UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [__]
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[__] | Preliminary Proxy Statement |
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[__] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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[X] | Definitive Proxy Statement |
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[__] | Definitive Additional Materials |
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[__] | Soliciting Material Pursuant to § 240.14a-12 |
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| Donaldson Company Inc. |
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| (Name of Registrant as Specified In Its Charter) |
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| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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[__] | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
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DONALDSON COMPANY, INC.
1400 West 94th Street
Minneapolis, Minnesota 55431-2370
www.donaldson.com
NOTICE OF 20122013 ANNUAL MEETING OF STOCKHOLDERS
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TIME: | 1:00 p.m. (local time) on Friday, November | |
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PLACE: | Donaldson Company, Inc. (“Donaldson” or the “Company”) Corporate Offices, Campus West, 2001 West 94th Street, Minneapolis, Minnesota 55431. | |
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ITEMS OF BUSINESS: | (1) To elect (2) To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending July 31, (3) To transact any other business that properly comes before the meeting. | |
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RECORD DATE: | You may vote if you are a Stockholder of record at the close of business on September | |
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PROXY VOTING: | It is important that your shares be represented and voted at the Annual Meeting. Instructions on voting your shares are on the Notice of Internet Availability of Proxy Materials you received for the Annual Meeting. If you received paper copies of the proxy materials, instructions on the different ways to vote your shares are found on the enclosed proxy card. You should vote by proxy even if you plan to attend the Annual Meeting. Your support is appreciated, and you are cordially invited to attend the Annual Meeting. | |
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| PLEASE PROMPTLY VOTE YOUR PROXY TO SAVE US THE EXPENSE OF ADDITIONAL SOLICITATION. | |
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| Notice of Internet Availability of Proxy Materials for the Stockholder Meeting to be held on November | |
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| By Order of the Board of Directors |
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| Norman C. Linnell |
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| Secretary |
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| Dated: October 4, |
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INFORMATION REGARDING THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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DONALDSON COMPANY, INC.
1400 West 94th Street
Minneapolis, Minnesota 55431-2370
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PROXY STATEMENT
Mailing Date: October 4, 2013
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PROPOSALS YOU ARE ASKED TO VOTE ON
Item 1: Election of Directors
TwoThree current Directors, William M. CookMichael J. Hoffman, Willard D. Oberton and Paul David Miller,John P. Wiehoff, are recommended for election to the Board of Directors at the Annual Meeting. Information on the nominees is provided on pages 8-10.page 8. Directors are elected for a three-year term so that approximately one-third are elected at each Annual Meeting of Stockholders.
The Board of Directors unanimously recommends a voteFOR the election of each Director nominee.
Item 2: Ratification of the Appointment of Independent Registered Public Accounting Firm
The Audit Committee has appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending July 31, 2013,2014, and is requesting ratification by the Stockholders.
The Board of Directors unanimously recommends a voteFOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 2013.2014.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive access to this Proxy Statement?
Because the Board of Directors of the Company is soliciting proxies for use at the Annual Meeting to be held on November 16, 201222, 2013 and you were a Donaldson Stockholder as of the close of business on the record date of September 19, 2012.25, 2013. Only Stockholders of record are entitled to vote at the Annual Meeting and the Board of Directors is soliciting your proxy to vote at the meeting. We had 148,125,817146,074,733 shares of Common Stock outstanding as of the close of business on the record date. Each share entitles its holder to one vote, and there is no cumulative voting.
This Proxy Statement summarizes the information you need to know to vote. We first mailed or otherwise made available to Stockholders the Proxy Statement and form of proxy on or about October 4, 2012.2013.
Why did I receive a notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials, including this Proxy Statement and our Fiscal 20122013 Annual Report to Stockholders, to our Stockholders by providing access to such documents on the internet instead of mailing printed copies. Most Stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice of Internet Availability of Proxy Materials, which was mailed to most of our Stockholders, will instruct you as to how you may access and review all of the proxy materials on the internet. Such notice also instructs you as to how you may submit your proxy on the internet. By accessing and reviewing the proxy materials on the internet, you will save us the cost of printing and mailing these materials to you and reduce the impact of such printing and mailing on the environment. However, if you would like to receive a paper copy of our proxy materials, please follow the instructions for requesting such materials provided in the Notice of Internet Availability of Proxy Materials.
SEC rules allow us to deliver a single copy of an annual report, proxy statement, or Notice of Internet Availability of Proxy Materials to two or more Stockholders that share the same household address. If you received multiple copies and would like to receive only one copy per household in the future, or if you received only one copy and would like to receive multiple copies in the future, you should contact your bank, broker or other nominee record holder, or, if you are a record holder, contact Norm Linnell, the Company Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299 or call 952-887-3631.
What am I voting on and what does the Board recommend?
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| 1. | The election of |
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| 2. | The ratification of the appointment of our independent registered public accounting firm for the fiscal year ending July 31, |
The Board recommends a vote:
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• | FOR each of the Directors; | |
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| • | FOR the ratification of the appointment of our independent registered public accounting firm. |
How do I vote if I am a Stockholder of record?
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If you are a Stockholder of record you may vote using any ONE of the following methods:
If you participate in the Donaldson Dividend Reinvestment Program or in the Donaldson Employee Stock Purchase Program administered by the transfer agent, your shares in those programs have been added to your other holdings and are included in your proxy materials. How do I vote if I hold stock through a Donaldson Employee benefit plan? We have added the shares of Common Stock held by participants in Donaldson’s Employee benefit plans to the participants’ other holdings shown on their proxy materials. Donaldson’s Employee benefit plans are the Employee Stock Ownership Plan, the PAYSOP, and the Donaldson Company, Inc. Retirement Savings Plan (the “401(k) Plan”). If you hold stock through Donaldson’s Employee benefit plans, voting your proxy using one of the first three methods above also serves as confidential voting instructions to the plan trustee, Fidelity Management Trust Company (“Fidelity”). Fidelity will vote your Employee benefit plan shares as directed by you provided that your proxy vote isRECEIVED BY NOVEMBER Fidelity also will vote the shares allocated to individual participant accounts for which it has not received instructions, as well as shares not so allocated, in the same proportion as the directed shares are voted. How do I vote if my shares are held in a brokerage account in my broker’s name If your shares are held in a brokerage account in your broker’s name (street name), you should follow the voting directions provided by your broker or nominee. If you do so, your broker or nominee will vote your shares as you have directed. What does it mean if I receive more than one Notice It means that you have multiple accounts with banks or stockbrokers or with the transfer agent. PLEASE VOTE ALL OF YOUR SHARES. What if I change my mind after I vote my shares? If you are a Stockholder of record you can revoke your proxy at any time before it is voted at the meeting by:
If your shares are held in a brokerage account in your broker’s name (street name), you should contact your broker or nominee for information on how to revoke your voting instructions and provide new voting instructions.
If you abstain from Item 2, your shares will be counted as present at the meeting for the purposes of determining a quorum, and they will be treated as shares not voted on the specific proposal. This means that for Item 2, abstentions have the same effect as a vote against such item. If you hold shares in street name and do not provide voting instructions to your broker, your broker will not vote your shares on any proposal where the broker does not have discretionary authority to vote. In such a situation, the shares will be considered present at the meeting for purposes of determining a quorum, but will not be considered to be represented at the meeting for purposes of calculating the vote with respect to the matter requiring discretionary authority. New York Stock Exchange (“NYSE”) rules permit brokers discretionary authority to vote on Item 2 if they do not receive instructions from the street name holder of the shares. As a result, if you do not vote your street name shares, your broker has authority to vote on Item 2 on your behalf. We use an independent inspector of elections, Broadridge Investor Communication Solutions, Inc., which tabulates the votes received. What if I do not specify how If you do not specify on your returned proxy card or through the telephone or internet prompts how you want to vote your shares, your shares will be voted FOR the election of How many shares must be present to hold the meeting? A quorum must be present for the meeting to be valid. This means that at least a majority of the shares outstanding as of the record date must be present. We will count you as present if you:
How many votes are needed to approve each item? Our Bylaws provide for a majority voting standard for the election of Directors in uncontested Director elections. A nominee for Director in an uncontested election will be elected to the Board if the votes cast FOR such nominee’s election exceed 50% of the number of votes cast with respect to such nominee. Votes cast with respect to a nominee include votes to withhold authority. Directors will be elected by a plurality vote at a Stockholder meeting if:
In order for the proposal to ratify the appointment of the independent registered public accounting firm to be approved, the affirmative vote of a majority of the shares of the Company’s Common Stock entitled to vote and represented at the meeting in person or by proxy is required. How will voting on any other business be conducted? We do not know of any business to be considered at the All Donaldson Stockholders of record as of the close of business on September Where do I find the voting results of the meeting? We will publish the voting results in a Form 8-K to be filed with the SEC within four business days of the meeting. How do I submit a Stockholder proposal? If you wish to include a proposal in the Company’s Proxy Statement for its Under our Bylaws, if you wish to nominate a Director or bring other business before the Stockholders at our
Who pays for the cost of proxy preparation and solicitation? Set forth below is information regarding persons known by the Company to own beneficially more than 5% of the outstanding Common Stock of the Company based on the number of shares of Common Stock outstanding on September
The following table shows information regarding the beneficial ownership of the Company’s Common Stock and information concerning deferred restricted stock units, deferred share units under stock option exercises and phantom stock units beneficially owned, as of September
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors and Officers to file initial reports of ownership and reports of changes in ownership with the SEC. To the Company’s knowledge, based on a review of copies of such forms and representations furnished to the Company during Fiscal The Bylaws of the Company provide that the Board of Directors shall consist of not less than 3 nor more than 15 Directors and that the number of Directors may be changed from time to time by the affirmative vote of a majority of the Directors. The Board of Directors currently consists of 11 Directors. Vacancies and newly created directorships resulting from an increase in the number of Directors may be filled by a majority of the Directors then in office and the Directors so chosen will hold office until the next election of the class for which such Directors shall have been chosen and until their successors are elected and qualified. Directors are elected for a term of three years with positions staggered so that approximately one-third of the Directors are elected at each Annual Meeting of Stockholders. The terms of Mr. Hoffman, Mr. Oberton and Mr. Wiehoff expire at the 2013 Annual Meeting of Stockholders. The and the Board of Directors Each of the nominees has agreed to serve as a Director if elected. The Board of Directors has no reason to believe that The Board of Directors recommends that Stockholders voteFORthe election of Mr. Information Regarding Directors The Director nominees and the Directors whose term in office will continue after the meeting have provided information about themselves in the following section. SEC rules require us to discuss briefly the specific experience, qualifications, attributes, or skills that led the Board to conclude that each Director nominee and Director should serve on our Board of Directors. This discussion is provided in a separate paragraph following each Director’s biography in thefollowing
Directors with Terms Expiring in 2013
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Directors with Terms Expiring in 2014 |
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F. Guillaume Bastiaens |
| Served as Vice Chairman (1998–2008) of Cargill, Inc., a provider of food, agricultural and risk management products and services, until his retirement in 2008. |
Directors with Terms Expiring in 2014 (continued)
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Janet M. Dolan |
| President of Act 3 Enterprises, a consulting services company, since 2005. Served as Chief Executive Officer (1999–2005) and President (1998–2005) of Tennant Company, a manufacturer of indoor and outdoor cleaning solutions and specialty coatings, until her retirement in 2005. Also a Director of The Travelers Companies, Inc. |
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Jeffrey Noddle |
| Served as Executive Chairman (2009–2010) of SUPERVALU INC., a food retailer and provider of distribution and logistics support services, until his retirement in 2010. Previously served as SUPERVALU’s Chairman and Chief Executive Officer (2002–2009). Also a Director of Ameriprise Financial, Inc. |
, and the Clorox Company. |
Directors with Terms Expiring in 2014(continued),
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Ajita G. Rajendra |
| President and Chief |
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Directors with Terms Expiring in 2015
Name | Principal Occupation and Business Experience | |
Andrew Cecere | Vice Chairman and Chief Financial Officer (2007) of U.S. Bancorp, a financial services provider. Previously, Vice Chairman, Wealth Management (2001–2007); Chief Financial Officer of the former U.S. Bancorp (2000–2001); and Vice Chairman of U.S. Bank (1999–2000). | |
William M. Cook | Chairman (2005), President, and Chief Executive Officer of the Company since 2004. Previously, Senior Vice President, International (2000–2004) and Chief Financial Officer (2001–2004); and Senior Vice President, Commercial and Industrial (1996–2000). Also a Director of IDEX Corporation and Valspar Corporation. |
Directors with Terms Expiring in 2015(continued)
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Admiral Paul David Miller | Served as Chairman (1999–2005) of Alliant Techsystems Inc. (ATK), an aerospace and defense company, until his retirement in 2005. Previously, Chief Executive Officer (1999–2003) and President (2000–2001). Prior to his retirement from the U.S. Navy following a 30 year career, Admiral Miller served as Commander-in-Chief, U.S. Atlantic Command and NATO Supreme Allied Commander-Atlantic. Also a Director of Teledyne Technologies, Incorporated and Huntington Ingalls Industries, Inc. | |
James J. Owens | President and Chief Executive Officer (2010) of H.B. Fuller Company, a leading global adhesives provider. Previously, Senior Vice President, Americas (2010) and Senior Vice President, North America (2008–2010). Also a Director of H.B. Fuller Company. | |
Jim Owens brings to the Board his 27 plus years of experience in global manufacturing businesses. He spent 22 years with National Starch’s adhesives business, a division of ICI (Imperial Chemical Industries Limited), in a variety of positions, including serving as Corporate Vice President and General Manager (2004–2008) and as Vice President and General Manager of the Europe/Middle East and Africa adhesives business. As President and CEO of H.B. Fuller Company, Jim has global leadership experience and public company Board experience. Jim also currently serves on the Board of Overseers of the Carlson School of Management at the University of Minnesota. Jim has a Bachelor’s degree in Chemical Engineering from the University of Delaware and an M.B.A. degree from The Wharton School, University of Pennsylvania. |
Board Oversight and Director Independence
Donaldson’s Board believes that a primary responsibility of the Board of Directors is to provide effective governance over Donaldson’s business. The Board selects the Chairman of the Board and the Chief Executive Officer and monitors the performance of senior management to whom it has delegated the conduct of the business. The Board has adopted a set of Corporate Governance Guidelines to assist in its governance, and the complete text of Donaldson’s Corporate Governance Guidelines is available on the Investor Relations page of our website atwww.donaldson.com under Corporate Governance.
Our Corporate Governance Guidelines provide that a significant majority of our Directors will be Non-Employee Directors who meet the independence requirements of the NYSE. The Corporate Governance Guidelines also require that our Corporate Governance, Audit, and Human Resources Committees be comprised entirely of Non-Employee Directors who meet all of the independence and experience requirements of the NYSE and SEC.
The Board has established the following independence standards consistent with the current listing standards of the NYSE for determining independence:
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| • | A Director will not be considered independent if, within the preceding three years: | |
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| The Director was an Employee of Donaldson, or an immediate family member of the Director was an Executive Officer of Donaldson; |
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| The Director or an immediate family member of the Director has received during any 12-month period more than $120,000 in direct compensation from us (other than Director and Committee fees and pension or other forms of deferred compensation for prior service to us); |
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| An Executive Officer of Donaldson was on the compensation committee of a company which, at the same time, employed the Director or an immediate family member of the Director as an Executive Officer; |
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| The Director was an Executive Officer or Employee of, or an immediate family member of the Director was an Executive Officer of, another company that does business with us and the annual revenue derived from that business by either company exceeds the greater of (i) $1,000,000 or (ii) 2% of the annual gross revenues of such company; or |
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| The Director or an immediate family member of the Director has been affiliated with or employed in a professional capacity by our independent registered public accounting firm. |
The Board has evaluated the transactions and relationships between each of our Non-Employee Directors and the Company, including those companies where Directors serve as an Officer. All transactions and relationships were significantly below the thresholds described above and all involved only the ordinary course of business purchase and sale of goods and services at companies where Directors serve as an Officer. Based on this review and the information provided in response to annual questionnaires completed by each independent Director regarding employment, business, familial, compensation, and other relationships with the Company and management, the Board has determined that every Director, with the exception of Bill Cook who is an Employee Director, (i) has no material relationship with Donaldson, (ii) satisfies all of the SEC and NYSE independence standards and our Board-approved independence standards and (iii) is independent. The Board also has determined that each member of its Corporate Governance, Audit, and Human Resources Committees is an independent Director.
Policy and Procedures RegardingProceduresRegarding Transactions with Related Persons
Our Board of Directors, upon the recommendation of the Corporate Governance Committee, has adopted a written Related Person Transaction Policy. This policy delegates to our Audit Committee responsibility for reviewing, approving, or ratifying transactions with certain “related persons” that are required to be disclosed under the rules of the SEC. Under the policy, a “related person” includes any of the Directors or Officers of the Company, certain Stockholders and members of their immediate family.
Our Related Person Transaction Policy applies to transactions that involve a related person where we are a participant and the related person has a material direct or indirect interest. Certain types of transactions have been evaluated and preapproved by the Board under the policy:
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| • | Any transaction in the ordinary course of business in which the aggregate amount involved will not exceed $120,000; |
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| • | Any transaction where the related person’s interest arises solely from being a Stockholder and all Stockholders receive the same benefit on a pro rata basis; and |
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| • | Any transaction with another company at which a related person’s only relationship is as an Employee, Director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of (i) $500,000 or (ii) 1% of that company’s or Donaldson’s total annual revenues. |
Our Corporate Governance Guidelines provide that the Board does not require the separation of the offices of Chairman of the Board and CEO. Our Board has the right to exercise its judgment to choose the Chairman as it deems best for the Company at any point in time. Currently, Bill Cook serves as both Chairman of the Board and CEO. Since the position of Chairman is not held by an independent Director, the Board has provided in the Corporate Governance Guidelines that it will appoint an independent Director to serve as the Lead Director. Currently Janet Dolan, the Chair of the Corporate Governance Committee, serves as the Lead Director. The Lead Director’s duties include coordinating the activities of the independent Directors, coordinating the agenda for and moderating executive sessions of the Board’s independent Directors, and facilitating communications between the other members of the Board. In performing these duties, the Lead Director is expected to consult with the Chairpersons of the appropriate Board Committees and solicit their participation in order to avoid diluting the authority or responsibilities of such Committee Chairperson.
The Board and its Corporate Governance Committee have carefully assessed the issue of a division of the responsibilities of Chairman and CEO and its application specifically to Donaldson and have determined that our current Board structure ensures a strong and independent Board of Directors and provides better governance and creation of long-term value for our Stockholders. Our Board consists of ten independent Directors all of whom have served in significant management and/or Board capacities at other public companies. Bill Cook is the only Employee Director on the Board. All of our Board Committees are restricted to only the independent Directors.
The Chairman and CEO is fully accountable to the Board, its Committees, and the Lead Director. This division of power is effective in ensuring that good principles of corporate governance will continue to be followed. The independent Directors meet in executive session at every Board and Committee meeting and have the authority to ensure that the proper balance of power, authority, and transparency is maintained in all aspects of governance at Donaldson. We believe our Board leadership structure effectively supports the risk oversight function of our Board.
Risk Oversight by Board of Directors
Our Board of Directors has responsibility for the oversight of risk management. The Board either as a whole or through its Committees, regularly discusses with management the Company’s risk assessments and risk management procedures and controls.
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| • | The Audit Committee has responsibility in its Charter to review the Company’s strategies, processes, and controls with respect to risk assessment and risk management and assists the Board in its oversight of risk management. |
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| • | The Human Resources Committee has responsibility in its Charter to review and assess risk with respect to the Company’s compensation arrangements and practices, including with respect to incentive compensation. |
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| • | The Corporate Governance Committee oversees risks associated with its areas of responsibility, including the risks associated with Director and CEO succession planning, Non-Employee Director compensation, and corporate governance practices. |
Our Board is kept abreast of the risk oversight efforts by its Committees through regular reports to our full Board by our Committee Chairs.
Meetings and Committees ofCommitteesof the Board of Directors
There were six meetings of the Board of Directors in Fiscal 2012.2013. Each Director attended at least 75% of the aggregate of all meetings of the Board and its Committees on which she or he served during the year. It also is our policy that Directors are expected to attend our Annual Meeting of Stockholders. Last year, all eleven individuals then serving as Directors attended the Annual Meeting of Stockholders.Stockholders, with the exception of Jack Grundhofer who was unable to attend. Mr. Grundhofer retired effective as of the date of the 2012 Annual Meeting after 15 years of distinguished service.
The Board of Directors has three Committees:
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| • | Audit Committee |
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Each of the Board Committees has a written charter, approved by the Board, establishing the authority and responsibilities of the Committee. Each Committee’s charter is posted on the Investor Relations page of our website atwww.donaldson.com under the “Governance” caption. The following tables provide a summary of each Committee’s key areas of oversight, the number of meetings of each Committee during the last fiscal year, and the names of the Directors serving on each Committee.
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• | Appoints and replaces the independent registered public accounting firm and oversees |
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• | Pre-approves all auditing services and permitted non-audit services to be performed by the independent auditor, including related fees. |
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• | Reviews with management and the independent auditor our annual audited financial statements and recommends to the Board whether the audited financial statements should be included in the Company’s Annual Report on Form 10-K. |
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• | Reviews with management and the independent auditor our quarterly financial statements and the associated earnings news releases. |
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• | Reviews with management and the independent auditor significant reporting issues and judgments relating to the preparation of our financial statements, including internal controls. |
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• | Reviews with management and the independent auditor our critical accounting policies and practices and major issues regarding accounting principles. |
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• | Reviews the Company’s strategies, processes, and controls with respect to risk assessment and risk management and assists the Board in its oversight of risk management. |
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• | Reviews the appointment, performance, and replacement of the senior internal audit executive and reviews the CEO’s and CFO’s certification of internal controls and disclosure controls. |
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• | Reviews the Company’s compliance programs and procedures for the receipt, retention, and handling of complaints regarding accounting, internal controls, and auditing matters. |
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Responsibilities |
| Number of Meetings in Fiscal | ||
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• | Reviews and approves the CEO’s compensation, leads an annual evaluation of the CEO’s performance, and determines the CEO’s compensation based on this evaluation. |
| Directors who serve on the Committee: | |
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• | Reviews and approves executive compensation plans and all equity-based plans. |
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• | Reviews and approves incentive compensation goals and performance measurements applicable to our Officers. |
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• | Reviews the Company’s compensation risk analysis. |
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• | Reviews and recommends that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement and Form 10-K. |
|
The Committee has the authority to retain independent compensation consultants to assist in the analysis of our executive compensation program. The Committee’s current practice is to engage an independent executive compensation consultant to conduct a complete review of our executive compensation program every three years. The Committee will also engage, at its discretion, an independent consultant more frequently if it determines there is a need. The Committee engaged Mercer, a nationally known consulting firm, in July 2013, to perform a review of our executive compensation program. In its capacity as a compensation consultant to the Committee, Mercer reports directly to the Committee and the Committee retains sole authority to retain and terminate the consulting relationship. In Fiscal 2013, Mercer was engaged to assist in the analysis of our director compensation. Mercer received approximately $19,000 in fees from us in Fiscal 2013 in connection with services related to director compensation. Mercer disclosed to the Committee other services that it provides to the Company. Our Asia Pacific region engaged Mercer in Fiscal 2013 as a compensation consultant. Mercer received approximately $40,000 in fees from our Asia Pacific region in Fiscal 2013 in connection with its provision of other compensation-related services. In addition, Mercer is affiliated with other companies whose businesses are unrelated to the provision of compensation-related consulting services, including providing actuarial and other pension related services. These affiliated companies have been engaged by management as the Company’s actuary since 2002. We paid these affiliated companies approximately $210,094 for such services in Fiscal 2013. All of the additional services performed by Mercer and its affiliated companies were approved by management and performed at the direction of management in the ordinary course of business. In assessing the independence of Mercer, the Committee considered the factors contained in the applicable SEC and NYSE rules, including the amount and nature of the additional consulting work provided to the Company by Mercer. The Committee concluded that no conflict of interest exists that would prevent Mercer from independently advising the Committee. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Responsibilities |
| Number of Meetings in Fiscal | ||
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• | Reviews and establishes the process for the consideration and selection of Director candidates and recommends Director candidates for election to the Board. |
| Directors who serve on the Committee: | |
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• | Reviews and recommends the size and composition of the Board. |
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• | Reviews and recommends the size, composition, and responsibilities of all Board Committees. |
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• | Reviews and recommends policies and procedures to enhance the effectiveness of the Board, including those in the Corporate Governance Guidelines. |
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• | Oversees the Board’s annual |
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• | Reviews and recommends to the Board the compensation paid to the independent Non-Employee Directors. |
|
Corporate GovernanceCorporateGovernance Guidelines
Our Board has adopted a set of Corporate Governance Guidelines to assist it in carrying out its oversight responsibilities. These guidelines address a broad range of topics, including Director qualifications, Director nomination processes, term limits, Board and Committee structure and process, Board evaluations, Director education, CEO evaluation, CEO and management succession and development planning, and conflicts of interest. The complete text of the guidelines is available on the Investor Relations page of our website atwww.donaldson.com under the Corporate Governance caption.
Code of Business ConductBusinessConduct and Ethics
All of our Directors and Employees, including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and other senior executives, are required to comply with our code of business conduct and ethics to help ensure that our business is conducted in accordance with the highest standards of legal and ethical behavior. Employees are required to bring any violations and suspected violations of the code to Donaldson’s attention through management, the Company’s Compliance Committee, the Company’s legal counsel, or by using our confidential compliance helpline. Our toll-free U.S. compliance helpline number is 888-366-6031. Information on accessing the helpline from our international locations is available atwww.donaldson.com.
The full text of our code of business conduct and ethics is posted on the Investor Relations page of our website atwww.donaldson.com under the Corporate Governance caption.
Board Composition andCompositionand Qualifications
Our Corporate Governance Committee oversees the process for identifying and evaluating candidates for the Board of Directors. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the Stockholders. General and specific guidelines for Director selection and qualification standards are detailed in the Corporate Governance Guidelines. The Corporate Governance Committee will consider nominations from Stockholders under these standards if the nominations are timely received as described in this Proxy Statement.
Director SelectionDirectorSelection Process
The Bylaws of the Company provide that the Board of Directors shall consist of not less than 3 nor more than 15 Directors and that the number of Directors may be changed from time to time by the affirming vote of a majority of the Directors. The Board of Directors has currently consistsestablished the number of 11 Directors butconstituting the entire Board has decided to decrease the size of the Board to 9 upon the expiration of Mr. Eugster’s and Mr. Grundhofer’s terms at the 2012 Annual Meeting of Stockholders.11. Vacancies and newly created Directorships resulting from an increase in the number of Directors may be filled by a majority of the Directors then in office and the Directors so chosen will hold office until the next election of the class for which such Directors shall have been chosen and until their successors are elected and qualified. Directors are elected for a term of three years with positions staggered so that approximately one-third of the Directors are elected at each Annual Meeting of the Stockholders. Based on a recommendation from the Corporate Governance Committee, each year the Board will recommend a slate of Directors to be presented for election at the Annual Meeting of Stockholders.
The Corporate Governance Committee will consider candidates submitted by members of the Board, Director search firms, executives and our Stockholders, and the Committee will review such candidates in accordance with our Bylaws, Corporate Governance Guidelines, and applicable legal and regulatory requirements. The Corporate Governance Committee’s process includes the consideration of the qualities listed in the Corporate Governance Guidelines, including that Directors should possess the highest personal and professional ethics, integrity, and values and be committed to representing the long-term interests of the Stockholders. The Corporate Governance Committee reviews and discusses Director candidates on a regular basis at its Committee meetings. In identifying and recommending candidates for nomination by the Board as a Director of Donaldson, the Corporate Governance Committee will consider appropriate criteria including current or recent experience as a Chairman of a Board, CEO or other senior Officer;executive, business expertise, and diversity factors. Diversity is meant to be interpreted broadly. It includes race, gender, and national origin and also includes differences of professional experience, global experience, education, and other individual qualities and attributes. The Committee will work periodically with one or more nationally recognized search firms to assist in identifying strong Director candidates and will seek candidates who are minorities and/or women. The Committee also will consider general criteria such as independence, ethical standards, a proven record of accomplishment, and the ability to provide valuable perspectives and meaningful oversight. The Committee will work periodically with one or more nationally recognized search firms to assist in identifying strong Director candidates. Candidates recommended by Stockholders are evaluated in accordance with the same criteria as other candidates and recommendations should be submitted by following the same procedures as required to formally nominate a candidate.
Our Bylaws provide that if a Stockholder proposes to nominate a candidate at the Annual Meeting of Stockholders, the Stockholder must give written notice of the nomination to our Corporate Secretary in compliance with the applicable deadline for submitting Stockholder proposals for the applicable Annual Meeting. The Stockholder must attend the meeting in person or by proxy. The Stockholder’s notice must set forth as to each nominee all information relating to the person whom the Stockholder proposes to nominate that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected). No Stockholders submitted Director nominations in connection with this year’s meeting.
Independent Director ExecutiveDirectorExecutive Sessions and Evaluations
The Chair of our Corporate Governance Committee currently is designated as Lead Director and presides over all meetings or executive sessions of the independent Directors. Our independent Directors meet in executive session without management present at each Board meeting. Likewise, all Board Committees regularly meet in executive session without management. The Board and each Committee conducted an evaluation of its performance in Fiscal 2012.2013.
Communications withCommunicationswith Directors
The Company’s compliance helpline is in place for our Employees and others to direct their concerns to the Audit Committee, on a confidential and anonymous basis, regarding accounting, internal accounting controls, and auditing matters.
In addition, we have adopted procedures for our Stockholders, Employees, and other interested parties to communicate directly with the members of the Board of Directors. You can communicate by writing to the Chair of the Audit Committee, the Chair of the Corporate Governance Committee, the independent Directors as a group, or the full Board, in the care of the office of the Company Secretary, Donaldson Company, Inc., MS 101, P.O. Box 1299, Minneapolis, MN 55440-1299.
Written communications about accounting, internal accounting controls, and auditing matters should be addressed to the Chair of the Audit Committee. Please indicate if you would like your communication to be kept confidential from management. The procedures for communication with the Board of Directors also are posted on the Investor Relations page of our website atwww.donaldson.com under Corporate Governance.
Audit Committee Expertise;Complaint-Handling Procedures
In addition to meeting the independence requirements of the NYSE and the SEC, all members of the Audit Committee have been determined by the Board to meet the financial literacy requirements of the NYSE’s listing standards. The Board also has designated John P. Wiehoff and Andrew Cecere as the Audit Committee financial expertexperts as defined by SEC regulations.
In accordance with federal law, the Audit Committee has adopted procedures governing the receipt, retention, and handling of complaints regarding accounting and auditing matters. These procedures include a means for Employees to submit concerns on a confidential and anonymous basis, through the Company’s compliance helpline.
DIRECTOR COMPENSATIONDIRECTORCOMPENSATION
Annual compensation for our Non-Employee Directors is designed to attract and retain highly qualified Non-Employee Directors and to provide equity-based compensation in order to align Director compensation with the long-term interests of our Stockholders. Directors are subject to a stock ownership requirement which requires them to own shares equal to five times their annual retainer within five years of their election as a Director. As of the end of Fiscal 2012,2013, all Non-Employee Directors who had been a Director for five years had met their ownership requirements. Effective January 1, 2013, Non-Employee Director compensation is comprised of annual retainers meeting fees, and an annual stock option grant. Prior to January 1, 2013, Non-Employee Director compensation also included meeting fees.
Our Corporate Governance Committee (“CG Committee”) assists the Board of Directors in providing oversight on Director compensation. The CG Committee oversees, reviews, and reports to the Board on Director compensation. The CG Committee annually reviews competitive market data for Non-Employee Director compensation and makes recommendations to the Board of Directors for its approval. The CG Committee is assisted in performing its duties by our Human Resources Department, and when needed, an independent outside executive compensation consultant. The CG Committee engaged Mercer to conduct a review of the Non-Employee Director compensation program during Fiscal 2013. The information was presented to the CG Committee at the July 2013 CG Committee meeting.
During Fiscal 2012, aIn their review, Mercer provided information regarding market analysis was completed by our Human Resources Departmentpractices and reviewed by the Committee. This review consisted of an analysis oftrends and analyzed competitive market data from a selected peer group of companies. ThisThe peer group wasis consistent with the peer group usedMercer is using for the executive compensation review (seeFiscal 2014 Executive Compensation review. The following changes have been made to the Fiscal 2013 peer group that is listed in the Compensation Process section of the Compensation Discussion and AnalysisAnalysis:
Peer Companies removed from the Fiscal 2013 peer group:
Federal Signal Corporation | ||
Graco Inc. | ||
Pentair, Inc. | ||
Standard Motor Products, Inc. |
Peer Companies added to the Fiscal 2013 peer group:
Flowserve Corporation | ||
Gardner Denver Inc. | ||
ITT Corporation | ||
Rexnord Corporation | ||
Nordson Corporation | ||
Trimas Corporation |
Overall, Mercer’s review showed that our director compensation program is aligned with market trends. Cash compensation is below the 25th percentile of the peer group. Equity compensation and total direct compensation are above the 75th percentile of the peer group. Mercer presented items for additional details). In reviewing this dataconsideration and market trends,recommended changes to elements of our Director compensation. Based on these recommendations, the CG Committee approved the changes to our Director compensation program which are described below. These changes will become effective January 1, 2013.2014.
Non-Employee Directors receive an annual retainer of $38,000. Thirty percent$53,000. $15,000 of the annual retainer is automatically deferred into a deferred stock account. The number of shares of stock deferred is equal to the amount of the retainer deferred divided by the most recent closing stock price on the date of the retainer payment, which is January 1st.1st. The remainder of the retainer is paid in cash unless the Director elects, prior to the year the retainer is paid, to defer all or a portion of the remaining retainer into the Donaldson Company, Inc. Compensation Plan for Non-Employee Directors.
Changes for 2013.The A Non-Employee Director who is newly appointed to the Board during the year will receive a prorated annual retainer is being increased from $38,000 to $53,000. The Directors will no longer receive Board meeting fees of $2,500 per meeting. $15,000based on the effective date of the annual retainer will be automatically deferred into a deferred stock account as described above. The remainder of the retainer is paid in cash unless the Director elects, priorDirector’s election to the year the retainer is paid, to defer all or a portion of the remaining retainer into the Donaldson Company, Inc. Compensation Plan for Non-Employee Directors.Board.
The Chairs of the Board Committees receive an additional annual retainer as follows:
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|
Changes for 2013.The annual retainers for the Chairs of the Board Committees are increasing to reflect that there will no longer be meeting fees paid for Committee attendance. The annual retainer for the Corporate Governance Committee Chair is also being increased to recognize that the Corporate Governance Committee Chair is also the Lead Director for the Board. The new retainers are:
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|
|
| • | $22,000 for the Audit Committee Chair |
|
|
|
| • | $11,500 for the Human Resources Committee Chair |
|
|
|
| • | $11,500 for the Corporate Governance Committee Chair |
Also effective January 1, 2013, an Changes for 2014.Based on Mercer’s Director compensation review, the CG Committee and Board approved increasing the annual retainer is being added for the Human Resources and Corporate Governance Committee membershipChairs to recognize that meeting fees will no longer be paid. The retainers approved for$15,000.
Board Committee membership are as follows:members receive the following additional annual retainers:
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|
| • | $12,000 for Audit Committee membership |
|
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|
| • | $3,000 for Human Resources Committee membership |
|
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|
| • | $2,000 for Corporate Governance Committee membership |
These additional retainers are also paid in cash unless the Director elects to defer all or a portion of the retainer into the Donaldson Company, Inc. Compensation Plan for Non-Employee Directors.
For the period from July 1, 2012 through December 31, 2012, Non-Employee Directors receivereceived $2,500 for each Board meeting attended. Members of the Board Committees receivereceived the following meeting fees for each Committee meeting:meeting attended:
| • | $1,500 for Audit Committee meetings |
|
|
|
| • | $1,000 for Human Resources Committee meetings |
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| • | $1,000 for Corporate Governance Committee meetings |
Non-Employee Directors cancould elect to receive the meeting fees in cash, deferred cash, or deferred stock. For those electing to receive deferred stock for their meeting fees, shares arewere deferred into the deferred stock account effective December 31st and June 30th of each year.31st. The number of shares of stock deferred isinto the deferred stock account was equal to the amount of the meeting fees divided by the closing stock price on the effective date or on the previous business day if the effective date falls on a holiday or weekend.December 31st.
Changes for 2013.Meeting Effective January 1, 2013, meeting fees willare no longer be paid for Board or Committee meeting attendance.
The Company’s Non-Qualified Stock Option Program for Non-Employee Directors provides an annual grant of a non-qualified stock option to purchase 7,200 (adjusted to 14,400 shares due to the March 2012 Company two-for-one stock split) shares of Common Stock to each Non-Employee Director who is a member of the Board on the first business day following January 1st of each year. The annual grant date in Fiscal 20122013 was January 3, 2012.2, 2013. The grant price is the closing stock price on the date of grant. The options are subject to a 3-year vesting schedule so that one-third of the shares vest on the first year anniversary, one-third vest on the second year anniversary, and one-third vest on the third year anniversary, and the options have a ten-year term. The option awards granted from 1998 through 2004 includeincluded a “reload option” that has the same features as the reload options granted to Officers. The reload grant features are described in the Compensation and Discussion Analysis section under the Stock Option description.
A Non-Employee Director who is newly appointed to the Board during the year will receive a prorated stock option grant based on the number of completed months the Director is on the Board during the year.
Changes for 2013.2014.Due to the March 23, 2012 two-for-one Company stock split, Based on Mercer’s Director compensation review, the Committee approved increasingchanging the annual stock option grant to 14,400from a fixed number of shares to reflecta fixed value. The annual stock option grant will be based on a $140,000 fixed value. This change is designed to maintain a stable value of equity grant for our Director compensation. The number of options granted will be determined by dividing the split.fixed value of $140,000 by the Black Sholes value as of the date of the grant (the shares will be rounded to the nearest 100 shares). This change will be effective for the stock option granted in January 2014.
The Company sponsors the Donaldson Company, Inc. Compensation Plan for Non-Employee Directors, a non-qualified deferred compensation plan. The Planplan permits the Directors to elect to receive their annual retainers and meeting fees (prior to January 1, 2013) in one or more of the following methods:
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| • | In cash on a current basis; |
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| • | In cash on a deferred basis (deferred cash account); or |
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| • | In Company stock on a deferred basis (deferred stock account). |
Annual retainers are paid on January 1st.1st. As predetermined by the Board, the number of shares deferred into the deferred stock account for the annual retainers is equal to the amount of the retainer deferred divided by the closing stock price on the previous business day.
Meeting fees arewere paid on December 31st and June 30th.31, 2012. Effective January 1, 2013, meeting fees are no longer paid for Board or Committee meeting attendance. As determinedpredetermined by the Board, the number of shares of stock deferred into the deferred stock account for meeting fees iswas equal to the amount of the meeting fees elected to be deferred divided by the closing stock price on December 31st and June 30th or the previous business day if December 31st or June 30th is a holiday or weekend.31st.
Any amount deferred into a deferred cash account prior to January 1, 2011 will be credited with interest at a rate equal to the ten-year Treasury Bond rate plus two percent. Effective for deferrals made after December 31, 2010, the interest rate will be the ten-year Treasury Bond rate.
The amounts deferred into a deferred stock account will be credited with any quarterly dividends paid on the Company’s Common Stock. The Company contributes shares in an amount equal to the deferred stock accounts to a trust and a Director is entitled to direct the trustee to vote all shares allocated to the Director’s account. The Common Stock will be distributed to each Director following retirement pursuant to the Director’s deferral payment election. The trust assets remain subject to the claims of the Company’s creditors, and become irrevocable in the event of a “Change in Control” as defined under the 1991 Master Stock Compensation Plan, the 2001 Master Stock Incentive Plan, and the 2010 Master Stock Incentive Plan.
Fiscal 20122013 Director Compensation
The Fiscal 20122013 compensation for our Non-Employee Directors is shown in the following table. Note that all prior year shares and per share amounts in theAndrew Cecere was appointed as a Director Compensation narratives and tables reflect the impact of the Company’s two-for-one stock split that occurred during the third quarter ofCompany effective September 27, 2013 and therefore did not receive any compensation in Fiscal 2012.2013.
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Name |
| Fees |
| Stock |
| Option |
| Change in |
| All Other |
| Total |
|
| Fees |
| Stock |
| Option |
| Change in |
| All Other |
| Total |
| ||||||||||||
F. Guillaume Bastiaens |
| 37,620 |
| 19,335 |
| 139,506 |
| 0 |
| 5,702 |
| 202,163 |
|
| 14,758 |
| 58,028 |
| 148,202 |
| 0 |
| 7,306 |
| 228,294 |
| ||||||||||||
Janet M. Dolan |
| 48,275 |
| 11,437 |
| 155,772 |
| 0 |
| 3,109 |
| 218,593 |
|
| 70,083 |
| 15,008 |
| 169,473 |
| 0 |
| 3,984 |
| 258,548 |
| ||||||||||||
Jack W. Eugster |
| 8,400 |
| 63,581 |
| 170,277 |
| 1,349 |
| 8,224 |
| 251,831 |
| |||||||||||||||||||||||||
John F. Grundhofer |
| 30,579 |
| 19,607 |
| 139,506 |
| 0 |
| 1,178 |
| 190,870 |
| |||||||||||||||||||||||||
Michael J. Hoffman |
| 0 |
| 58,017 |
| 139,506 |
| 0 |
| 0 |
| 197,523 |
|
| 0 |
| 68,504 |
| 134,263 |
| 0 |
| 0 |
| 202,767 |
| ||||||||||||
Paul David Miller |
| 25,000 |
| 37,989 |
| 139,506 |
| 0 |
| 0 |
| 202,495 |
|
| 25,000 |
| 53,037 |
| 134,263 |
| 0 |
| 0 |
| 212,300 |
| ||||||||||||
Jeffrey Noddle |
| 50,550 |
| 13,956 |
| 205,168 |
| 0 |
| 0 |
| 269,674 |
|
| 70,063 |
| 15,008 |
| 134,263 |
| 0 |
| 0 |
| 219,334 |
| ||||||||||||
Willard D. Oberton |
| 34,200 |
| 22,793 |
| 139,506 |
| 0 |
| 0 |
| 196,499 |
|
| 27,938 |
| 55,763 |
| 134,263 |
| 0 |
| 0 |
| 217,964 |
| ||||||||||||
James J. Owens |
| 39,041 |
| 11,706 |
| 105,245 |
| 0 |
| 0 |
| 155,992 |
| |||||||||||||||||||||||||
Ajita G. Rajendra |
| 0 |
| 67,006 |
| 139,506 |
| 0 |
| 0 |
| 206,512 |
|
| 0 |
| 77,995 |
| 134,263 |
| 0 |
| 0 |
| 212,258 |
| ||||||||||||
John P. Wiehoff |
| 0 |
| 67,994 |
| 139,506 |
| 0 |
| 0 |
| 207,500 |
|
| 0 |
| 91,000 |
| 134,263 |
| 0 |
| 0 |
| 225,263 |
|
|
|
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|
| |
(1) | The column shows the portion of the | |
|
| |
(2) | This column represents the aggregate grant date fair value of deferred stock awards granted during Fiscal |
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| Retainer Fees(a) |
| December 31, 2011 |
| June 30, 2012 |
|
| Retainer Fees(a) |
| Meeting Fees(b) |
| ||||||||||||||||||||
Name |
| Deferred |
| Grant Date |
| Deferred |
| Grant Date |
| Deferred |
| Grant Date |
|
| Deferred Stock |
| Grant Date Fair Value ($) |
| Deferred Stock |
| Grant Date Fair Value ($) |
| ||||||||||
F. Guillaume Bastiaens |
| 568 |
| 19,335 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 1,767 |
| 58,028 |
| 0 |
| 0 |
| ||||||||||
Janet M. Dolan |
| 336 |
| 11,437 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 457 |
| 15,008 |
| 0 |
| 0 |
| ||||||||||
Jack W. Eugster |
| 1,162 |
| 39,554 |
| 250 |
| 8,510 |
| 465 |
| 15,517 |
| |||||||||||||||||||
John F. Grundhofer |
| 400 |
| 13,616 |
| 176 |
| 5,991 |
| 0 |
| 0 |
| |||||||||||||||||||
Michael J. Hoffman |
| 1,116 |
| 37,989 |
| 308 |
| 10,484 |
| 286 |
| 9,544 |
|
| 1,767 |
| 58,028 |
| 319 |
| 10,476 |
| ||||||||||
Paul David Miller |
| 1,116 |
| 37,989 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 1,615 |
| 53,037 |
| 0 |
| 0 |
| ||||||||||
Jeffrey Noddle |
| 410 |
| 13,956 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 457 |
| 15,008 |
| 0 |
| 0 |
| ||||||||||
Willard D. Oberton |
| 530 |
| 18,041 |
| 70 |
| 2,383 |
| 71 |
| 2,369 |
|
| 1,614 |
| 53,004 |
| 84 |
| 2,759 |
| ||||||||||
James J. Owens |
| 324 |
| 11,706 |
| 0 |
| 0 |
| |||||||||||||||||||||||
Ajita G. Rajendra |
| 1,116 |
| 37,989 |
| 426 |
| 14,501 |
| 435 |
| 14,516 |
|
| 2,070 |
| 67,979 |
| 305 |
| 10,016 |
| ||||||||||
John P. Wiehoff |
| 1,118 |
| 38,057 |
| 454 |
| 15,454 |
| 434 |
| 14,483 |
|
| 2,283 |
| 74,974 |
| 488 |
| 16,026 |
|
|
|
| |
|
| ||
a. | The Fiscal | ||
|
| ||
b. | The Fiscal |
|
|
(3) | The following table lists for each Director (a) the deferred stock awards that are vested and will be paid out at the deferral election date made by the Director as of July 31, |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred Stock |
| Restricted Stock |
| Total |
|
| Deferred Stock |
| Restricted Stock |
| Total |
| ||||||
Mr. Bastiaens |
| 18,028 |
| 17,820 |
| 35,848 |
|
| 20,017 |
| 17,820 |
| 37,837 |
| ||||||
Ms. Dolan |
| 50,973 |
| 9,716 |
| 60,689 |
|
| 52,028 |
| 9,716 |
| 61,744 |
| ||||||
Mr. Eugster |
| 65,801 |
| 25,700 |
| 91,501 |
| |||||||||||||
Mr. Grundhofer |
| 54,611 |
| 3,680 |
| 58,291 |
| |||||||||||||
Mr. Hoffman |
| 21,441 |
| 0 |
| 21,441 |
|
| 23,791 |
| 0 |
| 23,791 |
| ||||||
Mr. Miller |
| 26,622 |
| 0 |
| 26,622 |
|
| 28,558 |
| 0 |
| 28,558 |
| ||||||
Mr. Noddle |
| 44,030 |
| 0 |
| 44,030 |
|
| 45,004 |
| 0 |
| 45,004 |
| ||||||
Mr. Oberton |
| 6,701 |
| 0 |
| 6,701 |
|
| 8,487 |
| 0 |
| 8,487 |
| ||||||
Mr. Owens |
| 325 |
| 0 |
| 325 |
| |||||||||||||
Mr. Rajendra |
| 3,756 |
| 0 |
| 3,756 |
|
| 6,190 |
| 0 |
| 6,190 |
| ||||||
Mr. Wiehoff |
| 30,447 |
| 0 |
| 30,447 |
|
| 33,591 |
| 0 |
| 33,591 |
|
|
|
(4) | This column represents the aggregate grant date fair value of stock option awards to purchase 14,400 shares of Common Stock granted during Fiscal |
|
|
| The amount included in this column for each Non-Employee Director includes |
Mr. Owens received a prorated annual stock option grant of 10,800 shares effective April 1, 2013 based on his appointment to the Board on March 22, 2013. The exercise price for this option was the closing market price of the stock on the grant date. | |
|
|
| As of July 31, |
|
|
|
|
|
|
|
| ||
|
| Exercisable |
| Unexercisable |
| ||||
Mr. Bastiaens |
|
|
|
|
|
|
| ||
Ms. Dolan |
|
|
|
|
|
| |||
|
|
| |||||||
|
|
|
| ||||||
Mr. Hoffman |
|
|
|
|
|
|
| ||
Mr. Miller |
|
|
|
|
|
|
| ||
Mr. Noddle |
|
|
|
|
|
|
| ||
Mr. Oberton |
|
|
|
|
|
| |||
Mr. Owens | 0 shares | 10,800 shares |
| ||||||
Mr. Rajendra |
|
|
|
|
|
|
| ||
Mr. Wiehoff |
|
|
|
|
|
|
|
|
|
(5) |
|
| This column represents the amount of cash dividends paid on previously granted restricted stock awards last made to Non-Employee Directors in 1997. |
The Human Resources Committee (“Committee”) of the Board of Directors of Donaldson, acting in its capacity as the Compensation Committee of the Company, has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for the fiscal year ended July 31, 2012.2013.
Submitted by the Human Resources Committee
Jeffrey Noddle, ChairF. Guillaume BastiaensMichael J. HoffmanWillard D. ObertonAjita G. RajendraJohn P. Wiehoff
Jeffrey Noddle, Chair |
F. Guillaume Bastiaens |
Michael J. Hoffman |
Ajita G. Rajendra |
Compensation Discussion and Analysis
Executive Summary
The Compensation Discussion and Analysis provides information on the Company’s executive compensation program and the compensation awarded for Fiscal 20122013 to the following Executive Officers (our “Named(“Named Executive Officers” or “NEOs”):
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|
| • | William Cook, Chairman, President and Chief Executive Officer |
|
|
|
| • | James Shaw, Vice President and Chief Financial Officer |
|
|
|
| • | Tod Carpenter, Senior Vice President, Engine Products |
|
|
|
| • | Charles McMurray, Senior Vice President and Chief Administrative Officer |
|
|
|
| • | Jay Ward, Senior Vice President, Industrial Products |
|
|
This Compensation Discussion and Analysis should be reviewed in conjunction with the tables and narratives that follow it. Note that all prior year shares and per share amounts in the Compensation Discussion and Analysis and the narratives and tables reflect the impact of the Company’s two-for-one stock split that occurred during the third quarter of Fiscal 2012.
Principles and Objectives of the Company’s Executive Compensation Program
The Committee establishes and administers ourthe Company’s executive compensation program. The key principles of ourthe executive compensation strategy include:
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| • | Aligning |
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| • | Emphasizing Company financial performance by linking a significant portion of Executive Officer compensation to the actual financial performance of the Company |
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|
| • | Providing significant amounts of equity-based compensation in order to tie |
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| • | Targeting total Executive Officer compensation by comparison to proxy disclosure data for our established peer group (as recommended by an outside independent consultant) and published market survey data |
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|
| • | Requiring significant levels of Company stock ownership by |
The Company’s objective is to create long-term Shareholder value through superior share price appreciation. Our executive compensation program is designed to support this objective and ensure that the interests of our Executive Officers (“Officers”) are properly aligned with our Shareholders’ long-term interests. Our program emphasizes variable performance-based compensation that promotes the achievement of both short-term and long-term business objectives which are aligned with the Company’s business strategy, and rewards performance when those objectives are actually
achieved. The mix of base salary, annual cash incentives, and long-term incentives is designed to ensure the long-term growth of the Company while delivering strong annual results and returnsreturn on investment (ROI). We believe our program has effectively contributed to our Company’s strong sales, earnings growth, and ROI over the past 2324 years.
The key objectives of ourthe executive compensation program include:
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|
|
| • | Aligning the interests of our Officers with the long-term interests of our Shareholders |
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|
|
| • | Providing competitive pay which enables us to attract, retain, reward, and motivate top leadership talent |
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|
| • | Consistently increasing Shareholder value |
The Committee believes the executive compensation program assists the Company in retaining a strong executive leadership team which works together to create maximum Shareholder value. Our NEOs also have high stock ownership requirements, ranging from three to ten times base salary, which further aligns the interests of our NEOs with the long-term interests of our Shareholders.
Fiscal 20122013 Financial Performance
Our Company’s financial performanceDuring Fiscal 2013, we experienced challenges in both our Engine and Industrial Products segments with flat to declining end market conditions in many of our Engine Products’ OEM businesses in the U.S. and Asia and in most of our Industrial Products’ businesses globally. We also experienced a period of inventory destocking by our Customers. These factors impacted our sales results for Fiscal 2012 was strong.2013. We were able to quickly adjust our variable costs in response to this slowdown and deliver the second best earnings per share (EPS) in the Company’s history despite our decreased sales levels. Some of our key business results included:
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|
| • | Net Sales of |
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|
|
| • | Operating Income Percent of |
|
|
|
| • |
|
|
|
|
| • |
|
• | ROI of |
Fiscal 20122013 Pay Implications
Our financial results directly impacted the compensation earned by our NEOs for Fiscal 2012.2013. Our Fiscal 20122013 annual cash incentive was structured so that actual compensation received by our NEOs was aligned with Company performance based on our key financial metrics of EPS, net sales, operating income percentage (net income percentage for our CFO), operating income (net income for our CFO), and ROI. As a resultoutlined above, the Company’s Fiscal 2013 performance resulted in our key metrics falling short of our strongFinancial Plan and therefore our Fiscal 2012 performance as outlined above, our2013 annual cash incentive payouts for Fiscal 2012our NEOs paying out below target. The payouts for our NEOs ranged between 120.1%16% and 157.8%32% of target.
Our Fiscal 20122013 long-term incentives were designed to directly link our NEOs’ compensation to our longer term financial success. Our long-term incentives for Fiscal 20122013 consisted of stock options and our Long-Term Compensation Plan. The stock options granted to our NEOs for Fiscal 20122013 will only provide value to our NEOs if our Company’s stock price appreciates over time. Payouts under our Long-Term Compensation Plan were based on the Company’s achievement of ROI and net sales growth financial objectives over a three-year cycle. For the three-year cycle beginning August 1, 2010 and ending July 31, 2012,2013, our average net sales growth was 10.0%8.9% and our average ROI over that period was 20.5%22.0%. These achievements resulted in payouts under the Long-Term Compensation Plan for our NEOs that ranged from 81.3%98% to 140.7%113% of target.
2011 Say-on-Pay Results
At our 2011 Annual Meeting, our Shareholders voted (with over 60% of the votes cast) to conduct an advisory vote on our executive compensation once every three years.
At our 2011 Annual Meeting, our Shareholders had the opportunity to provide an advisory vote on the compensation for our NEOs. Over 91% of the votes cast by our Shareholders voted in favor of our executive compensation proposal. The Committee believes that this strong support by our Shareholders of our approach to executive compensation reinforces the overall philosophy and structure of our program and confirms that it is in alignment with the long-term interests of our Shareholders.
In addition, at our 2011 Annual Meeting, our Shareholders voted (with over 60% of the votes cast) to conduct anOur next advisory vote on the compensation for our executive compensation once every three years. Therefore, our next advisory voteNEOs will be held at our 2014 Annual Meeting.
Conclusion
Our executive compensation program provides incentives to attain strong financial performance and to ensure alignment with our Shareholders’ long-term interests. The Committee believes that our executive compensation program, with its continued strong emphasis on performance-based compensation and stock ownership, properly motivates our Officers to produce strong returns for our Shareholders and to create Shareholder value. Additionally, the Committee believes that in challenging financial years, such as Fiscal 2013, our lower annual cash incentive payout levels appropriately reflect our Company’s actual performance.
Compensation Process
The Committee assists the Board of Directors in providing oversight on executive compensation. The Committee reviews and approves our overall compensation philosophy, strategy, and policies. The Committee annually reviews and approves all compensation for our Officers. As part of that review, the Committee takes into account competitive market analysis and recommendations by our CEO, our Human Resources Department, and an independent compensation consultant. For more information on the Committee, refer to the “MeetingsMeetings and Committees of the Board of Directors”Directors section of this Proxy Statement.
Compensation Consultant
The Committee has the authority to retain independent compensation consultants to assist in the analysis of our executive compensation program. The Committee’s current practice is to engage an independent executive compensation consultant to conduct a complete review of our executive compensation program every three years. The Committee will also engage, at its discretion, an independent consultant more frequently if it determines there is a need. The Committee is also assisted in performing its duties by the CEO and our Human Resources Department.
In May 2010, the Committee engaged Frederic W. Cook &Co.& Co., Inc. (“Frederic Cook”), an executive compensation consulting firm, to performperformed a complete review of our executive compensation program. Then in July 2013 the Committee engaged Mercer, a nationally known consulting firm, to perform an updated review of our executive compensation program. Mercer disclosed to the Committee the other services that it provides to the Company. Mercer has been engaged by management as the Company’s actuary since 2002. The Company also engaged Mercer in Fiscal 2013 as a compensation consultant for our Asia Pacific region. In itsassessing the independence of Mercer, the Committee considered the factors contained in the applicable SEC and NYSE rules, including the amount and nature of the additional consulting work provided to the Company by Mercer and concluded that no conflict of interest exists that would prevent Mercer from independently advising the Committee.
Mercer will present the results of their review, Frederic Cook provided information regarding market practices and trends, and made specific recommendations forany recommended changes to plan designs and policies consistent with the philosophies and objectives of our executive compensation program. As a result, the Committee made changes to specific compensation elements, which were implemented during Fiscal 2010 and Fiscal 2011.
The next full review of our executive compensation program with an outside compensation consultant will be completed during Fiscal 2013.to the Committee at its September 2013 meeting for its consideration as part of its oversight and approval of executive compensation.
Competitive Market
During Fiscal 2012,2013, the market analysis of our executive compensation was completed by the Human Resources Department and reviewed by the Committee. This annual review consisted of a market review of our program against a peer group of 24 companies. This peer group was established in Fiscal 2010;2010 and is reviewed by the Committee reviews the peer group annually. The peer group consists of companies with median revenues approximating the Company’s revenue. This peer group was intended to be representative of the market in which the Company competes for executive talent and consists of the following 24 companies:
|
|
|
| ||
| Actuant Corporation | Hubbell Inc. | Roper Industries | ||
| AMETEK, Inc. | IDEX Corporation | Snap-On Inc. | ||
| Briggs & Stratton Corporation | Kennametal Inc. | Standard Motor Products, Inc. | ||
| CLARCOR Inc. | Modine Manufacturing Co. |
| The Timken Company | |
| Crane Company | Pall Corporation |
| Toro Company | |
| Federal Signal Corporation | Pentair, Inc. |
| Valspar Corporation | |
| H.B. Fuller Company | Polaris Industries, Inc. |
| Watts Water Technologies, Inc. | |
| Graco Inc. | Regal-Beloit Corporation |
|
The Committee also reviewed market data for each Officer position using published survey data from Towers Watson and Hewitt Associates.Aon Hewitt. This information was used to inform the Committee of competitive pay practices and to help establish target base salary, incentive targets, and total compensation for our Officers. Base salary is generally targeted at the median of the peer group with performance-based incentives generally targeted at the 60th60th to 65th65th percentile of the peer group.
Compensation Mix at Target
It is the intention of the Committee and a key principle of our executive compensation program that a significant portion of an Officer’s total direct compensation be performance-based and that the portion of performance-based compensation should increase by level of position in the Company. For Fiscal 2012,2013, the performance-based portion of total target direct compensation was approximately 75% for our CEO, 70% for Senior Vice Presidents, and 60% for Vice Presidents.
The Company’s Fiscal 20122013 results were strongimpacted by the decline in sales and EPS and resulted in payouts of the annual cash incentive to our NEOs abovebelow target. The Company’s Long-Term Compensation Plan payouts to the NEOs for the three-year cycle concluding in Fiscal 20122013 ranged from 81.3%98% to 140.7%113% of target. As a result, actual total direct compensation paid to our NEOs for Fiscal 20122013 was abovebelow the target levels:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer |
| Target Total Direct |
| Actual Total Direct |
|
| Target Total Direct |
| Actual Total Direct |
| ||||
William Cook |
| $ | 3,607,518 |
| $ | 4,674,647 |
|
| $ | 3,449,798 |
| $ | 3,006,173 |
|
James Shaw |
| $ | 511,285 |
| $ | 547,970 |
|
| $ | 677,337 |
| $ | 435,656 |
|
Tod Carpenter |
| $ | 855,486 |
| $ | 893,136 |
|
| $ | 957,755 |
| $ | 779,919 |
|
Charles McMurray |
| $ | 1,060,633 |
| $ | 1,247,113 |
|
| $ | 1,019,863 |
| $ | 985,512 |
|
Jay Ward |
| $ | 1,120,129 |
| $ | 1,435,234 |
|
| $ | 997,035 |
| $ | 855,991 |
|
|
|
|
|
| |
* | Total Direct Compensation consists of base salary, annual cash incentive for Fiscal |
Executive Compensation Program Elements
The primary elements of our executive compensation program for Fiscal 20122013 were:
|
|
|
| • | Base Salary |
|
|
|
| • | Annual Cash Incentive |
|
|
|
| • | Long-Term |
|
|
|
| • | Benefits |
|
|
|
| • | Change in Control |
The Committee believes each compensation element is supported by the principles and objectives described previously in the Principles and Objectives of the Company’s Executive Compensation Program section.
Base Salary
The base salaries paid to our Officers are designed to provide a market competitive level of compensation for each Officer based on position, scope of responsibility, business and leadership experience, and individual performance. Base salaries are the least variable element of compensation and are not subject to the Company’s financial performance. Base salaries are generally targeted at the 50th percentilemedian of our peer group. The Committee reviews the Officers’ base salaries annually and may adjust them based on market competitiveness and individual performance.
The Committee reviewed the base salary for our CEO at its December 20112012 Committee meeting. Based on the market analysis completed by our Human Resources Department, the Committee adjusted the CEO’s base salary effective January 1, 20122013 from $824,300$875,000 to $875,000,$920,000, which was a 6.2%5.1% increase. As of January 1, 2012, his base salary is approximately 3% above the market median of the peer group.
During Fiscal 2012, there was a shift in job responsibilities for our other NEOs. The2013 the Committee also reviewed the base salaries of each of the other NEOs. Based on the market analysis completed by our Human Resource Department and recommendations from our CEO, the Committee approved the following base salary increases for our NEOs:
|
|
|
| • |
|
|
|
|
| • | Mr. Carpenter, |
|
|
|
| • | Mr. McMurray, |
|
|
|
| • | Mr. Ward, |
�� Annual Cash Incentive
The annual cash incentive award is designed to reward Officers for their contributions toward the Company’s achievement of specific goals and to link the interests of our Officers with the Company’s Board approved Financial Plan. This incentive compensation element focuses attention on the Company’s actual financial performance and provides a significant financial performance-based variable component of our total compensation package.
Each year, the Committee establishes the annual cash incentive target opportunities as a percentage of base salary. For Fiscal 2012,2013, based on our peer group market data, the annual cash incentive target opportunity for our NEOs ranged from 40%48% to 100% of base salary at target, based on position. If maximum performance had been achieved, the payouts for our NEOs would have ranged from 80%97% to 200% of base salary.
Mr. VerHage retired on October 31, 2011 and was not eligible for a Fiscal 2012 Annual Cash Incentive payment.
Performance Goals.Goals. Predetermined performance measures and goals are set by the Committee each year. For Fiscal 2012,2013, the Committee had lengthy discussions to determine appropriate performance measures. The annual cash incentive awards are calculated based on predetermined ranges for the achievement of the established performance measures. The goals reflect our strong performance-based philosophy, and the Committee believes the measures chosen are key to our financial success.
For Fiscal 2012,2013, the predetermined financial performance measures and the percentage of the incentive based on target performance of these measures as established by the Committee for the NEOs were as follows:
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|
|
Performance Measure |
| CEO |
| CFO |
| Other |
|
| CEO |
| CFO |
| Other |
| ||||||
Earnings per Share (EPS) |
| 50 | % |
| 40 | % |
| 40 | % |
| 50 | % |
| 40 | % |
| 40 | % | ||
Operating Income Percent of Sales |
| 10 | % |
| — |
| 20 | % |
| 10 | % |
| — |
| 15 | % | ||||
Operating Income |
| 5 | % |
| — |
| 10 | % | ||||||||||||
Net Income Percent of Sales |
| — |
| 20 | % |
| — |
|
| — |
| 15 | % |
| — |
| ||||
Net Income |
| — |
| 10 | % |
| — |
| ||||||||||||
Return on Investment (ROI) |
| 20 | % |
| 20 | % |
| 20 | % |
| 15 | % |
| 15 | % |
| 15 | % | ||
Net Sales |
| 20 | % |
| 20 | % |
| 20 | % |
| 20 | % |
| 20 | % |
| 20 | % |
The Earnings per Share (EPS) performance measure resultedwould result in a payout at the 100% level upon the attainment of our Fiscal 20112012 record EPS plus 10%. The other performance measures for Fiscal 20122013 were based on the Company’s Board approved Fiscal 20122013 Financial Plan with achievement of that plan resulting in a payout at the 100% level.
Annual cash incentive awards for NEOs with corporate responsibility are based on the Company’s overall financial results. The annual cash incentive awards for NEOs with business segment responsibility are based on their specific business segment results for operating income percent of sales, operating income, ROI (calculated as net operating profit after taxes divided by the average net operating investment for the period), and net sales.
ForThe challenging business environment we experienced during Fiscal 2011,2013 resulted in sales below our record sales achieved in Fiscal 2012 and directly impacted the Committee approved that any costs incurredlevel of payouts for our Fiscal 2013 annual cash incentive awards. The target EPS goal at 100% was $1.90 and the Company’s legal entity global tax restructuring project would be excluded from the incentive calculations. This adjustment had a slight positive impact on EPS. Forminimum achievement required was the Fiscal 2012 performance metrics, this adjusted EPS was used as the record EPS, which was the threshold level for the performance measures.
For Fiscal 2012, the 100% achievement EPS target was $1.60, the Fiscal 2011 adjusted EPS of $1.46 plus 10%.$1.73. The actual EPS achievement for Fiscal 20122013 was $1.73, or 185.7% of target level.$1.64 resulting in no payout for this measure.
The Company’s operating income percent of sales target for Fiscal 20122013 (100% achievement) was 14.1%14.7% with actual achievement at 14.6%14.1%, or 112.5%70% of target level. The operating income percent of sales target for our Engine business segment was 14.8%14.5% with actual achievement at 14.5%14.7%, or 85.0%105% of target. The operating income percent of sales target for our Industrial business segment was 14.6%16.0% and actual achievement was 16.2%14.9%, or 140.0%45% of target.target level.
The net income percent of sales goal target (100% achievement) for our CFO for Fiscal 20122013 was 10.0%10.5%. Actual achievement for Fiscal 20122013 was 10.6%10.2%, or 120.0%80% of the target level.
The Company’s operating income target for Fiscal 2013 (100% achievement) was $399.5 million and the minimum achievement required was $345.3 million. Actual achievement was $343.3 million resulting in no payout for this goal.
The net income target (100% achievement) for our CFO for Fiscal 2013 was $284.6 million and the minimum achievement required was $244.0 million. Actual achievement was $247.4 million, or 8% of the target level.
For Fiscal 2012,2013, the ROI performance measure target for the Company was 20.9%25.2%, which represents 100% achievement. The actual ROI achieved for Fiscal 20122013 was 23.5%21.5% for the Company, which exceededor 76% of the maximum achievement level of 23.0%. Therefore, this goal paid out at the maximum 200% target achievement level. As established by the Committee, a business segment may have a higher ROI target based on the dynamics of the particular business and exclusions of certain corporate accounts from the business segment ROI calculation. For Fiscal 2012,2013, the worldwide ROI targets for our Engine and Industrial business segments ranged between 27%26% and 29%33%. The actual ROI achieved for our Engine business segment was 25.2%25.7%, or 74.7%87% of target level. The actual ROI achieved for our Industrial business segment was 30.7%26.6%, or 185.7%47% of target level.
For Fiscal 2012,2013, the net sales corporate target (100% achievement) was $2.584$2.710 billion with actualthe minimum achievement atrequired of $2.493 billion, or 68.7% of target achievement.the Fiscal 2012 sales record. Actual achievement was $2.437 billion resulting in no payout for this goal. The net sales achievementtarget for the Engine business segment was $1.690 billion with a minimum achievement required of $1.570 billion. Actual achievement was $1.504 billion or 69.4% of target achievement.resulting in no payout. The net sales achievementtarget for the Industrial business segment was $1.020 billion with a minimum achievement required of $923 million. Actual achievement was $933 million, or 65.1%10% of the target achievement.payout.
Payouts. Payouts. For Fiscal 2012,2013, the Company results produced abovebelow target payouts for our NEOs ranging from 120.1%16% to 157.8%32% of target. The overall annual cash incentive payment for Fiscal 20122013 for each of our NEOs is set forth below:
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|
|
Named Executive Officer |
| Target Payment |
| Target Award |
| Actual Award |
|
| Target Payment |
| Target |
| Actual |
| ||||||
William Cook |
| 100 | % | $ | 875,000 |
| $ | 1,381,144 |
|
| 100 | % | $ | 920,000 |
| $ | 168,808 |
| ||
James Shaw |
| 40 | %* | $ | 106,563 |
| $ | 160,763 |
|
| 50 | %* | $ | 146,108 |
| $ | 35,328 |
| ||
Tod Carpenter |
| 60 | % | $ | 168,000 |
| $ | 201,801 |
|
| 60 | % | $ | 201,600 |
| $ | 63,775 |
| ||
Charles McMurray |
| 60 | % | $ | 191,564 |
| $ | 288,349 |
|
| 60 | % | $ | 197,311 |
| $ | 43,110 |
| ||
Jay Ward |
| 60 | % | $ | 198,000 |
| $ | 301,834 |
|
| 60 | % | $ | 209,880 |
| $ | 33,069 |
|
|
|
|
|
| |
* | Target percentage changed effective |
Mr. Carpenter’s target percentage increased for Fiscal 2012 from 40% to 60% based on his promotion during the first Fiscal quarter from Vice President to Senior Vice President.
Officers may elect to defer up to 100% of their annual cash incentive into the Donaldson Company, Inc. Deferred Compensation and 401(k) Excess Plan.
Long-Term Incentives
Long-Term Compensation Plan.Plan. The purpose of our Long-Term Compensation Plan is to provide a long-term incentive for our Officers which will reward them for the Company’s achievement of predetermined levels of long-term Company financial performance. The Long-Term Compensation Plan measures performance over a three-year period and the award is paid out at the end of the period based on the attainment of the pre-established Committee approvedCommittee-approved financial performance goals. This award is paid out in Company stock.
A new three-year performance cycle is established each year. Based on our peer group market data, the Committee establishes each new award, including the financial performance objectives, the award matrix, and payout targets (the number of performance units) for each Officer. The target number of performance units is based on a percentage (ranging from 40% to 80% depending on the Officer’s position) of base salary divided by the twelve-month weighted average Company stock price as of the end of the fiscal year in which the annual grant is made.
The potential payouts under the Long-Term Compensation Plan for cycles beginning on or after August 1, 2010 range from 0% to 200% of the target shares based on the predetermined levels of achievement over the three-year period. For cycles which began prior to August 1, 2010, the potential payouts under the Plan ranged from 0% to 275%.
The performance objectives are based on two metrics which the Committee believes are key to our long-term financial success: growth in net sales and ROI. Except as provided below, results for growth in net sales and ROI must meet the threshold performance level for both measures in order for a payout to be achieved. These targets are set by the Committee prior to the beginning of each three-year cycle. The Committee believes it is a key objective for the Company to maintain a certain level of ROI for our Shareholders when economic conditions result in sales growth that is below the threshold. Therefore, a payout ranging from 10% to 50% of target is available based on achievement of predetermined ROI results when the predetermined sales growth is below threshold.
Awards for Officers with corporate responsibility are based on overall Company growth in net sales and ROI. Awards for Officers with business segment responsibility are based 50% on their business segment results for net sales and average annual ROI and 50% on overall Company results. As established by the Committee, business segments can have different net sales and ROI target goals than the overall Company goals.
For the performance cycle with the three-year period that ended July 31, 2012,2013, the Company’s growth in net sales target was 10.0% annual growth in net sales. The Company’s average annual target ROI for that cycle was 19.0%. Actual Company achievement for that cycle was 10.0%8.9% average annual increasegrowth in net sales and 20.5%22.0% for ROI. This resulted in an achievement for Corporate goals of 112.5%107% of the target achievement level.
For our Engine business segment, the growth in net sales was 14.8%9.7% and the average ROI was 24.7%25.5%, resulting in achievement of 168.8%89% of the target achievement level. For our Industrial business segment, the growth in net sales was 3.8%7.5% and the average ROI was 27.6%28.6%, resulting in achievement of 50.0%108% of the target achievement level. A 7.3%9.6% growth in net sales and a 22.1%24.6% average ROI for Europe resulted in an 86.3%achievement of 118% of the target achievement level.
The target shares and the actual share payout for the NEOs were:
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Named Executive Officer |
| Target Shares |
| Actual Share Payout |
|
| Target Shares |
| Actual Share Payout |
| ||||
William Cook |
| 33,400 |
| 37,575 |
|
| 27,400 |
| 29,318 |
| ||||
Tod Carpenter |
| 5,200 |
| 5,169 |
|
| 4,200 |
| 4,725 |
| ||||
Charles McMurray |
| 10,200 |
| 8,288 |
|
| 8,200 |
| 8,795 |
| ||||
Jay Ward |
| 8,600 |
| 12,096 |
|
| 7,000 |
| 6,871 |
| ||||
Thomas VerHage |
| 9,000 |
| 10,125 |
|
The payouts are based on the position the NEO held at the beginning of the cycle. Therefore, Mr. Carpenter received a payout based on Europe results, Mr. McMurray received a payout based on the Industrial business segment results, and Mr. Ward received a payout based on the Engine business segment results.
Mr. Shaw was not eligible for the Long-Term Compensation Plan performance cycle that ended on July 31, 2012. Mr. VerHage was eligible for a prorated portion based on the months of active service prior to his retirement during the performance period.2013.
An Officer may elect to defer their Long-Term Compensation Plan payout into the Donaldson Company, Inc. Deferred Compensation and 401(k) Excess Plan.
Stock Options.Options. The Committee makes annual stock option awards to our Officers. Stock options vest over a three-year period from the date of the grant in one-third increments each year and have a ten-year term. The date of the grant is the date of the Committee meeting and the grant price is the closing price on the date of the Committee Meeting. On an annual basis, the Committee decides the number of options granted to our Officers. For Fiscal 2012,2013, the number of options granted was equal to a multiple of the Officer’s base salary divided by the 12-month weighted average stock price. The multiplier is based on the Officer’s position within the Company as follows:
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| • | 3.70 times base salary for the CEO |
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| • | 2.55 times base salary for Senior Vice Presidents |
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| • | 1.35 times base salary for Vice Presidents |
Stock option grants are made under the 2010 Master Stock Incentive Plan and all options are non-qualified stock options. For stock options granted prior to Fiscal 2011, grants provided to an Officer within the first five years of being named an Officer had a reload provision. This provision provided a new option grant to be established upon exercise of the original grant. Reload stock options are automatically granted under the terms of the original stock option agreement to which they relate and no further action of the Committee is required. The reload stock option is granted for the number of shares tendered as payment for the exercise price and tax withholding obligation. The option price of the reload option is equal to the market price of the stock on the date of exercise and will expire on the same date as the original option. Stock options that are currently granted to Officers do not have a reload provision.
Restricted Stock.Stock. Restricted stock awards are granted to Officers in special circumstances. The Committee may grant a restricted stock award as part of the hiring of a new Officer, in recognition of a significant change in roles and responsibilities for an Officer, or as a retention vehicle for a current Officer. Restricted stock grants generally have a five-year cliff vesting schedule. Dividend equivalents are paid on restricted stock during the vesting period. Mr. McMurrayShaw and Mr. Carpenter each received a restricted stock award of 2,000 shares effective October 1, 2011 in recognition of his role change from Senior Vice President, Industrial Products to Senior Vice President and Chief Administrative Officer.September 21, 2012. The following are the outstanding restricted stock grants for our NEOs.
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Named Executive Officer |
| Grant Date |
| Shares |
| Vesting Date |
| |||
James Shaw |
|
| 9/17/2010 |
|
| 4,000 |
|
| 9/17/2015 |
|
James Shaw | 9/21/2012 | 2,000 | 9/21/2017 | |||||||
Tod Carpenter |
|
| 9/21/2009 |
|
| 4,000 |
|
| 9/21/2014 | |
Tod Carpenter | 9/21/2012 | 2,000 | 9/21/2017 |
| ||||||
Charlie McMurray |
|
| 10/1/2011 |
|
| 4,000 |
|
| 10/1/2016 |
|
Jay Ward |
|
| 12/9/2008 |
|
| 6,000 |
|
| 12/9/2013 |
|
Benefits
To ensure that we provide a competitive total compensation program which supports our efforts to attract and retain key executive leadership, the Company provides indirect compensation, such as health and welfare benefits and retirement benefits, to its Officers.
Health and Welfare Benefits.Benefits. Our U.S. Officers participate in the same health and welfare programs as all other Company U.S. salaried Employees.
Retirement Benefits.Benefits. Our U.S. Officers participate in the following retirement plans which are provided to most other Company U.S. salaried Employees:
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| • | Salaried Employees’ Pension Plan is a defined benefit pension plan which provides retirement benefits to eligible U.S. Employees through a cash balance benefit. It is designed to meet the requirements of a qualified plan under ERISA and the Internal Revenue Code. See the Pension Benefits Table and narrative for more information on this |
In July 2013, the Company announced that effective August 1, 2013, the plan will be frozen to any Employees hired on or after August 1, 2013. Effective August 1, 2016, Employees hired prior to August 1, 2013 will no longer continue to accrue Company contribution credits under the plan. | ||
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| • | Retirement Savings and Employee Stock Ownership Plan is a defined contribution plan designed to meet the requirements of a qualified plan under ERISA and the Internal Revenue Code and to encourage our Employees to save for retirement. Most of our U.S. Employees are eligible to participate in this |
In July 2013, the Company announced that Employees hired on or after August 1, 2013 will be eligible for a 3% annual Company retirement contribution in addition to the Company match described above. Effective August 1, 2016, Employees hired prior to August 1, 2013 will be eligible for the 3% annual Company retirement contribution. |
Executive Benefits.Benefits. In order to attract and retain key executive leadership, the Company also provides the following executive retirement plans and deferred compensation plans:
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| • | Excess Pension Plan |
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| • | Deferred Compensation and 401(k) Excess Plan |
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| • | Supplemental Executive Retirement Plan |
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| • | Deferred Stock Option Gain Plan (frozen to new deferral elections) |
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| • | ESOP Restoration Plan (frozen plan) |
For details on these plans, refer to the Pension Benefits Table and narrative and the Non-Qualified Deferred Compensation Table and narrative.
Perquisites
Effective January 1, 2011, the Company does not provide any perquisites to our NEOs.
Change in Control Agreements
The Company has entered into a Change in Control Agreement (“CIC Agreement”) with each of our Officers. Other than the CIC Agreements, we do not have any employment contracts with our NEOs. The Committee believes that our CIC Agreements, which contain a “double-trigger” assist us in retaining our executive leadership and are designed to enable our Officers to maintain objectivity in the event of a change in control situation and to better protect the interests of our Shareholders. The Committee also believes that the change in control provisions in our stock option awards, Long-Term Compensation Plan, and deferred compensation plans, which are triggered by the change in control itself and are not dependent upon any qualifying termination of employment event, are important because they provide retention incentives during what can be an uncertain time for Officers and also provide additional assurances to the Company that it will be able to complete a transaction that the Board believes is in the best interests of our Shareholders.
The CIC Agreement in effect during Fiscal 20122013 provides that, upon a change in control, if the Officer’s employment with the Company is terminated within 24 months:
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| • | of the change in control without “cause,” or | |
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| • | of the change in control, or under certain circumstances a potential change in control, by the Officer for “good reason,” | |
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| then the Company shall pay or provide the following severance payments to the Officer: | |||
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| ||
| • | A cash lump sum equal to a multiple of the sum of the Officer’s base salary plus the Officer’s target cash incentive from the Annual Cash Incentive Plan then in effect. The multiple is based on level within the Company as follows: | ||
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| CEO – three times the sum of base salary and target annual incentive | |
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| Senior Vice Presidents – two times the sum of base salary and target annual incentive | |
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| Vice Presidents – one times the sum of base salary and target annual incentive | |
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| • | Thirty-six months of additional coverage under our medical, dental, vision, life, accident, and disability plans. | ||
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| • | A cash lump sum equal to: | ||
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| ||
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| The value of the benefit under each pension plan assuming the benefit is fully vested and the Officer had three additional years of benefit accrual; less | |
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| ||
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| The value of the vested benefit accrued under the Salaried Employees’ Pension Plan, the Excess Pension Plan, and the Supplemental Executive Retirement Plan | |
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| • |
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This provision previously applied to all Officers except the CEO. Previously the CEO was eligible under the CIC Agreement for a payment to reimburse the CEO for any excise taxes on change in control payments that are considered excess parachute payments under section 280G of the Internal Revenue Code plus income and employment taxes on the tax gross-up. This provision was eliminated by the Committee and the Board of Directors effective September 28, 2012 and the CEO is now treated under this provision with regard to any excise tax liability. | ||||
| ||||
| • | Outplacement services, suitable to the Officer’s position, for up to three years. |
Under the Company’s non-qualified deferred compensation plans and the excess plans described above, the payment to the Officer of his or her vested benefit is accelerated to be payable in the form of a lump sum immediately following a change in control followed by a qualifying termination.
Stock Ownership Requirements
In order to ensure continual alignment with our Shareholders, the Committee has established stock ownership requirements for our Officers. The Committee believes that linking a significant portion of the Officer’s personal holdings to the Company’s long-term success, as reflected in the stock price, provides Officers a stake similar to that of our Shareholders. Therefore, Officers are expected to acquire and hold a significant amount of the Company’s stock. The Committee has established stock ownership requirements (based on all shares of Company stock owned by an Officer, including unvested restricted stock, but excluding unexercised stock options) for our Officers as follows:
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| • | Ten times base salary for our CEO |
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| • | Five times base salary for Senior Vice Presidents |
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| • | Three times base salary for Vice Presidents |
In addition, once initial ownership requirements are met, Officers must retain 25% of all net shares received from stock option exercises.
New Officers are expected to meet their ownership requirement within five years of being named an Officer. Given the current economic and market conditions, Officers will not be penalized for not meeting their ownership requirements within five years of being named an Officer as long as the Committee sees that they are making meaningful progress toward their requirement. As of the end of Fiscal 2012,2013, all the NEOs who had been in Officer roles at the Company for at least five years had met their ownership requirements.
Named Executive Officer Compensation
The determination of the base salary, annual incentive, and equity compensation for Fiscal 2013 for our CEO, William Cook, for 2012 was made as described above in the “Compensation Process”Compensation Process section of this Compensation Discussion and Analysis. Effective January 1, 2012,2013, Mr. Cook’s base salary was increased to $875,000$920,000 (reflecting a 6.2%5.1% increase). Mr. Cook’s base salary is approximately 3% above the median of the peer group.
Mr. Cook earned an annual cash incentive for Fiscal 20122013 of $1,381,144$168,808 which will be paid in October 2012.2013. This payout was at 157.85%18% of target achievement. This amount was calculated as described above under the Annual Cash Incentive section. Mr. Cook’s annual cash incentive was based on achievement of EPS at 185.7% of target level, a 112.5%70% of target level achievement of operating income percentage and a 200%76% of target level achievement of ROI,ROI. There was no payout for the EPS, operating income, and a 68.7% of target level achievement of net sales.sales performance goals. Mr. Cook earned a Long-Term Compensation Plan award payout for the three-year cycle ended July 31, 20122013 of 37,57529,318 shares, based on an achievement level of 112.5%107% of target. This award was determined as described above under the Long-Term Compensation Plan section. Mr. Cook received an annual stock option grant in December 20112012 of 116,00093,000 shares. This option grant vests over a three-year period from the date of grant in one-third increments and has a ten-year term. The option price was $34.88,$33.58, which was the closing stock price on the grant date, adjusted for the March 2012 stock split.date. The amount of the option grant was determined as described above in the “Stock Options”Stock Options section.
Each of the other NEOs is paid the same components of compensation as the CEO, and they are determined as described in thethis Compensation Discussion and Analysis. The determination of each of the other NEOs’ base salary, annual incentive, and equity compensation was determined as described above in the “Compensation Process”Compensation Process section.
Tax Considerations
The Committee monitors any changes in regulations when reviewing the various elements of our executive compensation program. Section 162(m) of the Internal Revenue Code generally disallows federal tax deductions for compensation in excess of $1 million paid to the CEO and the next three highest paid Officers (other than the CFO) whose compensation is required to be reported in the Summary Compensation Table of the Proxy Statement. Certain performance-based compensation is not subject to this deduction limitation.
The 1991 Master Stock Compensation Plan and the 2001 Master Stock Incentive Plan, both of which have expired, were approved by Shareholders in 1991 and 2001, respectively. The 2010 Master Stock Incentive Plan was approved by Shareholders at the 2010 annual meeting. These plans limit the number of shares under a stock option or the Long-Term Compensation Plan that can be granted in any one year to any one individual to further the policy of preserving the tax deduction for compensation paid to executives. Our Officer Annual Cash Incentive and our Long-Term Compensation Plans were adopted by the Committee as sub-plans of the 2010 Master Stock Incentive Plan, subject to all the terms and limits of that Plan. The awards provided by these sub-plans are intended to qualify as qualified performance-based compensation under Section 162(m) of the Internal Revenue Code. The Committee reviewed the potential consequences for the Company of Section 162(m) and believes that this provision did not affect the deductibility of compensation paid to our Officers in Fiscal 2012.2013.
The Committee reserves the right, in appropriate circumstances and for the benefit of Shareholders, to award compensation that may result in a loss of tax deductibility under Section 162(m).
The Committee designs and administers our equity compensation, our non-qualified deferred compensation, and CIC Agreements to be in compliance with Section 409A, the federal tax rules affecting non-qualified deferred compensation.
The Company has reviewed and assessed its compensation plans. To complete this review, the Company completed an inventory and analysis of its compensation programs globally and reviewed this with the Committee. Through this review, we determined that our compensation programs, policies, and practices for our Employees are not reasonably likely to have a material adverse effect on the Company. In making this determination, we took into account the compensation mix for our Employees along with the various risk control features of our programs, including balanced performance targets, our stock ownership guidelines, and appropriate incentive caps.
The following table provides summary information concerning compensation paid or accrued by the Company to or on behalf of the Company’s Named Executive Officers (“NEOs”): our CEO, our CFO, our former CFO and each of our three other most highly compensated Officers who served in such capacities as of the end of Fiscal 20122013 for services rendered during the 2010, 2011, 2012, and 20122013 fiscal years.
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Name and |
| Year |
| Salary(1) |
| Stock |
| Option |
| Non-equity |
| Change in |
| All Other |
| Total |
|
| Year |
| Salary (1) |
| Stock |
| Option |
| Non-Equity |
| Change in |
| All Other |
| Total |
| |||||||
William Cook, |
| 2012 |
| 853,550 |
| 755,085 |
| 1,244,890 |
| 1,381,144 |
| 1,157,816 |
| 91,306 |
| 5,483,791 |
|
| 2013 |
| 900,789 |
| 762,014 |
| 873,798 |
| 168,808 |
| 24,777 |
| 94,312 |
| 2,824,498 |
| |||||||
Chairman, |
| 2011 |
| 771,712 |
| 670,098 |
| 1,299,848 |
| 1,371,061 |
| 23,996 |
| 77,164 |
| 4,213,879 |
|
| 2012 |
| 853,550 |
| 755,085 |
| 1,244,890 |
| 1,381,144 |
| 1,157,816 |
| 91,306 |
| 5,483,791 |
| |||||||
President and CEO |
| 2010 |
| 700,000 |
| 650,339 |
| 1,130,309 |
| 763,109 |
| 19,088 |
| 25,252 |
| 3,288,097 |
|
| 2011 |
| 771,712 |
| 670,098 |
| 1,299,848 |
| 1,371,061 |
| 23,996 |
| 77,164 |
| 4,213,879 |
| |||||||
James Shaw, |
| 2012 |
| 257,485 |
| 116,985 |
| 129,722 |
| 160,763 |
| 71,945 |
| 14,531 |
| 751,431 |
|
| 2013 |
| 297,741 |
| 194,344 |
| 102,587 |
| 35,328 |
| 14,231 |
| 18,871 |
| 663,102 |
| |||||||
Vice President and CFO(7) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 |
| 257,485 |
| 116,985 |
| 129,722 |
| 160,763 |
| 71,945 |
| 14,531 |
| 751,431 |
| |||||||
Tod Carpenter, |
| 2012 |
| 275,431 |
| 180,795 |
| 239,486 |
| 201,801 |
| 106,272 |
| 234,682 |
| 1,238,467 |
|
| 2013 |
| 326,308 |
| 278,202 |
| 218,555 |
| 63,775 |
| 36,361 |
| 97,792 |
| 1,020,993 |
| |||||||
Senior Vice President, |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 |
| 275,431 |
| 180,795 |
| 239,486 |
| 201,801 |
| 106,272 |
| 234,682 |
| 1,238,467 |
| |||||||
Engine Products(8) |
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| |||||||
Charles McMurray, |
| 2012 |
| 317,665 |
| 315,210 |
| 358,230 |
| 288,349 |
| 174,229 |
| 27,794 |
| 1,481,477 |
|
| 2013 |
| 327,194 |
| 204,176 |
| 296,389 |
| 43,110 |
| 60,061 |
| 29,296 |
| 960,226 |
| |||||||
Senior Vice President |
| 2011 |
| 300,502 |
| 188,292 |
| 303,435 |
| 294,641 |
| 141,673 |
| 33,826 |
| 1,262,369 |
|
| 2012 |
| 317,665 |
| 315,210 |
| 358,230 |
| 288,349 |
| 174,229 |
| 27,794 |
| 1,481,477 |
| |||||||
and CAO |
| 2010 |
| 282,500 |
| 194,627 |
| 305,087 |
| 234,739 |
| 1,285 |
| 22,355 |
| 1,040,593 |
|
| 2011 |
| 300,502 |
| 188,292 |
| 303,435 |
| 294,641 |
| 141,673 |
| 33,826 |
| 1,262,369 |
| |||||||
Jay Ward, |
| 2012 |
| 326,435 |
| 212,700 |
| 394,129 |
| 301,834 |
| 320,229 |
| 88,878 |
| 1,644,205 |
|
| 2013 |
| 346,373 |
| 218,760 |
| 227,475 |
| 33,069 |
| 0 |
| 29,198 |
| 854,875 |
| |||||||
Senior Vice President, |
| 2011 |
| 292,833 |
| 188,292 |
| 441,708 |
| 312,911 |
| 89,756 |
| 236,156 |
| 1,561,656 |
|
| 2012 |
| 326,435 |
| 212,700 |
| 394,129 |
| 301,834 |
| 320,229 |
| 88,878 |
| 1,644,205 |
| |||||||
Industrial Products |
| 2010 |
| 240,000 |
| 166,145 |
| 429,795 |
| 189,700 |
| 57,240 |
| 170,665 |
| 1,253,545 |
|
| 2011 |
| 292,833 |
| 188,292 |
| 441,708 |
| 312,911 |
| 89,756 |
| 236,156 |
| 1,561,656 |
| |||||||
Thomas VerHage, |
| 2012 |
| 95,550 |
| 0 |
| 0 |
| 0 |
| 177,647 | (9) | 19,216 |
| 292,413 |
| ||||||||||||||||||||||||
Former Vice President |
| 2011 |
| 342,539 |
| 17,999 |
| 327,628 |
| 366,695 |
| 193,071 | (9) | 32,853 |
| 1,280,785 |
| ||||||||||||||||||||||||
and CFO |
| 2010 |
| 332,500 |
| 232,603 |
| 650,198 |
| 278,201 |
| 204,541 | (9) | 25,301 |
| 1,723,344 |
|
| ||
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| |
(1) | NEOs are eligible to defer a portion of their base salary into the Deferred Compensation and 401(k) Excess Plan. Mr. McMurray deferred $13,747 for Fiscal 2013, $31,766 for Fiscal 2012, and $30,050 for Fiscal 2011 | |
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| |
(2) | This column represents the aggregate grant date fair value of performance-based stock awards granted during the fiscal year under our Long-Term Compensation Plan for our NEOs and does not reflect compensation actually received by the NEOs. The performance period for the award granted during Fiscal 2013 is August 1, 2013 through July 31, 2016. The performance period for the award granted during Fiscal 2012 is August 1, 2012 through July 31, 2015. The performance period for the award granted during Fiscal 2011 is August 1, 2011 through July 31, 2014. | |
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| |
| The grant date fair value is based on the probable outcome of the performance conditions which is the target payout under each award included in the column. The grant date fair value based on the maximum payout awards granted during each fiscal year is the following: |
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|
| Long-Term Compensation Plan Award Granted during: |
| |||||||
Name |
| Fiscal 2010 |
| Fiscal 2011 |
| Fiscal 2012 |
| |||
William Cook |
| $ | 1,300,678 |
| $ | 1,340,196 |
| $ | 1,510,170 |
|
James Shaw |
|
| N/A |
|
| N/A |
| $ | 233,970 |
|
Tod Carpenter |
|
| N/A |
|
| N/A |
| $ | 361,590 |
|
Charles McMurray |
| $ | 389,254 |
| $ | 376,584 |
| $ | 411,220 |
|
Jay Ward |
| $ | 332,290 |
| $ | 376,584 |
| $ | 425,400 |
|
Thomas VerHage |
| $ | 465,206 |
| $ | 35,997 |
|
| N/A |
|
Long-Term Compensation Plan Award Granted during: Name Fiscal 2011 Fiscal 2012 Fiscal 2013 William Cook $ 1,340,196 $ 1,510,170 $ 1,524,028 James Shaw N/A $ 233,970 $ 247,928 Tod Carpenter N/A $ 361,590 $ 415,644 Charles McMurray $ 376,584 $ 411,220 $ 408,352 Jay Ward $ 376,584 $ 425,400 $ 437,520 This column also reflects the aggregate grant date fair value of $109,600 for a restricted stock grant of 4,000 shares awarded to Mr. McMurray on October 1, 2011.
This column also reflects the aggregate grant date fair value of $70,380 for a restricted stock grant of 2,000 shares awarded to both Mr. Shaw and Mr. Carpenter on September 21, 2012. |
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|
(3) | This column represents the aggregate grant date fair value of stock option awards granted during the fiscal year under the Company’s 2010 Master Stock Incentive Plan, 2001 Master Stock Incentive Plan and 1991 Master Stock Incentive Plan. These amounts were calculated in accordance with FASB ASC Topic 718. Refer to Footnote J of the Consolidated Financial Statements in our Annual Report on Form 10-K for Fiscal |
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|
| The Fiscal 2013 value for Mr. Cook includes $44,183, reflecting a grant date fair value of a reload option granted on August 28, 2012. The Fiscal 2012 value for Mr. Cook includes $87,372, reflecting a grant date fair value of a reload option granted on January 5, 2012. The Fiscal 2011 value for Mr. Cook includes $233,228, reflecting the grant date fair value of three reload options granted on September 20, 2010, September 24, 2010, and September 30, 2010. |
The Fiscal | |
September 5, 2012. The Fiscal 2012 value for Mr. McMurray includes $28,936, reflecting the grant date fair value of a reload option granted on December 13, 2011. | |
|
|
| The Fiscal 2012 value for Mr. Ward includes $64,836, reflecting the grant date fair value of a reload option granted on December 2, 2011. The Fiscal 2011 value for Mr. Ward includes $138,273, reflecting the grant date fair value of a reload option granted on January 12, 2011. |
| |
|
|
(4) | This is the amount earned under our Annual Cash Incentive Plan as described in the Compensation Discussion and Analysis for the fiscal year. The Fiscal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| Fiscal 2010 |
| Fiscal 2011 |
| Fiscal 2012 |
|
| Fiscal 2011 |
| Fiscal 2012 |
| Fiscal 2013 |
| ||||||
Charles McMurray |
| $ | 23,474 |
| $ | 29,464 |
| $ | 28,835 |
|
| $ | 29,464 |
| $ | 28,835 |
| $ | 0 |
|
Jay Ward |
| $ | 0 |
| $ | 0 |
| $ | 30,183 |
|
| $ | 0 |
| $ | 30,183 |
| $ | 3,307 |
|
Thomas VerHage |
| $ | 278,201 |
| $ | 0 |
| $ | 0 |
|
|
|
|
(5) | This column includes the annual change, if positive on an aggregate basis, in the value of our NEOs pension benefits for the following plans: | |
|
| |
| • | Salaried Employees’ Pension Plan |
|
|
|
| • | Excess Pension Plan |
|
|
|
| • | Supplemental Executive Retirement Plan |
|
|
|
| This column also includes the amounts for the dollar value of the interest accrued that is above the market interest rates determined under SEC rules for compensation deferred prior to January 1, 2011 under the Deferred Compensation and 401(k) Excess Plan. For deferrals made prior to January 1, 2011, the interest rate for the Plan as set by the Committee was the ten-year Treasury Bond rate plus two percent. Effective for deferrals made after December 31, 2010, the interest rate as set by the Committee is the ten-year Treasury Bond rate. |
|
| |
| The Fiscal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| Change in |
| Above Market |
|
| Change in |
| Above Market |
| ||||
William Cook |
| $ | 1,136,032 |
| $ | 21,784 |
|
| $ | (20,131 | ) | $ | 24,777 |
|
James Shaw |
| $ | 71,945 |
| $ | 0 |
|
| $ | 14,231 |
| $ | 0 |
|
Tod Carpenter |
| $ | 106,272 |
| $ | 0 |
|
| $ | 36,361 |
| $ | 0 |
|
Charles McMurray |
| $ | 172,278 |
| $ | 1,951 |
|
| $ | 57,842 |
| $ | 2,219 |
|
Jay Ward |
| $ | 320,229 |
| $ | 0 |
|
| $ | (10,281 | ) | $ | 0 |
|
Thomas VerHage |
| $ | 149,923 |
| $ | 27,724 |
|
|
|
(6) | The following components comprise the amounts in this column for Fiscal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| 401(k) |
| Life |
| Restricted |
| Other |
| Total |
|
| 401(k) |
| Life |
| Restricted |
| Other |
| Total |
| ||||||||||
William Cook |
| $ | 88,984 |
| $ | 2,322 |
| $ | 0 |
| $ | 0 |
| $ | 91,306 |
|
| $ | 91,277 |
| $ | 3,035 |
| $ | 0 |
| $ | 0 |
| $ | 94,312 |
|
James Shaw |
| $ | 12,754 |
| $ | 497 |
| $ | 1,280 |
| $ | 0 |
| $ | 14,531 |
|
| $ | 15,896 |
| $ | 695 |
| $ | 2,280 |
| $ | 0 |
| $ | 18,871 |
|
Tod Carpenter |
| $ | 18,318 |
| $ | 1,174 |
| $ | 1,505 |
| $ | 213,685 | (c) | $ | 234,682 |
|
| $ | 20,839 |
| $ | 1,242 |
| $ | 2,280 |
| $ | 73,431 | (c) | $ | 97,792 |
|
Charles McMurray |
| $ | 24,492 |
| $ | 2,322 |
| $ | 980 |
| $ | 0 |
| $ | 27,794 |
|
| $ | 24,621 |
| $ | 3,035 |
| $ | 1,640 |
| $ | 0 |
| $ | 29,296 |
|
Jay Ward |
| $ | 25,573 |
| $ | 808 |
| $ | 1,920 |
| $ | 60,577 | (d) | $ | 88,878 |
|
| $ | 25,928 |
| $ | 810 |
| $ | 2,460 |
| $ | 0 |
| $ | 29,198 |
|
Thomas VerHage |
| $ | 18,220 |
| $ | 625 |
| $ | 0 |
| $ | 371 | (e) | $ | 19,216 |
|
|
|
|
|
|
| |||
| a. | Company match to the Retirement Savings and Employee Stock Ownership Plan and the Deferred Compensation and 401k Excess Plan | |
|
|
| |
| b. | The imputed income on the Company-provided basic life insurance in excess of $50,000 | |
|
|
| |
| c. | Mr. Carpenter was an expatriate on assignment in Belgium from August 1, 2008 through September 30, 2011. |
|
|
|
|
|
Rent/Utilities |
| $ | 63,321 |
|
Relocation Expenses |
| $ | 23,333 |
|
Goods and Services Differential |
| $ | 7,638 |
|
Automobile |
| $ | 14,245 |
|
Home Leave |
| $ | 2,642 |
|
Mobility Premium |
| $ | 42,000 |
|
Foreign Tax Payments |
| $ | 57,988 |
|
Tax Gross-Up |
| $ | 2,518 |
|
Total |
| $ | 213,685 |
|
|
|
|
|
|
Foreign Tax Payments | $ | 70,382 | ||
Tax Gross-Up | $ | 1,043 | ||
Tax Preparation | $ | 500 | ||
Total | $ | 71,925 |
|
|
| |
|
|
|
|
| |
|
| |
(7) | Mr. Shaw was not a NEO in Fiscal | |
|
| |
(8) | Mr. Carpenter was not a NEO in Fiscal | |
|
|
Fiscal 20122013 Grants of Plan-Based Awards Table
This table provides information regarding each grant of an award made to our NEOs during Fiscal 2012.2013. This includes the following awards:
|
|
|
| • | Fiscal |
|
|
|
| • | Stock awards pursuant to the Long-Term Compensation Plan for the three-year incentive cycle beginning August 1, |
|
|
|
| • | Annual Stock options granted pursuant to the 2010 Master Stock Incentive Plan during Fiscal |
|
|
|
| • | Reload stock options granted pursuant to the 2001 Master Stock Incentive |
|
|
|
| • | Restricted stock awards granted pursuant to the 2010 Master Stock Incentive Plan during Fiscal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All |
| All |
| Exercise |
| Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
| Estimated Future Payouts |
| Estimated Future Payouts |
|
|
|
| ||||||||||||
Name and Award |
| Grant |
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
|
|
|
| ||||
William Cook |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 875,000 |
| 1,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/27/2012 |
|
|
|
|
|
|
| 2,130 |
| 21,300 |
| 42,600 |
|
|
|
|
|
|
| 755,085 |
Annual Stock Option |
| 12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 116,000 | (4) | 34.88 |
| 1,157,518 |
Reload Stock Option |
| 1/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,944 | (5) | 34.53 |
| 87,372 |
James Shaw |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 106,563 |
| 213,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/27/2012 |
|
|
|
|
|
|
| 330 |
| 3,300 |
| 6,600 |
|
|
|
|
|
|
| 116,985 |
Annual Stock Option |
| 12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,000 | (4) | 34.88 |
| 129,722 |
Tod Carpenter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 168,000 |
| 336,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/27/2012 |
|
|
|
|
|
|
| 510 |
| 5,100 |
| 10,200 |
|
|
|
|
|
|
| 180,795 |
Annual Stock Option |
| 12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,000 | (4) | 34.88 |
| 239,486 |
Charles McMurray |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 191,564 |
| 383,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/27/2012 |
|
|
|
|
|
|
| 580 |
| 5,800 |
| 11,600 |
|
|
|
|
|
|
| 205,610 |
Restricted Stock Award |
| 10/1/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,000 | (6) |
|
|
|
| 109,600 |
Annual Stock Option |
| 12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 33,000 | (4) | 34.88 |
| 329,294 |
Reload Stock Option |
| 12/13/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,014 | (5) | 34.15 |
| 28,936 |
Jay Ward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 198,000 |
| 396,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/27/2012 |
|
|
|
|
|
|
| 600 |
| 6,000 |
| 12,000 |
|
|
|
|
|
|
| 212,700 |
Reload Stock Option |
| 12/2/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,788 | (5) | 33.43 |
| 64,836 |
Annual Stock Option |
| 12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 33,000 | (4) | 34.88 |
| 329,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and |
|
|
|
|
|
|
| All Other |
| All Other |
| Exercise |
| Grant |
| ||||||||
| Grant Date |
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
|
|
|
|
| |||||
William Cook |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 920,000 |
| 1,840,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/26/2013 |
|
|
|
|
|
|
| 2,090 |
| 20,900 |
| 41,800 |
|
|
|
|
|
|
| 762,014 |
|
Reload Stock Option |
| 8/28/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,550 | (4) | 35.40 |
| 44,183 |
|
Annual Stock Option |
| 12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 93,000 | (3) | 33.58 |
| 829,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Shaw |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 146,108 |
| 292,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/26/2013 |
|
|
|
|
|
|
| 340 |
| 3,400 |
| 6,800 |
|
|
|
|
|
|
| 123,964 |
|
Restricted Stock Award |
| 9/21/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| 2,000 | (5) |
|
|
|
| 70,380 |
|
Annual Stock Option |
| 12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,500 | (3) | 33.58 |
| 102,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tod Carpenter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 201,600 |
| 403,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/26/2013 |
|
|
|
|
|
|
| 570 |
| 5,700 |
| 11,400 |
|
|
|
|
|
|
| 207,822 |
|
Restricted Stock Award |
| 9/21/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| 2,000 | (5) |
|
|
|
| 70,380 |
|
Annual Stock Option |
| 12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,500 | (3) | 33.58 |
| 218,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles McMurray |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 197,311 |
| 394,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/26/2013 |
|
|
|
|
|
|
| 560 |
| 5,600 |
| 11,200 |
|
|
|
|
|
|
| 204,176 |
|
Reload Stock Option |
| 9/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,047 | (4) | 35.66 |
| 40,645 |
|
Reload Stock Option |
| 9/5/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,634 | (4) | 35.66 |
| 41,650 |
|
Annual Stock Option |
| 12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,000 | (3) | 33.58 |
| 214,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay Ward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive |
|
|
| 0 |
| 209,880 |
| 419,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
| 7/26/2013 |
|
|
|
|
|
|
| 600 |
| 6,000 |
| 12,000 |
|
|
|
|
|
|
| 218,760 |
|
Annual Stock Option |
| 12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,500 | (3) | 33.58 |
| 227,475 |
|
|
|
|
| ||
(1) |
| |
| The Threshold, Target, and Maximum represent the range of potential payments for Fiscal | |
|
| |
| The Threshold, Target, and Maximum represent the range of payments under the Long-Term Compensation Plan described in the Compensation Discussion and Analysis which are for the three-year cycle approved by the Committee during Fiscal | |
|
| |
| The Annual Stock Option Grants were granted to our NEOs on December | |
|
| |
| This is a reload option award which is immediately vested, as described in the Compensation Discussion and Analysis under Stock Options. The reload option was approved by the Committee as part of the initial grant and was granted pursuant to the 2001 Master Stock Incentive Plan. | |
|
| |
| This is a Restricted Stock Award that will vest on |
Outstanding Equity Awards at 20122013 Fiscal Year-End
The following table summarizes the equity awards held by our NEOs as of the last day of Fiscal 2012.2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option Awards |
| Stock Awards | ||||||||||||
Name |
| Number of |
| Number of |
| Option |
| Option |
| Number of |
| Market |
| Equity |
| Equity |
William Cook |
| 43,000 |
| 0 |
| 8.890 |
| 12/5/2012 |
|
|
|
|
| 27,400 | (2) | 971,330 |
|
| 21,944 |
| 0 |
| 34.530 |
| 12/5/2012 |
|
|
|
|
| 24,200 | (3) | 857,890 |
|
| 76,000 |
| 0 |
| 15.190 |
| 12/5/2013 |
|
|
|
|
| 21,300 | (4) | 755,085 |
|
| 150,000 |
| 0 |
| 12.875 |
| 5/19/2014 |
|
|
|
|
|
|
|
|
|
| 107,000 |
| 0 |
| 15.345 |
| 12/7/2014 |
|
|
|
|
|
|
|
|
|
| 106,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
|
|
|
|
|
|
|
|
|
| 109,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
| 112,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
| 142,600 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 153,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 38,667 |
| 77,333 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
| 0 |
| 116,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
James Shaw |
| 4,000 |
| 0 |
| 13.395 |
| 6/14/2014 |
| 4,000 | (8) | 141,800 |
| 3,667 | (3) | 129,995 |
|
| 6,000 |
| 0 |
| 15.345 |
| 12/7/2014 |
|
|
|
|
| 3,300 | (4) | 116,985 |
|
| 5,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
|
|
|
|
|
|
|
|
|
| 5,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
| 6,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
| 6,000 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 4,000 |
| 2,000 | (7) | 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 2,000 |
| 4,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
| 0 |
| 13,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
Tod Carpenter |
| 12,000 |
| 0 |
| 8.890 |
| 12/5/2012 |
| 4,000 | (9) | 141,800 |
| 4,200 | (2) | 148,890 |
|
| 11,200 |
| 0 |
| 15.190 |
| 12/5/2013 |
|
|
|
|
| 3,800 | (3) | 134,710 |
|
| 5,000 |
| 0 |
| 15.250 |
| 1/18/2015 |
|
|
|
|
| 5,100 | (4) | 180,795 |
|
| 5,000 |
| 0 |
| 16.495 |
| 1/23/2016 |
|
|
|
|
|
|
|
|
|
| 1,000 |
| 0 |
| 16.075 |
| 7/26/2016 |
|
|
|
|
|
|
|
|
|
| 10,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
| 11,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
| 17,600 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 18,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 5,000 |
| 10,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
| 0 |
| 24,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
Charles McMurray |
| 18,000 |
| 0 |
| 15.190 |
| 12/5/2013 |
| 4,000 | (10) | 141,800 |
| 8,200 | (2) | 290,690 |
|
| 5,014 |
| 0 |
| 34.145 |
| 12/5/2013 |
|
|
|
|
| 6,800 | (3) | 241,060 |
|
| 14,000 |
| 0 |
| 15.345 |
| 12/7/2014 |
|
|
|
|
| 5,800 | (4) | 205,610 |
|
| 14,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
|
|
|
|
|
|
|
|
|
| 31,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
| 29,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
| 40,800 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 43,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 11,000 |
| 22,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
| 0 |
| 33,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
Jay Ward |
| 9,600 |
| 0 |
| 15.190 |
| 12/5/2013 |
| 6,000 | (11) | 212,700 |
| 7,000 | (2) | 248,150 |
|
| 5,000 |
| 0 |
| 15.250 |
| 1/18/2015 |
|
|
|
|
| 6,800 | (3) | 241,060 |
|
| 5,000 |
| 0 |
| 16.4950 |
| 1/23/2016 |
|
|
|
|
| 6,000 | (4) | 212,700 |
|
| 9,422 |
| 0 |
| 22.315 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
| 11,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
| 17,246 |
| 0 |
| 22.060 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 10,788 |
| 0 |
| 23.125 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 9,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 14,486 |
| 0 |
| 29.965 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 6,788 |
| 0 |
| 33.425 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 11,000 |
| 22,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
| 0 |
| 33,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
Thomas VerHage |
| 14,374 |
| 0 |
| 22.240 |
| 12/5/2016 |
|
|
|
|
| 4,083 | (2) | 144,742 |
|
| 13,580 |
| 0 |
| 28.900 |
| 12/4/2017 |
|
|
|
|
| 650 | (3) | 23,043 |
|
| 17,170 |
| 0 |
| 22.060 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 8,670 |
| 0 |
| 22.240 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
| 31,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
| 7,667 |
| 15,333 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option Awards |
| Stock Awards |
| ||||||||||||
Name |
| Number of |
| Number of |
| Option |
| Option |
| Number of |
| Market |
| Equity |
| Equity |
|
William Cook |
| 107,000 |
| 0 |
| 15.345 |
| 12/7/2014 |
|
|
|
|
| 24,200 | (2) | 877,250 |
|
|
| 106,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
|
|
|
|
| 21,300 | (3) | 772,125 |
|
|
| 109,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
| 20,900 | (4) | 757,625 |
|
|
| 112,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
|
| 142,600 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 153,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 77,333 |
| 38,667 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
| 38,667 |
| 77,333 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
|
|
| 0 |
| 93,000 | (7) | 33.580 |
| 12/7/2022 |
|
|
|
|
|
|
|
|
|
James Shaw |
| 6,000 |
| 0 |
| 15.345 |
| 12/7/2014 |
| 4,000 | (8) | 145,000 |
| 3,667 | (2) | 132,929 |
|
|
| 5,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
| 2,000 | (9) | 72,500 |
| 3,300 | (3) | 119,625 |
|
|
| 5,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
| 3,400 | (4) | 123,250 |
|
|
| 6,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
|
| 6,000 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 6,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 4,000 |
| 2,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
| 4,334 |
| 8,666 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
|
|
| 0 |
| 11,500 | (7) | 33.580 |
| 12/7/2022 |
|
|
|
|
|
|
|
|
|
Tod Carpenter |
| 5,000 |
| 0 |
| 15.250 |
| 1/18/2015 |
| 4,000 | (10) | 145,000 |
| 3,800 | (2) | 137,750 |
|
|
| 5,000 |
| 0 |
| 16.495 |
| 1/23/2016 |
| 2,000 | (11) | 72,500 |
| 5,100 | (3) | 184,875 |
|
|
| 1,000 |
| 0 |
| 16.075 |
| 7/26/2016 |
|
|
|
|
| 5,700 | (4) | 206,625 |
|
|
| 10,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
|
| 11,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
|
| 17,600 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 18,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 10,000 |
| 5,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
| 8,000 |
| 16,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
|
|
| 0 |
| 24,500 | (7) | 33.580 |
| 12/7/2022 |
|
|
|
|
|
|
|
|
|
Charles McMurray |
| 5,014 |
| 0 |
| 34.145 |
| 12/5/2013 |
| 4,000 | (12) | 145,000 |
| 6,800 | (2) | 246,500 |
|
|
| 11,047 |
| 0 |
| 35.660 |
| 12/5/2013 |
|
|
|
|
| 5,800 | (3) | 210,250 |
|
|
| 8,634 |
| 0 |
| 35.660 |
| 12/7/2014 |
|
|
|
|
| 5,600 | (4) | 203,000 |
|
|
| 14,000 |
| 0 |
| 16.400 |
| 12/16/2015 |
|
|
|
|
|
|
|
|
|
|
| 31,000 |
| 0 |
| 17.550 |
| 12/5/2016 |
|
|
|
|
|
|
|
|
|
|
| 29,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
|
| 40,800 |
| 0 |
| 17.275 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 43,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 22,000 |
| 11,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
| 11,000 |
| 22,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
|
|
| 0 |
| 24,000 | (7) | 33.580 |
| 12/7/2022 |
|
|
|
|
|
|
|
|
|
Jay Ward |
| 5,000 |
| 0 |
| 15.250 |
| 1/18/2015 |
| 6,000 | (13) | 217,500 |
| 6,800 | (2) | 246,500 |
|
|
| 5,000 |
| 0 |
| 16.495 |
| 1/23/2016 |
|
|
|
|
| 6,000 | (3) | 217,500 |
|
|
| 9,422 |
| 0 |
| 22.315 |
| 12/5/2016 |
|
|
|
|
| 6,000 | (4) | 217,500 |
|
|
| 11,000 |
| 0 |
| 23.000 |
| 12/4/2017 |
|
|
|
|
|
|
|
|
|
|
| 17,246 |
| 0 |
| 22.060 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 10,788 |
| 0 |
| 23.125 |
| 12/9/2018 |
|
|
|
|
|
|
|
|
|
|
| 9,000 |
| 0 |
| 21.200 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 14,486 |
| 0 |
| 29.965 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 6,788 |
| 0 |
| 33.425 |
| 12/11/2019 |
|
|
|
|
|
|
|
|
|
|
| 22,000 |
| 11,000 | (5) | 29.070 |
| 12/10/2020 |
|
|
|
|
|
|
|
|
|
|
| 11,000 |
| 22,000 | (6) | 34.880 |
| 12/9/2021 |
|
|
|
|
|
|
|
|
|
|
| 0 |
| 25,500 | (7) | 33.580 |
| 12/7/2022 |
|
|
|
|
|
|
|
|
|
| ||
|
| |
(1) | The market value is calculated using the closing stock price on the NYSE at the end of Fiscal | |
|
| |
(2) | This amount is the Target payout for the performance-based stock awards pursuant to the Long-Term Compensation Plan for the three-year incentive cycle ending July 31, |
|
| |
(3) | This amount is the Target payout for the performance-based stock awards pursuant to the Long-Term Compensation Plan for the three-year incentive period ending July 31, | |
|
| |
(4) | This amount is the Target payout for the performance-based stock awards pursuant to the Long-Term Compensation Plan for the three-year incentive period ending July 31, | |
|
| |
(5) | This stock option was granted on December 10, 2010 and vests over a three-year period from the grant date in one-third increments each year. This grant will be 100% vested on December 10, 2013. | |
|
| |
(6) | This stock option was granted on December 9, 2011 and vests over a three-year period from the grant date in one-third increments each year. This grant will be 100% vested on December 9, 2014. | |
|
| |
(7) | This stock option was granted on December | |
|
| |
(8) | Mr. Shaw’s restricted stock grant of 4,000 shares vests on September 17, 2015. | |
|
| |
(9) | Mr. Shaw’s restricted stock grant of 2,000 shares vests on September 21, 2017. | |
(10) | Mr. Carpenter’s restricted stock grant of 4,000 shares vests on September 21, 2014. | |
|
| |
| Mr. Carpenter’s restricted stock grant of 2,000 shares vests on September 21, 2017. | |
(12) | Mr. McMurray’s restricted stock grant of 4,000 shares vests on October 1, 2016. | |
(13) | Mr. Ward’s restricted stock grant of 6,000 shares vests on December 9, 2013. |
Fiscal 20122013 Option Exercises and Stock Vested Table
The following table summarizes information on stock option awards exercised and restricted stock awards vested during Fiscal 2012 for our NEOs. The following table summarizes information on stock option awards exercised during Fiscal 2012,2013 and Long-Term Compensation Plan payouts for the cycle ending July 31, 2012, and restricted stock awards vested during Fiscal 20122013 for our NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option Awards |
| Stock Awards |
|
| Option Awards |
| Stock Awards |
| ||||||||||||||||
Name |
| Number of |
| Value Realized |
| Number of |
| Value Realized |
|
| Number of |
| Value Realized |
| Number of |
| Value Realized |
| ||||||||
William Cook |
| 43,000 |
| 1,102,520 |
| 37,575 |
| 1,322,264 |
|
| 269,000 |
| 6,249,640 |
| 29,318 |
| 1,125,811 |
| ||||||||
James Shaw |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 4,000 |
| 80,032 |
| 0 |
| 0 |
| ||||||||
Tod Carpenter |
| 0 |
| 0 |
| 8,169 |
| 277,522 |
|
| 23,200 |
| 574,632 |
| 4,725 |
| 181,440 |
| ||||||||
Charles McMurray |
| 8,000 |
| 151,640 |
| 8,288(3 | ) |
| 291,655 |
|
| 32,000 |
| 652,870 |
| 8,795 |
| 337,728 |
| |||||||
Jay Ward |
| 19,000 |
| 340,025 |
| 12,096 |
| 425,658 |
|
| 9,600 |
| 196,294 |
| 6,871 |
| 263,846 |
| ||||||||
Thomas VerHage |
| 71,704 |
| 1,179,590 |
| 10,125 |
| 356,299 |
|
| ||
|
| |
(1) | Amount reported represents the | |
|
| |
(2) | Amount reported represents the closing price of our common stock as of the vesting date multiplied by the number of shares acquired on vesting. | |
|
|
The Company provides pension benefits to our Officers through the following plans:
|
|
|
| • | Salaried Employees’ Pension Plan |
|
|
|
| • | Excess Pension Plan |
|
|
|
| • | Supplemental Executive Retirement Plan |
Salaried Employees’ Pension Plan
The Salaried Employees’ Pension Plan is a defined benefit plan that provides retirement benefits to our eligible Employees through a cash balance benefit. Participants accumulate a benefit in a hypothetical account from interest credits and Company contribution credits. The Company contribution credits vary with service, age, and compensation. A participant’s benefit is 100% vested after three years of service. At retirement or termination, a participant who has a vested benefit can receive the benefit in the form of a lump sum or an actuarially equivalent annuity.
An Employee’s account earns interest each year based on the average yield on one-year Treasury Constant Maturities during the month of June prior to the plan year plus 1%. This is the Interest Crediting Rate. The minimum annual Interest Crediting Rate is 4.83%.
The Company contribution credit consists of a basic Company credit and an excess Company credit. The basic Company credit is equal to the basic Company credit percentage (see table below) multiplied by a participant’s compensation during the plan year. The excess Company credit is equal to the excess Company credit percentage (see table below) multiplied by a participant’s compensation during the plan year which exceeds the social security taxable wage base. The compensation used in the calculation is total cash compensation paid during the plan year which is August 1 – July 31.
Company contribution credits are credited to the account balance at the end of each plan year. The basic and excess Company contribution credit percentages are based on the sum of a participant’s age plus years of service at the end of the plan year. As of July 31, 2012,2013, the sum of age plus years of service for the NEOs was as follows: Mr. Cook, 90;92; Mr. Shaw, 51;53; Mr. Carpenter, 69;71; Mr. McMurray, 90;92; and Mr. Ward, 62. Mr. VerHage retired on October 31, 2011 and his sum of age plus service as of his retirement date was 65.
64. The following are the Company credit percentages:
|
|
|
|
|
|
|
|
|
| Company Credit Percentages |
| ||||
Age Plus Years of Service |
| Basic |
|
| Excess |
| |
Less than 40 |
|
| 3.0 | % |
| 3.0 | % |
40 – 49 |
|
| 4.0 | % |
| 4.0 | % |
50 – 59 |
|
| 5.0 | % |
| 5.0 | % |
60 – 69 |
|
| 6.5 | % |
| 5.0 | % |
70 or more |
|
| 8.5 | % |
| 5.0 | % |
In July 2013, the Company announced that effective August 1, 2013, the plan will be frozen to any Employees hired on or after August 1, 2013. Effective August 1, 2016, Employees hired prior to August 1, 2013 will no longer continue to accrue Company contribution credits under the plan.
Excess Pension Plan
The Excess Pension Plan mirrors the Salaried Employee’sEmployees’ Pension Plan. This Plan is an unfunded, non-qualified plan that primarily provides retirement benefits that cannot be paid under the Salaried Employees’ Pension Plan due to the Internal Revenue Code limitations on qualified plans for compensation and benefits. Vested benefits are paid out of this Plan on or after termination or retirement in up to 20 annual installments or a lump sum according to elections made by the participant in accordance with applicable IRS regulations.
Supplemental Executive Retirement Plan (SERP)(“SERP”)
The SERP is designed to guarantee our Officers a minimum lump sum retirement benefit from all Company funded retirement programs (including any retirement benefits from a previous employer) equal to 30% of the participant’s average compensation (average of the three highest consecutive years) multiplied by years of service (maximum of 20 years). To determine if any portion of this benefit would be payable under the SERP, all Company-provided retirement benefits from the Salaried Employees’ Pension Plan, the Excess Pension Plan, the Retirement Savings and Employee Stock Ownership Plan, and the Deferred Compensation and 401(k) Excess Plan, plus any retirement benefits that are provided from a previous employer are combined to offset the formula described above.
This benefit is payable at age 62 with ten years of service. Compensation in this Planplan is defined as base salary earned during the plan year plus the annual cash incentive earned during the plan year. A reduced benefit is available at age 55 with 15 years of service. The benefit is reduced by 2% for each year the benefit precedes age 62. Mr. VerHage, per his hiring terms, became eligible for a benefit under the SERP after five years of service. He will receive a payout, per his election, of 15 annual installments beginning November 1, 2013.
Effective January 1, 2008, the Committee decided to freeze the SERP to new entrants. Therefore, Mr. Carpenter and Mr. Shaw are not eligible for the SERP.
The following table summarizes information with respect to our Salaried Employees’ Pension Plan, Excess Pension Plan and Supplemental Executive Retirement Plan for each NEO.
FISCAL 2012 PENSION BENEFITSFISCAL 2013 PENSION BENEFITS
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Name |
| Plan Name |
| Number |
| Present |
| Payments |
| Plan Name |
| Number |
| Present |
| Payments |
| |||
William Cook |
| Salaried Employees’ Pension Plan |
| 32 |
| 834,809 |
| 0 |
| Salaried Employees’ Pension Plan |
| 33 |
| 850,417 |
| 0 |
| |||
|
| Excess Pension Plan |
| 32 |
| 2,394,869 |
| 0 |
| Excess Pension Plan |
| 33 |
| 2,637,674 |
| 0 |
| |||
|
| Supplemental Executive Retirement Plan(2) |
| 32 |
| 2,049,608 |
| 0 |
| Supplemental Executive Retirement Plan(2) |
| 33 |
| 1,771,064 |
| 0 |
| |||
|
|
|
|
|
|
|
| |||||||||||||
James Shaw |
| Salaried Employees’ Pension Plan |
| 8 |
| 164,279 |
| 0 |
| Salaried Employees’ Pension Plan |
| 9 |
| 161,192 |
| 0 |
| |||
|
| Excess Pension Plan |
| 9 |
| 55,106 |
| 0 |
| |||||||||||
|
| Excess Pension Plan |
| 8 |
| 37,789 |
| 0 |
|
|
|
|
|
|
| |||||
Tod Carpenter |
| Salaried Employees’ Pension Plan |
| 16 |
| 383,147 |
| 0 |
| Salaried Employees’ Pension Plan |
| 17 |
| 386,767 |
| 0 |
| |||
|
| Excess Pension Plan |
| 16 |
| 99,487 |
| 0 |
| Excess Pension Plan |
| 17 |
| 132,228 |
| 0 |
| |||
|
|
|
|
|
|
|
| |||||||||||||
Charles McMurray |
| Salaried Employees’ Pension Plan |
| 32 |
| 751,308 |
| 0 |
| Salaried Employees’ Pension Plan |
| 33 |
| 765,930 |
| 0 |
| |||
|
| Excess Pension Plan |
| 33 |
| 431,409 |
| 0 |
| |||||||||||
|
| Excess Pension Plan |
| 32 |
| 388,189 |
| 0 |
| Supplemental Executive Retirement Plan(2) |
| 33 |
| 0 |
| 0 |
| |||
|
| Supplemental Executive Retirement Plan(2) |
| 32 |
| 0 |
| 0 |
|
|
|
|
|
|
| |||||
Jay Ward |
| Salaried Employees’ Pension Plan |
| 14 |
| 318,494 |
| 0 |
| Salaried Employees’ Pension Plan |
| 15 |
| 308,350 |
| 0 |
| |||
|
| Excess Pension Plan |
| 14 |
| 155,045 |
| 0 |
| Excess Pension Plan |
| 15 |
| 187,247 |
| 0 |
| |||
|
| Supplemental Executive Retirement Plan(2) |
| 14 |
| 176,341 |
| 0 |
| Supplemental Executive Retirement Plan(2) |
| 15 |
| 144,000 |
| 0 |
| |||
Thomas VerHage |
| Salaried Employees’ Pension Plan |
| 7 |
| 101,935 |
| 0 | ||||||||||||
|
| Excess Pension Plan |
| 7 |
| 383,603 |
| 0 | ||||||||||||
|
| Supplemental Executive Retirement Plan(2)(3) |
| 7 |
| 508,406 |
| 0 |
| ||
|
| |
(1) | The present value of the accumulated benefit for the Salaried Employees’ Pension Plan and the Excess Pension Plan was determined by projecting the August 1, | |
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| |
| The present value of the Supplemental Executive Retirement Plan as of August 1, 2013 was determined by projecting the cash balance plans to age 62 using a 5.0% interest rate and projecting the defined contribution plans to age 62 using a 9.75% interest rate. This amount was then discounted using a | |
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| |
| No pre-retirement mortality or termination rates were used. | |
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| |
| The actual accrued balances as of the end of Fiscal |
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Name |
| Salaried |
| Excess |
|
| Salaried |
| Excess |
| ||||
William Cook |
| $ | 764,844 |
| $ | 2,194,155 |
|
| $ | 830,031 |
| $ | 2,574,444 |
|
James Shaw |
| $ | 121,002 |
| $ | 27,834 |
|
| $ | 146,341 |
| $ | 50,029 |
|
Tod Carpenter |
| $ | 323,549 |
| $ | 84,012 |
|
| $ | 367,422 |
| $ | 125,614 |
|
Charles McMurray |
| $ | 685,048 |
| $ | 353,953 |
|
| $ | 746,380 |
| $ | 420,398 |
|
Jay Ward |
| $ | 250,884 |
| $ | 122,132 |
|
| $ | 286,246 |
| $ | 173,824 |
|
Tom VerHage |
| $ | 101,935 |
| $ | 383,603 |
|
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| |
(2) | To be eligible for a benefit under the Supplemental Executive Retirement Plan, a participant must be at least age 55 and meet the service requirements. As of the end of Fiscal | |
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Non-Qualified Deferred Compensation
The Company allows Officers to defer compensation through the following plans:
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| • | Deferred Compensation and 401(k) Excess Plan |
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|
|
| • | Deferred Stock Option Gain Plan (Effective January 1, 2008, this Plan was frozen to new deferral elections. Deferrals are still made into the Plan based on deferral elections made prior to January 1, 2008.) |
Through the Deferred Compensation and 401(k) Excess Plan, the participants are eligible to defer the following:
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|
| • | Up to 75% of Base Salary |
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|
|
| • | Up to 100% of Annual Cash Incentive |
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|
|
| • | Up to 100% of the Long-Term Compensation Plan stock award |
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|
|
| • | Up to 25% of compensation in excess of the qualified plan compensation limits ($245,000 for |
Any deferred cash (base salary and annual cash incentive) will receive a matching Company contribution as described under the Retirement Savings and Employee Stock Ownership Plan in the Compensation Discussion and Analysis.
Participants have the following two investment alternatives for the deferrals of base salary and annual cash incentive:
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|
|
| • | Allocate the account to be credited with a fixed rate of return (this rate is approved annually by the Committee). For deferrals made prior to January 1, 2011, the rate of return is equal to the ten-year Treasury Bond rate plus two percent, and for deferrals made after January 1, 2011, the rate of return is equal to the ten-year Treasury Bond rate. |
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|
|
| • | Allocate the account to one or more measurement funds. Several mutual fund investments are available, and funds may be reallocated among the investment |
All stock deferrals (Long-Term Compensation Plan awards, Restricted Stock Grants, and Stock Option Gains) remain in stock, are funded through a non-qualified “rabbi” trust, and are paid out in stock. These deferrals earn any quarterly dividends that are paid on the Company’s Common Stock.
The Company also sponsors the ESOP Restoration Plan, which is a non-qualified supplemental deferred compensation plan that was established on August 1, 1990 and is funded through a non-qualified “rabbi” trust. This Plan provided benefits that were not payable under the Company’s Employee Stock Ownership Plan due to IRS limits on compensation. The Employee Stock Ownership Plan was a leveraged ESOP and contributions were made to the Plan from August 1987 through July 1997. Currently, the only new contributions made to the ESOP Restoration Plan are for any quarterly dividend equivalents. These quarterly dividend equivalents are based on dividends paid on the Company’s Common Stock.
Payments are made under these plans in the form of a lump sum or annual installments of up to 20 years. The deferral elections and payment elections are made in accordance with the timing requirements of applicable IRS regulations.
The following table summarizes information with respect to the participation of our NEOs in our Deferred Compensation and 401(k) Excess Plan and our Deferred Stock Option Gain Plan.
FISCAL 2012 NON-QUALIFIED DEFERRED COMPENSATIONFISCAL 2013 NON-QUALIFIED DEFERRED COMPENSATION
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Name |
| Executive |
| Registrant |
| Aggregate |
| Aggregate |
| Aggregate |
|
| Executive |
| Registrant |
| Aggregate |
| Aggregate |
| Aggregate Balance |
| ||||||||||
William Cook |
| 138,086 |
| 78,906 |
| 589,598 |
| 0 |
| 27,097,602 |
|
| 144,241 |
| 82,423 |
| 418,265 |
| 0 |
| 28,248,253 |
| ||||||||||
James Shaw |
| 7,447 |
| 3,723 |
| 2,929 |
| 0 |
| 37,455 |
|
| 15,411 |
| 7,706 |
| 12,106 |
| 0 |
| 72,678 |
| ||||||||||
Tod Carpenter |
| 13,841 |
| 7,909 |
| 12,932 |
| 0 |
| 93,126 |
|
| 17,206 |
| 9,832 |
| 19,011 |
| 0 |
| 139,175 |
| ||||||||||
Charles McMurray |
| 91,339 |
| 14,492 |
| 58,882 |
| 0 |
| 1,655,902 |
|
| 368,777 |
| 13,797 |
| 32,779 |
| 0 |
| 2,092,504 |
| ||||||||||
Jay Ward |
| 19,123 |
| 15,298 |
| 12,658 |
| 0 |
| 107,788 |
|
| 48,013 |
| 15,471 |
| 4,023 |
| 0 |
| 175,295 |
| ||||||||||
Thomas VerHage |
| 103,095 |
| 16,495 |
| 173,906 |
| 944,986 |
| 5,156,326 | (5) |
|
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|
|
|
| ||||
(1) | Includes amounts deferred into the non-qualified deferred compensation plans as follows: | ||||
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| ||||
| • | Deferred Base Salary of | |||
|
|
| |||
| • | Deferred Annual Cash Incentive of | |||
|
|
| |||
| • | Deferred Long-Term Compensation Plan award of $296,095 for Mr. McMurray | |||
• | 401(k) Excess contributions of | ||||
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|
| |||
(2) | This reflects the company match for deferred salary, deferred annual incentive, and 401(k) Excess contributions. These amounts were reported under All Other Compensation in the Summary Compensation Table. |
|
| ||
(3) | This includes amounts listed in the Summary Compensation Table in the Change in Pension Value and Non-Qualified Deferred Compensation Earnings column for Above Market Interest (see Footnote 5 of the Summary Compensation Table). |
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| |
(4) | This includes balances for our NEOs from the non-qualified deferred compensation plans as follows: |
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|
Name |
| Deferred |
| Deferred Stock |
| ESOP |
|
| Deferred |
| Deferred Stock |
| ESOP |
| ||||||
William Cook |
| $ | 12,833,324 |
| $ | 13,864,704 |
| $ | 399,574 |
|
| $ | 13,491,878 |
| $ | 14,343,017 |
| $ | 413,358 |
|
James Shaw |
| $ | 37,455 |
| $ | 0 |
| $ | 0 |
|
| $ | 72,678 |
| $ | 0 |
| $ | 0 |
|
Tod Carpenter |
| $ | 93,126 |
| $ | 0 |
| $ | 0 |
|
| $ | 139,175 |
| $ | 0 |
| $ | 0 |
|
Charles McMurray |
| $ | 1,655,902 |
| $ | 0 |
| $ | 0 |
|
| $ | 2,092,504 |
| $ | 0 |
| $ | 0 |
|
Jay Ward |
| $ | 107,788 |
| $ | 0 |
| $ | 0 |
|
| $ | 175,295 |
| $ | 0 |
| $ | 0 |
|
Thomas VerHage |
| $ | 5,033,311 |
| $ | 123,015 |
| $ | 0 |
|
|
|
| This also includes the following amounts that were reported as cash compensation to our NEOs in the Summary Compensation Table for current and previous years: Mr. Cook, |
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|
Potential Payments Upon Termination or Change in Control
The following discussion and tables reflect the amount of compensation that would be paid to the NEOs in the event of termination of employment of the Officer under several different termination scenarios. Since Mr. VerHage retired on October 31, 2011, compensation to be paid to him in the event of termination of employment is only discussed in the context of retirement.
Potential Payments upon Termination Absent a Change in Control
Retirement
Our Officers are eligible for retirement at age 55 with five years of vesting service. As of the end of Fiscal 2012,2013, Mr. Cook and Mr. McMurray were eligible for retirement. As previously stated, Mr. VerHage retired on October 31, 2011.
Upon retirement, all outstanding stock options will continue to remain outstanding and are exercisable as they vest for the remainder of their respective ten-year term (in accordance with the terms of the stock option plan document). Time-based restricted stock grants that have not vested would be prorated at retirement.
As of the end of Fiscal 2012,2013, Mr. McMurray has a restricted stock award. Mr. McMurray would have received 6671,467 shares of his restricted stock grant had he retired at fiscal year-end. The value of those shares at fiscal year-end was $23,645.$53,178.
In the event of retirement during the fiscal year after the end of the first quarter, the Officer would receive a prorated annual cash incentive at the end of the applicable performance period for the period of the year when actively employed. If Mr. Cook or Mr. McMurray had retired at fiscal year-end, each would have received his full annual cash incentive (as shown in the Summary Compensation Table). Since Mr. VerHage retired during the first quarter of the fiscal year, he is not eligible for a Fiscal 2012 incentive payment.
For any Long-Term Compensation Plan awards that are not vested (i.e., they are still within the three-year incentive cycle), a participant who retires receives a prorated payment at the end of the three-year incentive cycle based on the portion of the period during which the participant was actively employed. If Mr. Cook or Mr. McMurray had retired at fiscal year-end, each would have received 1/3 of the award for the cycle which ends July 31, 20142015 and 2/3 of the award for the cycle which ends July 31, 2013. Since Mr. VerHage retired on October 31, 2011, he will receive 1/12 of the award for the cycle which ends July 31, 2014;5/12 of the award for the cycle which ends July 31, 2013;and 3/4 of the award for the cycle which ends July 31, 2012.2014. The following are the shares and value at fiscal year-end that would have been paid out at retirement:
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|
Name |
| Shares |
| Value at Fiscal Year-End |
| ||
William Cook |
|
| 26,334 |
| $ | 933,540 |
|
Charles McMurray |
|
| 7,734 |
| $ | 274,170 |
|
Thomas VerHage |
|
| 4,733 |
| $ | 167,785 |
|
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|
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|
|
Name |
| Shares |
| Value at Fiscal Year-end |
| ||
William Cook |
|
| 23,233 |
| $ | 842,196 |
|
Charles McMurray |
|
| 6,466 |
| $ | 234,393 |
|
Payments under our Non-Qualified Deferred Compensation Plans and Excess Pension Plan would be paid according to the payment elections made by the NEO. The amounts reflected in the Non-Qualified Deferred Compensation Table and Pension Benefits Table would have been payable according to the Officer’s payment elections in the event of a retirement at the end of Fiscal 2012.2013. If our NEOs eligible for retirement had retired at fiscal year-end, the following SERP benefits would have been payable (per their payment election).
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Name |
| SERP Benefit |
| Form of Payment |
|
| SERP Benefit |
| Form of Payments |
| |||
William Cook |
| $ | 3,525,656 |
| 10 year annual installments |
|
| $ | 2,870,456 |
| 10 year annual installments |
| |
Charles McMurray |
| $ | 396,654 |
| Lump Sum |
|
| $ | 176,910 |
| Lump Sum |
| |
Thomas VerHage |
| $ | 508,471 |
| 15 year annual installments |
|
Per his payout election, Mr. VerHage will begin receiving his annual installments from the SERP on November 1, 2013.Table of Contents
Involuntary Termination
In the event of an involuntary termination not for cause, the Committee has the sole discretion to determine the amount, if any, of severance payments and benefits that will be offered to a NEO. We have no formal employment agreements with our Officers and they are not covered by our Company Severance Plan. Under our Severance Plan for U.S. salaried Employees, the Company generally pays severance equal to one week of base salary for each year of service up to a maximum of 26 weeks (a minimum of 8 weeks for director level) and a prorated incentive at target. We generally pay for continued coverage for elected medical and dental benefits for a period of one or two months based on years of service. Our NEOs would receive two months of benefit continuation based on their years of service. If the Committee were to follow our Severance Plan, the following payments would have been made to our NEOs if they had been involuntarily terminated at the end of Fiscal 2012:2013:
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Name |
| Severance |
| Benefit Continuation |
|
| Severance |
| Benefit Continuation |
| ||||
William Cook |
| $ | 1,312,500 |
| $ | 1,668 |
|
| $ | 1,380,000 |
| $ | 1,742 |
|
James Shaw |
| $ | 152,308 |
| $ | 2,146 |
|
| $ | 203,606 |
| $ | 2,268 |
|
Tod Carpenter |
| $ | 254,154 |
| $ | 1,668 |
|
| $ | 311,446 |
| $ | 1,742 |
|
Charles McMurray |
| $ | 351,201 |
| $ | 1,624 |
|
| $ | 361,737 |
| $ | 1,698 |
|
Jay Ward |
| $ | 286,846 |
| $ | 2,530 |
|
| $ | 310,784 |
| $ | 2,640 |
|
Upon involuntary termination, outstanding vested stock options must be exercised within one month of such termination. Unvested stock options and restricted stock grants that have not vested would be forfeited.
For any Long-Term Compensation Plan awards that are not vested (i.e., they are still within the three-year incentive cycle), the participant will not receive any payment for those cycles.
Payments under our Non-Qualified Deferred Compensation Plans and Excess Pension Plan would be paid according to the payment election made by the NEO. The amounts reflected in the Non-Qualified Deferred Compensation Table and the Pension Benefits Table would have been payable according to the Officer’s payment elections in the event of a termination at the end of Fiscal 2012.2013. Under the SERP, a participant must be at least age 55 and meet the service requirement at termination of employment to be eligible to receive a benefit from the Plan. Had Mr. Cook or Mr. McMurray been terminated at the end of the fiscal year, the following SERP benefit would have been payable:
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|
Name |
| SERP Benefit |
| Form of Payment |
|
| SERP Benefit |
| Form of Payments |
| |||
William Cook |
| $ | 3,525,656 |
| 10 year annual installments |
|
| $ | 2,870,456 |
| 10 year annual installments |
| |
Charles McMurray |
| $ | 396,654 |
| Lump Sum |
|
| $ | 176,910 |
| Lump Sum |
|
Since Mr. Ward was not age 55 as of the end of Fiscal 2012,2013, there would not have been any SERP benefit payable to him if he had been involuntarily terminated at the end of the fiscal year. Mr. Shaw and Mr. Carpenter are not eligible for the SERP.
Death
In the event of the death of an Officer, all outstanding vested stock options would continue to remain outstanding and would be exercisable by the named beneficiary for a period of 36 months following the death. Unvested stock options would be forfeited.
Time-based restricted stock grants that have not vested would be prorated at death, per the terms of the applicable restricted stock award agreement. As of the end of Fiscal 2012,2013, four of our NEOs have a restricted stock award.awards. Their named beneficiaries would have received the following shares of restricted stock had they died at the fiscal year-end.
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|
|
Name |
| Shares |
| Value at Fiscal Year-End |
|
| Shares |
| Value at Fiscal Year-end |
| ||||
James Shaw |
| 1,467 |
| $ | 52,005 |
|
| 2,600 |
| $ | 94,250 |
| ||
Tod Carpenter |
| 2,267 |
| $ | 80,365 |
|
| 3,400 |
| $ | 123,250 |
| ||
Charles McMurray |
| 667 |
| $ | 23,645 |
|
| 1,467 |
| $ | 53,179 |
| ||
Jay Ward |
| 4,300 |
| $ | 152,435 |
|
| 5,500 |
| $ | 199,375 |
|
In the event of death during the fiscal year, the Officer’s beneficiary would receive, at the end of the applicable performance period, a prorated annual cash incentive for the period of the year when actively employed. If a death occurred at fiscal year-end for each of our NEOs, the amount listed in the Summary Compensation Table for the annual cash incentive for each NEO would be paid to his/her beneficiary.
For any Long-Term Compensation Plan awards that are not vested (i.e., they are still within the three-year incentive cycle), the participant’s beneficiary would receive a prorated payment at the end of the three-year incentive cycle based on the portion of the period during which the participant was actively employed. Had a death of our NEOs occurred at fiscal year-end, their beneficiary would have received 1/3 of the long-term compensation cycle which ends on July 31, 20142015 and 2/3 of the long-term compensation cycle which ends on July 31, 2013.2014. Their named beneficiaries would have received the following shares had they died at fiscal year-end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| Shares |
| Value at Fiscal Year-End |
|
| Shares |
| Value at Fiscal Year-end |
| ||||
William Cook |
| 26,334 |
| $ | 933,540 |
|
| 23,233 |
| $ | 842,196 |
| ||
James Shaw |
| 1,000 |
| $ | 35,450 |
|
| 3,433 |
| $ | 124,446 |
| ||
Tod Carpenter |
| 4,067 |
| $ | 144,175 |
|
| 4,233 |
| $ | 153,446 |
| ||
Charles McMurray |
| 7,734 |
| $ | 274,170 |
|
| 6,466 |
| $ | 234,393 |
| ||
Jay Ward |
| 6,934 |
| $ | 245,810 |
|
| 6,533 |
| $ | 236,821 |
|
Upon the death of a NEO, payments under our Non-Qualified Deferred Compensation Plans and Excess Pension Plan would be accelerated. The amounts reflected in the Non-Qualified Deferred Compensation Table and Pension Benefits Table would have been payable to the named beneficiary as a lump sum in the event of the death of a NEO at the end of Fiscal 2012.2013.
Under the SERP, if a participant dies after 15 years of service and prior to age 62, his or her named beneficiary will receive a lump sum benefit from the SERP. If the NEOs had died at the end of Fiscal 2012,2013, their beneficiaries would have received the following lump sum from the SERP:
|
|
|
|
|
|
|
|
|
Name |
| SERP Benefit |
|
| SERP Benefit |
| ||
William Cook |
| $ | 3,525,656 |
|
| $ | 2,870,456 |
|
Charles McMurray |
| $ | 396,654 |
|
| $ | 176,910 |
|
Since Mr. Ward did not have 15 years of service as of the end of Fiscal 2012,2013, there would not have been any SERP benefit payable to his beneficiaries had he died at the end of the fiscal year. Mr. Shaw and Mr. Carpenter are not eligible for the SERP.
Disability
In the event of the disability of an Officer, all outstanding stock options would remain outstanding, continue to vest, and be exercisable for a period of 36 months following the disability.
Time-based restricted stock grants that have not vested would be prorated at disability, per the terms of the applicable restricted stock award agreement. As of the end of Fiscal 2012,2013, four of our NEOs have a restricted stock award. They would have received the following shares of restricted stock had they become disabled at fiscal year-end.
|
|
|
|
|
|
|
|
Name |
| Shares |
| Value at Fiscal Year-End |
| ||
James Shaw |
|
| 1,467 |
| $ | 52,005 |
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Tod Carpenter |
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| 2,267 |
| $ | 80,365 |
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Charles McMurray |
|
| 667 |
| $ | 23,645 |
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Jay Ward |
|
| 4,300 |
| $ | 152,435 |
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Name |
| Shares |
| Value at Fiscal Year-end |
| ||
James Shaw |
|
| 2,600 |
| $ | 94,250 |
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Tod Carpenter |
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| 3,400 |
| $ | 123,250 |
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Charles McMurray |
|
| 1,467 |
| $ | 53,179 |
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Jay Ward |
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| 5,500 |
| $ | 199,375 |
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Upon the occurrence of a disability, each Officer who participates in our long-term disability program will receive an annual benefit equal to 60% of total cash compensation until the earlier of: (a) age 65; (b) recovery from the disability; or (c) death. The portion of compensation up to $200,000 is fully insured and payable by our insurance company and the portion of compensation in excess of $200,000 is self insured and payable by the Company. Had our NEOs become disabled at fiscal year-end, they would have received annual disability benefits as follows:
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| Annual Disability Benefit |
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| Annual Disability Benefit |
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Name |
| Fully Insured Portion |
| Self Insured Portion |
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| Fully Insured Portion |
| Self Insured Portion |
| ||||
William Cook |
| $ | 120,000 |
| $ | 800,892 |
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| $ | 120,000 |
| $ | 1,249,160 |
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James Shaw |
| $ | 120,000 |
| $ | 57,546 |
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| $ | 120,000 |
| $ | 155,102 |
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Tod Carpenter |
| $ | 120,000 |
| $ | 106,402 |
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| $ | 120,000 |
| $ | 196,865 |
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Charles McMurray |
| $ | 120,000 |
| $ | 201,145 |
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| $ | 120,000 |
| $ | 249,326 |
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Jay Ward |
| $ | 120,000 |
| $ | 169,520 |
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| $ | 120,000 |
| $ | 268,924 |
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In the event of the disability during the fiscal year, the Officer would receive a prorated annual cash incentive for the period of the year when actively employed per the terms of the Plan. If a disability had occurred at fiscal year-end for each of our NEOs, the amount listed in the Summary Compensation Table for the annual cash incentive would be paid to them.
For any Long-Term Compensation Plan awards that are not vested (i.e., they are still within the three-year incentive cycle), a disabled participant would receive a prorated payment at the end of the three-year incentive cycle based on the portion of the period during which the participant was actively employed. Had a disability of our NEOs occurred at fiscal year-end, they would have received 1/3 of the long-term compensation cycle which ends on July 31, 20142015 and 2/3 of the long-term compensation cycle which ends on July 31, 20132014 (see the Outstanding Equity Awards at Fiscal Year-End table). They would have received the following shares had they become disabled at fiscal year-end.
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Name |
| Shares |
| Value at Fiscal Year-End |
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| Shares |
| Value at Fiscal Year-end |
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William Cook |
| 26,334 |
| $ | 933,540 |
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| 23,233 |
| $ | 842,196 |
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James Shaw |
| 1,000 |
| $ | 35,450 |
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| 3,433 |
| $ | 124,446 |
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Tod Carpenter |
| 4,067 |
| $ | 144,175 |
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| 4,233 |
| $ | 153,446 |
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Charles McMurray |
| 7,734 |
| $ | 274,170 |
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| 6,466 |
| $ | 234,393 |
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Jay Ward |
| 6,934 |
| $ | 245,810 |
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| 6,533 |
| $ | 236,821 |
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In the event of a qualifying disability, payments under our Non-Qualified Deferred Compensation Plans and Excess Pension Plan would be accelerated. The amounts reflected in the Non-Qualified Deferred Compensation Table and Pension Benefits Table would have been payable as a lump sum in the event of the disability of a NEO at the end of Fiscal 2012.2013.
Under the SERP, if a participant becomes disabled after 15 years of service and prior to age 62, he or she will receive a lump sum benefit from the SERP. If the NEOs had become disabled at the end of Fiscal 2012,2013, they would have received the following lump sum from the SERP:
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Name |
| SERP Benefit |
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| SERP Benefit |
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William Cook |
| $ | 3,525,656 |
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| $ | 2,870,456 |
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Charles McMurray |
| $ | 396,654 |
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| $ | 176,910 |
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Since Mr. Ward did not have 15 years of service as of the end of Fiscal 2012,2013, there would not have been any SERP benefit payable to him if he had become disabled at the end of the fiscal year. Mr. Shaw and Mr. Carpenter are not eligible for the SERP.
Voluntary Termination and Termination for Cause
A NEO is not entitled to receive any additional forms of severance payments or benefits upon his voluntary decision to terminate employment or upon his termination by the Company for cause prior to being eligible for retirement.
Payments under our Non-Qualified Deferred Compensation Plans and Excess Pension Plan would be paid according to the payment election made by the NEO. The amounts reflected in the Non-Qualified Deferred Compensation Table and the Pension Benefits Table would have been payable according to the Officer’s payment elections in the event of a termination at the end of Fiscal 2012.2013. Under the SERP, a participant must be at least age 55 and meet the service requirement at termination of employment to be eligible to receive a benefit from the Plan. Had Mr. Cook or Mr. McMurray voluntarily terminated or been terminated by the Company for cause at the end of the fiscal year, the following SERP benefit would have been payable according to their payment election:
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Name |
| SERP Benefit |
| Form of Payment |
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William Cook |
| $ | 3,525,656 |
| 10 year annual installments |
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Charles McMurray |
| $ | 396,654 |
| Lump Sum |
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Name |
| SERP Benefit |
| Form of Payments |
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William Cook |
| $ | 2,870,456 |
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| 10 year annual installments |
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Charles McMurray |
| $ | 176,910 |
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| Lump Sum |
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Since Mr. Ward was not age 55 as of the end of Fiscal 2012,2013, there would not have been any SERP benefit payable to him if he had voluntarily terminated employment or had been terminated for cause at the end of the fiscal year. Mr. Shaw and Mr. Carpenter are not eligible for the SERP.
Potential Payments and Benefits Upon Termination Following or in Connection with a Change in Control
Upon the occurrence of a “change in control,” as generally defined below, whether or not there is a qualifying termination of employment:
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| • | All outstanding unvested stock options will immediately vest and become exercisable. As of the end of Fiscal |
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| • | All shares of time-based restricted stock will immediately vest and become unrestricted. As of the end of Fiscal |
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| • | Any Long-Term Compensation Plan awards will immediately vest and be paid out in a lump sum at target. See the Outstanding Equity Awards at 2013 Fiscal Year-End table. |
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| • | Any unvested benefits under the Salaried Employees’ Pension Plan will immediately vest. As of the end of Fiscal |
We have also entered into Change in Control Agreements (“CIC Agreements”) with each of the NEOs. Generally, a change in control includes the occurrence of any of the following events or circumstances:
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| (a) | The acquisition of 25% or more of the combined voting power of the Company’s outstanding shares, other than any acquisition from or by the Company or any Company-sponsored Employee benefit plan. |
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| (b) | Consummation of a merger or other business consolidation of the Company other than a transaction where the Company’s pre-transaction Shareholders retain at least 60% ownership of the surviving entity. |
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| (c) | A change in the Board of Directors composition in which the incumbent Directors, meaning those Directors who were not elected in a contested fashion, are no longer a majority of the Board. The CIC Agreements specify the circumstances under which a Director is deemed to have been elected in a contested fashion. |
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| (d) | Approval of a plan of liquidation or dissolution or a consummated agreement for the sale of all or substantially all of the Company’s assets to an entity, unless the Company’s pre-transaction Shareholders retain at least 60% ownership of the surviving entity. |
The CIC Agreements provide that upon a qualifying termination of employment in connection with a change in control (see the Compensation Discussion and Analysis under Change in Control Agreements for more information on a qualifying termination), in addition to the accelerated vesting of stock options and restricted stock and the Long-Term Compensation Plan stock awards described above, each Officer will receive severance payments equal to:
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| • | A cash lump sum equal to a multiple of the sum of the Officer’s base salary plus the Officer’s target cash incentive from the Annual Cash Incentive Plan then in effect. The multiple is based on level as follows: | |
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| CEO – three times the sum of base salary and target annual incentive |
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| Senior Vice Presidents – two times the sum of base salary and target annual incentive |
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| Vice Presidents – one times the sum of base salary and target annual incentive |
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| • | A lump sum of additional pension benefits equal to: | |
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| The value of the benefit under each pension plan assuming the benefit is fully vested and the Officer had three additional years of benefit accrual; less |
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| The value of the vested benefit accrued under the Salaried Employees’ Pension Plan, the Excess Pension Plan, and the Supplemental Executive Retirement Plan |
Each Officer will also be entitled to:
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| • | 36 months of continued medical, dental, vision, life, disability, and accident benefits |
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| • | Outplacement services suitable to the Officer’s position for a period of three years or until the first acceptance of an employment offer if earlier than three years |
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| • | For all Officers, |
This provision previously applied to all Officers except the CEO. Previously the CEO was eligible under the CIC Agreement for a payment to reimburse the CEO for any excise taxes on change in control payments that are considered excess parachute payments under section 280G of the Internal Revenue Code plus income and employment taxes on the tax gross-up. This provision was eliminated by the Committee and the Board of Directors effective September 28, 2012 and the CEO is now treated under this provision with regard to any excise tax liability. |
This table reflects the additional amounts per our CIC Agreements in effect for Fiscal 20122013 that would have been payable to the NEOs if a change in control had occurred and the Officer had a qualifying termination of employment effective July 31, 2012.2013. The table also shows the accelerated vesting of stock options, time-based restricted stock, Long-Term Compensation Plan stock awards, and retirement plan benefits that would be paid to our NEOs if a change in control had occurred and the Officer had a qualifying termination of employment effective July 31, 2012:2013:
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Named Executive |
| Cash |
| Equity(2) |
| Retirement |
| Benefit |
| Outplacement(5) |
| Excise Tax |
| Total |
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| Cash |
| Equity(2) |
| Retirement |
| Benefit |
| Outplacement(5) |
| Excise Tax |
| Total |
| ||||||||||||||
William Cook |
| $ | 5,250,000 |
| $ | 1,290,062 |
| $ | 2,424,993 |
| $ | 24,692 |
| $ | 75,000 |
| $ | 3,358,014 |
| $ | 12,422,761 |
|
| $ | 5,520,000 |
| $ | 1,438,517 |
| $ | 487,102 |
| $ | 25,628 |
| $ | 75,000 |
| $ | 0 |
| $ | 7,546,248 |
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James Shaw |
| $ | 385,000 |
| $ | 198,467 |
| $ | 96,853 |
| $ | 33,980 |
| $ | 75,000 |
| $ | 0 |
| $ | 789,300 |
|
| $ | 446,569 |
| $ | 398,404 |
| $ | 120,496 |
| $ | 35,960 |
| $ | 75,000 |
| $ | 0 |
| $ | 1,076,430 |
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Tod Carpenter |
| $ | 896,000 |
| $ | 325,915 |
| $ | 168,960 |
| $ | 24,692 |
| $ | 75,000 |
| $ | 0 |
| $ | 1,490,567 |
|
| $ | 1,075,200 |
| $ | 509,818 |
| $ | 196,829 |
| $ | 25,628 |
| $ | 75,000 |
| $ | 0 |
| $ | 1,882,475 |
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Charles McMurray |
| $ | 1,021,677 |
| $ | 511,779 |
| $ | 403,852 |
| $ | 24,224 |
| $ | 75,000 |
| $ | 0 |
| $ | 2,036,532 |
|
| $ | 1,052,326 |
| $ | 540,383 |
| $ | 165,997 |
| $ | 25,196 |
| $ | 75,000 |
| $ | 0 |
| $ | 1,858,903 |
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Jay Ward |
| $ | 1,056,000 |
| $ | 552,735 |
| $ | 204,059 |
| $ | 36,032 |
| $ | 75,000 |
| $ | 0 |
| $ | 1,923,826 |
|
| $ | 1,119,360 |
| $ | 621,721 |
| $ | 219,541 |
| $ | 37,364 |
| $ | 75,000 |
| $ | 0 |
| $ | 2,072,986 |
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(1) | Under the CIC Agreement, this amount is a lump sum equal to: | ||
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| • | Three times the sum of base salary and the annual incentive at target for Mr. Cook | |
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| • | Two times the sum of base salary and the annual incentive at target for Mr. Carpenter, Mr. McMurray and Mr. Ward | |
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| • | One times the sum of base salary and the annual incentive at target for Mr. Shaw | |
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(2) | This amount represents the accelerated vesting of the two Long-Term Compensation Plan stock award cycles that are in process as of July 31, | ||
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(3) | This amount represents the lump sum value of additional pension benefits equal to: | ||
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| • | The value of the benefit under each pension plan assuming the benefit is fully vested and the Officer had three additional years of benefit accrual; less | |
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| • | The value of the vested benefit accrued under the Salaried Employees’ Pension Plan, the Excess Pension Plan, and the Supplemental Executive Retirement Plan | |
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(4) | This amount represents the value of benefit continuation for three years based on our current premium levels. | ||
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(5) | This amount is based on the assumption that the NEO would utilize $25,000 per year in outplacement services for the full three years. | ||
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Under the CIC Agreement for Officers, other than the CEO, a provision has been added to the CIC Agreement thatpayment could reduce the paymentsbe reduced in situations where the Officer would otherwise be subject to the excise tax liability under Section 208G of the Internal Revenue Code. The amounts in the table above do not reflect any reductions that might be made.
With a change in control followed by a termination within 24 months, any payments under the Non-Qualified Deferred Compensation Plans described in the Compensation Discussion and Analysis and the narrative before the Non-Qualified Deferred Compensation Table would become immediately payable to the participant in the form of a lump sum.
With a change in control followed by a termination within 24 months, any payments under the Excess Pension Plan and SERP described in the Compensation Discussion and Analysis and the narrative before the Pension Benefits Table would also become immediately payable to the participant in the form of a lump sum. Under the Salaried Employees’ Pension Plan and the Excess Pension Plan, upon a change in control any accrued benefits become immediately vested. As of the end of Fiscal 2012,2013, all NEOs were 100% vested under these plans.
INFORMATION REGARDING THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The following is the report of the Audit Committee with respect to Donaldson’s audited financial statements presented in its Annual Report on Form 10-K for the fiscal year ended July 31, 2012.2013.
The Audit Committee of the Board of Directors is composed entirely of Non-Employee Directors, all of whom have been determined by the Board to be independent under the rules of the SEC and the NYSE. In addition, the Board has determined that John P. Wiehoff is an Audit Committee financial expert, as defined by the rules of the SEC.
The Audit Committee acts under a written charter approved by the Board of Directors. The Audit Committee assists the Board in carrying out its oversight of the Company’s financial reporting process, audit process, and internal controls. The Audit Committee formally met eight times during the past fiscal year in carrying out its oversight functions. The Audit Committee has the sole authority to appoint, terminate, or replace the Company’s independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee.
The Audit Committee reviewed and discussed the Company’s Fiscal 20122013 audited financial statements with management, the internal auditor, and PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm. The Audit Committee also met separately with the internal auditor and the independent registered public accounting firm to discuss and review those financial statements prior to issuance. Management has represented and PwC has confirmed in its opinion to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles and fairly present, in all material respects, the financial condition of the Company.
As part of its activities, the Audit Committee also:
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| 1. | Discussed with PwC the matters required to be discussed under |
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| 2. | Received the written disclosures and letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence; and |
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| 3. | Discussed with PwC its independence. |
Based on the review and discussions with management and PwC, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2012.
Members of the Audit Committee2013.
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| |||
John P. Wiehoff, Chair | James J. Owens | ||
Andrew Cecere | Willard D. Oberton | ||
Paul David Miller |
| Ajita G. Rajendra |
The aggregate fees billed to the Company for Fiscal 20122013 and Fiscal 20112012 by PwC, the Company’s independent registered public accounting firm, are as follows:
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| Fiscal 2011 |
| Fiscal 2010 |
| ||
Audit Fees |
| $ | 2,186,014 |
| $ | 1,886,398 |
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Audit-Related Fees |
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| 43,676 |
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| 59,724 |
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Tax Fees |
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| 0 |
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| 0 |
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All Other Fees |
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| 0 |
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| 1,500 |
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Total Fees |
| $ | 2,229,689 |
| $ | 1,947,622 |
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| Fiscal 2013 |
| Fiscal 2012 |
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Audit Fees |
| $ | 2,200,000 |
| $ | 2,186,014 |
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Audit-Related Fees |
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| 48,300 |
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| 43,676 |
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Tax Fees |
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| 0 |
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| 0 |
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All Other Fees |
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| 0 |
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| 0 |
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Total Fees |
| $ | 2,248,300 |
| $ | 2,229,689 |
|
Audit Fees include professional services rendered in connection with the audit of the Company’s financial statements, including the quarterly reviews, statutory audits of certain of the Company’s international subsidiaries, and the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Audit-Related Fees include accounting advisory fees related to financial accounting matters. All Other Fees include a license fee for technical materials.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm, including the fees and terms for those services. The Audit Committee may delegate to one or more designated Committee members the authority to grant pre-approvals. This designated member is the Chair of the Audit Committee. Any pre-approval by the Chair must be presented to the full Audit Committee at its next scheduled meeting. All of the services provided by the independent registered public accounting firm during Fiscal 20122013 and Fiscal 2011,2012, including services related to the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies.
ITEM 2: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm to audit the books and accounts of the Company for the fiscal year ending July 31, 2013.2014. PwC has audited the books and accounts of the Company since 2002. While the Company is not required to do so, it is submitting the selection of PwC to serve as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 20132014 for ratification in order to ascertain the views of the Company’s Stockholders on this appointment. Whether or not the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent registered public accounting firm, may in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its Stockholders. Representatives of PwC are expected to be present at the meeting and will have the opportunity to make a statement and to respond to appropriate questions. In the event this appointment is not ratified, the Audit Committee will reconsider its selection.
The Audit Committee of the Board of Directors recommends that Stockholders voteFORratification of the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending July 31, 2013.2014.
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| By Order of the Board of Directors |
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| Norman C. Linnell |
| Secretary |
October 4, |
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Donaldson Company, Inc. Annual Meeting of Stockholders
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Friday, November 22, 2013, at 1:00 p.m. |
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| VOTE BY INTERNET - www.proxyvote.com | |
| Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
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| ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS |
| If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | |
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| VOTE BY PHONE - 1-800-690-6903 |
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| Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. |
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| VOTE BY MAIL |
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| Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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| KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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| For |
| Withhold |
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| To withhold authority to vote for any individual |
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| The Board of Directors recommends you vote FOR the following: |
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| 1. | Election of Directors |
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| 01 | William M. Cook | 02 | Paul David Miller |
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| 01 | Michael J. Hoffman | 02 | Willard D. Oberton | 03 | John P. Wiehoff |
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| TheBoard of Directors recommends you vote FOR the following proposal: |
| For |
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| Abstain | |||||||||||
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| 2. | Ratification of the appointment of PricewaterhouseCoopers LLP as Donaldson Company, |
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| NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. |
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| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership |
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| Signature [PLEASE SIGN WITHIN BOX] | Date |
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| Signature (Joint Owners) |
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0000149338_1 R1.0.0.116990000185269_1 R1.0.0.51160
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice & Proxy Statement, Shareholder Letter, Form 10-K is/are available atwww.proxyvote.com. |
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DONALDSON COMPANY, INC. |
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This proxy is solicited by the Board of Directors |
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The undersigned appoints WILLIAM M. COOK, NORMAN C. LINNELL AND AMY C. BECKER, and each of them as proxies, each with the power to appoint a substitute, to represent and to vote, as designated on the reverse side, all shares of Common stock of DONALDSON COMPANY, INC. that the stockholder is entitled to vote at the |
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Meeting or any adjournment thereof. |
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF ALL DIRECTOR NOMINEES AND FOR PROPOSAL 2. |
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Continued and to be signed on reverse side |
0000149338_2 R1.0.0.116990000185269_2 R1.0.0.51160