||||||||||
| 2019 | 532,673 | — | 785,013 | — | 1,676,654 | 54,084 | 3,048,424 | |||||||||||||||||||
(1) For the fiscal years ended September 30, 2021, 2020 and 2019.
(2) Amounts in this column reflect the grant date fair value of awards of restricted shares/units of the Company’s Common Stock granted during fiscal 2021, 2020 and 2019 computed in accordance with Financial Accounting Standards Board ASC Topic 718; however, the estimate of forfeiture related to service-based vesting conditions is disregarded for purposes of this valuation. For details of individual grants of restricted share units during fiscal 2021, see the Grants of Plan-Based Awards table below. Performance-based shares that were forfeited in fiscal 2021 were as follows: 11,250 for Mr. Bartolacci, 1,300 for Mr. Dunn, 1,700 for Mr. Gackenbach, 600 for Mr. Kohl and 3,100 for Mr. Nicola. Performance-based shares that were forfeited in fiscal 2020 were as follows: 5,916 for Mr. Bartolacci, 150 for Mr. Dunn, 925 for Mr. Gackenbach, 252 for Mr. Kohl and 1,550 for Mr. Nicola. Mr. Dunn forfeited 4,303 performance-based shares in fiscal 2019. The assumptions on which this valuation is based are set forth in Note 12 to the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 19, 2021.
(3)The amounts shown in this column reflect amounts earned under the 2015 Incentive Plan in fiscal 2021, 2020 and 2019. For a full explanation of the operation of the Incentive Compensation Plan, refer to the narrative disclosure above and the Annual Incentive Compensation section of the Compensation Discussion and Analysis beginning on page 44 of this Proxy Statement.
(4) The amount shown in this column for each of the named executive officers is the increase, if any, in the actuarial present value of the accumulated benefits under all defined benefit plans for the years ended September 30, 2021, 2020 and 2019. For additional information regarding defined benefit pension plans, see the Pension Benefits table below.
(5) Amounts represent one or more of the following: premiums for officer’s life insurance, incremental premiums for long-term disability insurance, club dues, dividends on restricted shares, the value for personal use of Company leased vehicles or vehicle allowance, matching contributions to the Company’s 401(k) Plan and educational assistance. The fiscal 2021 amounts for Mr. Bartolacci include dividends on restricted shares of $81,000, the value of a leased vehicle of $14,490 and club membership dues of $20,065. The fiscal 2021 amounts for Mr. Dunn include dividends on restricted shares of $9,360 and vehicle allowances of $12,900. The fiscal 2021 amounts for Mr. Gackenbach includes dividends on restricted shares of $12,240, vehicle allowances of $12,900 and club membership dues of $7,575. The fiscal 2021 amounts for Mr. Kohl include dividends on restricted shares of $4,320 and the value of a leased vehicle of $12,900. The fiscal 2021 amounts for Mr. Nicola include dividends on restricted shares of $22,320, the value of a leased vehicle of $14,486 and club membership dues of $8,537.
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The following table provides information on grants of plan-based awards held by the named executive officers during fiscal 2017.2021.
Grants of Plan-Based Awards Table
| Name | Grant Date (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (4) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||
| Threshold ($) | Target ($) (2) | Maximum ($) | Threshold (#) | Target (# ) (3) | Maximum (#) | |||||||||||||||||||||||||||
| J.C. Bartolacci | 11/16/20 | 33,875 | $ | 909,883 | (5) | |||||||||||||||||||||||||||
| 11/16/20 | 33,875 | 909,883 | (5) | |||||||||||||||||||||||||||||
| 11/16/20 | 67,750 | 1,819,764 | (6) | |||||||||||||||||||||||||||||
| 11/16/20 | $ | 474,300 | $ | 948,600 | $ | 1,897,200 | ||||||||||||||||||||||||||
| B.J. Dunn | 11/16/20 | 5,375 | 144,373 | (5) | ||||||||||||||||||||||||||||
| 11/16/20 | 5,375 | 144,373 | (5) | |||||||||||||||||||||||||||||
| 11/16/20 | 10,750 | 288,744 | (6) | |||||||||||||||||||||||||||||
| 11/16/20 | 120,725 | 241,450 | 482,900 | |||||||||||||||||||||||||||||
| S.D. Gackenbach | 11/16/20 | 5,375 | 144,373 | (5) | ||||||||||||||||||||||||||||
| 11/16/20 | 5,375 | 144,373 | (5) | |||||||||||||||||||||||||||||
| 11/16/20 | 10,750 | 288,744 | (6) | |||||||||||||||||||||||||||||
| 11/16/20 | 121,000 | 242,000 | 484,000 | |||||||||||||||||||||||||||||
| G.R. Kohl | 11/16/20 | 7,425 | 199,436 | (5) | ||||||||||||||||||||||||||||
| 11/16/20 | 7,425 | 199,436 | (5) | |||||||||||||||||||||||||||||
| 11/16/20 | 14,850 | 398,870 | (6) | |||||||||||||||||||||||||||||
| 11/16/20 | 122,513 | 245,025 | 490,050 | |||||||||||||||||||||||||||||
| S.F. Nicola | 11/16/20 | 9,475 | 254,499 | (5) | ||||||||||||||||||||||||||||
| 11/16/20 | 9,475 | 254,499 | (5) | |||||||||||||||||||||||||||||
| 11/16/20 | 18,950 | 508,996 | (6) | |||||||||||||||||||||||||||||
| 11/16/20 | 196,875 | 393,750 | 787,500 | |||||||||||||||||||||||||||||
(1)All grants were effective as of the date on which the Compensation Committee of the Board of Directors met to approve them.
(2)Amounts represent target payouts under the Company’s 2015 Incentive Plan. The target represents the named executive officer’s annual salary multiplied by his respective target incentive award percentage. The target incentive award percentages, expressed as a percentage of annual base salary are 100% for Mr. Bartolacci, 55% for Mr. Dunn, Mr. Gackenbach and Mr. Kohl, and 70% for Mr. Nicola. For a full explanation refer to the Annual Incentive Compensation section of the Compensation Discussion and Analysis beginning on page 44 of this Proxy Statement.
(3) Amounts represent the number of restricted share units granted pursuant to the 2017 Equity Plan that vest upon certain performance criteria. Performance-based restricted share units granted in November 2020 were awarded such that, in general, 25% of the grant vests at target based upon the Company achieving certain metrics based on Return on Invested Capital ("ROIC"); and 25% of the grant vests at target based upon stock price appreciation for the Company's common stock. Vesting of all units are generally subject to continuing employment through November 16, 2023. Upon vesting, performance based units will be converted to the Company's common stock using a factor ranging from 50% to 200% based upon the level of achievement of the performance thresholds related to the above targets. Performance related units that do not achieve the ROIC or stock price appreciation thresholds by the end of the performance period will be forfeited. For a full explanation of the operation of the 2017 Equity Plan, refer to the Long-Term Incentive Compensation section of the Compensation Discussion and Analysis beginning on page 47 of this Proxy Statement.
(4) Amounts represent the number of shares of restricted share units granted pursuant to the 2017 Equity Plan that fully vest on the third anniversary of the grant date. Upon vesting, time-based units will be converted to an equal number of shares of the Company's common stock. Restricted share units may also vest under certain change-in-control circumstances, subject to double-trigger change-in-control provisions which require a change in control and involuntary or good reason employment termination. The restricted share units are forfeited upon employment termination, or within specified time limits following voluntary employment termination (with consent of the Company), retirement or death. For a full explanation of the operation of the 2017 Equity Plan, refer to the Long-Term Incentive Compensation section of the Compensation Discussion and Analysis beginning on page 47 of this Proxy Statement.
(5) Values are calculated based on the grant date fair value of the Company’s common stock and the expected probability that the shares will ultimately vest at target (see footnote 3 above).
(6) Values are calculated based on the grant date fair value of the Company’s common stock. The vesting period for retirement-eligible employees is accelerated.
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| Name | Grant Date (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (4) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||
| Threshold ($) | Target ($) (2) | Maximum ($) | Threshold (#) | Target (# ) (3) | Maximum (#) | |||||||||||||||
| J.C. Bartolacci | 11/16/16 | 5,917 | $ | 351,056 | (5) | |||||||||||||||
| 11/16/16 | 5,917 | 303,069 | (5) | |||||||||||||||||
| 11/16/16 | 5,916 | 258,470 | (5) | |||||||||||||||||
| 11/16/16 | 5,917 | 394,131 | (6) | |||||||||||||||||
| 11/16/16 | 5,917 | 394,131 | (6) | |||||||||||||||||
| 11/16/16 | 5,916 | 197,033 | (6) | |||||||||||||||||
| 11/16/16 | 35,500 | 2,364,655 | (7) | |||||||||||||||||
| 11/16/16 | $ | 423,225 | $ | 846,450 | $ | 1,692,900 | ||||||||||||||
| G.S. Babe | 11/16/16 | 725 | 43,014 | (5) | ||||||||||||||||
| 11/16/16 | 725 | 37,135 | (5) | |||||||||||||||||
| 11/16/16 | 725 | 31,675 | (5) | |||||||||||||||||
| 11/16/16 | 725 | 48,292 | (6) | |||||||||||||||||
| 11/16/16 | 725 | 48,292 | (6) | |||||||||||||||||
| 11/16/16 | 725 | 24,146 | (6) | |||||||||||||||||
| 11/16/16 | 4,350 | 289,754 | (7) | |||||||||||||||||
| 11/16/16 | 101,500 | 203,000 | 406,000 | |||||||||||||||||
| S.D. Gackenbach | 11/16/16 | 925 | 54,880 | (5) | ||||||||||||||||
| 11/16/16 | 925 | 47,379 | (5) | |||||||||||||||||
| 11/16/16 | 925 | 40,413 | (5) | |||||||||||||||||
| 11/16/16 | 925 | 61,614 | (6) | |||||||||||||||||
| 11/16/16 | 925 | 61,614 | (6) | |||||||||||||||||
| 11/16/16 | 925 | 30,807 | (6) | |||||||||||||||||
| 11/16/16 | 5,550 | 369,686 | (7) | |||||||||||||||||
| 11/16/16 | 109,725 | 219,450 | 438,900 | |||||||||||||||||
| S.F. Nicola | 11/16/16 | 1,550 | 91,962 | (5) | ||||||||||||||||
| 11/16/16 | 1,550 | 79,391 | (5) | |||||||||||||||||
| 11/16/16 | 1,550 | 67,719 | (5) | |||||||||||||||||
| 11/16/16 | 1,550 | 103,246 | (6) | |||||||||||||||||
| 11/16/16 | 1,550 | 103,246 | (6) | |||||||||||||||||
| 11/16/16 | 1,550 | 51,622 | (6) | |||||||||||||||||
| 11/16/16 | 9,300 | 619,473 | (7) | |||||||||||||||||
| 11/16/16 | 175,700 | 351,400 | 702,800 | |||||||||||||||||
| B.D. Walters | 11/16/16 | 750 | 44,498 | (5) | ||||||||||||||||
| 11/16/16 | 750 | 38,415 | (5) | |||||||||||||||||
| 11/16/16 | 750 | 32,767 | (5) | |||||||||||||||||
| 11/16/16 | 750 | 49,958 | (6) | |||||||||||||||||
| 11/16/16 | 750 | 49,958 | (6) | |||||||||||||||||
| 11/16/16 | 750 | 24,978 | (6) | |||||||||||||||||
| 11/16/16 | 4,500 | 299,745 | (7) | |||||||||||||||||
| 11/16/16 | 79,875 | 159,750 | 319,500 | |||||||||||||||||
The following table sets forth information concerning the fiscal 20172021 year-end value of unearned restricted sharesshares/share units for each of the named executive officers.
Outstanding Equity Awards at Fiscal Year-End Table
| Stock Awards | ||||||||||||||||||||
| No. of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (4) | |||||||||||||||||
| J.C. Bartolacci | — | $ | — | 23,083 | (5) | $ | 800,749 | |||||||||||||
| 27,240 | (1) | 944,956 | 40,860 | (6) | 1,417,433 | |||||||||||||||
| 28,245 | (2) | 979,819 | 52,455 | (7) | 1,819,664 | |||||||||||||||
| 67,750 | (3) | 2,350,248 | 67,750 | (8) | 2,350,248 | |||||||||||||||
| B.J. Dunn | — | — | 1,600 | (5) | 55,504 | |||||||||||||||
| 4,200 | (1) | 145,698 | 6,300 | (6) | 218,547 | |||||||||||||||
| 4,550 | (2) | 157,840 | 8,450 | (7) | 293,131 | |||||||||||||||
| 10,750 | (3) | 372,918 | 10,750 | (8) | 372,918 | |||||||||||||||
| S.D. Gackenbach | — | — | 3,550 | (5) | 123,150 | |||||||||||||||
| 4,200 | (1) | 145,698 | 6,300 | (6) | 218,547 | |||||||||||||||
| 4,550 | (2) | 157,840 | 8,450 | (7) | 293,131 | |||||||||||||||
| 10,750 | (3) | 372,918 | 10,750 | (8) | 372,918 | |||||||||||||||
| G.R. Kohl | — | — | 1,105 | (5) | 38,332 | |||||||||||||||
| 4,200 | (1) | 145,698 | 6,300 | (6) | 218,547 | |||||||||||||||
| 5,600 | (2) | 194,264 | 10,400 | (7) | 360,776 | |||||||||||||||
| 14,850 | (3) | 515,147 | 14,850 | (8) | 515,147 | |||||||||||||||
| S.F. Nicola | — | — | 6,200 | (5) | 215,078 | |||||||||||||||
| 7,440 | (1) | 258,094 | 11,160 | (6) | 387,140 | |||||||||||||||
| 8,610 | (2) | 298,681 | 15,990 | (7) | 554,693 | |||||||||||||||
| 18,950 | (3) | 657,376 | 18,950 | (8) | 657,376 | |||||||||||||||
(1)Represents restricted share units that were fully vested on November 14, 2021 and converted to an equal number of shares of the Company's common stock.
(2)Represents restricted share units that will be earned and fully vested on November 12, 2022. Upon vesting, these restricted share units will be converted to an equal number of shares of the Company's common stock.
(3)Represents restricted share units that will be earned and fully vested on November 16, 2023. Upon vesting, these restricted share units will be converted to an equal number of shares of the Company's common stock.
(4)Represents the value of all unvested restricted shares/share units as of September 30, 2021. The value is computed by multiplying all unvested restricted shares/share units by $34.69, the closing price of the Company’s common stock on September 30, 2021. The value calculated for restricted share units is based on vesting at target for performance related shares (see footnotes 6 and 7 below).
(5)Represents restricted shares that will be earned and vested as follows: one-half upon the stock price of the Company’s common stock reaching 115% of the grant date fair value of the Company’s common stock for ten consecutive trading days, one-half upon the price of the Company’s common stock reaching 125% of the grant date fair value of the Company’s common stock for ten consecutive trading days. One-half of these shares were cancelled on November 18, 2021.
(6)Represents restricted share units that will be earned and vested as follows: one-half upon achieving certain metrics based on Return on Invested Capital ("ROIC") and one-half upon achieving certain metrics based on adjusted earnings per share. Upon vesting, these performance based units will be converted to the Company's common stock using a factor ranging from 50% to 200% based upon the level of achievement of the performance thresholds related to the above targets. On November 18, 2021, the ROIC portion vested and converted into shares of the Company's common stock at a rate of approximately 114.72%; the adjusted earnings per share portion cancelled.
(7)Represents restricted share units that will be earned and vested as follows: one-half upon achieving certain metrics based on ROIC and one-half upon achieving certain metrics based on adjusted earnings per share. Upon vesting, these performance based units will be converted to the Company's common stock using a factor ranging from 50% to 200% based upon the level of achievement of the performance thresholds related to the above targets.
(8)Represents restricted share units that will be earned and vested as follows: one-half upon achieving certain metrics based on stock price appreciation and one-half upon achieving certain metrics based on ROIC. Upon vesting, these performance based units will be converted to the Company's common stock using a factor ranging from 50% to 200% based upon the level of achievement of the performance thresholds related to the above targets.
54
| Stock Awards | ||||||||||||
| No. of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (4) | |||||||||
| J.C. Bartolacci | 32,500 | (1) | $ | 2,023,125 | — | (5) | $ | — | ||||
| 35,500 | (2) | 2,209,875 | 11,834 | (6) | 736,667 | |||||||
| 35,500 | (3) | 2,209,875 | 35,500 | (7) | 2,209,875 | |||||||
| G.S. Babe | 3,000 | (8) | 186,750 | — | (9) | — | ||||||
| 3,660 | (2) | 227,835 | 1,220 | (6) | 75,945 | |||||||
| 4,350 | (3) | 270,788 | 4,350 | (7) | 270,788 | |||||||
| S.D. Gackenbach | 5,000 | (1) | 311,250 | — | (5) | — | ||||||
| 6,250 | (2) | 389,063 | 2,083 | (6) | 129,667 | |||||||
| 5,550 | (3) | 345,488 | 5,550 | (7) | 345,488 | |||||||
| S.F. Nicola | 11,280 | (1) | 702,180 | — | (5) | — | ||||||
| 8,660 | (2) | 539,085 | 2,887 | (6) | 179,716 | |||||||
| 9,300 | (3) | 578,925 | 9,300 | (7) | 578,925 | |||||||
| B.D. Walters | 6,050 | (1) | 376,613 | — | (5) | — | ||||||
| 4,560 | (2) | 283,860 | 1,520 | (6) | 94,620 | |||||||
| 4,500 | (3) | 280,125 | 4,500 | (7) | 280,125 | |||||||
The following table provides information on the vesting of restricted shares for each of the named executive officers during fiscal 2017.2021.
Stock Vested
| Stock Awards | ||||||||
| Name | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||||||
| J.C. Bartolacci | 33,750 | $ | 878,344 | |||||
| B.J. Dunn | 3,900 | 101,498 | ||||||
| S.D. Gackenbach | 5,100 | 132,728 | ||||||
| G.R. Kohl | 1,800 | 46,845 | ||||||
| S.F. Nicola | 9,300 | 242,033 | ||||||
| Stock Awards | ||||
| Name | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||
| J.C. Bartolacci | 65,833 | $ | 3,107,617 | |
| G.S. Babe | 2,940 | 162,815 | ||
| S.D. Gackenbach | 11,651 | 548,954 | ||
| S.F. Nicola | 19,378 | 896,254 | ||
| B.D. Walters | 7,899 | 378,144 | ||
Retirement Benefits
The Company's domestic retirementDB Plan, a noncontributory defined benefit plan, is noncontributorywas terminated on October 1, 2021. Benefit accruals for the DB Plan were initially frozen as of September 30, 2021, and providesplan participants subsequently received either lump sum payments or annuity contracts (based on their elections), representing full settlement and distribution of their accrued DB Plan benefits. NEO participants in the DB Plan were impacted by these actions in the same manner as all other U.S. eligible employees. The DB Plan previously provided benefits based upon length of service and final average earnings. Generally, employees age 21 with one year of continuous service are eligible to participate in the retirement plan. The benefit formula iswas 3/4 of 1% of the first $550 of final average monthly earnings plus 1‑1/4% of the excess times years of credited service (maximum 35 years). The plan is a defined benefit plan and coveredCovered compensation iswas limited generally to base salary or wages. Benefits arewere not subject to any deduction or offset for Social Security.
55
The table below sets forth the number of years of credited service and the present value at September 30, 20172021 of the accumulated benefits under the each of the retirement plans for each of the participating named executive officers.
Pension Benefits Table
| Name | Plan Name | Number of Years Credited Service (#) (1) | Present Value of Accumulated Benefit ($) (2) | Payments During Last Fiscal Year ($) | ||||||||||
| J.C. Bartolacci | DB Plan | 23 | $ | 2,719,723 | $ | — | ||||||||
| SERP | 24 | 9,715,137 | — | |||||||||||
| B.J. Dunn | DB Plan | 21 | 2,622,513 | — | ||||||||||
| SERP | 22 | 970,188 | — | |||||||||||
| S.D. Gackenbach | DB Plan | 9 | 886,137 | — | ||||||||||
| ORRP | 10 | 108,599 | — | |||||||||||
| S.F. Nicola | DB Plan | 27 | 2,679,897 | — | ||||||||||
| SERP | 28 | 4,361,101 | — | |||||||||||
(1)As of September 30, 2021. Years of credited service for the DB Plan begin on the first of the month following the completion of one year of service. Years of credited service for the Company’s SERP and ORRP begin on the initial date of service.
| Name | Plan Name | Number of Years Credited Service (#) (1) | Present Value of Accumulated Benefit ($) (2) | Payments During Last Fiscal Year ($) | ||||
| J.C. Bartolacci | Matthews International Corporation Employees Retirement Plan | 19 | $ | 648,577 | $ | — | ||
| Matthews International Corporation SERP | 20 | 5,499,603 | — | |||||
| S.D. Gackenbach | Matthews International Corporation Employees Retirement Plan | 5 | 169,213 | — | ||||
| Matthews International Corporation ORRP | 6 | 217,589 | — | |||||
| S.F. Nicola | Matthews International Corporation Employees Retirement Plan | 23 | 792,725 | — | ||||
| Matthews International Corporation SERP | 24 | 2,818,840 | — | |||||
| B.D. Walters | Matthews International Corporation Employees Retirement Plan | 11 | 282,111 | — | ||||
| Matthews International Corporation ORRP | 12 | 230,300 | — | |||||
The Company provides a 401(k) Plan covering substantially all domestic employees of the Company. Participants may make pre-tax contributions to their account of 1% up to 75% of their annual compensation. For employees and NEOs covered under the Matthews International Corporation Employees RetirementDB Plan, which includes the named executive officers,prior to its termination, the Company makesmade matching contributions to each participant at a rate of 50% of participants’ deferrals up to 1% of their annual compensation. Subsequent to the termination of the DB Plan, described above, the Company will make matching contributions to each participant at a rate of 100% for the first 3% deferred and 50% for the next 2% deferred up to 4% of their annual compensation. Participants are fully vested immediately in the value of their contributions and fully vested in the value of Company matching contributions after three years of service, provided they are a participant of the plan.
CEO Pay Ratio
Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires most companies with publicly traded stock in the United States to identify the median total compensation of their worldwide employee population (other than the chief executive officer) and to compare that amount with the total compensation of their chief executive officer. Total compensation amounts are required to be calculated using the SEC’s compensation disclosure rules applicable to reporting compensation in the Summary Compensation Table of the proxy statement. Median employee compensation used to calculate the pay ratio is required to be the total compensation paid to an actual employee of the company.
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To identify our median employee, we reviewed the annual base salary of all our employees other than the CEO as of September 30, 2021. As permitted by SEC rules, we excluded from our review employees based in Brazil, China, Costa Rica, Hong Kong, Hungary, Ireland, Mexico and Thailand because those individuals, in the aggregate, make up less than 5% of our total employee base, representing approximately 508 employees. Contingent workers who provide services to Matthews International but whose compensation is determined by an unaffiliated third party were also excluded from our determination of the median employee. We used an annual base salary as our consistently applied compensation measure as it represents the primary compensation component paid to all of our employees. As a result, annual base salary provides an accurate depiction of total earnings for the purpose of identifying our median employee. We then calculated the median employee’s total annual compensation in accordance with the requirements of the Summary Compensation Table. We did not use any material estimates, assumptions, adjustments or statistical sampling to determine the worldwide median employee.
Our median employee’s 2021 compensation was $68,165. Our Chief Executive Officer’s total 2021 compensation was $6,813,304 as reported in the Summary Compensation Table on page 52. Accordingly, our 2021 CEO to Median Employee Pay Ratio was 100:1.
Potential Payments upon Termination or Change in Control
The following discussion describes and quantifies the payments that would be made to each of the NEOs under a variety of circumstances, assuming that each had taken place on September 30, 2017:2021: (1) the executive resigns voluntarily without the consent of the Company; (2) the executive resigns voluntarily with the consent of the Company; (3) the executive is involuntarily terminated without cause; (4) the executive is involuntarily terminated with cause; (5) the executive dies or becomes permanently disabled while employed; (6) the executive retires; or (7) a change in control of the Company takes place.
The Company’s executive management, including the NEOs, are subject to change-in-control agreements. These agreements provide certain benefits upon a change-in-control of the Company provided that, upon a change-in-control, the executive’s employment is terminated involuntarily or for good reason (“double-trigger”). Upon such double-trigger, the executive (including the CEO) is generally entitled to two times his or her base salary and target bonus, and accelerated vesting of awards under the long-term incentive plan.
Restricted Stock. Under the terms of the existing restricted stock grants,and restricted share unit awards, in the event of voluntary termination of employment without the Company’s consent or any involuntary terminations, any unvested restricted sharesshares/share units are forfeited at the time of termination. In the event of death or termination due to permanent disability, retirement or voluntary termination with the Company’s consent, unvested performance-based restricted shares continue to performance vest for a period of two years following termination.termination and unvested performance-based restricted share units continue to performance vest over the term of the award. In the event of death or termination due to permanent disability, retirement or voluntary termination with the Company’s consent, unvested time-based restricted sharesshares/share units become immediately vested. In the event of a change in control of the Company, as definedall unvested time-based restricted shares/share units immediately vest in full. In addition, in the Company’s 2007, 2012 and 2017 Equity Incentive Plans, all unvested restricted shares immediately vest.
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SERP/ORRP. The SERP and the defined-benefit portion of ORRP were frozen in fiscal 2021 and therefore, upon a change in control the Company participants accrue five additional yearsreceive the payout of credited service under the SERP.frozen accumulated benefits.
The following table provides information on the potential incremental value of executive benefits upon termination of employment prior to and after a change ofin control, assuming termination would have occurred as of September 30, 2017.2021.
| Named Executive | Executive Benefit and Payment upon Separation | Voluntary Termination Without Consent | Voluntary Termination With Consent(1) (2) | Involuntary Termination Without Cause | Involuntary Termination With Cause | Death or Disability (1) (2) | Retirement (1) (2) | Change in Control (3) (4) | ||||||||||||||||||
| J.C. Bartolacci | Performance-based Restricted Shares/Share Units | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Time-based Restricted Shares/Share Units | — | 4,275,022 | — | — | 4,275,022 | 4,275,022 | — | |||||||||||||||||||
| SERP | — | — | — | — | — | — | 9,715,137 | |||||||||||||||||||
| Total | — | 4,275,022 | — | — | 4,275,022 | 4,275,022 | 9,715,137 | |||||||||||||||||||
| B.J. Dunn | Performance-based Restricted Shares/Share Units | — | — | — | — | — | — | — | ||||||||||||||||||
| Time-based Restricted Shares/Share Units | — | 676,455 | — | — | 676,455 | 676,455 | — | |||||||||||||||||||
| SERP | — | — | — | — | — | — | 970,188 | |||||||||||||||||||
| Total | — | 676,455 | — | — | 676,455 | 676,455 | 970,188 | |||||||||||||||||||
| S.D. Gackenbach | Performance-based Restricted Shares/Share Units | — | — | — | — | — | — | — | ||||||||||||||||||
| Time-based Restricted Shares/Share Units | — | 676,455 | — | — | 676,455 | 676,455 | — | |||||||||||||||||||
| ORRP | — | — | — | — | — | — | 108,599 | |||||||||||||||||||
| Total | — | 676,455 | — | — | 676,455 | 676,455 | 108,599 | |||||||||||||||||||
| G.R. Kohl | Performance-based Restricted Shares/Share Units | — | — | — | — | — | — | — | ||||||||||||||||||
| Time-based Restricted Shares/Share Units | — | 855,109 | — | — | 855,109 | 855,109 | — | |||||||||||||||||||
| Total | — | 855,109 | — | — | 855,109 | 855,109 | — | |||||||||||||||||||
| S.F. Nicola | Performance-based Restricted Shares/Share Units | — | — | — | — | — | — | — | ||||||||||||||||||
| Time-based Restricted Shares/Share Units | — | 1,214,150 | — | — | 1,214,150 | 1,214,150 | — | |||||||||||||||||||
| SERP | — | — | — | — | — | — | 4,361,101 | |||||||||||||||||||
| Total | — | 1,214,150 | — | — | 1,214,150 | 1,214,150 | 4,361,101 | |||||||||||||||||||
(1)The performance-based restricted share value represents the value of unvested restricted shares as of September 30, 2021 that had not met performance vesting criteria as of that date, but for which the performance vesting threshold was less than $34.69, the closing price of the Company’s common stock on the last trading day of fiscal 2021 (the “assumed performance vested shares”). The value of the restricted shares is computed by multiplying the number of assumed performance vested shares by $34.69. As of September 30, 2021 there were no assumed performance vested shares.
(2)The time-based restricted share unit value represents the value of unvested restricted share units as of September 30, 2021 that would vest upon termination as of September 30, 2021 (the “assumed time vested shares”). The value of the restricted share units is computed by multiplying the number of assumed time vested share units by $34.69, the closing price of the Company’s common stock on the last trading day of fiscal 2021.
(3)Time and performance restricted share units may vest under certain change-in-control circumstances, subject to double-trigger change-in-control provisions which require a change in control and involuntary or good reason employment termination. See "Potential Payments upon Termination or Change in Control - Restricted Stock" above.
(4)The value of the SERP represents the accumulated benefit obligation when the plan was frozen for eligible participants.
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| Named Executive | Executive Benefit and Payment upon Separation | Voluntary Termination Without Consent | Voluntary Termination With Consent (1) (2) | Involuntary Termination Without Cause | Involuntary Termination With Cause | Death or Disability (1) (2) | Retirement (1) (2) | Change in Control (3) (4) | |||||||
| J.C. Bartolacci | Performance-based Restricted Shares | — | — | — | — | — | — | 2,946,479 | |||||||
Time-based Restricted Shares | — | 6,442,875 | — | — | 6,442,875 | 6,442,875 | 6,442,875 | ||||||||
| SERP | — | — | — | — | — | — | 10,870,364 | ||||||||
| Total | — | 6,442,875 | — | — | 6,442,875 | 6,442,875 | 20,259,718 | ||||||||
| G.S. Babe | Performance-based Restricted Shares | — | — | — | — | — | — | 346,733 | |||||||
Time-based Restricted Shares | — | 685,373 | — | — | 685,373 | 685,373 | 685,373 | ||||||||
| Total | — | 685,373 | — | — | 685,373 | 685,373 | 1,032,106 | ||||||||
| S.D .Gackenbach | Performance-based Restricted Shares | — | — | — | — | — | — | 475,154 | |||||||
Time-based Restricted Shares | — | 1,045,800 | — | — | 1,045,800 | 1,045,800 | 1,045,800 | ||||||||
| Total | — | 1,045,800 | — | — | 1,045,800 | 1,045,800 | 1,520,954 | ||||||||
| S.F. Nicola | Performance-based Restricted Shares | — | — | — | — | — | — | 758,641 | |||||||
| Time-based Restricted Shares | — | 1,820,190 | — | — | 1,820,190 | 1,820,190 | 1,820,190 | ||||||||
| SERP | — | — | — | — | — | — | 5,866,217 | ||||||||
| Total | — | 1,820,190 | — | — | 1,820,190 | 1,820,190 | 8,445,048 | ||||||||
| B.D. Walters | Performance-based Restricted Shares | — | — | — | — | — | — | 374,745 | |||||||
Time-based Restricted Shares | — | 940,598 | — | — | 940,598 | 940,598 | 940,598 | ||||||||
| Total | — | 940,598 | — | — | 940,598 | 940,598 | 1,315,343 | ||||||||
AUDIT COMMITTEE MATTERS
Report of the Audit Committee
The Audit Committee of Matthews International Corporation (the "Company") is composed of threefour directors who the Board has determined to be independent under the U.S. Securities and Exchange Commission (“SEC”) regulations related to audit committee independence, the NASDAQNasdaq listing requirements and the Company’s Corporate Governance Guidelines. The Audit Committee operates under a written charter adopted by the Company’s Board of Directors.
Management of the Company has the primary responsibility for preparing the financial statements, establishing the system of internal controls, and assessing the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for reviewing the Company’s financial reporting process on behalf of the Board of Directors.
In this context, the Audit Committee has met and held discussions with management, internal audit and the independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has discussed the consolidated financial statements with management, internal audit and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Auditing Standard No. 1301, "Communications with Audit Committees", and such other matters as are required to be discussed under the standards applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
The Company’s independent registered public accounting firm also provided to the Audit Committee the written disclosures required by Public Company Accounting Oversight Board Rule 3526, “Communicationapplicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with Audit Committees Concerning Independence”,the audit committee concerning independence, and the Audit Committee discussed with the independent registered public accounting firm that firm’s independence.
The Committee discussed with the Company's independent registered public accounting firm and internal auditors the overall scope and plan for their respective audits. The Audit Committee meets with the independent registered public accounting firm and internal auditors to discuss the results of their examinations, their evaluations of the Company's internal controls, and the overall quality of the Company's financial reporting.
Based on the Audit Committee’s discussions referred to above and the Audit Committee’s review of the report of the independent registered public accounting firm on the consolidated financial statements of the Company for the year ended September 30, 2017,2021, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 20172021 for filing with the SEC.
| Audit Committee: | |||||
| A. Garcia-Tunon, Chairman | |||||
| L.D. Etzkorn | |||||
| M.K. O’Brien | |||||
| J.R. Whitaker | |||||
December 15, 2021
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Relationship with Independent Registered Public Accounting Firm
Ernst & Young LLP (“EY”) has been the independent registered public accounting firm performing the audits of the consolidated financial statementstatements of the Company since December 28, 2015. In addition to performing the audit of the Company's consolidated financial statements, EY provided fees for services related to the Company’s compliance with Section 404 of the Sarbanes-Oxley Act and various other services during fiscal 20172021 and 2016,2020, respectively. The aggregate fees (including out-of-pocket expenses) billed for fiscal 20172021 and 20162020 for each of the following categories of services are set forth below.
| 2021 | 2020 | |||||||||||||
| 2017 | 2016 | |||||||||||||
| Audit fees (includes audits and reviews of the Company’s fiscal 2017 and 2016 financial statements) | $ | 1,396,324 | $ | 1,363,735 | ||||||||||
| Audit-related fees (primarily due diligence and regulatory compliance work) | 358,477 | 167,886 | ||||||||||||
| Audit fees (includes audits and reviews of the Company’s fiscal 2021 and 2020 financial statements) | Audit fees (includes audits and reviews of the Company’s fiscal 2021 and 2020 financial statements) | $ | 1,490,000 | $ | 1,520,000 | |||||||||
| Audit-related fees (primarily regulatory compliance work) | Audit-related fees (primarily regulatory compliance work) | 216,660 | 354,415 | |||||||||||
| Tax fees (primarily tax compliance and advisory work) | 570,550 | 176,285 | Tax fees (primarily tax compliance and advisory work) | 414,303 | 207,746 | |||||||||
| All other fees | - | - | All other fees | - | ||||||||||
Fiscal 20172021 and 20162020 tax fees include tax compliance and planning fees. All services provided by EY for significant audit, audit-related, tax and other services are approved in advance by the Audit Committee. Fees for the annual audit, including quarterly reviews, are approved by the Audit Committee upon appointment of the Company’s independent registered public accounting firm. Other services are approved in advance on a specific project basis during the year. Examples of such projects include acquisition due diligence and tax assistance engagements. Where approval in advance by the Audit Committee is not practical due to time constraints, management provides a written description of the engagement to the Chairman of the Audit Committee and obtains the Chairman’s approval prior to proceeding with the engagement. Ratification of such services by the full Audit Committee is obtained at the next scheduled Audit Committee meeting. The Company’s independent registered public accounting firm provides a summary of audit and other services and related fees to the Audit Committee at each of its regularly scheduled Committee meetings. The summary includes total estimated fees for each individual project. The Audit Committee also considered whether the provision of non-audit services by EY is compatible with maintaining the independence of EY.
EY’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended September 30, 20172021 and 20162020 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principle.
During the fiscal years ended September 30, 20172021 and 2016,2020, the Company had not consulted with EY regarding either (i) the application of accounting principles to a specific transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements, or (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
During the two most recent fiscal years ended September 30, 20172021 and 2016,2020, there were no disagreements between Matthews and EY on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of EY, would have caused EY to make reference to the subject matter of the disagreement in connection with its reports on the consolidated financial statements for such years.
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CERTAIN TRANSACTIONS WITH RELATED PERSONS
Transactions with related persons are subject to review and approval by the Nominating and Corporate Governance Committee of the Board of Directors. Written policies and procedures relative to the identification of related party transactions are contained in the Company’s Code of Conduct and the Committee reviews and evaluates each such transaction based on the specific facts and circumstances involved.
The Company made additional investments of $130,265 during fiscal 2021 in Liquid X Printed Metals Inc. (“LiquidX”), a 20% interestprivate company, in Graphics IV. which Matthews participates as a strategic investor. Greg Babe, the Company’s Chief Technology Officer and a member of the Board of Directors, serves as President and CEO of LiquidX. Mr. Babe received no direct benefit in connection with these transactions.
SHAREHOLDERS SHARING THE SAME ADDRESS
The Graphics IV lease was in placeSEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple shareholders who reside at the same address may receive a single copy of our annual report and proxy materials, unless the affected shareholder has provided contrary instructions. This procedure reduces printing costs and postage fees.
A number of brokers with account holders who beneficially own our common stock will be “householding” our annual report and proxy materials. A single set of annual report and other proxy materials will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Shareholders may revoke their consent at any time by contacting the Company at Matthews International Corporation, Two NorthShore Center, Pittsburgh, Pennsylvania 15212-5851, Attention: Investor Relations, telephone (412) 442-8200.
Upon written or oral request, the Company will promptly deliver a separate copy of the Schawk acquisitionannual report and other proxy materials to any beneficial owner at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the annual report and other proxy materials, you may write or call the Company’s Investor Relations Department at Matthews International Corporation, Two NorthShore Center, Pittsburgh, Pennsylvania 15212-5851, Attention: Investor Relations, telephone (412) 442-8200. The annual report and proxy materials are also available on July 29, 2014, has an initial term ending March 31, 2019, after which time it automatically renews for successive periodsthe Company's website at www.matw.com/investors/sec-filings.
Shareholders who share the same address and currently receive multiple copies of our annual report and other proxy materials, who wish to receive only one year (unless terminated by notice), and has an annual base rent amount of $520,134.50, subject to annual adjustments to reflect increasesset in the Consumer Price Index (as defined in the Graphics IV lease). The base rent was established based upon a market-rent appraisal performed by a third-party appraisal firm. The total amount paid in fiscal 2017 under the Graphics IV lease was approximately $522,030.
future, can contact their bank, broker or other holder of record to request information about householding.
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SHAREHOLDER PROPOSALS FOR 20192023 ANNUAL MEETING
Shareholders may make proposals for inclusion in the proxy statement and proxy form for the 20192023 Annual Meeting of the Shareholders. To be considered for inclusion, any such proposal should be written and mailed to the Secretary of the Company at the corporate office for receipt by September 18, 2018 (12020, 2022(120 days prior to the anniversary date of the Company's fiscal 20172022 Proxy Statement).
Section 2.09 of the By-lawsBylaws of the Company requires that any shareholder intending to present a proposal for action at an Annual Meeting must give written notice of the proposal, containing the information specified in such Section 2.09, so that it is received by the Company notneither later nor earlier than the notice deadline determined under such Section 2.09. This notice deadlineperiod will generally be 75 to 120 days prior to the anniversary of the Company's Annual Meeting for the previous year, or October 20, 2022 to December 2, 20184, 2022 for the Company's Annual Meeting in 2019.2023. Any shareholder proposal received by the Secretary of the Company before October 20, 2022 and after December 2, 20184, 2022 will be considered untimely under Rule 14a-8(c)14a-8(e)(2) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934.
OTHER MATTERS
The cost of soliciting proxies in the accompanying form will be paid by the Company. Shareholder votes at the Annual Meeting will be tabulated by the Company's transfer agent, Computershare Trust Company, N.A. A copy of the Company's Annual Report for 20172021 has previously been mailed to each shareholder of record, or will be mailed with this Proxy Statement.
By Order of The Board of Directors
Steven F. Nicola
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Exhibit A
MATTHEWS INTERNATIONAL CORPORATION
AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN
SECTION 1
Purpose; Definitions
1.1 Purpose. The purposes of the Amended and Restated 2017 Equity Incentive Plan (the "Plan"“Plan”) are to encourage eligible employees of Matthews International Corporation (the "Corporation"“Corporation”) and its Subsidiaries to increase their efforts to make the Corporation and each Subsidiary more successful, to provide an additional inducement for such employees to remain with the Corporation or a Subsidiary, to reward such employees by providing an opportunity to acquire shares of Common Stock on favorable terms and to provide a means through which the Corporation may attract able persons to enter the employ of the Corporation or one of its Subsidiaries.
1.2 Certain Definitions. I nIn addition to terms defined herein in the first place where they are used, the following terms are defined as set forth below:
(a) “Award” means a stock option, a stock appreciation right, restricted stock, restricted stock units, performance units or other stock-based award granted under the Plan.
(b) “Base Price” shall have the meaning set forth in Section 5.3.
(c) "Common Stock"“Common Stock” shall mean the Class A Common Stock, par value $1.00 per share, of the Corporation.
(d) “Fair Market Value” with respect to a share of the Common Stock shall mean the mean between the following prices, as applicable, for the date as of which Fair Market Value is to be determined as quoted in such reliable publication as the Committee, in its sole discretion, may determine to rely upon: (i) if the Common Stock is listed on the New York Stock Exchange, the highest and lowest sales prices per share of the Common Stock as quoted in the NYSE-Composite Transactions listing for such date, (ii) if the Common Stock is not listed on such exchange, the highest and lowest sales prices per share of Common Stock for such date on (or on any composite index including) the NASDAQ Exchange or the principal United States of America securities exchange registered under the Securities Exchange Act of 1934, as amended (the “1934 Act”) on which the Common Stock is listed. If there are no such sale price quotations for the date as of which Fair Market Value is to be determined but there are such sale price quotations within a reasonable period both before and after such date, then Fair Market Value shall be determined by taking a weighted average of the means between the highest and lowest sales prices per share of the Common Stock as so quoted on the nearest date before and the nearest date after the date as of which Fair Market Value is to be determined. The average should be weighted inversely by the respective numbers of trading days between the selling dates and the date as of which Fair Market Value is to be determined. If there are no such sale price quotations on or within a reasonable period both before and after the date as of which Fair Market Value is to be determined, then Fair Market Value of the Common Stock shall be the weighted average of the means between such bona fide bid and asked prices on the nearest trading date before and the nearest trading date after the date as of which Fair Market Value is to be determined, if both such dates are within a reasonable period. The average is to be determined in the manner described above
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in this definition. If the Fair Market Value of the Common Stock cannot be determined on the basis previously set forth in this definition on the date as of which Fair Market Value is to be determined, the Committee shall in good faith and in conformance with the requirements
of Section 409A of the Code, to the extent applicable to an Award, determine the Fair Market Value of the Common Stock on such date. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse.
(e) “Free-Standing SARs” shall have the meaning set forth in Section 5.2.
(f) “Participant” means an eligible employee selected by the Committee who has received an Award under the Plan and any transferee or transferees of such employee to the extent the transfer is permitted under the Plan.
(g) “Performance Goals” means the performance goals, if any, established by the Committee in connection with the grant of restricted stock, restricted stock units, performance units or other Awards. In the case of Qualified Performance-Based Awards, the “Performance Goals” means such performance goals based on one or more of the following:
| (i) | The following criteria for the Corporation on a consolidated basis, one or more of its direct or indirect Subsidiaries, and/or one or more divisions of the foregoing, either in absolute terms or relative to the performance of (x) the Corporation, its Subsidiaries or divisions (for a different period), (y) one or more other companies or (z) an index covering multiple companies: | |||||||
| net income | ||||||||
| 2 | net income growth | |||||||
| 3 | economic value added (earnings less a capital charge) | |||||||
| 4 | EBITDA (earnings before interest, taxes, depreciation and amortization) or adjusted EBITDA | |||||||
| 5 | sales | |||||||
| 6 | revenue growth | |||||||
| 7 | costs | |||||||
| 8 | expenses | |||||||
| 9 | gross margin | |||||||
| 10 | operating margin | |||||||
| 11 | pre-tax profit or income | |||||||
| 12 | market share | |||||||
| 13 | return on net assets | |||||||
| 14 | return on assets | |||||||
| 15 | return on capital | |||||||
| 16 | return on invested capital | |||||||
| 17 | cash flow | |||||||
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| 18 | free cash flow | |||||||
| 19 | operating cash flow | |||||||
| 20 | operating income | |||||||
| 21 | EBIT (earnings before interest and taxes) | |||||||
| 22 | debt to earnings (including EBITDA and EBIT) | |||||||
| 23 | working capital | |||||||
| 24 | working capital as a percent of sales | |||||||
| 25 | performance versus budgeted amounts | |||||||
| 26 | innovation as measured by a percentage of sales from new products | |||||||
| 27 | environmental emissions improvement | |||||||
| 28 | workforce diversity | |||||||
| 29 | safety performance | |||||||
| (ii) | The following criteria for the Corporation, either in absolute terms or relative to the performance of the Corporation (for a different period), one or more other companies or an index covering multiple companies: | |||||||
| stock price | ||||||||
| 2 | return on shareholders’ equity | |||||||
| 3 | earnings per share (basic, diluted, GAAP or non-GAAP) | |||||||
| 4 | cash flow per share | |||||||
| 5 | total shareholder return (stock price appreciation plus dividends) | |||||||
(h) “Qualified Peformance-Based Award” means an Award intended to qvided in Section 12.
(h) “Qualified Performance-Based Award” means an Award intended to qualify for the Section 162(m) Exemption, as provided in Section 12.
(i) "Subsidiary"“Subsidiary” means any corporation, partnership, joint venture, limited liability company or other entity in an unbroken chain of entities beginning with the Corporation if each of the entities other than the last entity in the unbroken chain owns an equity interest possessing at least fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other entities in the chain.
(j) “Tandem SARs” shall have the meaning set forth in Section 5.2.
SECTION 2
Administration
2.1. Committee. The Plan shall be administered by a Committee (the "Committee"“Committee”) appointed by the Board of Directors of the Corporation (the "Board"“Board”) and consisting of not less than two members of the Board, who, at the time of their appointment to the Committee and at all times during their service as members of the Committee, are (a) "Non-Employee Directors"“Non-Employee Directors” as then defined under Rule 16b-3 under the 1934 Act, or any successor rule, (b) "outside directors"“outside directors” under Section 162(m)(4)(C) of the Internal Revenue Code of 1986 as amended (the “Code”) or any successor provision, and (c) independent directors
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under the applicable rules of any applicable stock exchange, if the Common Stock is subject to such rules. The Committee shall have plenary authority to interpret the Plan and prescribe such rules, regulations and procedures in connection with the operations of the Plan as it shall deem to be necessary and advisable for the administration of the Plan consistent with the purposes of the Plan. Without limitation of the foregoing, the Committee shall have the authority, subject to the terms and conditions of the Plan:
(a)to select the employees to whom Awards may be made;
(b)to determine whether and to what extent incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, other Awards of or based upon Common Stock, or any combination thereof, are to be granted hereunder;
(c)to determine the number of shares of Common Stock to be covered by each Award made hereunder;
(d)to determine the terms and conditions of each Award made hereunder, based on such factors as the Committee shall determine;
(e)subject to Section 2.5, to modify, amend or adjust the terms and conditions of any Award;
(f)to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable;
(g)to interpret the terms and provisions of the Plan and any Award under the Plan (and any agreement under Section 2.5 relating thereto);
(i)to decide all other matters that must be determined in connection with an Award;
(j)to determine whether, to what extent and under what circumstances cash, shares of Common Stock and other property and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the employee;
(k)to establish any “blackout” period that the Committee in its sole discretion deems necessary or advisable; and
(l)to otherwise administer the Plan.
In determining any Award to be made to any eligible employee, the Committee shall consider the position and the responsibilities of the employee being considered, the nature and value to the Corporation or a Subsidiary of his or her services, his or her present and/or potential contribution to the success of the Corporation or a Subsidiary and such other factors as the Committee may deem relevant. The Committee may, except to the extent prohibited by applicable law or the listing standards of the stock exchange which is the principal market for the Common Stock, allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any officers of the Corporation or committee of officers of the Corporation selected by it, except with respect to Awards (including Qualified Performance-Based Awards) to any covered employees as defined in Section 162(m)(3) of the Code (“Covered Employees”) or persons subject to Section 16 of the 1934 Act.
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2.2. Committee Action. The Committee shall keep records of action taken at its meetings. A majority of the Committee shall constitute a quorum at any meeting and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all members of the Committee, shall be the acts of the Committee.
2.3 Committee Discretion. Any determination made by the Committee or by an appropriately delegated officer pursuant to delegated authority under the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such officer at the time of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Corporation and the employees eligible under the Plan.
2.4 Cancellation; Suspension; Clawback. Any or all outstanding Awards to a Participant may, at any time between the date of grant and the third anniversary of any exercise, payment or vesting of such Awards, in the Committee’s sole discretion and subject to such terms and conditions established by the Committee, be cancelled, suspended, or required to be repaid to the Corporation if the Participant (whether during or after termination of employment with the Corporation and its Subsidiaries) (i) engages in the operation or management of a business (whether as owner, partner, officer, director, employee or otherwise) which is in competition with the Corporation or any of its Subsidiaries, (ii) induces or attempts to induce any customer, supplier, licensee or other individual, corporation or other business organization having a business relationship with the Corporation or any of its Subsidiaries to cease doing business with the Corporation or any of its Subsidiaries or in any way interferes with the relationship between any such customer, supplier, licensee or other person and the Corporation or any of its Subsidiaries, (iii) solicits any employee of the Corporation or any of its Subsidiaries to leave the employment thereof or in any way interferes with the relationship of such employee with the Corporation or any of its Subsidiaries, or (iv) makes any statements or comments, orally or in writing, of a defamatory or disparaging nature regarding the Corporation or any of its Subsidiaries (including but not limited to regarding any of their respective businesses, officers, directors, personnel, products or policies), provided, however, that this sentence shall not apply following the occurrence of a Section 11 Event (as defined in Section 11) unless the agreement under Section 2.5 specifically so provides. Whether a Participant has engaged in any such activities shall also be determined, in its sole discretion, by the Committee, and any such determination by the Committee shall be final and binding.
2.5 Agreements. The terms and conditions of each Award shall be set forth in a written (or electronic) agreement, which shall be delivered to the Participant receiving such Award upon, or as promptly as is reasonably practicable following, the making of such Award. The effectiveness of an Award shall be subject to the agreement being signed by the Corporation and the Participant receiving the Award unless otherwise provided in the agreement. Unless otherwise provided in the agreement, each agreement or amendment thereto shall be executed on behalf of the Corporation by the Chief Executive Officer (if other than the President), the President or any Vice President and by the Participant. The agreement confirming a stock option shall specify whether the stock option is an incentive stock option or a nonstatutory stock option. The provisions of such agreements need not be identical. Without the consent of the Participant, upon notice to the Participant thereof, the Committee may amend any Award to the Participant and the corresponding agreement in any respect not materially adverse to the Participant. All other amendments to the agreement shall be in writing (including electronic amendments) and executed on behalf of the Corporation and by the Participant. Any reference in the Plan to the agreement under Section 2.5 shall include any amendment to such agreement.
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SECTION 3
Eligibility
Those employees of the Corporation or any Subsidiary (including, but not limited to, Covered Employees) who share responsibility for the management, growth or protection of the business of the Corporation or any Subsidiary shall be eligible to receive Awards as described herein, provided however, that incentive stock options may be granted only to employees of the Corporation and Subsidiaries which are its subsidiaries within the meaning of Section 424(f) of the Code.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.5, the maximum aggregate number of shares of the Common Stock for which Awards may be made under the Plan shall be 1,700,0003,450,000 shares. The maximum number of shares of Common Stock that may be granted pursuant to options intended to be incentive stock options shall be 1,000,000 shares.
4.2 Individual Limit. The maximum number of shares of Common Stock as to which Awards other than performance units under Section 8 or Awards under Section 9 may be made under the Plan to any one Participant in any one calendar year is 250,000 shares, subject to adjustment and substitution as set forth in Section 4.5. For the purposes of this limitation, any adjustment or substitution made pursuant to Section 4.5 in a calendar year with respect to the maximum number of shares set forth in the preceding sentence shall also be made with respect to any shares subject to Awards previously granted under the Plan to such Participant in the same calendar year.
4.3 Share Counting.
(a) For purposes of the limit set forth in the first sentence of Section 4.1 (but not for purposes of Section 4.2), (i) each share of Common Stock which is subject to an Award, other than performance units, shall be counted as one (1) share, and (ii) with respect to any performance unit Award, one (1) share shall be counted for each performance unit subject to the Award, assuming the Performance Goals are satisfied at target level (as described in the Award Agreement) (the “Target Level”), provided, however, that in case of performance units, shares of Common Stock shall be counted as one (1) share for each actual share issued only atupon the time, if any, of the actual issuance of shares pursuant to the performance unit Award.
(b) To the extent that any Award is forfeited, or any option and the Tandem SAR (if any) or any Free-Standing SAR terminates, expires or lapses without being exercised, or any Award is settled for cash, the shares of Common Stock subject to such Awards shall again be available for Awards under the Plan under Section 4.1. However, shares of Common Stock subject to such Awards shall continue to be counted for purposes of Section 4.2 or Section 9, as applicable.
(c) If the exercise price of any option and/or the tax withholding obligations relating to any Awards are satisfied by delivering shares (either actually or through attestation) or withholding shares relating to such Award, the gross number of shares subject to the Award shall nonetheless be deemed to
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have been granted for purposes of Sections 4.1 and 4.2 and any shares which are delivered will not be added to the aggregate number of shares under Section 4.1 for which Awards may be made under the Plan.
(d) If a Tandem SAR is granted, each share of Common Stock subject to both the Tandem SAR and related stock option shall be counted as only one share of Common Stock for purposes of Sections 4.1 and 4.2.
(e) Each share of Common Stock subject to a stock option (with or without a Tandem SAR) or a Free-Standing SAR shall be counted as one share of Common Stock for purposes of Sections 4.1 and 4.2.
(f) All shares of Common Stock covered by a stock appreciation right, to the extent it is exercised and shares of Common Stock are actually issued upon exercise of the right, shall be counted for purposes of Sections 4.1 and 4.2, regardless of the number of shares used to settle the stock appreciation right upon exercise.
(g) Each share of Common Stock repurchased on the open market with the proceeds of a stock option exercise shall be deemed to have been granted for purposes of Sections 4.1 and 4.2 and any shares of Common Stock so repurchased will not be added to the aggregate number of shares under Section 4.1 for which Awards may be made under the Plan.
4.4 Common Stock. To the extent that the Corporation has such shares of Common Stock available to it and can issue such shares without violating any law or regulation, the Corporation will reserve Common Stock for issuance with respect to an Award payable in Common Stock. The shares of Common Stock which may be issued under the Plan may be either authorized but unissued shares or shares previously issued and thereafter acquired by the Corporation or partly each, as shall be determined from time to time by the Board.
4.5 Adjustment and Substitution of Shares. In the event of a merger, consolidation, acquisition of shares, stock rights offering, liquidation, separation, spinoff, disaffiliation of a Subsidiary from the Corporation, extraordinary dividend of cash or other property, or similar event affecting the Corporation or any of its Subsidiaries (each, a “Corporate Transaction”), the Committee or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to prevent the dilution or enlargement of the rights of Participants to (A) the aggregate number and kind of shares of Common Stock reserved for issuance and delivery under the Plan, (B) the various maximum limitations set forth in Sections 4.1 and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the number and kind of shares of Common Stock subject to outstanding Awards; and (D) the exercise price of outstanding Awards. In the event of a stock dividend, stock split, reverse stock split, reorganization, share combination, or recapitalization or similar event affecting the capital structure of the Corporation (each, a “Share Change”), the Committee or
the Board shall make such substitutions or adjustments as it deems appropriate and equitable to prevent the dilution or enlargement of the rights of Participants to (A) the aggregate number and kind of shares of Common Stock reserved for issuance and delivery under the Plan, (B) the various maximum limitations set forth in Sections 4.1 and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the number and kind of shares of Common Stock subject to outstanding Awards; and (D) the exercise price of outstanding Awards. In the case of Corporate Transactions, such adjustments may include, without limitation, (1) the cancellation of outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Committee or the Board in its sole discretion (it being understood that in the case of a Corporate Transaction with respect to which shareholders of Common Stock receive consideration other than publicly-traded equity securities of the ultimate surviving entity, any such determination by the Committee that the value of an option or stock appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each share pursuant to such Corporate Transaction
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over the exercise price of such option or stock appreciation right shall conclusively be deemed valid); (2) the substitution of other property (including, without limitation, cash or other securities of the Corporation and securities of entities other than the Corporation) for the shares subject to outstanding Awards; and (3) in connection with any disaffiliation of a Subsidiary, arranging for the assumption of Awards, or replacement of Awards with new Awards based on other property or other securities (including, without limitation, other securities of the Corporation and securities of entities other than the Corporation), by the affected Subsidiary, or by the entity that controls such Subsidiary following such disaffiliation (as well as any corresponding adjustments to Awards that remain based upon Corporation securities). The Committee shall adjust the Performance Goals applicable to any Awards to reflect any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in the Corporation’s financial statements, notes to the financial statements, management’s discussion and analysis or other of the Corporation’s SEC filings, provided that in the case of Performance Goals applicable to any Qualified Performance-Based Awards, such adjustment does not violate Section 162(m) of the Code or cause such Awards not to qualify for the Section 162(m) Exemption, as defined in Section 12.1. No adjustment or substitution provided in this Section 4.5 shall require the Corporation or any other entity to issue or sell a fraction of a share or other security. Except as provided in this Section 4.5, a Participant shall not have any rights with respect to any Corporate Transaction or Share Change.
4.6 Section 409A; Section 162(m); Incentive Stock Options. Notwithstanding the foregoing: (i) any adjustments made pursuant to Section 4.5 to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (ii) any adjustments made pursuant to Section 4.5 to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Awards either (A) continue not to be subject to Section 409A of the Code or (B) comply with the requirements of Section 409A of the Code; and (iii) in any event, neither the Committee nor the Board shall have the authority to make any adjustments pursuant to Section 4.5 to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the grant date of the Award to be subject thereto. If any such adjustment or substitution provided for in Section 4.5 requires the approval of shareholders in order to enable the Corporation to grant incentive stock options or to comply with Section 162(m) of the Code, then no such adjustment or substitution shall be made without the required shareholder approval. Notwithstanding the foregoing, in the case of incentive stock options, if the effect of any such adjustment or substitution would be to cause the option to fail to continue to qualify as an incentive stock option or to cause a modification, extension or renewal of such option within the meaning of Section 424 of the Code, the Committee may determine that such adjustment or substitution not be made but rather shall use reasonable efforts to effect such other adjustment of each then outstanding incentive stock option as the Committee, in its sole discretion, shall deem equitable and which will not result in any disqualification, modification, extension or renewal (within the meaning of Section 424 of the Code) of such incentive stock option.
SECTION 5
Grant of Stock Options and Stock Appreciation Rights
5.1 Types of Options; Limit on Incentive Stock Options. The Committee shall have authority, in its sole discretion, to grant "incentive“incentive stock options"options” pursuant to Section 422 of the Code, to grant "nonstatutory“nonstatutory stock options"options” (i.e., stock options which do not qualify under Sections 422 or 423 of the Code) or to grant both types of stock options (but not in tandem). Notwithstanding any other provision contained in the Plan or in any agreement under Section 2.5, but subject to the possible exercise of the Committee'sCommittee’s discretion
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contemplated in the last sentence of this Section 5.1, the aggregate Fair Market Value on the date of grant of the shares with respect to which such incentive stock options are exercisable for the first time by a Participant during any calendar year under all plans of the corporation employing such Participant, any parent or subsidiary corporation of such corporation and any predecessor corporation of any such corporation shall not exceed $100,000. If the date on which one or more incentive stock options could first be exercised would be accelerated pursuant to any provision of the Plan or any agreement under Section 2.5 and the acceleration of such exercise date would result in a violation of the $100,000 restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise dates of such incentive stock options shall be accelerated only to the extent, if any, that does not result in a violation of such restriction and, in such event, the exercise dates of the incentive stock options with the lowest option prices shall be accelerated to the earliest such dates. The Committee may, in its sole discretion, authorize the acceleration of the exercise date of one or more incentive stock options even if such acceleration would violate the $100,000 restriction set forth in the second sentence of this Section 5.1 and even if one or more such incentive stock options are thereby converted in whole or in part to nonstatutory stock options.
5.2 Types and Nature of Stock Appreciation Rights. Stock appreciation rights may be tandem stock appreciation rights which are granted in conjunction with incentive stock options or nonstatutory stock options (“Tandem SARs”), or stock appreciation rights which are not granted in conjunction with options (“Free-Standing SARs”). Upon the exercise of a stock appreciation right, the Participant shall be entitled to receive an amount in cash, shares of Common Stock, or both, in value equal to the product of (i) the excess of the Fair Market Value of one share of Common Stock on the date of exercise of the stock appreciation right over, in the case of a Tandem SAR, the exercise price of the related option, or in the case of a Free-Standing SAR, the Base Price per share (the “Spread”), multiplied by (ii) the number of shares of Common Stock in respect of which the stock appreciation right has been exercised. Notwithstanding the foregoing, the Committee at the time it grants a stock appreciation right may provide that the Spread covered by such stock appreciation right may not exceed a lower specified amount. The applicable agreement under Section 2.5 governing the stock appreciation rights shall specify whether such payment is to be made in cash or Common Stock or both, or shall reserve to the Committee or the Participant the right to make that determination prior to or upon the exercise of the stock appreciation right. Tandem SARs may be granted at the grant date of the related stock options or, in the case of a related nonstatutory stock option, also at a later date. At the time a Tandem SAR is granted, the Committee may limit the exercise period for such Tandem SAR, before and after which period no Tandem SAR shall attach to the underlying stock option. In no event shall the exercise period for a Tandem SAR exceed the exercise period for the related stock option. A Tandem SAR shall be exercisable only at such time or times and to the extent that the related option is exercisable in accordance with the provisions of this Section 5. A Tandem SAR shall terminate or be forfeited upon the exercise or forfeiture of the related stock option, and the related stock option shall terminate or be forfeited upon the exercise or forfeiture of the Tandem SAR. Any Tandem SAR granted with a related incentive stock option shall be exercisable only when the Fair Market Value of a share of Common Stock exceeds the exercise price for a share of Common Stock under the related incentive stock option.
5.3 Exercise Price and Base Price. The exercise price per share of Common Stock subject to an option and any Tandem SAR, and the base price per share for any Free-Standing SAR (the “Base Price”), shall be determined by the Committee and set forth in the applicable agreement under Section 2.5, and shall not be less than the Fair Market Value of a share of the Common Stock on the applicable grant date, except that in the case of an incentive stock option granted to a Participant who, immediately prior to such grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or any Subsidiary which is a corporation (a "Ten“Ten Percent Employee"Employee”), the exercise price shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date of grant. For purposes of this Section 5.3, an individual (i) shall be considered as owning not only shares of stock owned
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individually but also all shares of stock that are at the time owned, directly or indirectly, by or for the spouse, ancestors, lineal descendants and brothers and sisters (whether by the whole or half blood) of such individual and (ii) shall be considered as owning proportionately any shares owned, directly or indirectly, by or for any corporation, partnership, estate or trust in which such individual is a shareholder, partner or beneficiary. In no event may any option or stock appreciation right granted under this Plan, other than pursuant to Section 4.5, be amended to decrease the exercise price or Base Price thereof, be cancelled in conjunction with the grant of any new option or stock appreciation right with a lower exercise price or Base Price, be cancelled or repurchased for cash, property, or another Award at a time when the exercise price or Base Price is greater than the Fair Market Value of the underlying Common Stock, or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such option or stock appreciation right, unless such amendment, cancellation, or action is approved by the Corporation’s shareholders.
5.4 Term; Vesting and Exercisability. The term of each option and each stock appreciation right shall be fixed by the Committee, but shall not exceed ten years from the date of grant (five years in the case of an incentive stock option granted to a Ten Percent Employee). Except as otherwise provided herein, including without limitation, Section 15.11, options and stock appreciation rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and may be exercisable commencing with the grant date.Committee.
5.5 Method of Exercise. Subject to the provisions of this Section 5, options and stock appreciation rights may be exercised, in whole or in part (unless otherwise specified by the Committee in its sole discretion), at any time during the applicable term by giving written notice of exercise to the Corporation specifying the number of shares of Common Stock as to which the option or stock appreciation rights is being exercised. In the case of the exercise of an option, such notice shall be accompanied by payment in full of the exercise price in United States of America dollars by certified or bank check or wire of immediately available funds. If approved by the Committee (at the time of grant in the case of an incentive stock option or at any time in the case of a nonstatutory stock option), payment, in full or in part, may also be made as follows:
(a) Payment may be made in the form of unrestricted shares of Common Stock (by delivery of such shares or by attestation) of the same class as the Common Stock subject to the option already owned by the Participant (based on the Fair Market Value of the Common Stock on the date the option is exercised) provided however, that any portion of the exercise price representing a fraction of a share shall be paid in cash;
(b) To the extent permitted by applicable law, payment may be made by delivering a properly executed exercise notice to the Corporation, together with a copy of irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the exercise price, and, if requested, the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Corporation may, to the extent permitted by applicable law, enter into agreements for coordinated procedures with one or more brokerage firms. In the event the broker sells any shares on behalf of a Participant, the broker shall be acting solely as the agent of the Participant, and the Corporation disclaims any responsibility for the actions of the broker in making any such sales; and/or
(c) With such other instrument as approved by the Committee, including Corporation loans, to the extent permitted by applicable law.
5.6 Delivery; Rights of Shareholders. No shares shall be delivered pursuant to the exercise of an option until the exercise price for the option has been fully paid and applicable taxes have been withheld. Unless otherwise specified by the Committee, the applicable Participant shall have all of the rights of a shareholder of the Corporation holding Common Stock with respect to the shares of Common Stock to be
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issued upon the exercise of the option or stock appreciation right (including the right to vote the applicable shares and the right to receive dividends), when the Participant (i) has given written notice of exercise in accordance with the procedures established by the Committee, (ii) if requested, has given the representation described in Section 10, and (iii) in the case of an option, has paid in full the exercise price for such shares.
5.7 Nontransferability of Options and Stock AppreciationRights. Unless the Committee shall otherwise determine in the case of nonstatutory stock options and stock appreciation rights and limited to a transfer without the payment of value or consideration to the Participant, (i) no option or stock appreciation right shall be transferable by a Participant other than by will, or if the Participant dies intestate, by the laws of descent and distribution of the state of domicile of the Participant at the time of death, and (ii) all stock options and stock appreciation rights shall be exercisable during the lifetime of the Participant only by the Participant (or the Participant’s guardian or legal representative). Any Tandem SAR shall be transferable only when the related stock option is transferable and with the related stock option.
5.8 Termination of Employment. Unless the Committee, in its sole discretion, shall otherwise determine at the time of grant of the Award or, other than in the case of incentive stock options, thereafter, but subject to the provisions of Section 5.1 in the case of incentive stock options:
(a) If the employment of a Participant who is not disabled within the meaning of Section 422(c)(6) of the Code (a "Disabled Participant"“Disabled Participant”) is voluntarily terminated with the consent of the Corporation or a Subsidiary or a Participant retires under any retirement plan of the Corporation or a Subsidiary, any then outstanding incentive stock option held by such Participant shall be exercisable by the Participant (but only to the extent exercisable by the Participant immediately prior to the termination of employment) at any time prior to the expiration date of such incentive stock option or within three months after the date of termination of employment, whichever is the shorter period;
(b) If the employment of a Participant who is not a Disabled Participant is voluntarily terminated with the consent of the Corporation or a Subsidiary or a Participant retires under any retirement plan of the Corporation or a Subsidiary, any then outstanding nonstatutory stock option or stock appreciation right held by such Participant shall be exercisable by the Participant (but only to the extent exercisable by the Participant immediately prior to the termination of employment) at any time prior to the expiration date of such nonstatutory stock option or stock appreciation right or within one year after the date of termination of employment, whichever is the shorter period;
(c) If the employment of a Participant who is a Disabled Participant is voluntarily terminated with the consent of the Corporation or a Subsidiary, any then outstanding stock option or stock appreciation right held by such Participant shall be exercisable in full (whether or not so exercisable by the Participant immediately prior to the termination of employment) by the Participant at any time prior to the expiration date of such stock option or stock appreciation right or within one year after the date of termination of employment, whichever is the shorter period;
(d) Following the death of a Participant during employment, any outstanding stock option or stock appreciation right held by the Participant at the time of death shall be exercisable in full (whether or not so exercisable by the Participant immediately prior to the death of the Participant) by the person entitled to do so under the will of the Participant, or, if the Participant shall fail to make testamentary disposition of the stock option or stock appreciation right or shall die intestate, by the legal representative of the Participant at any time prior to the expiration date of such stock option or stock appreciation right or within one year after the date of death, whichever is the shorter period;
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(e) Following the death of a Participant after termination of employment during a period when a stock option or stock appreciation right is exercisable, any outstanding stock option or stock appreciation right held by the Participant at the time of death shall be exercisable by such person entitled to do so under the will of the Participant or by such legal representative (but only to the extent the stock option or stock appreciation right was exercisable by the Participant immediately prior to the death of the Participant) at any time prior to the expiration date of such stock option or stock appreciation right or within one year after the date of death, whichever is the shorter period; and
(f) Unless the exercise period of a stock option or stock appreciation right following termination of employment has been extended as provided in Section 11.3, if the employment of a Participant terminates for any reason other than voluntary termination with the consent of the Corporation or a Subsidiary, retirement under any retirement plan of the Corporation or a Subsidiary or death, all outstanding stock options and stock appreciation rights held by the Participant at the time of such termination of employment shall automatically terminate.
Whether termination of employment is a voluntary termination with the consent of the Corporation or a Subsidiary and whether a Participant is a Disabled Participant shall be determined in each case, in its sole discretion, by the Committee (or, in the case of Participants who are not (i) Covered Employees as of the end of the Corporation’s immediately preceding fiscal year or (ii) the Chief Executive Officer of the Corporation, by such Chief Executive Officer, in his sole discretion) and any such determination by the Committee or such Chief Executive Officer shall be final and binding. Without limitation of the foregoing, a termination of employment by the Participant shall not be a voluntary termination with the consent of the Corporation unless the Committee or, if applicable, such Chief Executive Officer, in its or his sole discretion, specifically consents to the termination of employment in writing. Termination of employment under the Plan shall occur only if the Participant is no longer employed by the Corporation or any Subsidiary. An approved leave of absence by the Participant from the Corporation or any Subsidiary shall not constitute a termination of employment under the Plan.
5.9 Other Terms and Conditions. Subject to the foregoing provisions of this Section 5 and the other provisions of the Plan, any stock option or stock appreciation right granted under the Plan may be exercised at such times and in such amounts and be subject to such restrictions and other terms and conditions, if any, as shall be determined, in its sole discretion, by the Committee and set forth in the agreement under Section 2.5.
SECTION 6
Restricted Stock
6.1 Restricted Stock Awards; Certificates. Shares of restricted stock are actual shares of Common Stock issued to a Participant, and shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of restricted stock shall be registered in the name of the applicable Participant and, unless held by or on behalf of the Corporation in escrow or custody until the restrictions lapse or the shares are forfeited, shall bear an appropriate conspicuous legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Matthews International Corporation Amended and Restated 2017 Equity Incentive Plan and a corresponding agreement. Copies of such Plan and agreement
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are on file at the offices of Matthews International Corporation, Two NorthShore Center, Pittsburgh, PA 15212-5851.”
The Committee may require that the certificates evidencing such shares be held in escrow or custody by or on behalf of the Corporation until the restrictions thereon shall have lapsed or the shares are forfeited and that, as a condition of any Award of restricted stock, the applicable Participant deliver to the Corporation a stock power, endorsed in blank, relating to the Common Stock covered by such Award.
6.2 Terms and Conditions. Shares of restricted stock shall be subject to the restrictions set forth in Section 15.11 and the following terms and conditions:
(a) The Committee shall, prior to or at the time of grant, condition the vesting of an Award of restricted stock upon (i) the continued service of the applicable Participant, (ii) the attainment of Performance Goals, or (iii) the attainment of Performance Goals and the continued service of the applicable Participant. The Committee shall establish at the time the restricted stock is granted the performance periods during which any Performance Goals specified by the Committee with respect to the restricted stock Award are to be measured. In the event that the Committee conditions the vesting of an Award of restricted stock upon the attainment of Performance Goals or the attainment of Performance Goals and the continued service of the applicable Participant, the Committee may, prior to or at the time of grant, designate an Award of restricted stock as a Qualified Performance-Based Award. The conditions for vesting and the other provisions of restricted stock Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient, and shall be established by the Committee in its sole discretion. Except in the case of a Qualified Performance-Based Award and subject to the restrictions set forth in Section 15.11, the Committee at any time after the date of grant, in its sole discretion, may modify or waive any of the conditions applicable to an Award of restricted stock.
(b) Subject to the provisions of the Plan (including Section 6.3) and the applicable agreement under Section 2.5, during the period, if any, set by the Committee, commencing with the date of such restricted stock Award for which such vesting restrictions apply (the “Restriction Period”), and until the expiration of the Restriction Period, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of such restricted stock. A restricted stock Award may vest in part on a pro rata basis prior to the expiration of any Restriction Period.
(c) Except as provided in this Section 6 and in the applicable agreement under Section 2.5, the applicable Participant shall have, with respect to the shares of restricted stock, all of the rights of a shareholder of the Corporation holding the Common Stock that is the subject of the restricted stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends. If so determined by the Committee and set forth in the applicable agreement under Section 2.5 and subject to Section 15.4, cash dividends on the Common Stock that is the subject of the restricted stock Award may be (i) automatically deferred and reinvested in additional restricted stock, and held subject to the same vesting and forfeiture conditions of the underlying restricted stock, or (ii) held by the Corporation in cash (without any payment of interest thereon) subject to the same vesting and forfeiture conditions of the restricted stock with respect to which the dividends are payable. Unless otherwise determined by the Committee and set forth in the applicable agreement under Section 2.5, any Common Stock or other securities payable with respect to any restricted stock as a result of or pursuant to Section 4.5, shall be held subject to the same vesting and forfeiture conditions of the underlying restricted stock.
(d) As soon as practicable after the applicable Restriction Period has ended, the Committee shall determine and certify (in writing in the case of Qualified Performance-Based Awards) whether and the extent to which the service period and/or the Performance Goals were met for the applicable restricted stock. If the vesting condition or conditions applicable to the restricted stock are not satisfied by the time
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the Restriction Period has expired, such restricted stock shall be forfeited. If and when the Restriction Period expires without a prior forfeiture of the shares of restricted stock (i) if legended certificates have been issued, unlegended certificates for such shares shall be delivered to the Participant upon surrender of the legended certificates, (ii) if legended certificates have not yet been issued, unlegended certificates (and any related blank stock powers previously executed by the Participant) shall be delivered to the Participant, and (iii) any cash dividends held by the Corporation pursuant to Section 6.2(c) shall be delivered to the Participant.
6.3 Permitted Transfers. Neither this Section 6 nor any other provision of the Plan shall preclude a Participant from transferring or assigning restricted stock, without the payment of value or consideration to the Participant, to (i) the trustee of a trust that is revocable by such Participant alone, both at the time of the transfer or assignment and at all times thereafter prior to such Participant'sParticipant’s death or (ii) the trustee of any other trust to the extent approved in advance by the Committee, in its sole discretion, in writing. A transfer or assignment of restricted stock from such trustee to any person other than such Participant shall be permitted only to the extent approved in advance by the Committee, in its sole discretion, in writing, and restricted stock held by such trustee shall be subject to all of the conditions and restrictions set forth in the Plan and in the applicable agreement under Section 2.5 as if such trustee were a party to such agreement.
SECTION 7
Restricted Stock Units
7.1 Restricted Stock Unit Awards. Restricted stock units are Awards denominated in shares of Common Stock that will be settled, subject to the terms and conditions of the restricted stock units and at the sole discretion of the Committee, in an amount in cash, shares of Common Stock, or both, based upon the Fair Market Value of a specified number of shares of Common Stock.
7.2 Terms and Conditions. Restricted stock units shall be subject to the restrictions set forth in Section 15.11 and the following terms and conditions:
(a) The Committee shall, prior to or at the time of grant, condition the vesting of restricted stock units upon (i) the continued service of the applicable Participant, (ii) the attainment of Performance Goals or (iii) the attainment of Performance Goals and the continued service of the applicable Participant. In the event that the Committee conditions the vesting of restricted stock units upon the attainment of Performance Goals or the attainment of Performance Goals and the continued service of the applicable Participant, the Committee may, prior to or at the time of grant, designate the restricted stock units as a Qualified Performance-Based Award. The Committee shall determine the performance period(s) during which any Performance Goals are to be achieved. The conditions for grant or vesting and the other provisions of restricted stock units (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient. An Award of restricted stock units shall be settled as and when the restricted stock units vest, as determined and certified (in writing in the case of Qualified Performance-Based Awards) by the Committee, or at a later time specified by the Committee or in accordance with an election of the Participant, if the Committee so permits. Except in the case of a Qualified Performance-Based Award and subject to the restrictions set forth in Section 15.11, the Committee at any time after the date of grant, in its sole discretion, may modify or waive any of the conditions applicable to an Award of restricted stock units.
(b) Subject to the provisions of the Plan and the applicable agreement under Section 2.5, during the period, if any, set by the Committee, commencing with the date of grant of such restricted stock units for which such vesting restrictions apply (the “Units Restriction Period”), and until the expiration of the
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Units Restriction Period, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber restricted stock units. A restricted stock unit may vest in part prior to the expiration of any Units Restriction Period.
(c) Participants granted restricted stock units shall not be entitled to any dividends payable on the Common Stock unless the agreement under Section 2.5 for restricted stock units specifies to what extent and on what terms and conditions the applicable Participant shall be entitled to receive current or deferred payments of cash, Common Stock or other property corresponding to the dividends payable on the Common Stock (subject to Section 15.4 below). Restricted stock units shall not have any voting rights, and holders of restricted stock units shall not be shareholders of the Corporation unless and until shares of Common Stock are issued by the Corporation (in book-entry form or otherwise).
SECTION 8
Performance Units
Performance units may be granted hereunder to eligible employees, for no cash consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The Committee shall establish at the time the performance unit is granted the performance period(s) during which any Performance Goals specified by the Committee with respect to the Award are to be measured, provided, however, that performance units shall be subject to the restrictions set forth in Section 15.11. The Performance Goals to be achieved during any performance period(s) and the length of the performance period(s) shall be determined by the Committee upon the grant of each performance unit. The Committee may, in connection with the grant of performance units, designate them as Qualified Performance-Based Awards. The conditions for grant or vesting and the other provisions of performance
units (including without limitation any applicable Performance Goals) need not be the same with respect to each Participant. Performance units may be paid in cash, shares of Common Stock, other property or any combination thereof, in the sole discretion of the Committee as set forth in the applicable agreement under Section 2.5. Performance units shall not have any voting rights, and holders of performance units shall not be shareholders of the Corporation unless and until shares of Common Stock are issued by the Corporation (in book-entry form or otherwise). The Performance Goals to be achieved for each performance period, whether the Performance Goals have been achieved, and the amount of the Award to be distributed shall be conclusively determined and certified (in writing in the case of Qualified Performance-Based Awards) by the Committee. Performance units may be paid in a lump sum or in installments following the close of the performance period(s). The Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber performance units. The maximum value of the property, including cash, that may be paid or distributed to any Participant pursuant to a grant of performance units made in any one calendar year shall be five million United States of America dollars ($5,000,000). Except in the case of a Qualified Performance-Based Award and subject to the restrictions set forth in Section 15.11, the Committee at any time after the grant of performance units, in its sole discretion, may modify or waive any of the conditions applicable to an Award of performance units.
SECTION 9
Other Stock-Based Awards
The Committee may award Common Stock and other Awards that are valued in whole or in part by reference to, or are otherwise based upon, Common Stock, including but not limited to, unrestricted stock or dividend equivalents. Any such Award shall be subject to the restrictions set forth in Section 15.11 and
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such other terms and conditions as established by the Committee, and may include Qualified Performance-Based Awards. The maximum value of Common Stock and other property, including cash, that may be paid or distributed to any Participant pursuant to this Section 9 (and not pursuant to other sections of the Plan) in any one calendar year shall be five million United States of America dollars ($5,000,000).
SECTION 10
Issuance of Shares
The Committee may require each person purchasing or receiving shares of Common Stock pursuant to an Award to represent to and agree with the Corporation in writing that such person is acquiring the shares only for investment and without a present view to the sale or distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. The obligation of the Corporation to issue shares of Common Stock under the Plan shall be subject to (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such shares, if deemed necessary or appropriate by counsel for the Corporation, (ii) the condition that the shares shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange, if any, on which the shares of Common Stock may then be listed, (iii) all other applicable laws, regulations, rules and orders which may then be in effect and (iv) obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable. The inability or impracticability of the Corporation to obtain or maintain authority from any regulatory body having jurisdiction, which authority is deemed by the Corporation’s counsel to be necessary to the lawful issuance, sale or delivery of any shares of Common Stock hereunder, shall relieve the Corporation of any liability in respect of the failure to issue, sell or deliver such shares of Common Stock as to which such requisite authority shall not have been obtained.
SECTION 11
Additional Rights in Certain Events
11.1 Definitions.
For purposes of this Section 11, the following terms shall have the following meanings:
(1) The term "Person"“Person” shall be used as that term is used in Sections 13(d) and 14(d) of the 1934 Act as in effect on the effective date of the Plan.
(2) "Beneficial Ownership"“Beneficial Ownership” shall be determined as provided in Rule 13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) "Voting Shares"“Voting Shares” shall mean all securities of a corporation entitling the holders thereof to vote in an annual election of Directors (without consideration of the rights of any class of stock other than the common stock of the corporation to elect directors by a separate class vote); and a specified percentage of "Voting Power"“Voting Power” of a corporation shall mean such number of the Voting Shares as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock other than the common stock of a corporation to elect directors by a separate class vote).
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(4) "Section“Section 11 Event"Event” shall mean the date upon which any of the following events occurs:
(a) The Corporation acquires actual knowledge that any Person other than the Corporation, a Subsidiary or any employee benefit plan(s) sponsored by the Corporation has acquired the Beneficial Ownership, directly or indirectly, of securities of the Corporation entitling such Person to 20% or more of the Voting Power of the Corporation;
(b) DuringAt any period of two consecutive years,time less than a majority60% of the total number of authorized members of the Board of Directors (excluding vacant seats) are filled byshall be individuals who were either (i) Directors aton the beginningeffective date of such period andthe Plan or (ii) individuals whose election, by the Corporation’s security holders, or nomination for election, was approved by a vote (including a vote approving a merger or other agreement providing the membership of such individuals on the Board of Directors) of at least a majority of the members of the Nominating and Corporate Governance Committee (consisting of directors then still in office who were directors at the beginning of such period or who were approved for election or nomination hereunder) or at least two-thirds of the Directors then still in office who were Directors on the effective date of the Plan or who were so approved (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors relating to the election of Directors which would be subject to Rule 14a-11 under the 1934 Act, or any successor rule, including by reason of any agreement intended to avoid or settle any such election contest or proxy contest), provided that for purposes of this Section 11.1(4)(b), each Board then-authorized seat shall count once for determining whether a Section 11 Event has occurred;;
(c) The consummation of a merger, consolidation, share exchange, division or sale or other disposition of assets of the Corporation as a result of which the shareholders of the Corporation immediately prior to such transaction shall not hold, directly or indirectly, immediately following such transaction, a majority of the Voting Power of (i) in the case of a merger or consolidation, the surviving or resulting corporation, (ii) in the case of a share exchange, the acquiring corporation or (iii) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 30% of the consolidated assets of the Corporation immediately prior to the transaction; or
(d) The commencement of any liquidation or dissolution of the Corporation (other than pursuant to any transfer of 70% or more of the consolidated assets of the Corporation to an entity or entities controlled by the Corporation and/or its shareholders following such liquidation or dissolution);
provided, however, that if securities beneficially owned by a Participant are included in determining the Beneficial Ownership of a Person referred to in paragraph 4(a) above, then no Section 11 Event with respect to such Participant shall be deemed to have occurred by reason of such event.
11.2 Acceleration of the Exercise Date of Stock Options and Stock Appreciation Rights. Subject to the provisions of Section 5 in the case of incentive stock options and Section 11.6, unless the agreement under Section 2.5 shall otherwise provide, notwithstanding any other provision contained in the Plan, in case any Section 11 Event occurs all outstanding stock options and stock appreciation rights (other than those held by a Participant referred to in the proviso to Section 11.1(4)) shall become immediately and fully exercisable whether or not otherwise exercisable by their terms.
11.3 Extension of the Expiration Date of Stock Options and Stock Appreciation Rights. Subject to the provisions of Section 5 in the case of incentive stock options and Section 11.6, unless the agreement under Section 2.5 shall otherwise provide, notwithstanding any other provision contained in the Plan, all stock options and stock appreciation rights held by a Participant (other than those held by a Participant referred to in the proviso to Section 11.1(4)) whose employment with the Corporation or a Subsidiary terminates within one year of any Section 11 Event for any reason other than voluntary termination with the consent of the Corporation or a Subsidiary, retirement under any retirement plan of the Corporation or a Subsidiary
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or death shall be exercisable for a period of three months from the date of such termination of employment, but in no event after the expiration date of the stock option or stock appreciation right.
11.4 Lapse of Restrictions on Restricted Stock Awards. Unless the agreement under Section 2.5 shall otherwise provide, notwithstanding any other provision contained in the Plan other than Section 11.6, if any Section 11 Event occurs prior to the scheduled lapse of all restrictions applicable to restricted stock Awards under the Plan (including but not limited to Qualified Performance-Based Awards), all such restrictions (other than those applicable to a Participant referred to in the proviso to Section 11.1(4)) shall lapse upon the occurrence of any such Section 11 Event regardless of the scheduled lapse of such restrictions.
11.5 Vesting of Restricted Stock Units and Performance Units. Unless the agreement under Section 2.5 shall otherwise provide, notwithstanding any other provision contained in the Plan other than Section 11.6, if any Section 11 Event occurs, all restricted stock units and performance units (including but not limited to Qualified Performance-Based Awards) (other than those held by a Participant referred to in the proviso to Section 11.1(4)) shall be considered to be earned and payable in full, any vesting conditions shall be considered to have been satisfied, and such restricted stock units and performance units shall be settled in cash as promptly as is practicable after the Section 11 Event.
11.6 Code Section 409A. Notwithstanding the foregoing, if any Award is subject to Section 409A of the Code, this Section 11 shall be applicable only to the extent specifically provided in the agreement under Section 2.5 applicable to the Award and permitted pursuant to Section 12.2.
SECTION 12
Qualified Performance-Based Awards; Section 409A
12.1 Qualified Performance-Based Awards.
(a) The provisions of this Plan are intended to ensure that all options and stock appreciation rights granted hereunder to any Participant who is or may be a Covered Employee in the tax year in which any amount attributable to such option or stock appreciation right is expected to be deductible to the Corporation qualify for the exemption from the limitation on deductions imposed by Section 162(m) of the Code (the “Section 162(m) Exemption”), and all such Awards shall therefore be considered Qualified Performance-Based Awards and this Plan shall be interpreted and operated consistent with that intention. When granting any Award other than an option or stock appreciation right, the Committee may designate such Award as a Qualified Performance-Based Award, based upon a determination that (i) the recipient is or may be a Covered Employee with respect to such Award, and (ii) the Committee wishes such Award to qualify for the Section 162(m) Exemption, and the terms of any such Award (and of the grant thereof) shall be consistent with such designation. With respect to Qualified Performance-Based Awards, within 90 days after the commencement of a performance period or, if earlier, by the expiration of 25% of a performance period, the Committee will designate one or more performance periods, determine the Participants for the performance periods and establish the Performance Goals for the performance periods.
(b) Each Qualified Performance-Based Award (other than an option or stock appreciation right) shall be earned, vested and/or payable (as applicable) upon certification in writing by the Committee of the achievement of one or more Performance Goals, together with the satisfaction of any other conditions, such as continued employment, as previously established by the Committee with respect to such Award.
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(c) Notwithstanding any provision in the Plan or in any agreement under Section 2.5, to the extent that any such provision or action of the Committee would cause any Qualified Performance-Based Award not to qualify for the Section 162(m) Exemption, such provision or action shall be null and void as it relates to Covered Employees, to the extent permitted by law and deemed advisable by the Committee.
12.2 Code Section 409A. It is the intention of the Corporation that no Award shall be “deferred compensation” subject to Section 409A of the Code, unless and to the extent that the Committee specifically determines otherwise as provided in the immediately following sentence, and the Plan and the terms and conditions of all Awards shall be interpreted accordingly. The terms and conditions governing any Awards that the Committee determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or shares of Common Stock pursuant thereto and any rules regarding treatment of such Awards in the event of a Section 11 Event, shall be set forth in the applicable agreement under Section 2.5, and shall comply in all respects with Section 409A of the Code.
SECTION 13
Effect of the Plan on the Rights of Employees and Employer
Neither the adoption of the Plan nor any action of the Board or the Committee pursuant to the Plan shall be deemed to give any employee any right to be granted any Award under the Plan. Nothing in the Plan, in any Award under the Plan or in any agreement under Section 2.5 providing for any Award under the Plan shall confer any right to any employee to continue in the employ of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation or any Subsidiary to terminate the employment of any employee at any time or adjust the compensation of any employee at any time.
SECTION 14
Amendment or Termination
The right to amend the Plan at any time and from time to time and the right to terminate the Plan are hereby specifically reserved to the Board; provided that no such amendment of the Plan shall, without shareholder approval (a) increase the maximum aggregate number of shares of Common Stock for which Awards may be made under Section 4.1 of the Plan, (b) increase the maximum aggregate number of shares of Common Stock as to which incentive stock options may be granted under Section 4.1 of the Plan, (c) make any changes in the class of employees eligible to receive Awards under the Plan, (d) change the maximum number of shares of Common Stock as to which Awards may be made to any Participant under Section 4.2 of the Plan, or the maximum amount that may be paid or distributed to any Participant pursuant to a grant of performance units or other stock-based Awards made in any one calendar year under Section 8 or 9 of the Plan, respectively, (e) change the exercise price or Base Price permitted under Section 5.3 of the Plan or the restrictions regarding repricing under Section 5.3 of the Plan,(f) be made if shareholder approval of the amendment is at the time required for Awards under the Plan to qualify for the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by the rules of any stock exchange on which the Common Stock may then be listed or (g) be made to the extent such approval is needed for Qualified Performance-Based Awards to qualify for the Section 162(m) Exemption. No amendment or termination of the Plan shall, without the written consent of the holder of an Award under the Plan, adversely affect the rights of such holder with respect thereto.
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SECTION 15
General Provisions
15.1 Additional Compensation Arrangements. Nothing contained in the Plan shall prevent the Corporation or any Subsidiary from adopting other or additional compensation arrangements for its employees.
15.2 Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of a Participant for federal, state, local or foreign income or employment or other tax purposes with respect to any Award under the Plan, such Participant shall pay to the Corporation (or, if applicable, a Subsidiary), or make arrangements satisfactory to the Corporation (or, if applicable, a Subsidiary) regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement, having a Fair Market Value on the date of withholding equal to the minimum amount (and not
any greater amount unless otherwise determined by the Committee) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes, and provided that any fractional share amount must be paid in cash or withheld from compensation otherwise due to the Participant. The obligations of the Corporation under the Plan shall be conditional on such payment or arrangements, and the Corporation and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to such Participant. The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Common Stock.
15.3 Limitation of Liability. The grant of any Award shall not:
(a) give a Participant any rights except as expressly set forth in the Plan or in the agreement under Section 2.5;
(b) create any fiduciary or other obligation of the Corporation or any Subsidiary to take any action or provide to the Participant any assistance or dedicate or permit the use of any assets of the Corporation or any Subsidiary that would permit the Participant to be able to attain any Performance Goals associated with any Award;
(c) create any trust, fiduciary or other duty or obligation of the Corporation or any Subsidiary to engage in any particular business, continue to engage in any particular business, engage in any particular business practices or sell any particular product or products; or
(d) create any obligation of the Corporation or any Subsidiary that shall be greater than the obligation of the Corporation or that Subsidiary to any of their general unsecured creditors.
15.4 Limitation on Dividend Reinvestment and Dividend Equivalents. Reinvestment of dividends in additional restricted stock at the time of any dividend payment, and the payment of shares with respect to dividends to Participants holding Awards of restricted stock units, shall only be permissible if authorized by the Committee and if sufficient shares of Common Stock are available under Section 4 for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient shares of Common Stock are not available for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of restricted stock units equal in number to the shares of Common Stock that would have been obtained by such payment or reinvestment, the terms of which restricted stock units shall provide for settlement in cash and for dividend equivalent reinvestment in further restricted stock units on the terms contemplated by this Section 15.4.
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15.5 Governing Law and Interpretation. To the extent not preempted by federal law, the Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Plan are not part of the provisions hereof and shall have no force or effect.
15.6 Dispute Resolution. Since Awards are granted in Western Pennsylvania, records relating to the Plan and Awards are located in Western Pennsylvania, and the Plan and Awards are administered in Western Pennsylvania, the Corporation and the Participant to whom an Award is granted, for themselves and their heirs, representatives, successors and assigns (collectively, the “Parties”) irrevocably submit to the exclusive and sole jurisdiction and venue of the state courts of Allegheny County, Pennsylvania and the federal courts of the Western District of Pennsylvania with respect to any and all disputes arising out of or relating to the Plan, the subject matter of the Plan or any Awards under the Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any Awards or the terms and conditions of the Plan. To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to the Plan, and to ensure consistency in application and interpretation of the governing law under Section 15.5 of the Plan, the Parties agree that (a) sole and exclusive appropriate venue for any
such action shall be the Pennsylvania courts described in the immediately preceding sentence, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Pennsylvania courts, and no other, (c) such Pennsylvania courts shall have sole and exclusive jurisdiction over the Parties and over the subject matter of any dispute relating hereto and (d) the Parties waive any and all objections and defenses to bringing any such action before such Pennsylvania courts, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens.
15.7 Non-Transferability. Except as otherwise specifically provided in the Plan or by the Committee and limited to a transfer without the payment of value or consideration to the Participant, Awards under the Plan are not transferable except by will or by laws of descent and distribution of the state of domicile of the Participant at the time of death.
15.8 Deferrals. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred, provided that any such deferral is consistent with all aspects of Section 409A of the Code. Subject to the provisions of this Plan and any agreement under Section 2.5, the recipient of an Award (including, without limitation, any deferred Award) may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, interest or dividends, or interest or dividend equivalents, with respect to the number of shares covered by the Award, as determined by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional shares or otherwise reinvested; provided, however, that in no event shall interest, dividends or dividend equivalents be paid on any unearned Awards until such Awards have vested.
15.9 Integration. The Plan and any written agreements executed by Participants and the Corporation under Section 2.5 contain all of the understandings and representations between the parties and supersede any prior understandings and agreements entered into between them regarding the subject matter within. There are no representations, agreements, arrangements or understandings, oral or written, between the parties relating to the subject matter of the Plan which are not fully expressed in the Plan and the written agreements.
15.10 Foreign Employees and Foreign Law Considerations. The Committee may grant Awards to eligible employees who are foreign nationals, who are located outside the United States of America or who are not compensated from a payroll maintained in the United States of America, or who are otherwise subject to (or could cause the Corporation to be subject to) legal or regulatory provisions of countries or jurisdictions
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outside the United States of America, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.
15.11 Certain Restrictions on Certain Awards. Subject to the terms of the Plan and more restrictive terms, if any, of the applicable agreement under Section 2.5, (a) any Award of restricted stock, restricted stock units, performance units, or other stock-based Awards under Section 9 shall be subject to vesting during a restriction period of at least three (3) years following the date of grant and (b) any Award of options and stock appreciation rights under Section 5 shall be subject to vesting during a restriction period of at least one (1) year following the date of grant, provided, however, that:
(i) AWith respect to any Award of restricted stock, restricted stock units, performance units, or other stock-based Awards under Section 9, a restriction period of only at least one (1) year following the date of grant is permissible if vesting is conditional, in whole or in part, upon the achievement of Performance Goals, except that there need not be any minimum restriction period for a Performance Goal based upon stock price if there is also a service-based restriction of at least one (1) year following the date of grant;
(ii) To the extent permitted by the Committee, in its sole discretion, and specified in the applicable agreement under Section 2.5, an Award of restricted stock, restricted stock units, performance units, or other stock-based Awards under Section 9 with a restriction period of at least three (3) years may first vest in part upon completion of one year of service measured from the vesting commencement date of the Award and thereafter on a pro rata basis over the remainder of any such restriction period;
(iii) To the extent permitted by the Committee, in its sole discretion, and specified in the applicable agreement under Section 2.5, an Award may vest prior to the expiration of any restriction period required under this Section 15.11 in the event of a Participant’s death or retirement, the Participant becoming a Disabled Participant, or an involuntary termination of the Participant’s employment by the Corporation or a Subsidiary;
(iv) In the event of the occurrence of a Section 11 Event, an Award may vest prior to the expiration of any restriction period required under this Section 15.11 pursuant to Section 11.4 or Section 11.5 or as otherwise permitted by the Committee, in its sole discretion, and specified in the applicable agreement under Section 2.5; and
(v) The Committee may grant Awards of restricted stock, restricted stock units, performance units and other stock-based Awards under Section 9 without regard to the foregoing requirements, and the Committee may accelerate the vesting of and lapse any restrictions with respect to, any such Awards (in addition to the potential acceleration under (ii)-(iv) of the foregoing), for up to, collectively for all such Awards, five percent (5%) of the shares of Common Stock for which Awards may be made under Section 4.1 of the Plan, as adjusted under the terms of the Plan.
15.12 Other Benefit Plans. All Awards shall constitute a special incentive payment to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for the purpose of determining any benefit under any pension, retirement, profit sharing, bonus, life insurance or other benefit plan of the Corporation or any Subsidiary or under any agreement between the Corporation or any Subsidiary and the Participant, unless such plan or agreement specifically provides otherwise.
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15.13 Indemnification. Subject to the requirements of Pennsylvania state law, each individual who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Corporation to whom authority was delegated in accordance with Section 2.1, shall be indemnified and held harmless by the Corporation against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Corporation’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf, unless such loss, cost, liability, or expense is a result of his/her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Corporation’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless.
15.14 No Representations or Covenants With Respect to Tax Qualification. Although the Corporation may endeavor to (i) qualify an Award for favorable United States or foreign tax treatment (e.g., incentive stock options under Section 422 of the Code) or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Corporation makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Corporation shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan.
15.15 Compliance With Laws. Without limitation of Section 10, the granting of Awards and the issuance of shares of Common Stock under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or stock exchanges on which the Corporation is listed as may be required.
SECTION 16
Effective Date and Duration of Plan
The effective date and date of adoption of the Plan (as amended and restated) shall be the date of adoption of the Plan (as amended and restated) by the Board (the “Adoption Date”), provided that the Plan (as amended and restated) is approved by a majority of the votes cast at a meeting of shareholders duly called, convened and held prior to the anniversary of the Adoption Date (the day prior to such anniversary, the “Forfeiture Date”), at which a quorum representing a majority of the outstanding Voting Shares of the Corporation is, either in person or by proxy, present and voting on the Plan. NoExcept with respect to 1,700,000 shares of Common Stock initially reserved under the Plan and subject to Awards granted prior to, on or following the Adoption Date, no stock option or stock appreciation right granted under the Plan on or after the Adoption Date may be exercised until after such approval and any restricted stock, restricted stock units, performance units or other Award awarded under the Plan shall be forfeited to the Corporation on the Forfeiture Date if such approval has not been obtained on or prior to that date. No Award under the Plan may be made subsequent to the day prior to the ten-year anniversary of the Adoption Date, but Awards granted prior to such date may extend beyond such date.
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Exhibit B
This proxy is solicited from you by the Board of Directors for use at the Annual Meeting of the Shareholders of Matthews International Corporation on February 15, 201817, 2022.
PROXY - MATTHEWS INTERNATIONAL CORPORATION
Notice ofof:
To be held on February 15, 201817, 2022
Virtually via live webcast
The Annual Meeting of the Shareholders of Matthews International Corporation (the “2018“2022 Annual Meeting”) will be held at 9:00 AM (PST)(EST), Thursday, February 15, 201817, 2022 virtually via a live webcast at The Heathman Hotel, located at 1001 Southwest Broadway, Portland, Oregon,www.meetnow.global/M6KTJFA, for the purpose of considering and acting upon the the proposals set forth on the reverse side of this form.
Shareholders of record at the close of business on December 29, 201731, 2021 will be entitled to vote at the 20182022 Annual Meeting or any adjournments thereof.
The undersigned hereby appoints Joseph C. Bartolacci and Steven F. Nicola and each of them, with full power of substitution and revocation, as proxies to vote all shares of Common Stock of Matthews International Corporation (the “Company”) which the undersigned is entitled to vote at the 20182022 Annual Meeting of the Shareholders or any adjournment thereof, with the authority to vote as designated on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS INSTRUCTED BY YOU ON THE REVERSE SIDE OF THIS CARD WITH RESPECT TO THE PROPOSALS SET FORTH IN THE PROXY STATEMENT, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE 20182022 ANNUAL MEETING AND ANY ADJOURNMENT THEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL THE NOMINEES AND FOR PROPOSALS 2, 3 AND 4 IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED PREPAID ENVELOPE.
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Continued and to be signed on reverse side
C. Non-Voting Items
| Change of Address - Please print new address below | ||||||||
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ANNUAL MEETING PROXY CARD
A. Proposals – The Board of Directors recommends a vote FOR all the nominees and FOR Proposals 2, 3 and 4.
| 1. | Election of | three (3) directors of the Company for a term of three (3) years: | ||||||||||||||||||||||||||||||||||||||
| FOR | WITHHOLD | |||||||||||||||||||||||||||||||||||||||
| 01 - | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||||
| 02 - | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||||
| 03 - | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||||||||||||||
| 2. | Approve the adoption of the Amended and Restated 2017 Equity Incentive Plan | [ ] | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||||||||||||||
| 3. | Ratify the appointment of Ernst & Young LLP as the | [ ] | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||||||||||||||
| 4. | Provide an advisory (non-binding) vote on the executive compensation of the Company’s named executive officers. | [ ] | [ ] | [ ] | ||||||||||||||||||||||||||||||||||||
B. Non-Voting Items
Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
| Signature 1 - Please keep signature within the box | Signature 2 - Please keep signature within the box | |||||||
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