The Board as a whole should reflect the appropriate balance of knowledge, experience, skills, expertise and diversity that, when taken together, will enhance the quality of the Board’s deliberations and decisions. Although the Board has no formal policy regarding diversity, the Board believes that diversity is an essential element of Board effectiveness. In this context, diversity is defined broadly to include differences in background, skills, education, experience, gender, race, national origin and culture.
The Executive Committee exercises the authority of the Board during the intervals between Board meetings and does not meet on a regular basis. Its members are identified in theCommittee Membership in 2010table.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
Executive Summary
In 2010, general economic conditions began to stabilize, credit markets improved and U.S. domestic automotive production levels increased. The U.S. Seasonally Adjusted Annual Rate (SAAR) of sales increased in 2010 forCompensation Committee (Committee) oversees the first time in three years to 11.6 million units as the U.S. domestic automotive industry began to recover from the severe downturn it had suffered. Over the past several years, AAM’s senior management team implemented a restructuring plan that resulted in a cost structure aligned with current and projected levels of customer demand and market requirements. This plan has proven successful, yielding significant, permanent structural cost reductions, which has driven down our operating breakeven level. These actions positioned AAM to significantly improve profitability and free cash flow in 2010.
Company's executive compensation program. Our executive compensation program reflects an externally competitive compensation structure based on a comprehensive market study of executive compensation programs in AAM’sAAM's comparative peer group. In addition to attracting and retaining key executives, the program is designed to drive Company and individual performance while aligning the interests of our executives with those of our stockholders.
Stockholder Outreach
At our 2013 annual meeting, 58% of our stockholders voted in favor of the Company's say on pay proposal. This result was considerably less favorable than the level of support AAM received for its 2012 and 2011 say on pay proposals, which was 95% and 98%, respectively. As a result of this outcome, the Board directed senior management to conduct stockholder outreach to gain an understanding of stockholder concerns about our executive compensation programs. The Board and the Committee believe that direct feedback from our stockholders is valuable in evaluating possible changes to our executive compensation programs in order to further align AAM's compensation programs and practices with the objectives of our stockholders.
Senior management contacted our top 25 institutional stockholders, representing approximately two-thirds of the total shares outstanding, to discuss the outcome of the 2013 vote. Nine of these investors agreed to meet with us. During the fall of 2013, senior management had discussions with these investors, which included eight of AAM's top 15 institutional holders.The dialog with these stockholders was open, positive and constructive. The key areas of concern expressed by these stockholders included the following:
composition of our comparative peer group and the need for clear, descriptive disclosures regarding the criteria used to select companies in our comparative peer group;
| |
• | the importance of setting the target level of total executive compensation at the 50th percentile; |
•lack of performance-based equity incentive compensation;
the importance of pay-for-performance alignment of CEO compensation;
the lack of a formal clawback policy; and
compensation of Co-Founder and former Executive Chairman (now deceased).
Throughout the outreach process, management reported the feedback received from our stockholders to the Board and the Committee. In consideration of this feedback and the written comments of proxy advisory firms, the Committee reviewed our compensation program and practices for executive officers, including our named executive officers (NEOs). In conducting this review, the Committee received advice from its independent compensation consultant and input from senior management and the Board. As a result, the Committee made changes to our executive compensation program as described below.
Key Changes to Executive Compensation Program
Approved a new comparative peer group for benchmarking executive compensation. The Committee approved a new comparative peer group, which has greater relevance to AAM in terms of industry, revenues, market capitalization, global complexity and competition. AAM's projected 2014 revenues approximate the median 2014 projected revenues of the new comparative peer group. The size of the comparative peer group was reduced from 38 to 20 companies.
| |
• | Targeted the 50th percentile for total compensation of executive officers. In determining 2014 compensation, the Committee targeted total compensation at approximately the 50th percentile of our new comparative peer group. As a result, the Committee has moved away from setting annual and long-term incentive pay opportunities between the 50th and 75th percentile of our comparative peer group. This total compensation target is considered to be a generally accepted benchmark of external competitiveness that supports AAM's ability to attract and retain key executives. |
Introduced a performance share award vehicle as a component of long-term incentive compensation. Stockholders commented that our long-term incentive (LTI) program includesshould include performance-based equity awards. Historically, our LTI program was comprised of 50% cash-based performance awards and 50% restricted stock units (RSUs) with time-based vesting. The Committee redesigned the LTI program to strengthen pay-for-performance alignment of executive compensation. For 2014, the Committee
introduced performance share awards that account for 66% of the total LTI award value. The payouts earned under these awards will be measured by EBITDA margin and relative TSR performance over a mixthree-year period and paid only to the extent that pre-established performance targets are achieved. The Committee decided that the remaining 34% of base salaries, targetthe LTI equity awards should be in the form of RSUs with three-year cliff vesting in order to promote the retention of key executives. This new LTI design, which is 100% equity-based, further aligns the interests of executive officers with those of our stockholders.
Capped annual incentive opportunitiesperformance metrics. A 2013 report from a proxy advisory firm noted that a performance metric used in determining annual incentive award payouts -- net income as a percentage of sales (NIPS) -- did not have a stated maximum payout. Although the award opportunity for this metric was practically limited by its direct link to actual Company performance, the Committee considered this comment while setting financial targets for 2014 annual incentive award opportunities. Accordingly, the Committee established a stated maximum payout for the NIPS performance metric. As a result, all performance metrics for annual incentive compensation have stated maximum payouts.
Adopted a clawback policy. The Committee adopted a clawback policy applicable to executive officers effective January 1, 2014. Generally, if the Committee determines that an executive officer engaged in fraud or intentional misconduct that resulted in a material restatement of our financial statements, the Committee may seek to recover performance-based incentive compensation to the extent such compensation is based on the financial performance of the Company and if other criteria are met.
Eliminated discretionary bonuses to the former Executive Chairman and other NEOs. Stockholders expressed concern regarding the 2012 discretionary bonus paid to Mr. R.E. Dauch (now deceased). Mr. R.E. Dauch's 2012 bonus was determined under his prior employment agreement, which provided for the use of discretion in assessing performance and determining the annual bonus payout. Beginning in 2013, under his 2012 employment agreement, Mr. R.E. Dauch's annual incentive was calculated based on the Company's achievement of financial targets set by the Committee in advance of the performance period. These performance metrics were approved by our stockholders under the 2012 Omnibus Incentive Plan. No discretionary increases were made to 2013 annual incentive payouts for Mr. R.E. Dauch or any of our other NEOs.
We believe that the above changes to our executive compensation program address the concerns raised by the 2013 advisory vote on executive compensation and by our stockholders. The Company is committed to further engagement with our stockholders regarding executive compensation and related matters. We believe that these discussions are a valuable component of our overall investor relations program. The Committee will continue to consider feedback from our stockholders in determining AAM's executive compensation programs and practices.
2013 Performance
In 2013, our financial performance was highlighted by sales growth that outpaced the industry and profitability that solidly rebounded from our 2012 performance. The performance goals under our executive compensation programs are established to reward achievement of the Company's goals and objectives. The 2013 payouts of annual and cash-based long-term incentives as compared to incentive payouts for executive officers. In 2010,2012 reflect this pay-for-performance alignment. As discussed in more detail below, improvements in the Company's performance for 2013 resulted in higher incentive payouts for certain awards as compared to 2012 payments. For example, our annual incentives were based exclusively on achievement ofachievements related to net operating cash flow goals. Our current long-termand relative TSR resulted in higher incentive programpayouts for 2013 as compared to 2012. This result supports AAM's compensation objectives of rewarding performance and aligning the interests of our executive officers with those of our stockholders.
Leadership Changes - NEOs
On August 2, 2013, Richard E. Dauch, the Company's Co-Founder and Executive Chairman, passed away. Effective August 16, 2013, the Board appointed President & Chief Executive Officer David C. Dauch as Chairman of the Board. Mr. D.C. Dauch has served as AAM’s President & CEO since September 2012.
John J. Bellanti, AAM's Executive Vice President, Worldwide Operations, retired from AAM effective January 1, 2014. Upon Mr. Bellanti's retirement, Alberto L. Satine became Senior Vice President, Global Driveline Operations, assuming leadership responsibility for a significant portion of our global operations. Previously, Mr. Satine served as AAM's Group Vice President, Global Sales & Business Development and held numerous positions of increasing responsibility since he joined AAM in May 2001.
Named Executive Officers
Our NEOs for the fiscal year ending December 31, 2013 include the following individuals whose titles shown below are the positions held as of that date (except for Mr. R.E. Dauch):
David C. Dauch, Chairman, President & Chief Executive Officer;
Michael K. Simonte, Executive Vice President & Chief Financial Officer;
John J. Bellanti, Executive Vice President, Worldwide Operations;
Alberto L. Satine, Group Vice President, Global Sales & Business Development;
Norman Willemse, Vice President, Metal Formed Products Business Unit; and
Richard E. Dauch, Co-Founder and former Executive Chairman (deceased).
Although Mr. R.E. Dauch passed away during 2013, he is a cash-based programidentified as a resultan NEO based on his 2013 compensation. Our discussion of AAM not having an equity plan availableAAM's executive compensation programs throughout the Compensation Discussion and Analysis (CD&A) applies generally to our NEOs, except for new equity-based awards. We use total shareholder return (TSR) and earnings before interest, taxes, depreciation and amortization (EBITDA) as the performance measures for long-term incentive awards.Mr. R.E. Dauch. His compensation is described separately under Compensation of former Executive Chairman below.
Executive Compensation Philosophy and Objectives
The Committee is responsible for establishing and reviewing the overall compensation philosophy of the Company. The Committee believes that the compensation paid to executives should be structured to provide AAM executives with meaningful rewards, while maintaining alignment with stockholder interests, corporate values and management initiatives. In addition, the annual compensation limit of $3 million for any executive officer and other restrictions contained in the 2009 Settlement and Commercial Agreement we entered into with GM (2009 Settlement and Commercial Agreement) will be considered by the Committee in order to ensure compliance with the agreement as long as it remains in effect.
The Committee believes that AAM’s executive compensation program should consist of a mix of base salary, annual incentive compensation and long-term incentive compensation, with limited perquisites and other personal benefits. One of the key objectives of establishing a mix of base salaries, annual incentive and long-term incentive compensation is to have a significant portion of total compensation be performance basedperformance-based and contingent upon the achievement of stated Company performance goals.
In an effort to more closely align the objectives of the philosophy to market competitive practices, theThe Committee approved stated target percentile goals for each component of pay. The following pay percentile goals are used as a guide to help set compensation levels for the NEOs, excluding the CEO (whose compensation is determined under his employment agreement, as described below). In addition to these goals, the Committeealso considers other factors in setting compensation levels for the NEOs includingsuch as Company and individual performance, succession planning and the specific needsrequirements of the position for the Company.
| | |
Pay Component
| | Target Percentile Goal
|
|
Base Salary | | 50th Percentile |
Target Annual Incentive | | Between 50th and 75th Percentiles |
Long-Term Incentives | | Between 50th and 75th Percentiles |
These percentile goals were established based on the Committee’s objective that base salaries should be consistent with market salaries at the 50th percentile. The percentile goals for annual
20
AAM competes for executive talent. The criteria used to assess the market and to select theour eight competitor peer group included:companies were included and two were excluded (namely, Autoliv, a foreign corporation, and Magna International, which has significantly greater revenues than AAM).
| | |
| • | Operating/Industry Competitors — Companies with which we compete for the sale of products and services; |
| • | Labor Market Competitors — Companies with which we compete for executive talent; |
| • | Competitors for Capital — Companies with which we compete for investment dollars and against which investment performance is evaluated; and |
| • | Revenue Size — Companies with revenues within a relevant range. |
We believe the new comparative peer group has greater relevance to AAM in terms of industry, revenues, market capitalization, global complexity and competition. We expect that AAM's new and incremental backlog will drive AAM's sales to exceed the rate of growth expected in the industry. AAM's projected 2014 revenues are well positioned relative to the median of the comparative peer group's 2014 projected revenues.
BasedThe following table shows the companies in our new comparative peer group (used to determine 2014 compensation), the prior comparative peer group (used to determine 2013 compensation), and the companies in our competitor peer group as disclosed in our 2013 annual report to shareholders.
|
| | | |
Company | 2014 Peer Group | 2013 Peer Group | Competitor Peer Group |
A. O. Smith Corporation | X | X | |
BorgWarner Inc. | X | X | X |
Briggs & Stratton | X | | |
Cooper-Standard Holdings, Inc. | X | | |
Dana Holding Corporation | X | X | X |
Donaldson Company, Inc. | X | X | |
Federal-Mogul Corporation | X | X | |
Flowserve Corporation | X | X | |
Kennametal Inc. | X | X | |
Lear Corporation | X | X | X |
Meritor Inc. | X | X | X |
Regal-Beloit Corporation | X | | |
Tenneco Automotive Inc. | X | | X |
Terex Corporation | X | X | |
Tower International Inc. | X | | |
Trinity Industries, Inc. | X | X | |
USG Corporation | X | X | |
Valmont Industries, Inc. | X | X | |
Visteon Corporation | X | X | X |
Woodward Inc. | X | | |
Ball Corporation | | X | |
Brady Corporation | | X | |
Cameron International Corporation | | X | |
Cummins Inc. | | X | |
Dover Corporation | | X | |
Eaton Corporation | | X | |
Federal Signal Corporation | | X | |
Fleetwood Enterprises, Inc. | | X | |
FMC Technologies | | X | |
Genuine Parts Company | | X | |
Harley-Davidson Motor Company | | X | |
Ingersoll-Rand Company | | X | |
Joy Global Inc. | | X | |
Navistar International | | X | |
Owens-Illinois, Inc. | | X | |
PACCAR Inc. | | X | |
Polaris Industries Inc. | | X | |
Rockwell Automation | | X | |
Sauer-Danfoss Inc. | | X | |
Sonoco Products Company | | X | |
Thomas & Betts Corporation | | X | |
The Timken Company | | X | |
TRW Automotive Holdings Corp. | | X | |
Woodward Governor Company | | X | |
Autoliv Inc. | | | X |
Magna International Inc. | | | X |
Total Number of Companies | 20 | 38 | 8 |
Compensation Benchmarking
The Committee targets approximately the 50th percentile of our comparative peer group for total direct compensation of executives holding similar positions at companies in our comparative peer group. Total direct compensation consists of base salary plus target annual and long-term incentive compensation. Total direct compensation for each NEO may be above or below the 50th percentile of our comparative peer group due to various factors, including an individual's level of responsibility, demonstrated skills and experience, significance of position, contribution to the Company's performance, time in position and potential for advancement in the context of succession planning. The Committee generally sets performance objectives for annual and long-term
incentive compensation so that targeted total direct compensation levels can be achieved only when performance objectives are met. Consequently, actual pay earned by executives may vary from targeted levels based on the foregoing criteria,degree to which specific performance objectives are attained.
The Committee has moved away from setting annual and long-term incentive pay opportunities between the Committee approved the following50th and 75th percentile of our comparative peer group to be used for 2010targeting total direct compensation at approximately the 50th percentile. This target reflects a generally accepted benchmark of external competitiveness and 2011 pay decisions:supports our ability to attract and retain key executives.
| | |
A. O. Smith Corporation | | Joy Global Inc. |
ArvinMeritor Inc. | | Kennametal Inc. |
Ball Corporation | | Lear Corporation |
BorgWarner Inc. | | Navistar International |
Brady Corporation | | Owens-Illinois, Inc. |
Cameron International Corporation | | PACCAR Inc. |
Cummins Inc. | | Polaris Industries Inc. |
Dana Corporation | | Rockwell Automation |
Donaldson Company, Inc. | | Sauer-Danfoss Inc. |
Dover Corporation | | Sonoco Products Company |
Eaton Corporation | | Terex Corporation |
Federal Signal Corporation | | Thomas & Betts Corporation |
Federal-Mogul Corporation | | The Timken Company |
Fleetwood Enterprises, Inc. | | Trinity Industries, Inc. |
Flowserve Corporation | | TRW Automotive Holdings Corp. |
FMC Technologies | | USG Corporation |
Genuine Parts Company | | Valmont Industries, Inc. |
Harley-Davidson Motor Company | | Visteon Corporation |
Ingersoll-Rand Company | | Woodward Governor Company |
The market data analysis used in determining executive officer compensation levels was revenue size adjusted using regressed market values for each relevant position.
Tally Sheets
Annually, the Committee reviews compensation tally sheets for each executive officer, including the NEOs. The tally sheets, which are prepared by management, provide a summary of the current amounts of each component of pay includingand a historical reviewhistory of prior long-term incentive grants. The tally sheets also provide a summaryshow estimates of the potential payoutspayments and benefits uponthat could be realized under various hypothetical termination events.scenarios. The elements and calculations reviewed aretally sheets consist of information that is substantially similar to the information providedshown for each NEO inPotential Payments Upon Termination or Change in Controlbelow. The Committee did not change the NEOs’ compensation based on its review of this information. The Committee expects to review updated tally sheets on an annual basis.information in 2013.
Components of the AAM Compensation Program
The primary components of AAM’s executive compensation program are base salary, annual incentives, long-term incentives, and benefits and perquisites. The discussion below
Base Salary. In the fourth quarter of each year, the elements of compensation applies to the NEOs, other than Mr. R. E. Dauch, our CEO. Mr. R. E. Dauch’s compensation is discussed separately inCompensation of Chief Executive Officerbelow.
Base Salary. BaseCommittee reviews base salaries provide fixed compensation to thefor executive for services rendered during the year. To more closely align its compensation programs with market competitive practices,
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the Company implemented market-based changes in compensation levels over a two-year period that concluded in 2010. The Committee based its salary determinationsofficers for the
NEOs (other thanfollowing calendar year. In determining 2013 base salaries for executive officers, the
CEO) by reference to the 50th percentileCommittee reviewed benchmarking data comparing pay levels of our
executive officers with that of executives holding similar positions at companies in our comparative peer group. The
recommendations of the CEO and President & COO wereCommittee also considered
for other NEOs’ salaries. Those recommendations were based oneach individual’s experience, time in position, professional development, contribution to the Company,
individual performance and other factors.
For NEOs other than the Chairman, President & CEO, the Committee considered the recommendations of Mr. D.C. Dauch in determining NEO base salaries. The Committee approved
2013 base salary increases for the
following base salaries for 2011:NEOs listed below as follows: | | | | |
| | Base Salary |
|
Richard. E. Dauch | | $ | 2,702,300 | |
Michael K. Simonte | | $ | 515,000 | |
David C. Dauch (effective November 1, 2010) | | $ | 650,000 | |
John J. Bellanti | | $ | 473,800 | |
John E. Jerge | | $ | 303,000 | |
|
| | | | | | | | |
| | Base Salary |
| | 2013 | | 2012 |
David C. Dauch (effective September 1, 2013) | | $ | 1,100,000 |
| | $ | 1,000,000 |
|
Michael K. Simonte | | $ | 543,800 |
| | $ | 527,900 |
|
John J. Bellanti | | $ | 500,300 |
| | $ | 485,700 |
|
Alberto L. Satine | | $ | 360,000 |
| | $ | 320,000 |
|
Norman Willemse | | $ | 320,000 |
| | $ | 310,600 |
|
Effective September 1, 2013, Mr. D.C. Dauch’s base salary was increased effective November 1, 2010 in connection withto $1,100,000. This increase reflects the additional leadership responsibilities he assumed in August 2013 upon the areaspassing of labor relations, legalMr. R.E. Dauch. In making this determination, the Committee considered benchmarking data provided by Meridian regarding CEO compensation among our comparative peer group. The Committee approved Mr. D.C. Dauch's base salary increase effective September 1, 2013 with the expectation that this level would remain in effect for fiscal 2014.
The increases in 2013 base salary shown above for Mr. Simonte, Mr. Bellanti (in lump sum) and administration. NEOMr. Willemse represent annual merit increases of 3%, which is consistent with the budgeted amount for the merit program for U.S. salaried associates.
The increase in Mr. Satine's 2013 base salaries for 2010, 2009salary was 12.5%. Based on the recommendation of the Chairman, President & CEO, the Committee considered Mr. Satine's significant role in strategic matters, the depth of his manufacturing and 2008 are shownengineering experience in light of AAM's expanding global operations and his demonstrated leadership capabilities. This salary adjustment was made in theSummary Compensation context of AAM's succession planning for a key leadership position previously held by Mr. Bellanti, who retired as head of worldwide operations on January 1, 2014. Mr. Satine assumed leadership responsibility for a significant portion of AAM's global operations upon Mr. Bellanti's retirement.
Annual Incentive Compensation. Annual incentive compensation at AAM is designed to:
encourage executives to achieve short-term objectives to foster achievement of the Company's long-term goals;
| | |
| • | Encourage executives to achieve short-term goals to foster the long-term goals of the Company; |
| • | Reward performance to support strategic initiatives; and |
| • | Provide incentivesreward performance to support strategic initiatives; and provide incentive for executive retention. |
Annual incentive compensation is measured by our achievement of financial targets established under AAM’s Incentive Compensation Plan for Executive Officers. All executive officers participated in this plan during 2013.
On an annual basis, the Committee determines one or more performance factors, and the relative weighting of each factor, in consideration of the Company’s key performance objectives. Under the plan, the performance factors that may be selected areare: (1) net income as a percentage of sales (NIPS); (2) after tax return on invested capital (ROIC); and (3) net operating cash flow. ROIC is defined as after-tax return divided by average invested capital. Net operating cash flow is defined as cash provided by or used in operating activities less capital expenditures.expenditures net of proceeds from the sale of property, plant and equipment. ROIC is defined as after-tax return divided by average invested capital. Target performance levels, established annually, are intended to be aggressive but achievable metrics based on industry conditions.
CashPayment of annual cash incentive awards are permitted to the extent the Company (1) meets or exceeds threshold levels of performance set by the Committee and (2) reports positive net income for the performance year. However, the
The annual incentive plan permits the Committee to make discretionary adjustments if the Committeeit determines that the achievement of performance targets for a plan year do not reflect the true performance of the Company due to unanticipated circumstances specified in the plan. No such adjustments wereAlthough the plan permits the Committee to exercise discretion in adjusting individual award payouts, the Committee made no discretionary increases to 2013 payouts for any of our NEOs.
The table below shows the 2013 target annual incentive opportunities for the 2008, 2009 or 2010 plan years.following NEOs, stated as a percentage of base salary:
Individual awards may be increased or decreased by the Committee, based on the CEO’s recommendation, in consideration of individual experience, time in position, professional development, contribution to the Company, individual performance and other factors. No changes were recommended for 2010 |
| |
| Target Annual Incentive Opportunity |
David C. Dauch | 125% |
Michael K. Simonte | 80% |
John J. Bellanti | 80% |
Alberto L. Satine | 60% |
Norman Willemse | 60% |
The 2013 annual incentive awards paid to executive officers.target for each NEO remains unchanged from 2012.
20102013 Annual Incentives
Incentive Performance
In support of the Company’s 2010 strategic initiatives,2013 goals and objectives, the Committee approved the use of net operating cash flow and NIPS, each with equal weighting, as the sole performance metric to be used inmetrics for determining 20102013 annual incentivescash incentives. These performance metrics were selected for the following reasons:
| | |
| • | Cash flow is a critical financial metric for AAM at this time due to its impact on liquidity and debt reduction; |
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| | |
| • | Increasing cash flow is key to achieving credit rating upgrades, which will have a favorable impact on the Company’s cost of future financing; and |
| • | The Committee believes increasing cash flow benefits AAM stakeholders. |
Net operating cash flow is a critical financial metric for AAM due to its impact on liquidity, debt reduction and stockholder value creation;
The following table summarizesIncreasing net operating cash flow is key to achieving credit rating upgrades, which will have a favorable impact on the approved target annual incentive opportunities for the NEOs in 2010Company’s cost of future financing;
Net income is a key indicator of financial and 2011 (stated as a percentage of base salary):operational performance; and
| | | | |
| | Annual Incentive
|
| | Opportunity |
|
Richard. E. Dauch | | | * | |
Michael K. Simonte | | | 80 | % |
David C. Dauch | | | 90 | % |
John J. Bellanti | | | 80 | % |
John E. Jerge | | | 60 | % |
Patrick S. Lancaster (Retired 1/1/2011) | | | 80 | % |
Net income and net income growth are highly correlated to cash flow, cash flow growth and stockholder value creation.
| | |
| * | Mr. R.E. Dauch received no annual incentive award in 2010 in consideration of the $3 million compensation limitation under the 2009 Settlement and Commercial Agreement. |
In the fourth quarter of 2009, the Committee determined the 2010 award levels for the net operating cash flow performance metric2012, in conjunction with a review of the Board-approved annual budget, the Committee set 2013 performance targets for the net operating cash flow and projections provided to AAM’s lenders. The award levels areNIPS performance metrics as follows:
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| | | | | | |
| | Net Operating Cash Flow |
| | Performance | | Payout |
|
Threshold | | $(60) million | | | 50 | % |
Target | | Breakeven | | | 100 | % |
Maximum | | $25 million | | | 125 | % |
|
| | | | | | | | |
| | Net Operating Cash Flow | | Net Income as a Percentage of Sales |
| | Performance | | Payout | | Performance | | Payout |
Threshold | | $25 million | | 50% | | 1% | | 30% |
Target | | $75 million | | 100% | | 3% | | 100% |
Maximum | | $100 million | | 125% | | >3% | | >100% |
Budgeted net operating cash flow for 2013 was $50 million. The 2010 threshold awardtarget performance level for net operating cash flow was based on projections provided to AAM’s lenders in 2009 in obtaining amendments to our senior credit agreements and refinancing substantially all senior debt maturities through 2014. The target awardthe Company outperforming the budget by $25 million; the maximum performance level was set at breakeven net operating cash flow. The maximum award level was determined to be an aggressive target based on outperforming the Company’s projected volumes and industry conditions when the target was established.
budget by $50 million. The 2013 annual budget also included $30 million in proceeds from anticipated sale-leaseback transactions.
The Company’s 2010 net operating cash flow performance exceeded the maximum target award level by more than $100 million. Accordingly, the Committee approved a payout of 125 percent of target. The annual incentive awards paid to the NEOs are shown in theSummary Compensation Table.
2011 Annual Incentives
In 2010, the Compensation Committee approved the use of net operating cash flow and net income as a percentage of sales (NIPS), each with an equal weighting, as the performance metrics to be used in determining 2011 annual incentives. Net operating cash flow was selected for the reasons described above under2010 Annual Incentives. NIPS was selected as a performance metric for 2011 for the following reasons:
| | |
| • | Net income is a key indicator of financial and operational performance; and |
| • | Net income and net income growth is highly correlated to cash flow, return on invested capital and stockholder value creation. |
Award levels for NIPS and net operating cash flow were determined in the fourth quarter of 2010. Target and threshold performance levels for NIPS were establisheddetermined based on a review ofour performance relative to our competitor peer group benchmarks for the three most recently completed years. AAM’s competitor
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peer group as shown in our 2010 annual report includes ArvinMeritor Inc.; Autoliv Inc.; BorgWarner Inc.; Dana Corporation; Lear Corporation; Magna International Inc.; Tenneco Automotive Inc. and Visteon Corporation (competitor peer group).group. The target performance level for NIPS, or 3 percent,3%, was set at a level to meet the performance of the top one-thirdone-half of our competitor peer group for the three most recently completedrecent fiscal years.
Although there was no stated maximum award opportunity based on NIPS for 2013, the Committee established a maximum payout for such awards beginning in 2014.
The Committee determined the performance award levels forCompany’s 2013 adjusted net operating cash flow performance based on the Board approved budget. The target performance level forwas $32.4 million. For 2013, net operating cash flow isincluded the proceeds from sale-leaseback transactions and excluded the impact of debt refinancing costs and other special charges totaling $28.1 million. Accordingly, a payout of 57% was made for 2013 based on our outperforming the budget by $25 millionnet operating cash flow metric.
The Company’s 2013 NIPS was 3.79%, excluding the impact of debt refinancing costs and other special charges. Accordingly, the maximumNIPS performance level is basedmetric resulted in an achievement of 117% of target.
Based on outperforming the budget by $50 million. These 2011weighting of each performance targets will be disclosedmetric, the 2013 annual incentive awards resulted in our 2012 proxy statement.a payout of 87% of target. No discretionary increases were made to 2013 annual incentive payouts for any NEO. The annual incentive awards paid are shown in the Summary Compensation Table.
Long-Term Incentives.Incentive Compensation. Long-term incentive compensation at AAM is designed to:
| | |
| • | Alignalign executive officer and stockholder interests; |
| • | Reward achievement of long-term performance goals; and |
| • | Provide incentives for executive retention. |
In prior years, AAM granted equity awards toreward achievement of long-term performance goals; and
provide incentives for executive officers underretention.
The table below shows the 1999 Stock Incentive Plan. That plan expired in 2009 and was not replaced by the Company. Since AAM does not have an equity plan in place, the Committee approved changes to the2013 target long-term incentive programopportunities for executive officers that impact both (1) each executive officer’s award opportunity and (2) the type of long-term incentive awards.
Cash-Based Long-Term Incentive Plan. In 2009, the Committee approved a cash-based long-term incentive program, which provides the entire long-term incentive opportunity for executive officers. Under the AAM 2009 Long-Term Incentive Plan (AAM LTIP), each participant receives a target award value,following NEOs, stated as
a dollar amount based on a percentage of base
salary.salary: |
| | |
| Target Long-Term Incentive Opportunity |
| 2013 | 2012 |
David C. Dauch | 350% | 240% |
Michael K. Simonte | 200% | 120% |
John J. Bellanti | 200% | 120% |
Alberto L. Satine | 120% | 80% |
Norman Willemse | 100% | 80% |
The following table summarizesIn determining 2013 long-term incentive target opportunities, the Committee considered Meridian’s market analysis, which indicated that long-term incentive target award amountsopportunities for our NEOs at 2012 levels were below the 50thpercentile for comparable positions at companies in our comparative peer group. As a result, the Committee approved 2013 long-term incentive targets shown above with the objective of targeting total compensation at approximately the 50th percentile.
2013 Long-Term Incentives
In March 2013, the Company granted the NEOs in 2011equity-based and 2010:
| | | | | | | | |
| | 2011
| | 2010
|
| | Target Award
| | Target Award
|
| | Amount | | Amount |
|
Richard. E. Dauch | | $ | — | | | $ | — | |
Michael K. Simonte | | $ | 618,000 | | | $ | 600,000 | |
David C. Dauch | | $ | 1,170,000 | | | $ | 1,008,000 | |
John J. Bellanti | | $ | 568,560 | | | $ | 552,000 | |
John E. Jerge | | $ | 242,400 | | | $ | 228,000 | |
Patrick S. Lancaster (Retired 1/1/11) | | $ | — | | | $ | 528,000 | |
| | |
| * | Mr. R.E. Dauch received no long-term incentive award in 2010 in consideration of the $3 million compensation limit under the 2009 Settlement and Commercial Agreement. |
Award payouts can range from 0 percent to 200 percent of the target value based on the level of performance over a three-year period beginning in January of the year of the award.
Performance Measures
For grantscash-based long-term incentives under the AAM LTIP,2012 Omnibus Incentive Plan. The Committee determined the actual cash payouts will be determined based on the levelform and mix of performance against two performance metrics approved by the Committee. awards in consideration of AAM’s compensation objectives, current market practice and share usage.
One-half of the targettotal 2013 long-term incentive award payment will be earned based onvalue for NEOs was in the cumulative amountform of earnings before interest, taxes, depreciationcash-based performance units (PUs) with a notional value of one dollar and amortization (EBITDA) over a three-year performance period. In calculating this award,one-half was in the plan gives the Committee discretion to exclude certain special items from EBITDA, such as special charges or gains, non-recurring operating costs, extraordinary gains or losses, the impactform of changesrestricted stock units (RSUs). The RSUs are payable in accounting principles, or any other unusual items. EBITDA was chosen as one of the measures of Company performance as it is a key indicator of the Company’s financial and operational
25
performance and is useful in analyzing entity valuation. In addition, EBITDA as a performance measure complements the metrics used to determine payouts under other incentive programs.
The remaining one-half of the target award amount will be earned based on a total shareholder return (TSR) measure that compares the Company’s TSR overcommon stock, contingent upon continued employment through the three-year performance period relativevesting period. The RSUs were designed to the TSR of AAM’s competitor peer group. Relative TSR was chosen as one of the measures of Company performance in orderprovide opportunities for share ownership and to motivate executive officers to build long-term value for our stockholders above that of our competitor peer group. Share price appreciation and dividends paidstockholders.
The target award payment for PUs will be measured overdetermined based on the Company’s cumulative earnings before interest, taxes, depreciation and amortization (EBITDA) margin performance from January 1, 2013 through December 31, 2015. These awards were designed to align executive officer performance goals with those of the Company. The Committee selected EBITDA as the performance periodmeasure based on its belief that EBITDA is a key indicator of the Company’s financial and operational performance and is useful in analyzing entity valuation.
The terms of the RSUs and PUs are described in more detail in the Narrative to determine TSR.Summary Compensation Table and Grants of Plan-Based Awards Table below.
The following tables illustratetable shows the threshold, target and maximum EBITDA margin performance levels forused in determining 2013 award payouts for each performance measure. ThePUs. These EBITDA performance levels shown below were designed to drive a level of performance in the top one-thirdone-half of our competitor peer group. The competitor peer group consists of companies listed in the table shown above in Peer Group and Compensation Benchmarking.
EBITDA Performance Measure |
| | | | |
Performance Level | | 3 Year Cumulative EBITDA Margin | | Percent of Target Award Opportunity Earned |
Threshold | | 10% | | 25% |
Target | | 12% | | 100% |
Maximum | | 15% | | 200% |
| | | | | | | | |
| | | | Percent of
|
| | 3-Year Cumulative
| | Target Award
|
Performance Level | | EBITDA | | Opportunity Earned |
|
Threshold | | | 8 | % | | | 25 | % |
Target | | | 12 | % | | | 100 | % |
Maximum | | | 15 | % | | | 200 | % |
2014 Long-Term Incentives
TSR Performance Measure
| | | | | | | | |
| | | | Percent of
|
| | Company’s TSR
| | Target Award
|
| | Percentile
| | Opportunity
|
Performance Level
| | Rank | | Earned |
|
Threshold | | | 35(th | ) | | | 50 | % |
Target | | | 50(th | ) | | | 100 | % |
Maximum | | | 75(th | ) | | | 200 | % |
Senior Executive Special Incentive Program. On March 15, 2010,Following the Compensationresults of our 2013 stockholder advisory vote on executive compensation and feedback received during our stockholder outreach, the Committee redesigned our LTI program for 2014 to strengthen the pay-for-performance alignment of long-term incentive compensation for executive officers. In determining the new program design, the Committee received guidance from Meridian regarding design alternatives and market trends. Meridian evaluated the 2013 LTI program described above, considering our LTI program objectives, pay-for-performance alignment and mix of award vehicles. In consideration of Meridian's recommendations, the Committee approved LTI program design changes for 2014.
A key design change was the introduction of performance shares as a special incentivenew equity-based award vehicle. Under our 2014 LTI program, performance share awards account for certain NEOs. The special incentive program was developed to recognize the extraordinary efforts of Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and Mr. Lancaster in navigating the Company through the turbulent financial and market conditions in 2009. As a result of their individual and collective efforts, the Company was able to successfully complete its restructuring outside of bankruptcy, gain contract clarity with GM, and address liquidity concerns by entering into the 2009 Settlement and Commercial Agreement, amending senior credit agreements and raising cash proceeds through an equity offering.
Payments under the special incentive program for Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti are contingent upon termination66% of the financial accommodations providedtotal LTI award opportunity for executive officers. This proportion of performance-based equity awards exceeds the current market practice of approximately 50% of total LTI compensation being performance-based. Payouts earned under these awards will be measured by GM in connection with the 2009 Settlementcumulative EBITDA margin and Commercial Agreementrelative total shareholder return (TSR) performance over a three-year performance period and the Access and Security Agreement (Access Agreement). The Committee and the full Board believe that termination of the financial accommodations provided by GM and the Access Agreement is in the best interests of AAM, its stockholders and other key stakeholders. The benefits to AAM of terminating the financial accommodations provided by GM and the Access Agreement include, among other things, a cost savings associated with eliminating the one percent sales discount relatedpaid only to the expedited payment terms. The Company also anticipates improved flexibility in accessing new sources of debt capital by eliminating certain covenants and other restrictionsextent that accompany the financial accommodations provided by GM and the Access Agreement.
The special incentive program was also designed to retain Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti and to motivate them to accomplish the objectives described above. It is expected that
26
they will be instrumental to the Company in strengthening our financial and competitive position in the future. The special incentive program for Mr. Lancaster was designed to reward his efforts in 2009 and provide him with an additional retirement incentive. The special incentive program awards for Mr. Simonte, Mr. D. C. Dauch, Mr. Bellanti and Mr. Lancaster (award recipients)pre-established performance targets are as follows:
| | | | |
| | Total
| |
| | Award Value | |
|
David C. Dauch | | $ | 5,000,000 | |
Michael K. Simonte | | $ | 3,000,000 | |
John J. Bellanti | | $ | 1,000,000 | |
Patrick S. Lancaster | | $ | 1,000,000 | |
| | | | |
Total | | $ | 10,000,000 | |
| | | | |
achieved. The Committee determined that the specialremaining 34% of long-term incentive equity awards should be in the form of RSUs settled in common stock with three-year cliff vesting. The Committee believes these RSUs promote retention of key executives.
Our new LTI program was appropriately valued at $10 million in considerationdesign, which is 100% equity-based, further aligns the interests of executive officers with those of our stockholders by tying a substantial portion of each executive officer's long-term incentive award to Company performance and by promoting increased stock ownership.
Prior Long-Term Incentive Awards under the AAM 2009 Long-Term Incentive Plan
Prior to adoption of the total value that the award recipients preserved for2012 Omnibus Incentive Plan, the Company’s stockholders and other key stakeholders. TheLTI program is cash based due in part toconsisted of cash-based performance awards made under the lackAAM 2009 Long-Term Incentive Plan (2009 AAM LTIP). Payouts of equity available for compensation awards. The amount allocated to each award recipient wasthe 2011 cash-based performance awards were determined based on individual contributions. As President & COO, Mr. D.C. Dauch ledcumulative EBITDA margin and relative TSR for the operational restructuring of the Company and negotiations with GM resulting in the 2009 Settlement and Commercial Agreement described above. Mr. Simonte led the Company’s financial restructuring, including negotiations with lenders and GM, and effectively managed investor and media communications. Mr. Bellanti played a critical role in the operational restructuring efforts, while maintaining excellence in the Company’s quality, warranty, delivery and launch performance during an extremely difficult and volatile production environment. Mr. Bellanti’s management of theday-to-day operations of the Company enabled Mr. D.C. Dauch and Mr. Simonte to focus their efforts on the broader restructuring plans, negotiations and liquidity issues. Mr. Lancaster supported the GM negotiations with a focus on gaining commercial contract clarity and protecting the Company’s interests during GM’s bankruptcy proceedings.
The awards for Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti are comprised of special incentives and annual incentives. Special incentives are approximately 30 percent to 40 percent of the total award and will be payable to the award recipients upon termination of the financial accommodations provided by GM and the Access Agreement. Annual incentives are comprised of four equal installments and the date on which the installment payments commence is contingent upon the date of termination of the GM financial accommodations and the Access Agreement. The first annual incentive installment payment will be made no earlier than October 31, 2011 and the final annual incentive installment payment will be made no later than January 31, 2015. In the case of both the special incentives and the annual incentives, the recipient will forfeit the award if the Access Agreement is not terminated by December 31, 2014. The award recipients must be employed with AAM on the relevant payment date to receive payment under the award, except in the event of death, disability, and resignation for good reason or termination other than for cause. Upon his retirement, the award for Mr. Lancaster became payable in a lump sum.
The contributions of Mr. R.E. Dauch and his leadership role with the Company are discussed further inCompensation of Chief Executive Officer.
Settlement Agreement with Mr. Lancaster
On July 12, 2010, the Committee approved a settlement agreement between AAM and Mr. Lancaster to provide cash payments and certain other benefits to Mr. Lancaster in connection with his retirement from AAM effectiveperiod beginning January 1, 2011 (Settlement Agreement).through December 31, 2013. The Company’s cumulative EBITDA percentage for the performance period was 13.2%, after adjustments approved by the Committee for certain special charges, including costs associated with plant closures and debt refinancing. The adjusted EBITDA percentage resulted in a payment at 140% of target. The Company’s relative TSR for the performance period ranked above the 75th percentile of our competitor peer group and resulted in a payout of 200% of target.
Based on the 50% weighting of EBITDA and relative TSR performance, total award payments were 170% of target for each NEO. See Summary Compensation Table for the amounts paid in March 2014.
Equity Grant Practices
AAM generally makes equity grants to its executive officers and benefits payable to Mr. Lancaster pursuantother executives on an annual basis, subject to the Settlement Agreementapproval of the Committee. Grants are describedtypically made in theNarrative first quarter of each year to Summary Compensation Tablecoincide with the communication to executive officers of their annual cash incentive awards for the previous year’s performance. This timing increases the impact of the awards by strengthening the link between pay and Grantsperformance. AAM does not and has never permitted backdating, spring loading or other timing of Plan-Based Awards TableandPotential Payments Upon Termination or Change in Control.
27
Other Compensation Componentsoption grants with the release of material non-public information.
Benefits. Our executive officersNEOs participate in the benefitssame benefit and retirement plans provided toin which our U.S. salaried associates.associates participate. A group of approximately 4050 senior executives, including executive officers,the NEOs, also receive supplemental life, supplemental disability and umbrella liability and travel accident insurance benefits.
Executive officers Our NEOs are eligible to participate in AAM’s qualified and nonqualified defined benefit pension plans and defined contribution plan.plans. They are also eligible to participate in a nonqualified deferred compensation plan that permits deferrals of a portion of base salaryand/or annual cash incentive compensation on a pretax basis. These plans are described in thePension BenefitsandNonqualified Deferred Compensationsections below.
Change in Control Payments and Benefits. Under the 2009 Settlement and Commercial Agreement, all executive officer continuity agreements were terminated. These agreements had provided enhanced severance benefits following a change in control of the Company.
Perquisites. AAM provides a limited number of perquisites forto senior executives, including executive officers, which are described in the footnotes to theSummary Compensation Table. The most significant perquisite provided is the use of a Company-provided vehicle with AAM content. This perquisite is common among automotive suppliers.our NEOs. AAM has never owned a corporate aircraft and generally does not provide leased aircraft for personal use. AAM does not pay for country club memberships. Senior executives are eligible for the use of a Company-provided vehicle with AAM content. The President & CEO is entitled to the use of two Company-provided vehicles. From time to time, the Company invites spouses of AAM senior executives to attend Company business events. For attendance that requires a spouse to travel, the Company pays for the spouse’s travel and other related non-business expenses and reimburses the executive for taxes attributable to the income associated with this benefit. Perquisites are further described in the footnotes to the Summary Compensation Table.
Total NEO Compensation. In determining NEO pay levels, the Committee reviews each element of compensation -- base salary, annual incentive compensation and long-term incentive compensation -- with the objective of targeting total compensation at approximately the 50th percentile of executives holding similar positions at companies in our comparative peer group.
Based on Meridian's market data analysis, 2013 total compensation for Mr. D.C. Dauch, Mr. Bellanti and Mr. Willemse was at approximately the 50thpercentile of pay among executives holding similar positions at companies in our comparative peer group. Total 2013 compensation for Mr. Simonte and Mr. Satine was between the 50thand 75thpercentile among executives holding similar positions at companies in our comparative peer group. For purposes of this comparison, the scope of responsibilities of both Mr. Simonte and Mr. Satine is broader than those holding similar positions at the companies in the comparative peer group. As a result, the pay levels for Mr. Simonte and Mr. Satine were set above the 50th percentile to reflect the additional leadership responsibilities they have as compared to the benchmarked positions. Mr. Simonte has significant leadership responsibilities over key functional areas beyond his role as CFO and leader of AAM's global finance organization. These functional areas include information technology, legal, and marketing and communications. Mr. Satine's position was benchmarked against the lead sales position among our comparative peer group; however, Mr. Satine has broader responsibilities associated with his leadership of AAM's global strategic business development.
Compensation of Chiefformer Executive OfficerChairman
Mr. R. E. Dauch’sThe compensation of AAM's Co-Founder and former Executive Chairman of the Board is governed by anset forth in his employment agreement dated August 27, 2012. The terms of his employment agreement, which was amended in December 2009. The agreement is furtherterminated upon his death on August 2, 2013, are described in theNarrative to Summary Compensation and Grants of Plan-Based Awards Tablebelow. The CEO’s
Mr. R.E. Dauch's total compensation arrangements are structured in consideration of the breadth ofreflected his responsibilities for the entire Company, his unique experienceextensive knowledge and expertise in the global automotive industry his leadership skills and service to AAM since he co-founded the Company in 1994.
Compensation Limit. In accordance with the December 22, 2009 employment agreement amendment between the Company and Mr. R. E. Dauch, the CEO agreed to forego compensation payable to him under his then current employment agreement to the extent his annual compensation would exceed the $3 million limit set forth in the 2009 Settlement and Commercial Agreement.
The primary elements of the CEO’s compensation as set forth in his employment agreement are base salary, annual cash bonus, benefits and perquisites, subject in each case to the $3 million compensation limit described above. As discussed below, effective January 1, 2010, Mr. R.E. Dauch will no longer receive annual equity awards from the Company.
Base Salary. Base salary is determined by the Committee as part of the annual compensation review process. In determining Mr. R.E. Dauch’s compensation in 2009, the Committee considered his role in overseeing and directing the Company’s successful restructuring outside of bankruptcy under the extraordinary circumstances facing the automotive industry in 2009. As a result, value was preserved for AAM’s stockholders and other key stakeholders. The Committee considers Mr. R.E. Dauch’s continuing leadership, unique role and the services he provides to AAM criticalBoard’s expectations regarding his contribution to the achievement of the Company’s strategicAAM’s goals for 2010. No change was made to Mr. R.E. Dauch’s base salary for 2010 or 2011.and business strategy objectives. The components of his compensation are described below.
In connection with the annual compensation limit set forth in the 2009 Settlement and Commercial Agreement, Mr. R.E. Dauch agreed to forego certain compensation and benefits that he was entitled to in accordance with his employment agreement. As described below, Mr. R. E. Dauch will no longer receive equity grants and did not receive a bonus in 2010, 2009 and 2008. He also agreed to terminate his change in control agreement. These factors were also taken into consideration by the Committee in determining Mr. R.E. Dauch’s base salary. Pursuant to the December 22, 2009
28
employment agreement amendment,Base Salary. Mr. R.E. Dauch’s annual base salary is $2,702,300, effective June 16, 2009. Base salary for 2010, 20092013 was set at $2 million. The amounts paid through August 2, 2013 and 2008 isin 2012 and 2011 are shown in theSummary Compensation Table.
Annual Cash Bonus.Incentive. For calendar year 2013, Mr. R. E.R.E. Dauch iswas eligible for ana target annual cash bonus asincentive opportunity of two times his annual base salary. His 2013 annual incentive was determined under AAM's Incentive
Compensation Plan for Executive Officers. Accordingly, his 2013 annual incentive was based on the achievement of the pre-established performance metrics described above in 2013 Annual Incentive Performance. Based on the weighting of each performance metric, he was eligible to receive a 2013 annual incentive of 87% of his employment agreement. Seetarget opportunity. The annual incentive paid to Mr. R.E. Dauch's beneficiary was pro-rated based on time served through August 2, 2013. The Committee exercised no discretion in determining his 2013 annual incentive award payout. See Narrative to Summary Compensation Table and Grants of Plan-Based Awards Tablebelow. The annual cash bonus is based on the Committee’s assessment of Company performance as compared to that of the competitor peer group. Pursuant to his employment agreement,
Long-Term Incentives. Mr. R.E. Dauch iswas not entitled to receive an annual bonus paymenta long-term incentive award in 2013. Vesting of three times his annual salary if AAM outperforms its competitor peer group by greater thanoutstanding long-term incentive awards was accelerated upon his death pursuant to the historical amount. However, his annual bonus will be reduced, if necessary, to comply with the $3 million limit on annual compensation set forthapplicable award agreements. The grant date fair value of these awards was reported in the 2009 Settlement and Commercial Agreement. In determining Mr. R. E. Dauch’s annual cash award, the Committee may use discretion in considering other factors, which may differ from year to year.
Long-term Incentives. Pursuantsummary compensation table for 2012. See Narrative to the December 22, 2009 employment agreement amendment, Mr. R. E. Dauch agreed to forego receipt of the annual equity awards the Company had agreed to provide under his employment agreement since it was first executed in November 1997. As a result, effective January 1, 2010, Mr. R.E. Dauch will no longer receive annual equity awards from the Company. The terms of the outstanding awards granted prior to 2010 are described in theNarrative to Summary Compensation Table and Grants of Plan-Based Awards Table.Table and Options Exercised and Stock Vested table below.
Benefits and Perquisites. Mr. R. E.R.E. Dauch participatesparticipated in the same benefit programs provided forin which other executive officers. In addition, underofficers participate. Under his employment agreement, AAM provides Mr. R. E. Dauchprovided him with the use of an additionaltwo Company vehiclevehicles and reimbursesreimbursed him for premiums underpaid for a $5 million life insurance policy. The Company will also provide postretirement health care benefits upon expiration of his employment agreement. Perquisites provided to the CEO in 2010, 20092013, 2012 and 20082011 are reported in theSummary Compensation Table.
Management’sExecutive Officer Stock Ownership Requirements & Anti-Hedging Policy
The Committee has establishedA fundamental objective of our compensation program is for executive officers to own AAM stock in order to align their interests with those of our stockholders and to reinforce the importance of making sound long-term decisions. In April 2012, based on an analysis provided by Meridian and in order to align the Company's stock ownership requirements for executive officers. The lack of an equity plan to grant restricted stock or other equity awards restricts the Company’s ability to support their achievement of stock ownership requirements. To address this issue,with prevalent market practices, the Committee determined provisionalrevised the Company's stock ownership requirements, based on a set number of shares.as follows:
Fixed Share Requirement for Executive Officers
|
| | | | |
| | No.Multiple of Shares |
Base Salary |
Chief Executive Officer | | | 350,000 | |
President & COO | | | 50,000 | 5 |
Executive Vice President | | | 25,000 | 3 |
Senior Vice President, Group Vice President and Vice President | | | 15,000 | 2 |
The stock ownershipExecutive officers have five years from April 2012 to meet these requirements must be attained withinor, for new executive officers, five years from the effective date of appointment. Shares owned directly and any unvested RSUs (settled in stock) count toward the requirement, while unexercised stock options are not included. These ownership levels must be maintained as long as the person is an executive officer of AAM.
The Committee annually reviews each executive officer’s stock ownership level according to this policy. Each of our current NEOs has met the ownership requirements established for his position.
Anti-hedging and Anti-pledging Policy
All employees and non-employee directors are prohibited from entering into transactions that may result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including but not limited to the use of financial derivatives, short sales or any similar transactions. Pledging of Company stock is also prohibited.
Severance Benefits and Restrictive Covenants
On September 27, 2013, Mr. D.C. Dauch's employment agreement was amended and restated to provide for newly appointedcertain severance benefits if his employment is terminated as a result of a change in control of the Company (CIC). His employment agreement also provides for an automatic two-year extension following a CIC. Benefits payable to Mr. D.C. Dauch upon termination of employment without cause or upon resignation for good reason remain unchanged from his prior employment agreement. Severance benefits provided under his employment agreement are described under Potential Payments Upon Termination or Change in Control below.
The Board believes the CIC arrangement with Mr. D.C. Dauch is in the best interests of the Company and our stockholders. The CIC arrangement will enhance stockholder value by encouraging him to consider CIC transactions that may be in the best interests of the Company and our stockholders, even if the transaction may ultimately result in termination of his employment.
AAM does not provide any other NEO with severance benefits upon termination of employment for any reason, including as a result of a ClC. However, early vesting of certain long-term incentive awards is allowed upon a
CIC. The Committee believes this feature reflects competitive market practices, encourages retention of key executives and reduces their concerns that payment of these awards will be jeopardized by a CIC.
Each of the NEOs has agreed to non-competition and non-solicitation covenants for a period following termination of employment. For additional information, see Potential Payments Upon Termination or Change in Control below.
Executive Compensation Recoupment (Clawback) Policy
During our outreach efforts following the 2013 vote, stockholders expressed a concern that we had not adopted a clawback policy. Based on this feedback, the Committee adopted an executive officers, within five yearscompensation recoupment (clawback) policy. This policy authorizes the Committee to determine whether to require recoupment of such appointment. Currently,performance-based incentive compensation actually paid or awarded to any executive officer if certain conditions are met. For purposes of this policy, performance-based compensation includes all executive officers are in complianceannual incentives for periods beginning with the stock ownership requirements.2014 fiscal year and long-term incentives awarded after January 1, 2014, whether paid in cash or equity, to the extent the awards are determined based on the Company's financial performance.
The Committee may require recoupment if the executive officer engaged in fraud or intentional misconduct that caused or contributed to the need for a material restatement of the Company's financial statements filed with the SEC. If the Committee determines that any performance-based compensation paid or awarded to the executive officer would not have been awarded or would have been awarded at a lower amount had it been calculated based on such restated financial statements (adjusted compensation), the Committee may seek to recover for the benefit of the Company the excess of the awarded compensation over the adjusted compensation (excess compensation). In deciding whether to seek recovery of excess compensation from the executive officer, the Committee will consider the factors it deems relevant under the circumstances and whether the assertion of a claim is in the best interests of the Company.
AAM prohibits hedging and pledging ofTax Gross Ups
The Company stock.does not provide tax gross ups to an executive officer upon a change in control.
Federal Income Tax Considerations
Deductibility of Executive Compensation.Compensation
In general, the compensation awarded to the NEOs will be taxable to the executive and will give rise to a corresponding corporate deduction at the time the compensation is paid. Section 162(m) of the Internal Revenue Code (Code) deniesprecludes a federal incomepublic corporation from taking a tax deduction for certain compensation in excess of $1 million per year paid to the CEO or to any of the other NEOs other than the CFO. The portion of theannual compensation in excess of $1 million paid to certainthe CEO or to other NEOs in 2010 was not deductible for federal income tax purposes.other than the CFO. One exception applies to performance-based compensation paid pursuant to stockholder-approved employee benefit plans. Performance-based compensation is compensation that is paid only if the individual’s performance meets pre-established objective performance goals based on performance criteria approved by our stockholders.
29
Although deductibility of compensation is preferred, tax deductibility is not athe primary objective of the Company’sour compensation programs. The Committee believesmay decide to pay compensation or grant awards that achievingserve the objectives of our executive compensation objectives set forth above is more important thanprogram even though such compensation or awards may not be deductible by the benefit of tax deductibility. Company.
The Company reservesannual incentives and long-term incentive performance unit awards granted in 2013 to our NEOs are intended to comply with the rightperformance-based compensation exemption under Section 162(m). RSUs granted to maintain flexibilityNEOs in how executive officers are compensated, which may result in limiting2013, although not deductible, were considered to be the deductibility of amounts of compensation from time to time.
Risk Assessment of Compensation Policies and Practices
In 2011, AAM management conductedappropriate vehicle for a risk assessmentportion of the Company’slong-term incentive component of our executive compensation policies and practices relating to AAM’s compensation programs for executive officers and other associates on a global basis. The process used by management to conduct the risk assessment was approved by the Compensation Committee. Based on the risk assessment and other factors, management concluded that AAM’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee agreed with management’s conclusion.program.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee hasWe have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K, and basedwith management. Based on such review and discussions,discussion, we recommended to the Board of Directors that suchthe Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee of the Board of Directors
Forest J. Farmer, Chairman
Elizabeth A. Chappell
Steven B. Hantler
Larry K. Switzer
Thomas K. Walker
30
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of our named executive officers (Richard E. Dauch, Co-Founder, Chairman of the Board & Chief Executive Officer, Michael K. Simonte, Executive Vice President — Finance & Chief Financial Officer, David C. Dauch, President & Chief Operating Officer, John J. Bellanti, Executive Vice President, Worldwide Operations, John E. Jerge, President — AAM Americas and Patrick S. Lancaster, retired effective January 1, 2011, former Executive Vice President, Chief Administrative Officer & Secretary, for the fiscal years ended December 31, 2010,2013, December 31, 20092012 and December 31, 2008.2011.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | Change in
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | Pension Value
| | | | | | |
| | | | | | | | | | | | | | | | | | Non-Equity
| | | and
| | | | | | |
| | | | | | | | | | | | | | | | | | Incentive
| | | Nonqualified
| | | | | | |
| | | | | | | | | | | | | | | | | | Plan
| | | Deferred
| | | All Other
| | | |
| | | | | | | | | | | | Stock
| | | Options
| | | Compen-
| | | Compensation
| | | Compen-
| | | |
Name and
| | | | | | Salary
| | | Bonus(2)
| | | Awards(3)
| | | Awards(3)
| | | sation(4)
| | | Earnings(5)
| | | sation(6)
| | | Total
|
Principal Position | | | Year | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Richard E. Dauch(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Co-Founder, Chairman & | | | | 2010 | | | | | 2,702,304 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 2,692,143 | (7) | | | | 158,981 | | | | | 5,553,428 | (7) |
Chief Executive Officer | | | | 2009 | | | | | 2,156,269 | | | | | — | | | | | 167,583 | | | | | 210,000 | | | | | — | | | | | 7,074,845 | | | | | 112,485 | | | | | 9,721,182 | |
| | | | 2008 | | | | | 1,620,667 | | | | | — | | | | | 596,655 | | | | | 400,500 | | | | | — | | | | | 3,081,360 | | | | | 105,673 | | | | | 5,804,855 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Michael K. Simonte | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive Vice President — | | | | 2010 | | | | | 500,004 | | | | | — | | | | | — | | | | | — | | | | | 500,000 | | | | | 97,430 | | | | | 51,294 | | | | | 1,148,728 | |
Finance & Chief Financial Officer | | | | 2009 | | | | | 372,375 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 69,597 | | | | | 46,477 | | | | | 488,449 | |
| | | | 2008 | | | | | 271,125 | | | | | — | | | | | 100,800 | | | | | 33,375 | | | | | — | | | | | 59,884 | | | | | 44,235 | | | | | 509,419 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
David C. Dauch(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
President & Chief | | | | 2010 | | | | | 575,004 | | | | | — | | | | | — | | | | | — | | | | | 731,250 | | | | | 97,540 | | | | | 27,006 | | | | | 1,430,800 | |
Operating Officer | | | | 2009 | | | | | 411,125 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 101,071 | | | | | 27,748 | | | | | 539,944 | |
| | | | 2008 | | | | | 358,875 | | | | | — | | | | | 120,960 | | | | | 41,385 | | | | | — | | | | | 96,222 | | | | | 21,460 | | | | | 638,902 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John J. Bellanti | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Executive Vice President, | | | | 2010 | | | | | 459,996 | | | | | — | | | | | — | | | | | — | | | | | 460,000 | | | | | 357,673 | | | | | 30,312 | | | | | 1,307,981 | |
Worldwide Operations | | | | 2009 | | | | | 355,417 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 224,999 | | | | | 31,518 | | | | | 611,934 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John E. Jerge | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
President — AAM Americas | | | | 2010 | | | | | 288,000 | | | | | — | | | | | — | | | | | — | | | | | 227,250 | | | | | 74,685 | | | | | 43,226 | | | | | 633,161 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Patrick S. Lancaster(8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Former Executive Vice President, | | | | 2010 | | | | | 440,004 | | | | | 704,000 | | | | | — | | | | | — | | | | | 173,184 | | | | | 283,152 | (8) | | | | 1,081,878 | (9) | | | | 2,682,218 | (10) |
Chief Administrative Officer & | | | | 2009 | | | | | 356,158 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 348,353 | | | | | 31,999 | | | | | 736,510 | |
Secretary | | | | 2008 | | | | | 268,896 | | | | | — | | | | | 146,160 | | | | | 32,040 | | | | | — | | | | | 145,474 | | | | | 33,979 | | | | | 626,549 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Options Awards ($) | Non-Equity Incentive Plan Compen- sation(2) ($) | Change in Pension Value And Nonqualified Deferred Compensation Earnings(3) ($) | All Other Compen- sation(4) ($) | Total ($) |
David C. Dauch(5) Chairman, President & Chief Executive Officer | 2013 | 1,033,333 |
| — |
| 1,750,002 |
| — |
| 3,185,250 |
| 245,423 |
| 116,389 |
| 6,330,397 |
|
2012 | 873,333 |
| 21,500 |
| 979,013 |
| — |
| 1,728,100 |
| 565,534 |
| 67,695 |
| 4,235,175 |
|
2011 | 650,004 |
| 111,150 |
| — |
| — |
| 7,169,180 |
| 397,228 |
| 28,778 |
| 8,356,340 |
|
Michael K. Simonte Executive Vice President & Chief Financial Officer | 2013 | 543,800 |
| — |
| 543,810 |
|
|
| 1,429,085 |
| 27,943 |
| 50,817 |
| 2,595,455 |
|
2012 | 527,900 |
| 4,617 |
| 316,743 |
| — |
| 935,383 |
| 294,245 |
| 48,942 |
| 2,127,830 |
|
2011 | 515,004 |
| 37,080 |
| — |
| — |
| 4,255,095 |
| 251,101 |
| 49,604 |
| 5,107,884 |
|
John J. Bellanti(6) Executive Vice President, Worldwide Operations | 2013 | 500,300 |
| — |
| 485,713 |
| — |
| 1,678,896 |
| — |
| 45,240 |
| 2,710,149 |
|
2012 | 485,700 |
| — |
| 291,424 |
| — |
| 802,400 |
| 188,187 |
| 42,429 |
| 1,810,140 |
|
2011 | 473,796 |
| — |
| — |
| — |
| 2,166,972 |
| 446,401 |
| 33,823 |
| 3,120,992 |
|
Alberto L. Satine(6) Group Vice President Global Sales & Business Development | 2013 | 360,000 |
| — |
| 216,006 |
| — |
| 565,800 |
| — |
| 41,399 |
| 1,183,205 |
|
Norman Willemse Vice President, Metal Formed Product Business Unit | 2013 | 320,000 |
| — |
| 160,006 |
| — |
| 579,120 |
| 12,546 |
| 50,348 |
| 1,122,020 |
|
2012 | 310,600 |
| — |
| 124,249 |
| — |
| 376,808 |
| 100,562 |
| 48,162 |
| 960,381 |
|
2011 | 303,000 |
| — |
| — |
| — |
| 603,180 |
| 113,444 |
| 41,412 |
| 1,061,036 |
|
Richard E. Dauch(5) Co-Founder & Former Executive Chairman (deceased August 2, 2013) | 2013 | 1,181,818 |
| — |
| — |
| — |
| 2,030,000 |
| — |
| 155,822 |
| 3,367,640 |
|
2012 | 2,000,000 |
| 4,000,000 |
| 6,874,007 |
| 627,000 |
| — |
| 4,201,202 |
| 141,916 |
| 17,844,125 |
|
2011 | 2,526,728 |
| 6,000,000 |
| — |
| — |
| — |
| 2,802,700 |
| 149,441 |
| 11,478,869 |
|
| | |
(1) | | Mr. R. E. Dauch and Mr. D.C. Dauch receive compensation based solely on their role as executive officers. They receive no additional compensation for serving as directors. |
|
(2) | | Mr. R.E. Dauch received no annual incentive award in 2010 in consideration of the $3 million compensation limitation in the 2009 Settlement and Commercial Agreement. Mr. Lancaster received a 2010 bonus payment pursuant to the Settlement Agreement as described in theNarrative to Summary Compensation Table and Grants of Plan-Based Award Table. |
|
(3) | | Reflects the full grant date fair value of equity awards made during fiscal years 2009 and 2008.year 2013 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. The grant date fair value of stock awards is calculated using the closing market price of AAM common stock on the date of grant. The grant date fair valueSee Note 7 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2013 regarding assumptions underlying the valuation of option awards was $1.40 and $2.67 per share of common stock covered by the award for 2009 and 2008 respectively, calculated using the Black-Scholes option pricing model. Fiscal year amounts for 2008 were recomputed based on each award’s full grant date fair value reported in that fiscal year’sGrants of Plan-Based Awards Table.equity awards. |
| |
|
(4) | (2) | Reflects amounts earned under the AAM Incentive Compensation Plan for Executive Officers for Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and Mr. Jerge. Amount reflected for Mr. Lancaster is a pro-rata payment of the 2010 performance award under the2009 AAM LTIP that vested upon his retirement;with respect to the remaining amount was forfeited.three-year performance period ending December 31, 2013. The 2013 amounts are as follows: |
31
|
| | | | | | | | | | | |
| AAM Incentive Compensation Plan | | AAM LTIP | | Total |
David C. Dauch | $ | 1,196,250 |
| | $ | 1,989,000 |
| | $ | 3,185,250 |
|
Michael K. Simonte | $ | 378,485 |
| | $ | 1,050,600 |
| | $ | 1,429,085 |
|
John J. Bellanti(a) | $ | 285,000 |
| | $ | 1,393,896 |
| | $ | 1,678,896 |
|
Alberto L. Satine | $ | 185,000 |
| | $ | 380,800 |
| | $ | 565,800 |
|
Norman Willemse | $ | 167,040 |
| | $ | 412,080 |
| | $ | 579,120 |
|
Richard E. Dauch | $ | 2,030,000 |
| | $ | — |
| | $ | 2,030,000 |
|
(a) For Mr. Bellanti, amount also includes pro-rata payments of the 2012 and 2013 performance unit awards under the 2012 Omnibus Incentive Plan. The awards were pro-rated through December 31, 2013 due to his retirement on January 1, 2014.
| | |
(5)(3) | | This column reflectsReflects the annualized increase in pension value under the Salaried Retirement Program, the Albion Pension Plan and the Supplemental Executive Retirement Program (SERP). There was a net negative change in pension values for 2013 of ($256,846) for Mr. Bellanti; ($104,383) for Mr. Satine and ($12,731,110) for Mr. R.E. Dauch. See also Pension Benefits Table below. There are no above-market or preferential earnings on compensation deferred under our Executive Deferred Compensation Plan. |
(4) The components of All Other Compensation for 2013 are as follows:
|
| | | | | | | | | | | | | | |
Name | Employer 401(k) Match Contributions(a) ($) | Retirement Contributions(b) ($) | Executive Life Insurance Premiums(c) ($) | Company-Provided Vehicles(d) ($) | Tax Gross Ups for Spousal Travel(e) ($) | Other(f) ($) | Total ($) |
David C. Dauch | 12,569 |
| 12,750 |
| 7,640 |
| 31,632 |
| 22,704 |
| 29,094 |
| 116,389 |
|
Michael K. Simonte | 12,575 |
| 12,750 |
| 3,681 |
| 20,301 |
| — |
| 1,510 |
| 50,817 |
|
John J. Bellanti | 8,750 |
| 12,750 |
| 7,155 |
| 14,188 |
| 424 |
| 1,973 |
| 45,240 |
|
Albert L. Satine | — |
| 12,750 |
| 3,171 |
| 23,618 |
| — |
| 1,860 |
| 41,399 |
|
Norman Willemse | 12,469 |
| 12,750 |
| 3,219 |
| — |
| 424 |
| 21,486 |
| 50,348 |
|
Richard E. Dauch | 6,906 |
| 6,906 |
| 110,046 |
| 31,364 |
| — |
| 600 |
| 155,822 |
|
(a)Includes employer matching contributions under AAM’s 401(k) plan.
(b)Includes employer retirement contributions under AAM’s 401(k) plan.
(c)Includes executive life insurance premiums.
| |
(d) | Includes personal use of Company-provided vehicles. The aggregate incremental cost of Company-provided vehicles is based on total vehicle cost if business use of the vehicle is less than 30%. For Mr. D.C. Dauch and Mr. R.E. Dauch, includes the cost of the personal use of a second Company-provided vehicle for each of them. |
| |
(6) | (e) | Includes amounts reimbursed for 2010, employer contributions undertaxes attributable to the 401(k) plan,income associated with the cost of spousal travel for participation in Company business meetings and events. |
| |
(f) | For Mr. D.C. Dauch, includes the cost of travel for spousal participation in Company business meetings and events of $26,091, meals provided during business hours, the cost of an executive life insurance premiumsphysical and personal umbrella liability insurance premiums. Also includes meals provided during business hours for each NEO and personal use of Company-provided vehicles for Mr. R.E. Dauch, Mr. Simonte, Mr. Bellanti, Mr. Jerge and Mr. Lancaster, and executive physical examinations for Mr. R.E. Dauch, Mr. D.C. Dauch, Mr. Bellanti, Mr. Jerge and Mr. Lancaster. Employer contributions under the Company’s 401(k) Plan consisted of matching contributions of $11,925 for Mr. R.E. Dauch,For Mr. Simonte and Mr. Jerge; $11,740 for Mr. D.C. Dauch;Satine, includes the cost of an executive physical and $8,250 forpersonal umbrella liability insurance premiums. For Mr. Bellanti, includes the cost of travel for spousal participation in Company business meetings and events, the cost of an executive physical and personal umbrella liability insurance premiums. For Mr. Lancaster; retirementWillemse, includes the cost of travel for spousal participation in Company business meetings and events, the cost of airfare for personal travel under an international relocation arrangement, employer matching contributions under the Executive Deferred Compensation Plan and the cost of $12,250 for Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge. The total forpersonal umbrella liability insurance premiums. For Mr. R.E. Dauch, includes $117,586 for executive life insurance premiums and the cost of his spouse’s attendance at Company business events. |
|
(7) | | The benefits associated with the change in other pension values are excluded from the measurement of total compensation under the 2009 Settlement and Commercial Agreement. Under the 2009 Settlement and Commercial Agreement, annual compensation for any executive officer, current or former, cannot exceed $3 million. The following table illustrates AAM’s compliance with this provision of the 2009 Settlement and Commercial Agreement as it relates to Mr. R.E. Dauch’s 2010 compensation:personal umbrella liability insurance premiums. |
| | | | |
Total 2010 compensation as presented on Summary Compensation Table | | $ | 5,553,428 | |
Less: Value of pension / SERP benefits granted prior to 2010 | | | 2,692,143 | |
| | | | |
Total 2010 compensation as measured under the 2009 Settlement and Commercial Agreement | | $ | 2,861,285 | |
| | | | |
(5) Compensation of Mr. D.C. Dauch and Mr. R.E. Dauch is based solely on employment as executive officers. They received no compensation for serving as directors.
(6) Mr. Satine was appointed Senior Vice President, Global Driveline Operations effective January 1, 2014 upon the retirement of Mr. Bellanti.
| | |
(8) | | Effective July 12, 2010, Mr. Lancaster assumed the role of Special Advisor to AAM’s Co-Founder, Chairman & CEO, a non-officer position, and retired from AAM effective January 1, 2011. His Salaried Pension and SERP benefit commenced in 2011. The change in pension value reflects actual commencement dates and form of payment elections. |
|
(9) | | Includes a $1 million special incentive program award earned by Mr. Lancaster as of December 31, 2010. Also includes $47,444, which represents the value of the Company vehicle transferred to Mr. Lancaster pursuant to the Settlement Agreement. |
|
(10) | | Mr. Lancaster’s total 2010 annual compensation is in compliance with the $3 million annual compensation limit under the 2009 Settlement and Commercial Agreement. |
32
GRANTS OF PLAN-BASED AWARDS
Annual and long-term incentive awards granted in 20102013 to the NEOs are shown in the following table. The annual and long-term incentive compensation programs are described inCompensation Discussion and Analysis and following the table below.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | Estimated Future Payouts Under
| |
| | | | | | | Non-Equity Incentive Plan Awards(2)(3) | |
Name | | | Grant Date | | | | Threshold ($) | | | | Target ($) | | | | Maximum ($) | |
Richard E. Dauch(1) | | | | — | | | | | — | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Michael K. Simonte | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Annual Incentive(2) | | | | — | | | | | 200,000 | | | | | 400,000 | | | | | 500,000 | |
| | | | | | | | | | | | | | | | | | | | |
Long-Term Incentive(3) | | | | 01/07/2010 | | | | | 225,000 | | | | | 600,000 | | | | | 1,200,000 | |
| | | | | | | | | | | | | | | | | | | | |
Senior Executive Special Incentive Program(4) | | | | 03/15/2010 | | | | | 3,000,000 | | | | | 3,000,000 | | | | | 3,000,000 | |
| | | | | | | | | | | | | | | | | | | | |
David C. Dauch | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Annual Incentive(2) | | | | — | | | | | 292,500 | | | | | 585,000 | | | | | 731,250 | |
| | | | | | | | | | | | | | | | | | | | |
Long-Term Incentive(3) | | | | 01/07/2010 | | | | | 378,000 | | | | | 1,008,000 | | | | | 2,016,000 | |
| | | | | | | | | | | | | | | | | | | | |
Senior Executive Special Incentive Program(4) | | | | 03/15/2010 | | | | | 5,000,000 | | | | | 5,000,000 | | | | | 5,000,000 | |
| | | | | | | | | | | | | | | | | | | | |
John J. Bellanti | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Annual Incentive(2) | | | | — | | | | | 184,000 | | | | | 368,000 | | | | | 460,000 | |
| | | | | | | | | | | | | | | | | | | | |
Long-Term Incentive(3) | | | | 01/07/2010 | | | | | 207,000 | | | | | 552,000 | | | | | 1,104,000 | |
| | | | | | | | | | | | | | | | | | | | |
Senior Executive Special Incentive Program(4) | | | | 03/15/2010 | | | | | 1,000,000 | | | | | 1,000,000 | | | | | 1,000,000 | |
| | | | | | | | | | | | | | | | | | | | |
John E. Jerge | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Annual Incentive(2) | | | | — | | | | | 90,900 | | | | | 181,800 | | | | | 227,250 | |
| | | | | | | | | | | | | | | | | | | | |
Long-Term Incentive(3) | | | | 01/07/2010 | | | | | 85,500 | | | | | 228,000 | | | | | 456,000 | |
| | | | | | | | | | | | | | | | | | | | |
Patrick S. Lancaster | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Annual Incentive(5) | | | | — | | | | | 176,000 | | | | | 352,000 | | | | | 440,000 | |
| | | | | | | | | | | | | | | | | | | | |
Long-Term Incentive(3)(6) | | | | 01/07/2010 | | | | | 198,000 | | | | | 528,000 | | | | | 1,056,000 | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
Name | Grant Date | Approval Date | Estimated Future Payouts under Non Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares of Stock or Units(2) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(3) ($) |
Threshold ($) | Target ($) | Maximum ($) |
David C. Dauch | | | | | | | | | |
Annual Incentive | 1/1/2013 | 10/24/2012 | 550,000 |
| 1,375,000 |
| — |
| — |
| — |
| — |
| — |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | — |
| — |
| — |
| 137,687 |
| — |
| — |
| 1,750,002 |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | 437,500 |
| 1,750,000 |
| 3,500,000 |
| — |
| — |
| — |
| — |
|
Michael K. Simonte | | | | | | | | | |
Annual Incentive | 1/1/2013 | 10/24/2012 | 174,016 |
| 435,040 |
| — |
| — |
| — |
| — |
| — |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | — |
| — |
| — |
| 42,786 |
| — |
| — |
| 543,810 |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | 135,950 |
| 543,800 |
| 1,087,600 |
| — |
| — |
| — |
| — |
|
John J. Bellanti | | | | | | | | | |
Annual Incentive | 1/1/2013 | 10/24/2012 | 155,424 |
| 388,560 |
| — |
| — |
| — |
| — |
| — |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | — |
| — |
| — |
| 38,215 |
| — |
| — |
| 485,713 |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | 121,425 |
| 485,700 |
| 971,400 |
| — |
| — |
| — |
| — |
|
Alberto L. Satine | | | | | | | | | |
Annual Incentive | 1/1/2013 | 10/24/2012 | 86,400 |
| 216,000 |
| — |
| — |
| — |
| — |
| — |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | — |
| — |
| — |
| 16,995 |
| — |
| — |
| 216,006 |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | 54,000 |
| 216,000 |
| 432,000 |
| — |
| — |
| — |
| — |
|
Norman Willemse | | | | | | | | | |
Annual Incentive | 1/1/2013 | 10/24/2012 | 76,800 |
| 192,000 |
| — |
| — |
| — |
| — |
| — |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | — |
| — |
| — |
| 12,589 |
| — |
| — |
| 160,006 |
|
Long-Term Incentive | 3/6/2013 | 2/6/2013 | 40,000 |
| 160,000 |
| 320,000 |
| — |
| — |
| — |
| — |
|
Richard E. Dauch | | | |
| |
| |
| |
| |
| |
| |
|
Annual Incentive | 1/1/2013 | 10/24/2012 | 1,600,000 |
| 4,000,000 |
| — |
| — |
| — |
| — |
| — |
|
| | |
(1) | | Mr. R.E. Dauch received noReflects annual incentive or long-term incentive awards in 2010 in consideration of the $3 million annual compensation limit set forth in the 2009 Settlement and Commercial Agreement. |
|
(2) | | Annual incentive awards granted under the AAM Incentive Compensation Plan for Executive Officers. Also reflects the long-term incentive performance unit awards (PUs) granted under the 2012 Omnibus Incentive Plan. The PUs are payable in cash based on the Company’s EBITDA performance. See further discussion of determinationthese incentive awards under the Narrative to Summary Compensation Table and Grants of the awards underAnnual Incentive Compensationin theCompensation Discussion and Analysis.Plan-Based Award Table. |
| |
(2) | Reflects RSU awards granted under the 2012 Omnibus Incentive Plan. The awards are payable in common stock, contingent upon continued employment through the three-year vesting period. See further discussion in the Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards Table. No options were granted in 2013. |
| |
(3) | | Long-term incentive performance awards were granted underReflects the AAM LTIP. See further discussionfull grant date fair value of the awards underLong-Term Incentivesin theCompensation Discussion and Analysis. |
|
(4) | | Mr. Simonte, Mr. D.C. Dauch and Mr. Bellanti received awards under the Senior Executive Special Incentive Program further described in theCompensation Discussion and Analysis. |
|
(5) | | Mr. Lancaster received a bonus payment of $704,000 for 2010RSUs made during fiscal year 2013 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the Settlement Agreement. |
|
(6) | | Mr. Lancaster received a pro-rata paymentassumptions used in our financial statements. The grant date fair value of stock awards is calculated using the 2010 performance award, shownclosing market price of AAM common stock on the date of grant. See Note 7 to the audited consolidated financial statements in our annual report on Form 10-K for theSummary Compensation Table, in connection with his retirement effective January 1, 2011. year ended December 31, 2013 regarding assumptions underlying the valuation of equity awards. |
33
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
President & CEO Employment Agreement
In accordance with the December 22, 2009Mr. D.C. Dauch’s employment agreement amendment betweenas President & CEO provides for the Companyfollowing compensation and benefits:
|
| |
Term | Initial Term: September 1, 2012 through August 31, 2015 Additional one-year extensions unless either party provides 60 days’ written notice of intent not to renew. Automatic two-year extension upon a change in control. |
Base Salary | $1 million effective September 1, 2012, subject to annual review and increase by the Compensation Committee in its sole discretion. Base salary increased to $1.1 million effective September 1, 2013. |
Annual Incentive | Participation in the AAM Annual Incentive Plan for Executive Officers Target opportunity is 125% of base salary |
Long-Term Incentive | Participation in the plans applicable to executive officers Target opportunity is 350% of base salary
|
Other Benefits | Participation in plans applicable to executive officers Retiree medical, dental and vision coverage equivalent to the benefit levels offered in the Company’s group health care plans for active salaried associates as of September 1, 2012 |
Mr. R. E.D.C. Dauch the CEO agreedis also entitled to forego compensation payable to him under his then current Employment Agreement to the extent his annual compensation would exceed the $3 million limit set forthcertain payments and benefits in the 2009 Settlement and Commercial Agreement. event of termination of employment under the scenarios described below in Potential Payments Upon Termination or Change in Control.
Former Executive Chairman Employment Agreement
Mr. R.E. Dauch’s employment agreement as amended, providesthe former Executive Chairman, which terminated upon his death on August 2, 2013, provided for the following compensation and benefits (subject to the $3 million compensation limit under the 2009 Settlement and Commercial Agreement with GM):benefits:
|
| |
Term | • | Annual base salary of $2,702,300 (effective June 16, 2009), subject to annual adjustment by the Committee;In effect through August 2, 2013 |
Base Salary | • $2 million per year |
2013 Annual Incentive | Subject toParticipation in the $3 million limit on annual compensation described above, annual cash bonus in an amount determined by the CommitteeAAM Annual Incentive Plan for Executive Officers Target opportunity is 200% of base salary. 2013 award pro-rated based on our financial performance, relative to our competitor peer group: |
| | time served through August 2, 2013. |
Long-Term Incentive | • | equalNo grants subsequent to 3 times annual base salary if we continue to outperform our competitor peer group;2012. |
Other Benefits | • | greater than 3 times annual base salary if we outperform our competitor peer group by greater than the historical amount; or |
| • | upParticipation in plans applicable to the amount of Mr. R.E. Dauch’s base salary if we do not outperform our competitor peer group; |
| | |
| • | executive officers Reimbursement of premiums under a $5 million life insurance policy purchased by Mr. R.E. Dauch; |
| • | Annual executive physical examination and health and disability coverage as provided to other senior executives; and |
| • | Dauch Use and maintenance of two Company-provided automobiles and the perquisites and other benefits provided to our senior executives. |
Annual Incentive Awards
In 2013, annual incentive awards were granted under the AAM Incentive Compensation Plan for Executive Officers. Net operating cash flow and NIPS were selected as performance metrics for these awards. The current term continues through December 31, 2011maximum payout for net operating cash flow is 125%. Although there was no established maximum payout for NIPS in 2013, a stated maximum was established in 2014. See Annual Incentive Compensation in the CD&A.
Long-Term Incentive Awards
In 2013, the Company granted long-term incentive awards to NEOs in the form of RSUs and is automatically extended for successive one-yearcash-based performance units. The terms unless either party gives notice of termination at least 60 days priorthese awards, as well as the outstanding cash-based performance awards granted to NEOs under the end of the applicable term. The potential payments and benefits upon termination of Mr. R.E. Dauch’s employment2009 AAM LTIP are described inPotential Payments Upon Termination or Change in Control.
Settlement Agreement with Mr. Lancaster
In accordance with the Settlement Agreement between AAM and Mr. Lancaster effective July 12, 2010, the Committee approved the following cash payments and other benefits to Mr. Lancaster in connection with his retirement effective January 1, 2011 (Retirement Date):
| | |
| • | Continued payment of his annual base salary in consideration of his services as Special Advisor to the CEO through December 31, 2010; |
| • | A 2010 bonus payment of $704,000 on March 15, 2011; |
| • | Payment of $850,000, less withholding taxes, on or before August 15, 2010 in settlement of a claim; |
| • | Title to his Company-provided vehicle as of December 31, 2010; |
| • | Consulting fees of $420,000 for services provided during 2011, payable in monthly installments, provided that Mr. Lancaster performs no work for a competitor of AAM; |
| • | Vesting of his outstanding restricted stock and restricted stock units on the Retirement Date; |
| • | Continued eligibility for the $1,000,000 Senior Special Incentive Program award granted to him on March 15, 2010; and |
| • | Continued eligibility to receive a pro rata portion of outstanding long-term cash incentive awards granted in 2009 and 2010. |
34
Payments made pursuant to this agreement were conditioned upon Mr. Lancaster’s execution of a full waiver and release of claims against AAM, which he signed on January 5, 2011. The payments and benefits payable to Mr. Lancaster pursuant to the Settlement Agreement are described inPotential Payments Upon Termination or Change in Control.
Long-Term Incentive AwardsCompensation
The following description refers to awards granted prior to 2010 under in the Company’s 1999 StockCD&A.
2013 Awards Granted Under the 2012 Omnibus Incentive Plan which has since expired. Information concerning outstanding awards is included
Restricted Stock Units (RSUs). The RSUs granted to NEOs underOutstanding Equity Awards age 57 at December 31, 2010below.
Stock Options. Outstanding optionsthe date of grant vest in three years, while RSUs granted to NEOs age 57 and over vest ratably in three approximately equal installments on the first, second and third anniversaries of the grant date. Generally,annual installments. Upon vesting, may accelerateall RSUs are payable in common stock. Vesting is accelerated upon termination of employment due to death or disability or upon a change in control. The award is forfeited if employment is terminated for any other reason prior to vesting. Vested options expire ten years after
Performance Unit Awards (PUs). The PUs granted to the grant dateNEOs on March 6, 2013 are based upon the attainment of certain EBITDA margin performance targets over a three-year performance period beginning January 1, 2013 through December 31, 2015. PUs have an initial notional value equal to one dollar and maywill be exercised any time before the earliest of: (1) the expirationsettled in cash. A pro-rata portion of the grant, (2) five years following termination of employment (one year following termination for options granted before 2002) due toaward is payable upon death, disability, retirement, or a change in control, (3) 90 days following termination of employment without cause and (4) termination of employment for cause.
Restricted Stock. Restricted stock awarded to executives under age 60 vests on the third anniversary of the grant date. Restricted stock awarded to executives age 60 and over vests in three approximately equal annual installments through March 14, 2011. Vesting accelerates upon death, disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO, or upon a change in control.
The following table illustrates the threshold, target and maximum EBITDA margin performance levels for determining awards under PUs.
|
| | | |
Performance Level | 3 Year Cumulative EBITDA Margin | | Percent of Target Award Opportunity Earned |
Threshold | 10% | | 25% |
Target | 12% | | 100% |
Maximum | 15% | | 200% |
2011 Awards granted under the AAM 2009 Long-Term Incentive Plan
Cash-Based Performance Accelerated Restricted Stock (PARS) and Performance Accelerated Restricted Stock Units (RSUs). PARS and RSUs vest on the fifth anniversaryAwards. Prior to adoption of the grant date unless vesting is accelerated on2012 Omnibus Incentive Plan, the third or fourth anniversariesCompany’s long-term incentive program consisted of cash-based performance awards made under the grant date2009 AAM LTIP. The cash payouts are determined based on our total shareholder return. Vesting may also accelerate upon termination of employment due to death, disability or upon a change in control. If the NEO’s employment is terminated for any other reason, he will forfeit his unvested PARSEBITDA margin and RSUs.
Vesting is accelerated on the third anniversary of the grant date if AAM’srelative total shareholder return for the preceding(TSR) performance levels as shown below over a three-year period meets or exceeds the 66th percentile of our competitor peer group. If vesting is not accelerated on the third anniversary, then vesting is accelerated on the fourth anniversary of the grant date if shareholder return exceeds the 66th percentile of our competitor peer group for the preceding four years. Total shareholder return is definedperformance period. The 2011 awards were paid in March 2014 as the cumulative appreciation (assuming reinvestment of dividends) of an investment in common stock. Vesting will not accelerate unless AAM has positive TSR.
PARS consist of issued and outstanding shares of AAM common stock, subject to forfeiture and transfer restrictions prior to vesting of the awards, and carry voting and dividend rights from the date of grant. RSUs consist of the right to receive, upon vesting of the award, an amount in cash equal to the fair market value of the number of shares of common stock covered by the award. RSUs carry the right to receive dividend equivalent payments from the date of grant, payableshown in the calendar quarter when dividends are paid on our common stock.Summary Compensation Table above. No other awards under the 2009 AAM LTIP remain outstanding at December 31, 2013. In calculating these awards, the Committee has discretion to exclude certain special items from EBITDA, such as special charges or gains, non-recurring operating costs, extraordinary gains or losses, the impact of changes in accounting principles, or other unusual items.
The following tables illustrate the threshold, target and maximum performance levels for determining 2011 award payouts for each performance measure.
2008 Performance Awards. In 2008, Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti and Mr. Jerge received 25 percent of their long-term incentive award in the form of performance awards. The award represented the right to a payment in cash based on AAM’s relative TSR over a three year performance period beginning in January 2008. Based on AAM’s relative TSR for the period January 2008 through December 2010, the awards did not result in a payment to Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti or Mr. Jerge. |
| | | | | | | |
| EBITDA Performance Measure | | TSR Performance Measure |
Performance Level | 3-Year Cumulative EBITDA Margin | | Percent of Target Award Opportunity Earned | | Company’s TSR Percentile Rank | | Percent of Target Award Opportunity Earned |
Threshold | 8% | | 25% | | 35th | | 50% |
Target | 12% | | 100% | | 50th | | 100% |
Maximum | 15% | | 200% | | 75th | | 200% |
Performance Awards. The Performance Awards are discussed in theCompensation Discussion and Analysis.33
35
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 20102013
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Option Awards | | | | | | | | Stock Awards | |
| | | | | | | | | | | | | | | | | | | | | | | Market
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| | | | | | | | | | | | | | | | | | | Number of
| | | | Value of
| |
| | | | | | | | | | | | | | | | | | | Shares
| | | | Shares
| |
| | | Number of
| | | | Number of
| | | | | | | | | | | | or Units
| | | | or Units
| |
| | | Securities
| | | | Securities
| | | | | | | | | | | | of Stock
| | | | of Stock
| |
| | | Underlying
| | | | Underlying
| | | | | | | | | | | | That
| | | | That
| |
| | | Unexercised
| | | | Unexercised
| | | | Option
| | | | | | | | Have
| | | | Have
| |
| | | Options
| | | | Options
| | | | Exercise
| | | | Option
| | | | Not
| | | | Not
| |
| | | Exercisable
| | | | Unexercisable
| | | | Price
| | | | Expiration
| | | | Vested
| | | | Vested(8)
| |
Name | | | (#) | | | | (#) | | | | ($) | | | | Date | | | | (#) | | | | ($) | |
Richard E. Dauch | | | | 240,000 | | | | | | | | | | 8.85 | | | | | 4/2/2011 | | | | | 19,534 | (1) | | | | 251,207 | |
| | | | 300,000 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 39,958 | (2) | | | | 513,860 | |
| | | | 300,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | | | | | | | |
| | | | 300,000 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | | | | | | | |
| | | | 150,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | | | | | | | |
| | | | 150,000 | | | | | | | | | | 15.58 | | | | | 3/15/2016 | | | | | | | | | | | |
| | | | 150,000 | | | | | | | | | | 26.02 | | | | | 3/14/2017 | | | | | | | | | | | |
| | | | 100,500 | | | | | 49,500(1 | ) | | | | 10.08 | | | | | 6/25/2018 | | | | | | | | | | | |
| | | | — | | | | | 100,500(2 | ) | | | | 2.81 | | | | | 1/6/2019 | | | | | | | | | | | |
Michael K. Simonte | | | | 39,664 | | | | | | | | | | 15.56 | | | | | 2/2/2011 | | | | | 3,600 | (3)(6) | | | | 46,296 | |
| | | | 9,500 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 2,400 | (4)(6) | | | | 30,864 | |
| | | | 10,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | 3,600 | (3)(7) | | | | 46,296 | |
| | | | 8,500 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | 2,400 | (4)(7) | | | | 30,864 | |
| | | | 9,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | 10,000 | (5) | | | | 128,600 | |
| | | | 10,000 | | | | | | | | | | 15.58 | | | | | 3/15/2016 | | | | | | | | | | | |
| | | | 10,000 | | | | | | | | | | 26.02 | | | | | 3/14/2017 | | | | | | | | | | | |
| | | | 8,375 | | | | | 4,125(1 | ) | | | | 10.08 | | | | | 6/25/2018 | | | | | | | | | | | |
David C. Dauch | | | | 7,260 | | | | | | | | | | 8.85 | | | | | 4/2/2011 | | | | | 4,800 | (3)(6) | | | | 61,728 | |
| | | | 16,750 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 3,200 | (4)(6) | | | | 41,152 | |
| | | | 28,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | 4,500 | (3)(7) | | | | 57,870 | |
| | | | 28,000 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | 3,000 | (4)(7) | | | | 38,580 | |
| | | | 12,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | 12,000 | (5) | | | | 154,320 | |
| | | | 15,000 | | | | | | | | | | 15.58 | | | | | 3/15/2016 | | | | | | | | | | | |
| | | | 13,000 | | | | | | | | | | 26.02 | | | | | 3/14/2017 | | | | | | | | | | | |
| | | | 10,385 | | | | | 5,115(1 | ) | | | | 10.08 | | | | | 6/25/2018 | | | | | | | | | | | |
John J. Bellanti | | | | 12,000 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 3,600 | (3)(6) | | | | 46,296 | |
| | | | 13,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | 2,400 | (4)(6) | | | | 30,864 | |
| | | | 16,000 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | 3,600 | (3)(7) | | | | 46,296 | |
| | | | 9,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | 2,400 | (4)(7) | | | | 30,864 | |
| | | | 6,700 | | | | | | | | | | 15.58 | | | | | 3/15/2016 | | | | | 9,000 | (5) | | | | 115,740 | |
| | | | 10,000 | | | | | | | | | | 26.02 | | | | | 3/14/2017 | | | | | | | | | | | |
| | | | 7,370 | | | | | 3,630(1 | ) | | | | 10.08 | | | | | 6/25/2018 | | | | | | | | | | | |
John E. Jerge | | | | 11,500 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 3,600 | (3)(6) | | | | 46,296 | |
| | | | 12,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | 2,400 | (4)(6) | | | | 30,864 | |
| | | | 10,000 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | 3,300 | (3)(7) | | | | 42,438 | |
| | | | 8,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | 2,200 | (4)(7) | | | | 28,292 | |
| | | | 10,000 | | | | | | | | | | 15.58 | | | | | 3/15/2016 | | | | | 7,000 | (5) | | | | 90,020 | |
| | | | 9,500 | | | | | | | | | | 26.02 | | | | | 3/14/2017 | | | | | | | | | | | |
| | | | 6,030 | | | | | 2,970(1 | ) | | | | 10.08 | | | | | 6/25/2018 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
36
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Option Awards | | | | | | | | Stock Awards | |
| | | | | | | | | | | | | | | | | | | | | | | Market
| |
| | | | | | | | | | | | | | | | | | | Number of
| | | | Value of
| |
| | | | | | | | | | | | | | | | | | | Shares
| | | | Shares
| |
| | | Number of
| | | | Number of
| | | | | | | | | | | | or Units
| | | | or Units
| |
| | | Securities
| | | | Securities
| | | | | | | | | | | | of Stock
| | | | of Stock
| |
| | | Underlying
| | | | Underlying
| | | | | | | | | | | | That
| | | | That
| |
| | | Unexercised
| | | | Unexercised
| | | | Option
| | | | | | | | Have
| | | | Have
| |
| | | Options
| | | | Options
| | | | Exercise
| | | | Option
| | | | Not
| | | | Not
| |
| | | Exercisable
| | | | Unexercisable
| | | | Price
| | | | Expiration
| | | | Vested
| | | | Vested(8)
| |
Name | | | (#) | | | | (#) | | | | ($) | | | | Date | | | | (#) | | | | ($) | |
Patrick S. Lancaster | | | | 35,000 | | | | | | | | | | 8.85 | | | | | 4/2/2011 | | | | | 3,900 | (10) | | | | 50,154 | |
| | | | 40,000 | | | | | | | | | | 24.15 | | | | | 1/23/2012 | | | | | 2,600 | (10) | | | | 33,436 | |
| | | | 30,000 | | | | | | | | | | 23.73 | | | | | 1/22/2013 | | | | | 3,300 | (10) | | | | 42,438 | |
| | | | 25,000 | | | | | | | | | | 38.70 | | | | | 2/2/2014 | | | | | 2,200 | (10) | | | | 28,292 | |
| | | | 9,000 | | | | | | | | | | 26.65 | | | | | 3/15/2015 | | | | | 4,785 | (10) | | | | 61,535 | |
| | | | 11,000 | (9) | | | | | | | | | 15.58 | | | | | 1/1/2016 | | | | | | | | | | | |
| | | | 9,500 | (9) | | | | | | | | | 26.02 | | | | | 1/1/2016 | | | | | | | | | | | |
| | | | 8,040 | (9) | | | | 3,960(9 | ) | | | | 10.08 | | | | | 1/1/2016 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | |
Name | Number of Securities Underlying Unexercised Options Exercisable(1) (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) |
David C. Dauch | 28,000 |
| 38.70 |
| 2/2/2014 | 79,326(3) | 1,622,217 |
|
| 12,000 |
| 26.65 |
| 3/15/2015 | 22,382(4) | 457,712 |
|
| 15,000 |
| 15.58 |
| 3/15/2016 | 137,687(5) | 2,815,699 |
|
| 13,000 |
| 26.02 |
| 3/14/2017 |
|
|
Michael K. Simonte | 8,500 |
| 38.70 |
| 2/2/2014 | 34,466(3) | 704,830 |
|
| 9,000 |
| 26.65 |
| 3/15/2015 | 42,786(5) | 874,974 |
|
| 10,000 |
| 15.58 |
| 3/15/2016 |
|
|
| 10,000 |
| 26.02 |
| 3/14/2017 |
|
|
John J. Bellanti | 16,000 |
| 38.70 |
| 2/2/2014 | 21,247(3) | 434,501 |
|
| 9,000 |
| 26.65 |
| 3/15/2015 | 38,215(5) | 781,497 |
|
| 6,700 |
| 15.58 |
| 3/15/2016 |
|
|
| 10,000 |
| 26.02 |
| 3/14/2017 |
|
|
| 11,000 |
| 10.08 |
| 6/25/2018 |
|
|
Alberto L. Satine | 9,000 |
| 38.70 |
| 2/2/2014 | 13,929(3) | 284,848 |
|
| 8,000 |
| 26.65 |
| 3/15/2015 | 16,995(5) | 347,548 |
|
| 8,000 |
| 26.02 |
| 3/14/2017 | | |
Norman Willemse | 7,500 |
| 38.70 |
| 2/2/2014 | 13,520(3) | 276,484 |
|
| 9,700 |
| 10.08 |
| 6/25/2018 | 12,589(5) | 257,445 |
|
Richard E. Dauch(6) | 300,000 |
| 38.70 |
| 2/2/2014 | | |
| 150,000 |
| 26.65 |
| 3/15/2015 | | |
| 150,000 |
| 15.58 |
| 3/15/2016 | | |
| 150,000 |
| 26.02 |
| 3/14/2017 | | |
| 100,500 |
| 9.19 |
| 8/2/2017 | | |
| | |
(1) | All outstanding options are vested as of December 31, 2013. |
| Granted under the 1999 Stock Incentive Plan on June 25, 2008. The remaining shares and options vested on March 14, 2011. |
|
(2) | Reflects value of outstanding RSUs using a share price of $20.45, the closing price of AAM common stock on December 31, 2013. |
| Granted under the 1999 Stock Incentive Plan on January 6, 2009. Approximately one-half of the shares vested on January 6, 2011 and one-half vest on January 6, 2012. |
|
(3) | | Reflects PARS granted under the 1999 Stock Incentive Plan. PARS vest on the fifth anniversary of the grant date, unless vesting is accelerated at the end of the fourth year after the grant date. Accelerated vesting is contingent upon our achievement of predetermined performance goals, measured by our relative TSR. Vesting will not be accelerated unless TSR is positive. |
|
(4) | | Reflects RSUs granted on May 30, 2012 under the 1999 Stock2012 Omnibus Incentive Plan. RSUs for Mr. D.C. Dauch, Mr. Simonte, Mr. Satine and Mr. Willemse vest three years from the date of grant. RSUs for Mr. Bellanti were forfeited upon retirement on the fifth anniversary of the grant date, unless vesting is accelerated at the end of the fourth year after the grant date. Accelerated vesting is contingent upon our achievement of predetermined performance goals, measured by our relative TSR. Vesting will not be accelerated unless TSR is positive.January 1, 2014. |
| |
(4) | Reflects RSUs granted on September 1, 2012 under the 2012 Omnibus Incentive Plan pursuant to Mr. D.C. Dauch’s employment agreement. The RSUs for Mr. D.C. Dauch vest three years from the date of grant. |
| |
(5) | | Reflects restricted stockRSUs granted on March 6, 2013 under the 1999 Stock2012 Omnibus Incentive PlanPlan. RSUs for Mr. D.C. Dauch, Mr. Simonte, Mr. Satine and Mr. Willemse vest three years from the date of grant. RSUs for Mr. Bellanti were forfeited upon his retirement on June 25, 2008. The restricted stock awards vested on March 14, 2011.January 1, 2014. |
| |
(6) | | Granted on March 15, 2006. The PARS and RSUs vested on March 15, 2011. |
|
(7) | | Granted on March 14, 2007. The PARS and RSUs vest on March 14, 2012. VestingUpon his death, vesting of theseMr. R.E.Dauch's outstanding long-term incentive awards did not accelerate on March 14, 2011. |
|
(8) | | Reflectswas accelerated under the closing market value on December 31, 2010 ($12.86)terms of the numberapplicable award agreements. Unexercised stock options remain exercisable by his beneficiary until the earlier of shares of AAM common stock covered by outstanding PARS, RSUs and restricted stock awards on December 31, 2010. |
|
(9) | | Mr. Lancaster hasthe option expiration date or five years from retirement to exercise these vested options. Unvested options were forfeited. |
|
(10) | | Mr. Lancaster’s outstanding stock awards vested upon his retirement effective January 1, 2011 pursuant to the Settlement Agreement.date of death. |
37
OPTIONS EXERCISED AND STOCK VESTED
| | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | | Stock Awards | |
| | | Number of
| | | | | | | | Number of
| | | | | |
| | | Shares
| | | | Value
| | | | Shares
| | | | Value
| |
| | | Acquired on
| | | | Realized on
| | | | Acquired on
| | | | Realized on
| |
| | | Exercise
| | | | Exercise(1)
| | | | Vesting(2)(3)(4)
| | | | Vesting(5)
| |
Name | | | (#) | | | | ($) | | | | (#) | | | | ($) | |
Richard E. Dauch | | | | 49,500 | | | | | 430,758 | | | | | 39,805 | | | | | 361,413 | |
| | | | | | | | | | | | | | | | | | | | |
Michael K. Simonte | | | | 10,000 | | | | | 36,601 | | | | | 5,500 | | | | | 55,275 | |
| | | | | | | | | | | | | | | | | | | | |
David C. Dauch | | | | — | | | | | — | | | | | 7,000 | | | | | 70,350 | |
| | | | | | | | | | | | | | | | | | | | |
John J. Bellanti | | | | — | | | | | — | | | | | 5,000 | | | | | 50,250 | |
| | | | | | | | | | | | | | | | | | | | |
John E. Jerge | | | | 11,000 | | | | | 24,938 | | | | | 5,000 | | | | | 50,250 | |
| | | | | | | | | | | | | | | | | | | | |
Patrick S. Lancaster | | | | — | | | | | — | | | | | 10,930 | | | | | 102,698 | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise(1) (#) | Value Realized on Exercise(1) ($) | Number of Shares Acquired on Vesting(2) (#) | Value Realized on Vesting(3) ($) |
David C. Dauch | — |
| — |
| — |
| — |
|
Michael K. Simonte | 12,500 |
| 119,115 |
| — |
| — |
|
John J. Bellanti | — |
| — |
| 10,464 |
| 190,445 |
|
Alberto L. Satine | 16,700 |
| 120,046 |
| — |
| — |
|
Norman Willemse | — |
| — |
| — |
| — |
|
Richard E. Dauch | 49,500 |
| 445,995 |
| 627,493 |
| 13,078,015 |
|
| | |
(1) | | For Mr. R.E. Dauch, Mr. Simonte and Mr. Jerge, reflectsReflects the number of shares receivedacquired upon exercise of stock options multiplied byoptions. Value realized upon exercise is based on the difference between the salemarket price of AAM common stock acquired upon exercise and the exercise price for such options.stock options on the exercise date. |
| |
(2) | | Reflects the lapse of the transfer and forfeiture restrictions under awards of restricted stockRSUs granted in May 2012 to Mr. Bellanti and Mr. R.E. Dauch in January 2009. Restricted stock awarded to executives age 60 and over vest inDauch. The first of three approximately equal annual installments through January 6, 2012. |
|
(3) | | Reflectsvested in May 2013. For Mr. R.E. Dauch, also reflects the lapse of the transfer and forfeiture restrictions under awardsRSUs that were unvested as of restricted stock granted to Mr. R.E. Dauch and Mr. Lancaster in June 2008. Restricted stock awarded to executives over age 60 vest in three approximately equal annual installments through March 14, 2011.his death. |
| |
|
(4) | | Reflects the lapse of the transfer and forfeiture restrictions under awards of PARS and RSUs granted to Mr. Simonte, Mr. D.C. Dauch, Mr. Bellanti, Mr. Jerge and Mr. Lancaster in March 2005. These awards vested in March 2010. |
|
(5) | (3) | Reflects the number of restricted shares PARS andunderlying vested RSUs vested, multiplied by the closing market price of AAM common stock on the vesting date. For Mr. R.E. Dauch, the value realized on vesting upon death was $12,228,260. |
38
PENSION BENEFITS
The following table shows the value of the benefits accumulated by the NEOs and their years of credited service under AAM’s Salaried Retirement Program (SRP), the Albion Pension Plan and the SERP.AAM’s Supplemental Executive Retirement Program (SERP). The years of credited service are through December 31, 2010,2013, AAM’s fiscal year-end measurement date used for financial statement reporting purposes. The values shown are based on unreduced benefits deferred to the earliest age at which unreduced benefits are payable. The assumptions used to calculate the actuarial present value of accumulated benefits are the same assumptions used in our audited consolidated financial statements for the fiscal year ended December 31, 2010, except that the values in the table do not reflect assumptions for future compensation increases or future service credits2013 and assume continued serviceemployment until unreduced retirement age is attained. For material assumptions, see Note 6 to the audited consolidated financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2013.
| | | | | | | | | | | | | |
| | | | | | Number of
| | | Present
|
| | | | | | Years of
| | | Value of
|
| | | | | | Credited
| | | Accumulated
|
| | | | | | Service
| | | Benefit
|
Name | | | Plan Name | | | (#) | | | ($) |
Richard E. Dauch(1) | | | AAM Retirement Program for Salaried Employees | | | | 16.8333 | | | | | 843,319 | |
| | | AAM Supplemental Executive Retirement Program | | | | 21.0000 | (2) | | | | 22,862,681 | |
| | | | | | | | | | | | | |
Michael K. Simonte | | | AAM Retirement Program for Salaried Employees | | | | 8.0833 | (3) | | | | 117,400 | |
| | | AAM Supplemental Executive Retirement Program | | | | 12.0833 | | | | | 300,241 | |
| | | | | | | | | | | | | |
David C. Dauch | | | AAM Retirement Program for Salaried Employees | | | | 11.5000 | (3) | | | | 176,622 | |
| | | AAM Supplemental Executive Retirement Program | | | | 15.5000 | | | | | 483,193 | |
| | | | | | | | | | | | | |
John J. Bellanti(4) | | | AAM Retirement Program for Salaried Employees | | | | 16.8333 | | | | | 647,252 | |
| | | AAM Supplemental Executive Retirement Program | | | | 16.8333 | | | | | 614,249 | |
| | | | | | | | | | | | | |
John E. Jerge | | | AAM Retirement Program for Salaried Employees | | | | 12.8333 | (3) | | | | 206,053 | |
| | | AAM Supplemental Executive Retirement Program | | | | 16.8333 | | | | | 335,632 | |
| | | | | | | | | | | | | |
Patrick S. Lancaster(5) | | | AAM Retirement Program for Salaried Employees | | | | 16.5833 | | | | | 861,446 | |
| | | AAM Supplemental Executive Retirement Program | | | | 16.5833 | | | | | 727,786 | |
| | | | | | | | | | | | | |
|
| | | | | | |
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
David C. Dauch | AAM Retirement Program for Salaried Employees | 11.5000(1) | 250,031 |
| — |
|
AAM Supplemental Executive Retirement Program | 18.5000 | 1,617,968 |
| — |
|
Michael K. Simonte | AAM Retirement Program for Salaried Employees | 8.0833(1) | 167,221 |
| — |
|
AAM Supplemental Executive Retirement Program | 15.0833 | 823,708 |
| — |
|
John J. Bellanti(2) | AAM Retirement Program for Salaried Employees | 17.8333(1) | 804,187 |
| — |
|
AAM Supplemental Executive Retirement Program | 19.8333 | 835,056 |
| — |
|
Alberto Satine(3) | AAM Retirement Program for Salaried Employees | 10.5833(1) | 399,540 |
| — |
|
AAM Supplemental Executive Retirement Program | 12.5833 | 281,112 |
| — |
|
Norman Willemse(4) | Albion Pension Plan | 6.3333 | 276,017 |
| — |
|
AAM Supplemental Executive Retirement Program | 11.9167 | 279,998 |
| — |
|
Richard E. Dauch(5) | AAM Retirement Program for Salaried Employees | 17.8333(1) | 544,571 |
| 16,163 |
|
AAM Supplemental Executive Retirement Program | 23.5833 | 17,434,222 |
| 503,028 |
|
| | |
(1) | Benefits under the SRP were frozen effective December 31, 2006 for Mr. D.C. Dauch and Mr. Simonte. Benefits under the SRP were frozen effective December 31, 2011 for Mr. Bellanti, Mr. Satine and Mr. R.E. Dauch. |
| |
(2) | Mr. R.E. DauchBellanti retired on January 1, 2014 under the SRP and the SERP. The present value of accumulated benefits as of December 31, 2013 was reduced to reflect Mr. Bellanti's actual pension elections. |
| |
(3) | Mr. Satine was eligible to retire on December 31, 2010 with full benefits under the Salaried Retirement Program and the SERP. |
|
(2) | | As of December 31, 2009, Mr. R.E. Dauch earned 20 years of credited service in accordance with his employment agreement extension dated November 3, 2005. |
|
(3) | | Benefits were frozen effective December 31, 2006 under the Salaried Retirement Program for Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge. |
|
(4) | | Mr. Bellanti was eligible to retire on December 31, 20102013 under both the Salaried Retirement ProgramSRP and the SERP. He qualifies for a reduced benefit of approximately 68%54% of the unreduced benefit under the Salaried Retirement ProgramSRP and for the basic form of benefit under the SERP. |
| |
(4) | Mr. Willemse is not a participant in the SRP. Mr. Willemse was eligible to retire on December 31, 2013 under both the Albion Pension Plan and the SERP. He qualifies for the current benefit formula under the SERP. |
| |
(5) | | Mr. Lancaster retired effective January 1, 2011. BenefitsR.E. Dauch's present value of accumulated benefits as of December 31, 2013 was reduced to the survivorship portion of the benefits payable under both plans commencethe SERP and the SRP. His surviving spouse began receiving benefit payments in 2011. The present values reflect actual commencement dates and form of payment elections.September 2013. |
We provide pension benefits for NEOs under our Salaried Retirement Program,the SRP, a broad-based defined benefit pension plan open tocovering substantially all of our U.S. salaried associates hired prior to January 1, 2002,2007, and our SERP. The purpose of the SERP is to provide total retirement benefits at a competitive level with executives of other major industrial companies. Our Albion Automotive Limited
subsidiary located in Glasgow, Scotland provides pension benefits under the Albion Pension Plan for its salaried associates. Mr. Willemse was a participant in the Albion Pension Plan while an associate of Albion Automotive Limited.
Salaried Retirement Program.Program (SRP). The annual retirement benefit payable to each executive, commencing on retirement at or after age 65, equals the sum of the executive’s contributions plus an additional benefit based on the executive’s average monthly salary (determined as the average of the executive’s base salary in the highest 60 months during his final 10 years of service) and years of credited service. The SRP also includes a cash benefit structure for participants hired between January 1, 2002 and December 31, 2006. None of the NEOs are covered by the cash benefit structure. The amount of compensation that may be taken into account for determining benefits is limited under the Internal Revenue Code. The maximum annual compensation under this limit was $245,000 for the year ended December 31, 2010.
39
Benefits under the Salaried Retirement ProgramSRP may be paid as a single life annuity or, upon election, in the form of a joint and survivor annuity with a reduction in the amount of the annual benefit.
Effective December 31, 2006, the Salaried Retirement ProgramSRP was amended to freeze benefits at current levels for associates who willwere not be eligible to retire by December 1, 2011. Mr. R.E. Dauch, Mr. Lancaster and Mr. Bellanti are grandfathered and will continueAssociates who were eligible for early or normal retirement on or before December 31, 2011 continued to accrue benefits through December 31, 2011. The NEOs did not accrue benefits under the program throughplan in 2013.
Albion Pension Plan. The annual retirement benefit payable, commencing on retirement at or after age 65, is based on the earlierexecutive’s average salary (determined as the average of (1) December 31, 2011 or (2) the dateexecutive’s base salary in the highest 36 months during the final 10 years of retirement or other terminationservice with Albion Automotive Limited), years of employment.pensionable service and the percentage of participant contributions made to the plan. Benefits under the Albion Pension Plan will be paid as an annuity; however, a participant may elect to receive a portion of the benefit payable in a lump sum.
Supplemental Executive Retirement Program.Program (SERP). Mr. R.E. Dauch, Mr. LancasterBellanti and Mr. BellantiSatine, who were grandfathered under the SRP, are eligible to receive the basic form of pension benefit under ourthe SERP upon retirement. In addition, they are eligible to receive the alternative form of benefit, if greater than the basic benefit, upon retirement at or after age 62. The executive must have at least 10 years of credited service to receive either form of benefit under the SERP.
The total monthly benefit payable under the basic form of SERP is equal to the following amount:
Two percent of the executive’s average monthly salary calculated as of December 31, 2011 (as determined for the SRP excluding the limitations as specified under the Internal Revenue Code), multiplied by the executive’s years of credited service; less
| | |
| • | Two percent of the executive’s average monthly salary (as determined for the Salaried Retirement Program excluding the limitations as specified under the Internal Revenue Code), multiplied by the executive’s years of credited service; less |
|
| • | The benefit payable to the executive under the Salaried Retirement Program (without reduction for survivor benefits), plus two percentThe benefit payable to the executive under the SRP (without reduction for survivor benefits), plus 2% of the maximum monthly social security benefit payable at age 65 multiplied by the executive’s years of credited service. |
The Compensation Committee has discretion to reduce or eliminate the amount payable under the alternative form of benefit. Subject to the Compensation Committee’s discretion, the total monthly benefit payable under the alternative form of SERP is equal to the following amount:
1.5% of the executive’s average monthly salary calculated as of December 31, 2011 (as determined for the SRP excluding the limitations as specified under the Internal Revenue Code) and average monthly incentive compensation as of December 31, 2011 (determined as the average of the highest five of the executive’s last 10 annual cash incentive awards, divided by 12) multiplied by the executive’s years of credited service; less
| | |
| • | 1.5 percent of the executive’s average monthly salary (as determined for the Salaried Retirement Program excluding the limitations as specified under the Internal Revenue Code) and average monthly incentive compensation (determined as the average of the highest five of the executive’s last 10 annual cash incentive awards, divided by 12) multiplied by the executive’s years of credited service; less |
|
| • | The benefit payable to the executive under the Salaried Retirement ProgramThe benefit payable to the executive under the SRP (without reduction for survivor benefits), plus the maximum monthly social security benefit payable at age 65. |
SERP benefits payable under the basic and alternative forms are generally paid as a single life annuity. If the executive’s spouse is eligible for survivor benefits under the Salaried Retirement Program,SRP; however, the executive’s monthly SERP benefit will be reduced and paid in the form of a joint and survivor annuity.
Effective January 1, 2007, the SERP was amended to change the benefit accrual formulae for executivesMr. D.C. Dauch, Mr. Simonte and Mr. Willemse, who arewere not grandfathered under the Salaried Retirement Program. Because they are grandfathered, Mr. R.E. Dauch and Mr. Bellanti may continue to accrue SERP benefits under the basic and alternative forms through December 31, 2011.
Mr. Simonte, Mr. D.C. Dauch and Mr. Jerge, who are not grandfathered under the Salaried Retirement Program,SRP, are eligible to receive a defined contribution benefit under the current SERP formula, payable six months after retirement in a lump sum. The amount of the benefit will be equal to 12.5 percent12.5% of the executive’s final average compensation (determined as the executive’s average annual base salary and cash incentive for the highest five consecutive years), multiplied by the executive’s years of credited service, less the sum of the actuariallyactuarial equivalent value of the executive’s benefits payable under the Salaried Retirement ProgramSRP, Albion Pension Plan and the balance of the executive’s employer retirement contribution account under ourAAM’s 401(k) plan.
40
NONQUALIFIED DEFERRED COMPENSATION
The following table summarizes the NEOs compensation under the Executive Deferred Compensation Plan for the 20102013 fiscal year. All of the NEOs are fully vested in any applicable Company matching contributions.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Executive
| | | | Registrant
| | | | Aggregate
| | | | Aggregate
| | | | Aggregate
| |
| | | Contributions
| | | | contributions in
| | | | Earnings
| | | | Withdrawals
| | | | Balance at
| |
| | | in Last FY
| | | | Last FY
| | | | In Last FY(1)
| | | | Distributions
| | | | Last FYE
| |
Name | | | ($) | | | | ($) | | | | ($) | | | | ($) | | | | ($) | |
Richard E. Dauch | | | | — | | | | | — | | | | | 360,214 | | | | | — | | | | | 4,865,696 | |
Michael K. Simonte | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
David C. Dauch | | | | — | | | | | — | | | | | 30,545 | | | | | — | | | | | 263,066 | |
John J. Bellanti | | | | — | | | | | — | | | | | 58,046 | | | | | — | | | | | 498,071 | |
John E. Jerge | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Patrick S. Lancaster | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | |
Name | Executive Contributions in Last FY(1) ($) | Registrant contributions in Last FY(2) ($) | Aggregate Earnings In Last FY(3) ($) | Aggregate Withdrawals Distributions(4) ($) | Aggregate Balance at Last FYE(5) ($) |
David C. Dauch | — |
| — |
| 50,956 |
| — |
| 352,194 |
|
Michael K. Simonte | — |
| — |
| — |
| — |
| — |
|
John J. Bellanti | — |
| — |
| 93,646 |
| — |
| 661,521 |
|
Alberto L. Satine | — |
| — |
| — |
| — |
| — |
|
Norman Willemse | 35,100 |
| 768 |
| 11,069 |
| — |
| 75,904 |
|
Richard E. Dauch | — |
| — |
| 55,056 |
| (5,557,373 | ) | — |
|
| | |
(1) | For Mr. Willemse, reflects $25,600 of his 2013 base salary and $9,500 of his 2012 annual incentive award paid March 2013. Base salary amounts deferred are included in the salary column for 2013 in the Summary Compensation Table and the 2012 annual incentive award deferred is included in the non-equity incentive compensation column for 2012 in the Summary Compensation Table. |
| |
(2) | Reflects the Company's 3% match on Mr. Willemse's 2013 base salary deferral. This amount is included in the all other compensation column for 2013 in the Summary Compensation Table. |
| |
(3) | Reflects hypothetical accrued earnings during 20102013 on notional investments designed to track the performance of funds similar to those available to participants in the Company’s 401(k) plan. None of the earnings shown in this column are reported as compensation in theSummary Compensation Table. |
| |
(4) | Upon his death, Mr. R.E. Dauch's beneficiary received a distribution of the plan account balance. |
| |
(5) | Of the aggregate balance, the amounts reflect compensation previously reported in the Summary Compensation Table for each of the NEOs. For Mr. Willemse, the amount includes $26,368 reported as compensation in the Summary Compensation Table for 2013. |
Under AAM’s Executive Deferred Compensation Plan, a nonqualified, tax-deferred savings plan, certain executives, including our NEOs, may elect to defer the payment of six6% to 75 percent75% of their base salaryand/or their annual incentive compensation award during any plan year. Base salary deferred into the Executive Deferred Compensation Planplan receives a three percent3% Company match. Matching contributions are vested after five years of credited service. The amounts deferred are unfunded and unsecured obligations of AAM.
Amounts deferred or credited into this plan are represented in the executive’s notional account and are “invested” among funds similar to those available under the Company’sAAM’s 401(k) plan. Forty percent of deferral elections are automatically and irrevocably allocated to the restricted investment benchmark, the PIMCO Total Return Fund. The remaining 60 percent of deferral elections60% may be allocated by the executive to any of the investments available under the plan and may be reallocated on a daily basis among any of the investments available under the plan.available. Although the executive has no actual or constructive ownership of shares in the investment funds, the return on the executive’s account is determined as if the amounts were notionally invested in these funds.
41
The table below shows the investment fund options available under the Executive Deferred Compensation Plan and the annual rates of return for the calendar year ended December 31, 2010.2013.
| | | | | | | | | |
| | | Rate of
| | | | | | Rate of
|
Name of Fund | | | Return | | | Name of Fund | | | Return |
Fidelity Retirement Money Market Portfolio | | | .02% | | | Fidelity Freedom Income Fund | | | 7.63% |
PIMCO Total Return Fund | | | 8.83% | | | Fidelity Freedom 2000 Fund | | | 7.86% |
PIMCO High Yield Fund | | | 14.24% | | | Fidelity Freedom 2005 Fund | | | 10.57% |
Fifth Third Disciplined Large Cap Value Fund | | | 13.44% | | | Fidelity Freedom 2010 Fund | | | 11.65% |
Domini Social Equity Fund | | | 14.36% | | | Fidelity Freedom 2015 Fund | | | 11.75% |
Spartan U.S. Equity Index Fund | | | 14.98% | | | Fidelity Freedom 2020 Fund | | | 12.93% |
American Funds Growth Fund of America | | | 12.63% | | | Fidelity Freedom 2025 Fund | | | 13.82% |
Fidelity Growth Company Fund | | | 20.55% | | | Fidelity Freedom 2030 Fund | | | 14.04% |
Fidelity Low-Priced Stock Fund | | | 20.70% | | | Fidelity Freedom 2035 Fund | | | 14.46% |
Nuveen Mid Cap Growth Opportunities(1) | | | 27.91% | | | Fidelity Freedom 2040 Fund | | | 14.62% |
American Beacon Small Cap Value Fund | | | 26.19% | | | Fidelity Freedom 2045 Fund | | | 14.72% |
Munder Small Cap Value Fund | | | 27.16% | | | Fidelity Freedom 2050 Fund | | | 14.90% |
Fidelity Diversified International Fund | | | 9.65% | | | | | | |
Spartan International Index Fund | | | 7.70% | | | | | | |
Vanguard External Market Index | | | 27.37% | | | | | | |
| | | | | | | | | |
| | |
(1) | | Formerly First American Mid Cap Growth Opportunities. |
|
| | | | | |
Name of Fund | Rate of Return | Name of Fund | Rate of Return |
Fidelity Retirement Money Market Portfolio | 0.01 | % | Vanguard External Market Index | 38.37 | % |
PIMCO Total Return Fund | (1.92 | )% | Fidelity Freedom Income K Fund | 4.60 | % |
PIMCO High Yield Fund | 5.77 | % | Fidelity Freedom K 2000 Fund | 4.56 | % |
Domini Social Equity Fund | 33.30 | % | Fidelity Freedom K 2005 Fund | 8.15 | % |
Spartan 500 Index Fund | 32.35 | % | Fidelity Freedom K 2010 Fund | 11.20 | % |
Touchstone Value Y Fund | 31.29 | % | Fidelity Freedom K 2015 Fund | 11.96 | % |
T. Rowe Price Growth Stock Fund | 39.20 | % | Fidelity Freedom K 2020 Fund | 13.35 | % |
Fidelity Growth Company Fund | 37.61 | % | Fidelity Freedom K 2025 Fund | 16.65 | % |
Fidelity Low-Priced Stock Fund | 34.45 | % | Fidelity Freedom K 2030 Fund | 18.21 | % |
Nuveen Mid Cap Growth Opportunities | 36.86 | % | Fidelity Freedom K 2035 Fund | 20.86 | % |
American Beacon Small Cap Value Fund | 40.06 | % | Fidelity Freedom K 2040 Fund | 21.25 | % |
Royce PA Mutual Fund | 35.25 | % | Fidelity Freedom K 2045 Fund | 21.84 | % |
Fidelity Diversified International Fund | 25.19 | % | Fidelity Freedom K 2050 Fund | 22.08 | % |
Spartan International Index Fund | 21.80 | % | Fidelity Freedom K 2055 Fund | 22.78 | % |
Distributions can be received (1) upon retirement in a lump sum or in annual payments over a period of five or ten years, (2) in a lump sum upon death, disability, termination of employment, change in control or (3) if elected by the executive, during employment at a specified date after a minimum deferral period. The minimum deferral period is at least three years following the end of the plan year to which the deferral election relates, and distributions during employment consist of employee deferrals and related earnings or losses (not the Company contributions and related earnings or losses).
42
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Under the employment agreement with our CEO and other arrangements covering our NEOs, certain payments and benefits will be provided to the NEOs in the event of termination of employment. The following tables show the estimated potential payments and benefits that each of the NEOs would receive upon termination of employment under different scenarios,various circumstances that would trigger payments under applicable employment agreements and the Company’s plans and programs, assuming that the termination was effectiveevent occurred on December 31, 2010.2013. Although the calculations are intended to provide reasonable estimates of the potential payments, they are based on numerous assumptions and may not represent the actual amounts the NEOs would receive upon each termination event.
Termination of Continuity Agreements
Prior to 2009, all executive officers had continuity agreements with the Company, which provided certain severance benefits following a change in control. In accordance with the 2009 Settlement and Commercial Agreement, all executive officers agreed to terminate their continuity agreements in 2009.
President & CEO Employment Agreement
Under our employment agreement with Mr. R.E.D.C. Dauch, the Company may terminate his employment with or without cause, or upon his disability. Cause exists if he:means:
a material breach of his obligations under the agreement;
| | |
| • | is convicted of a felony involving an intentional act; |
| • | engages in dishonesty or fraud; or |
| • | breaches any of his material obligations to AAM, including willful neglect or misconduct of his duties or willful and material breach of any of the terms and conditions of his employment agreement. |
the willful and continued failure or refusal to satisfactorily perform his duties;
a conviction of or pleading guilty (or no contest) to a felony or to another crime involving dishonesty or moral turpitude or which reflects negatively upon the Company or impairs its operations;
engaging in any misconduct, negligence, act of dishonesty (including any violation of federal securities laws) or violence that is materially injurious to the Company;
a material breach of a restrictive covenant (i.e., non-competition, non-solicitation) or Company policy;
refusal to follow the directions of the Board; or
any other willful misconduct that is materially injurious to AAM's financial condition or business reputation.
In addition, he may resign for good reason, meaningwhich means:
a material decrease in compensation or a failure by the Company:Company to pay material compensation;
| | |
| • | reduces his base salary or bonus opportunity; |
| • | substantially reduces his duties, responsibilities or reporting responsibilities; or |
| • | relocates him outside of the Detroit-metropolitan area. |
a material diminution of responsibilities, positions or titles (other than solely as a result of the Company ceasing to be a publicly-traded company);
If his employment is terminatedrelocation outside the Detroit-metropolitan area; or
a material breach by the Company.
Upon termination for cause or upon resignation without good reason, Mr. R.E.D.C. Dauch will beis entitled to receive only accrued butand unpaid amounts as ofcompensation. Participation in the termination date.
Company’s benefit plans would cease upon termination.
If his employment is terminated without cause, or if he resignsupon his resignation for good reason, Mr. D.C. Dauch is entitled to receive accrued and unpaid compensation and continued payment of base salary for two years following termination. He is also entitled to receive $50,000 of outplacement services and health care benefits for two years.
If Mr. D.C. Dauch's employment is terminated without cause or for good reason within two years of a change in control, he will be entitled to:
| | |
| • | severance payments equal to two years of his annual base salary; |
| • | continuation of his health care benefits for two years; |
| • | bonus payments accrued as of the termination date; and |
| • | reimbursement of premiums for his purchase of a $5 million executive life insurance policy for two years. |
If he resigns without good reason, Mr. R.E. Dauchto payment of his base salary, annual incentive and medical benefits for two years, as well as any accrued and unpaid compensation and benefits and outplacement services. The annual incentive payment will be entitled todetermined based on the higher of (1) accrued but unpaid amounts ashis average annual bonus for the three fiscal years preceding termination of employment or the change in control, or (2) his target bonus for the year of the termination date and (2) reimbursement of premiumsemployment or of the change in control.
Mr. D.C. Dauch's employment agreement contains the following restrictive covenants that extend for two years for a $5 million executive life insurance policy purchased by Mr. R.E. Dauch.
Underfollowing termination of employment or the expiration of his employment agreement, Mr. R.E. Dauch is subject to:
| | |
| • | a non-disclosure and confidentiality provision extending two years following termination or expiration of the agreement; |
| • | a non-competition covenant, which prohibits him, throughout the term of the employment agreement and for two years following the termination or expiration of the agreement, from directly or indirectly engaging in any business competitive with AAM and our products and business plans; and a covenant prohibiting solicitation of our employees and customers for two years thereafter. |
43
agreement: (1) non-disclosure and confidentiality; (2) non-competition; and (3) non-solicitation of AAM employees and customers.
If AAM terminates his employment terminates due to disability or death, Mr. R.E.D.C. Dauch will be entitled to accrued benefits under applicable benefit plans and programs (such as our Deferred Compensation Plan, Salaried Retirement Plan and SERP) and reimbursement of executive life insurance premiums as described above. Should Mr. R.E. Dauch die during the term of his employment agreement, his estateand/or spouse would be entitled to accrued benefits under applicable benefit plans and programs.
In accordance with his employment agreement, as amended, the CEO agreed to forego compensation payable to him to the extent his annual compensation would exceed the $3 million limit.
Settlement Agreement with Mr. Lancaster
On July 12, 2010, the Compensation Committee approved an agreement between AAM and Mr. Lancaster to provide cash payments and certain other benefits to Mr. Lancaster in connection with his retirement from AAM effective January 1, 2011. The terms of the Settlement Agreement are described in theNarrative to Summary Compensation Table and Grants of Plan-Based Awards Table.
Non-Competition Agreements
Mr. Simonte, Mr. D.C. Dauch,Bellanti, Mr. BellantiWillemse and Mr. JergeSatine each have each entered into a non-competition agreement that prohibits each of them, while employed by AAM and for one year following termination of employment, the executive from:
directly or indirectly engaging in any business that competes with AAM;
| | |
| • | directly or indirectly engaging in any business or activity that is in competition with AAM and its products for one year following termination of employment unless the reason for such termination is a reduction in force by AAM; |
| • | recruiting, soliciting or inducing (or attempting to recruit, solicit or induce) any of our employees to leave AAM, or offer employment to our employees or otherwise interfere with our relationship with our employees, agents or consultants; and |
| • | using, exploiting, disclosing or communicating our confidential information to any third party without our prior written consent. |
soliciting or inducing our employees to leave AAM, or offering employment to our employees or otherwise interfering with our relationship with our employees, agents or consultants; and
using, exploiting or disclosing our confidential information to any third party without our prior written consent.
44
Potential Payments Upon Termination or Change in Control
Richard E. Dauch
The following table shows estimatedtables below reflect potential payments to each NEO upon resignation for good reason, termination without cause, disability, retirement and a change in control for Mr. R.E. Dauch. Mr. R.E. Dauch was eligible to retire onas of December 31, 2010.2013. Upon termination for cause or resignation without good reason, each NEO would receive only accrued and unpaid compensation. The assumptions used to determine retirement benefits for eligible NEOs are the same assumptionsas those used in our audited consolidated financial statements for the fiscal year ended December 31, 2010.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Not for
| | | | | | | | | |
| | | For Cause
| | | Cause
| | | Disability
| | | | | | Change in
|
| | | Termination
| | | Termination
| | | Retirement(1)
| | | Retirement
| | | Control
|
| | | ($) | | | ($) | | | ($) | | | ($) | | | ($) |
Compensation: | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Bonus(2) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Severance(3) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Retirement Plans: | | | | | | | | | | | | | | | | | | | | | | | | | |
Defined Benefit | | | | | | | | | | | | | | | | | | | | | | | | | |
Retirement Program(4) | | | | — | | | | | — | | | | | 843,319 | | | | | 843,319 | | | | | — | |
SERP(5) | | | | — | | | | | — | | | | | 22,862,681 | | | | | 22,862,681 | | | | | — | |
Welfare Benefit(6) | | | | — | | | | | — | | | | | 1,440,270 | | | | | 1,440,270 | | | | | — | |
Equity: | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Stock Options(7) | | | | — | | | | | — | | | | | 1,147,635 | | | | | — | | | | | 1,147,635 | |
Restricted Stock(8) | | | | — | | | | | — | | | | | 765,067 | | | | | — | | | | | 765,067 | |
Other Benefits: | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Deferred Compensation(9) | | | | 4,865,696 | | | | | 4,865,696 | | | | | 4,865,696 | | | | | 4,865,696 | | | | | 4,865,696 | |
Health care(10) | | | | — | | | | | 17,858 | | | | | — | | | | | — | | | | | — | |
Life Insurance(11) | | | | — | | | | | 47,780 | | | | | 47,780 | | | | | 47,780 | | | | | — | |
Use of Vehicles(3) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
280G TaxGross-Up(3) | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
Total | | | | 4,865,696 | | | | | 4,931,334 | | | | | 31,972,448 | | | | | 30,059,746 | | | | | 6,778,398 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(1) | | Assumes retirement due to total and permanent disability on December 31, 2010. |
|
(2) | | Assumes $3 million compensation limit is in effect on December 31, 2010. |
|
(3) | | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
|
(4) | | Reflects a present value of a joint and survivor annuity benefit payable monthly. |
|
(5) | | The present value calculated under the alternative formula assuming a joint and survivor annuity benefit payable monthly. |
|
(6) | | Reflects benefits for Mr. R.E.2013. See Note 6 to the audited consolidated financial statements in our 2013 annual report on Form 10-K. Mr. D.C. Dauch and his spouse assuming retirement or disability on December 31, 2010 as set forth in his employment agreement. |
|
(7) | | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. |
|
(8) | | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value of restricted stock reflects the fair market value of unvested awards. |
|
(9) | | Assumes amount is payable in a lump sum upon occurrence of termination event. |
45
| | |
(10) | | Upon termination without cause, Mr. R.E. Dauch would receive two years of health care benefits. |
|
(11) | | Represents reimbursement for the premiums associated with Mr. R.E. Dauch’s purchase of a $5 million executive life insurance policy for two years. |
Michael K. Simonte
The following table shows estimated potential payments upon resignation, termination, disability and a change in control for Mr. Simonte as of December 31, 2010. Mr. Simonte waswere not eligible to retire as of December 31, 2010.2013. The footnotes following the tables provide additional detail regarding the potential payments and benefits shown for each termination scenario.
|
| | | | | | | | | | |
David C. Dauch | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement(1) ($) | Retirement ($) | Change in Control ($) |
Compensation: | | | | | |
Severance(2) | 2,200,000 |
| 2,200,000 |
| — |
| — |
| 2,200,000 |
|
Annual Incentive(3) | 1,196,250 |
| 1,196,250 |
| 1,196,250 |
| — |
| 2,750,000 |
|
Long Term Incentives: | | | | | |
RSUs(4) | — |
| — |
| 4,895,628 |
| — |
| 4,895,628 |
|
2011 Performance Awards(5) | — |
| 1,989,000 |
| 1,989,000 |
| — |
| — |
|
2012 Performance Unit Awards(6) | — |
| 588,909 |
| 588,909 |
| — |
| 588,909 |
|
2013 Performance Unit Awards(6) | — |
| 583,333 |
| 583,333 |
| — |
| 583,333 |
|
2010 Special Incentive Program(7) | 875,000 |
| 875,000 |
| 875,000 |
| — |
| — |
|
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation(8) | 352,194 |
| 352,194 |
| 352,194 |
| — |
| 352,194 |
|
Health care(9) | 29,819 |
| 29,819 |
| 316,971 |
| — |
| 29,819 |
|
Disability(10) | — |
| — |
| 7,787,266 |
| — |
| — |
|
Life Insurance(11) | — |
| — |
| 143,981 |
| — |
| — |
|
Outplacement Services(12) | 50,000 |
| 50,000 |
| — |
| — |
| 50,000 |
|
Total | 4,703,263 |
| 7,864,505 |
| 18,728,532 |
| — |
| 11,449,883 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Disability
| | | Change in
|
| | | Resignation
| | | Termination
| | | Retirement(1)
| | | Control
|
| | | ($) | | | ($) | | | ($) | | | ($) |
Compensation: | | | | — | | | | | — | | | | | — | | | | | — | |
Bonus(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Severance(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Long Term Incentives: | | | | — | | | | | — | | | | | — | | | | | — | |
Stock Options(3) | | | | — | | | | | — | | | | | 11,468 | | | | | 11,468 | |
PARS and RSUs(4) | | | | — | | | | | — | | | | | 154,320 | | | | | 154,320 | |
Restricted Stock(5) | | | | — | | | | | — | | | | | 128,600 | | | | | 128,600 | |
2009 Performance Award(6) | | | | — | | | | | — | | | | | 337,500 | | | | | 506,250 | |
2010 Performance Award(7) | | | | — | | | | | — | | | | | 200,000 | | | | | — | |
Other Benefits: | | | | — | | | | | — | | | | | — | | | | | — | |
Health care(8) | | | | — | | | | | — | | | | | 237,857 | | | | | — | |
Disability(9) | | | | — | | | | | — | | | | | 4,078,916 | | | | | — | |
Life Insurance(10) | | | | — | | | | | — | | | | | 59,822 | | | | | — | |
Use of Vehicles(2) | | | | — | | | | | — | | | | | — | | | | | — | |
280G TaxGross-Up(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Total | | | | — | | | | | — | | | | | 5,208,483 | | | | | 800,638 | |
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | |
Michael K. Simonte | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement(1) ($) | Retirement ($) | Change in Control ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| — |
|
Annual Incentive(13) | — |
| — |
| 378,485 |
| — |
| — |
|
Long Term Incentives: | | | | | |
RSUs(4) | — |
| — |
| 1,579,804 |
| — |
| 1,579,804 |
|
2011 Performance Awards(5) | — |
| 1,050,600 |
| 1,050,600 |
| — |
| — |
|
2012 Performance Unit Awards(6) | — |
| 201,562 |
| 201,562 |
| — |
| 201,562 |
|
2013 Performance Unit Awards(6) | — |
| 181,267 |
| 181,267 |
| — |
| 181,267 |
|
2010 Special Incentive Program(7) | 500,000 |
| 500,000 |
| 500,000 |
| — |
| — |
|
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| — |
| — |
|
SERP | — |
| — |
| — |
| — |
| — |
|
Welfare Benefit | — |
| — |
| — |
| — |
| — |
|
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health care(14) | — |
| — |
| 312,521 |
| — |
| — |
|
Disability(10) | — |
| — |
| 4,158,162 |
| — |
| — |
|
Life Insurance(11) | — |
| — |
| 71,264 |
| — |
| — |
|
Outplacement Services | — |
| — |
| — |
| — |
| — |
|
Total | 500,000 |
| 1,933,429 |
| 8,433,665 |
| — |
| 1,962,633 |
|
|
| | | | | | | | | | |
(1)John J. Bellanti | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement ($) | Retirement(15) ($) | Change in Control ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| — |
|
Annual Incentive | — |
| — |
| — |
| 285,000 |
| — |
|
Long Term Incentives: | | | | | |
RSUs | — |
| — |
| — |
| — |
| — |
|
2011 Performance Awards | — |
| — |
| — |
| 966,552 |
| — |
|
2012 Performance Unit Awards | — |
| — |
| — |
| 212,232 |
| — |
|
2013 Performance Unit Awards | — |
| — |
| — |
| 215,112 |
| — |
|
2010 Special Incentive Program | — |
| — |
| — |
| — |
| — |
|
Other Benefits: | | | | | |
Retirement Plans | — |
| — |
| — |
| 804,187 |
| — |
|
SERP | — |
| — |
| — |
| 835,056 |
| — |
|
Welfare Benefit | — |
| — |
| — |
| 195,617 |
| — |
|
Deferred Compensation(8) | — |
| — |
| — |
| 661,521 |
| — |
|
Health care | — |
| — |
| — |
| — |
| — |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services | — |
| — |
| — |
| — |
| — |
|
Total | — |
| — |
| — |
| 4,175,277 |
| — |
|
|
| | | | | | | | | | |
Alberto L. Satine | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement ($) | Retirement ($) | Change in Control ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| — |
|
Annual Incentive(13) | — |
| — |
| 185,000 |
| 185,000 |
| — |
|
Long Term Incentives: | | | | | |
RSUs(4) | — |
| — |
| 632,396 |
| — |
| 632,396 |
|
2011 Performance Awards(5) | — |
| 380,800 |
| 380,800 |
| 380,800 |
| — |
|
2012 Performance Unit Awards(6) | — |
| 81,455 |
| 81,455 |
| 81,455 |
| 81,455 |
|
2013 Performance Unit Awards(6) | | 72,000 |
| 72,000 |
| 72,000 |
| 72,000 |
|
2010 Special Incentive Program | — |
| — |
| — |
| — |
| — |
|
Other Benefits: | | | | | |
Retirement Plans(16) | — |
| — |
| 690,218 |
| 357,635 |
| — |
|
SERP(17) | — |
| — |
| — |
| 281,112 |
| — |
|
Welfare Benefit(18) | | | 13,678 |
| — |
| |
Deferred Compensation | — |
| — |
| — |
| — |
| — |
|
Health care | — |
| — |
| — |
| — |
| — |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services | — |
| — |
| — |
| — |
| — |
|
Total | — |
| 534,255 |
| 2,055,547 |
| 1,358,002 |
| 785,851 |
|
|
| | | | | | | | | | |
Norman Willemse | For Good Reason Resignation ($) | Without Cause Termination ($) | Disability Retirement ($) | Retirement ($) | Change in Control ($) |
Compensation: | | | | | |
Severance | — |
| — |
| — |
| — |
| — |
|
Annual Incentive(13) | — |
| — |
| 167,040 |
| 167,040 |
| — |
|
Long Term Incentives: | | | | | |
RSUs(4) | — |
| — |
| 533,929 |
| — |
| 533,929 |
|
2011 Performance Awards(5) | — |
| 412,080 |
| 412,080 |
| 412,080 |
| — |
|
2012 Performance Unit Awards(6) | — |
| 79,062 |
| 79,062 |
| 79,062 |
| 79,062 |
|
2013 Performance Unit Awards(6) | — |
| 53,333 |
| 53,333 |
| 53,333 |
| 53,333 |
|
2010 Special Incentive Program | — |
| — |
| — |
| — |
| — |
|
Other Benefits: | | | | | |
Retirement Plans(19) | — |
| — |
| 261,558 |
| 261,558 |
| — |
|
SERP(17) | — |
| — |
| 279,998 |
| 279,998 |
| — |
|
Welfare Benefit(18) | — |
| — |
| 13,236 |
| — |
| — |
|
Deferred Compensation(8) | 75,904 |
| 75,904 |
| 75,904 |
| 75,904 |
| 75,904 |
|
Health care | — |
| — |
| — |
| — |
| — |
|
Disability | — |
| — |
| — |
| — |
| — |
|
Life Insurance | — |
| — |
| — |
| — |
| — |
|
Outplacement Services | — |
| — |
| — |
| — |
| — |
|
Total | 75,904 |
| 620,379 |
| 1,876,140 |
| 1,328,975 |
| 742,228 |
|
Notes to Termination Tables
| |
(1) | Assumes total and permanent disability on December 31, 2010.2013. Because Mr. D.C. Dauch and Mr. Simonte hashave more than 10 years of service, he isboth are eligible to retire due to total and permanent disability and receive pension and postretireepost-retiree health care benefits. Amount assumesAs a result, their amounts assume continued employment (on leave) until retirement. |
| |
(2) | | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
|
(3) | | Generally, outstanding stock option awards vest uponUpon resignation for good reason, termination of employment due to death, disabilitywithout cause or upon a change in control, Mr. D.C. Dauch is entitled to receive two years’ base salary, payable semimonthly. |
| |
(3) | Under Mr. D.C. Dauch's employment agreement, he is entitled to accrued and unpaid compensation upon termination without cause or resignation for good reason. In the event of disability, AAM’s Incentive Compensation Plan for Executive Officers provides a pro-rated award payout through the date of disability. Accordingly, the amount reflects his 2013 award paid in March 2014 under these termination events. He is also entitled to payment of an annual bonus for two years if he is terminated without cause or resigns for good reason within two years of a change in control. At December 31, 2010,The annual bonus will be determined based on the fair market valuehigher of (a) his average annual bonus for the three fiscal years preceding termination of employment or the change in control, or (b) his target bonus for the year of the underlying shares was greater thantermination of his employment or of the exercise pricechange in control. In the event of certain unvested options.a change in control, the amount reflects his target bonus for two years. |
| |
|
(4) | | Outstanding PARS and RSU awardsRSUs vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market valuenumber of unvested awards.RSUs multiplied by the closing price of AAM common stock on December 31, 2013. |
| |
(5) | The 2011 performance award payable in the event of disability or termination without cause would be based on actual performance through December 31, 2013. Reflects award earned through December 31, 2013 and paid in March 2014. |
| |
(5)(6) | | VestingThe 2012 and 2013 performance unit awards payable in the event of outstanding restricted stock awards is accelerated upona disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEOwithout cause or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. |
|
(6) | | The 2009 performance award payable to Mr. Simonte in the event of a disabilitycontrol would be based on actual performance and on the pro-rata portion of his employment as compared to the |
46
| | |
| | performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. |
|
(7) | | The 2010 performance award payable to Mr. Simonte in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010,2013, approximately two-thirds and one-third of the performance period for the 2012 and 2013 awards, respectively, would have lapsed. Reflects pro-rata award assuming target is achieved. The actual payout may range from 0% to 200%. |
| |
(7) | Under a special incentive program adopted in March 2010, awards do not includeupon resignation for good reason, termination without cause or in the event of disability, Mr. D.C. Dauch and Mr. Simonte would be entitled to program amounts earned and unpaid. Amounts reflect the final annual installments payable in October 2014. |
| |
(8) | Reflects account balance in the Executive Deferred Compensation Plan as of December 31, 2013. Assumes amount is payable in a provisionlump sum upon occurrence of the termination event. |
| |
(9) | Under Mr. D.C. Dauch’s employment agreement, he is entitled to two years of health care benefits (including his spouse) if his employment is terminated without cause or if he resigns for payment upongood reason. He is also entitled to this benefit if his employment is terminated without cause or if he resigns for good reason within two years of a change in control. |
|
(8) | | Under In the event of disability, scenario,the amount reflects health care benefits until retirement. |
| |
(9) | (10) | Reflects benefits equal to 100% of base salary for year one and 662/3%60% and 66-2/3% of base salary until retirement.retirement for Mr. D.C. Dauch and Mr. Simonte, respectively, based on participant elections. |
| |
|
(10) | (11) | Under the disability scenario, reflects basic and supplemental life insurance benefits until retirement. |
David C. Dauch
The following table shows estimated potential payments upon resignation, termination, disability and a change in control for Mr. D.C. Dauch as of December 31, 2010. Mr. D.C. Dauch was not eligible to retire as of December 31, 2010.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Disability
| | | Change in
|
| | | Resignation
| | | Termination
| | | Retirement(1)
| | | Control
|
| | | ($) | | | ($) | | | ($) | | | ($) |
Compensation: | | | | — | | | | | — | | | | | — | | | | | — | |
Bonus(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Severance(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Long Term Incentives: | | | | — | | | | | — | | | | | — | | | | | — | |
Stock Options(3) | | | | — | | | | | — | | | | | 14,220 | | | | | 14,220 | |
PARS and RSUs(4) | | | | — | | | | | — | | | | | 199,330 | | | | | 199,330 | |
Restricted Stock(5) | | | | — | | | | | — | | | | | 154,320 | | | | | 154,320 | |
2009 Performance Award(6) | | | | — | | | | | — | | | | | 621,000 | | | | | 931,500 | |
2010 Performance Award(7) | | | | — | | | | | — | | | | | 336,000 | | | | | — | |
Other Benefits: | | | | — | | | | | — | | | | | — | | | | | — | |
Deferred Compensation(8) | | | | 263,066 | | | | | 263,066 | | | | | 263,066 | | | | | 263,066 | |
Health care(9) | | | | — | | | | | — | | | | | 241,068 | | | | | — | |
Disability(10) | | | | — | | | | | — | | | | | 4,885,679 | | | | | — | |
Life Insurance(11) | | | | — | | | | | — | | | | | 80,062 | | | | | — | |
Use of Vehicles(2) | | | | — | | | | | — | | | | | — | | | | | — | |
280G TaxGross-Up(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Total | | | | 263,066 | | | | | 263,066 | | | | | 6,794,745 | | | | | 1,562,436 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
(1)(12) | | Assumes total and permanent disability on December 31, 2010. BecauseUnder Mr. D.C. Dauch has more than 10 years of service,Dauch’s employment agreement, he is eligibleentitled to retire due to total and permanent disability and receive pension and postretiree health care benefits. Amount assumes continued employment (on leave) until retirement. |
|
(2) | | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
|
(3) | | Generally, outstanding stock option awards vest$50,000 of outplacement services upon termination of employment duewithout cause or resignation for good reason. He is also entitled to death, disabilitythis benefit if his employment is terminated without cause or uponif he resigns for good reason within two years of a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. |
47
| | |
(4)(13) | | Outstanding PARS and RSU awards vest upon terminationUnder AAM's Incentive Compensation Plan for Executive Officers, the award payout is pro-rated through the date of employment due to death, disability or upon a change in control.retirement. The value for PARS and RSUsamount reflects the fair market value of unvested awards.2013 award paid in March 2014. |
| |
|
(5) | | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. |
|
(6) | | The 2009 performance award payable to Mr. D.C. Dauch in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. |
|
(7) | | The 2010 performance award payable to Mr. D.C. Dauch in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. |
|
(8) | | Assumes amount is payable in a lump sum upon occurrence of termination event. |
|
(9) | (14) | Under the disability scenario, reflects health care benefits tountil retirement. |
|
(10) | | Reflects benefits equal to 100% of base salary for year one and 60% of base salary to retirement. |
|
(11) | | Under the disability scenario, reflects basic and supplemental life insurance benefits to retirement. |
48
John J. Bellanti
The following table shows the estimated potential payments upon termination, retirement and a change in control for Mr. Bellanti as of December 31, 2010. Mr. Bellanti was eligible to retire on December 31, 2010. The assumptions used to determine retirement benefits are the same assumptions used in our audited consolidated financial statements for the fiscal year ended December 31, 2010.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Disability
| | | | | | Change in
|
| | | Termination
| | | Retirement(1)
| | | Retirement
| | | Control
|
| | | ($) | | | ($) | | | ($) | | | ($) |
Compensation: | | | | — | | | | | — | | | | | — | | | | | — | |
Bonus(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Severance(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Retirement Plans: | | | | — | | | | | — | | | | | — | | | | | — | |
Defined Benefit | | | | — | | | | | — | | | | | — | | | | | — | |
Retirement Program(3) | | | | — | | | | | 972,382 | | | | | 661,351 | | | | | — | |
SERP(4) | | | | — | | | | | 265,752 | | | | | 614,249 | | | | | — | |
Welfare Benefit(5) | | | | — | | | | | 120,377 | | | | | 120,377 | | | | | — | |
Equity: | | | | — | | | | | — | | | | | — | | | | | — | |
Stock Options(6) | | | | — | | | | | 10,091 | | | | | — | | | | | 10,091 | |
PARS and RSUs(7) | | | | — | | | | | 154,320 | | | | | — | | | | | 154,320 | |
Restricted Stock(8) | | | | — | | | | | 115,740 | | | | | — | | | | | 115,740 | |
2009 Performance Award(9) | | | | — | | | | | 315,000 | | | | | 315,000 | | | | | 472,500 | |
2010 Performance Award(10) | | | | — | | | | | 184,000 | | | | | 184,000 | | | | | — | |
Other Benefits: | | | | — | | | | | — | | | | | — | | | | | — | |
Deferred Compensation(11) | | | | 498,071 | | | | | 498,071 | | | | | 498,071 | | | | | 498,071 | |
Use of Vehicles(2) | | | | — | | | | | — | | | | | — | | | | | — | |
280G TaxGross-Up(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Total | | | | 498,071 | | | | | 2,635,733 | | | | | 2,393,048 | | | | | 1,250,722 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
(1)(15) | Upon his retirement on January 1, 2014, Mr. Bellanti was entitled to receive his 2013 annual incentive and certain long-term incentive awards. The annual and long-term incentive amounts reflect payments made to Mr. Bellanti under these awards in March 2014. Upon his retirement, he forfeited unvested RSUs and the remaining annual installment payment under the 2010 special incentive program. The pension and SERP amounts reflect Mr. Bellanti's actual pension elections. |
| Assumes retirement due to total and permanent disability on December 31, 2010. |
|
(2) | | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
|
(3) | (16) | Reflects a joint and survivor annuity benefit payable monthly. |
| |
(4)(17) | | TheReflects the present value of the SERP calculated under the alternative formula assuming a lump sum benefit for Mr. Satine and a joint and survivor annuity benefit payable monthly for Mr. Willemse under the disability and retirement scenarios. |
|
(5) | | Reflects benefits for Mr. Bellanti and his spouse assuming retirement on December 31, 2010 under the welfare benefit plan effective January 1, 2008. |
|
(6) | | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. |
|
(7) | | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards. |
49
| | |
(8)(18) | Reflects welfare benefits assuming retirement under our retiree welfare plan. |
| Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value of restricted stock reflects the fair market value of unvested awards. |
|
(9)(19) | | The 2009 performance award payable toReflects Mr. BellantiWillemse's benefits in the event of a disability or retirement would be based on actual performance and on the pro-rata portion of his employmentAlbion Pension Plan as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. |
|
(10) | | The 2010 performance award payable to Mr. Bellanti in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. |
|
(11) | | Assumes amount is payable in a lump sum upon occurrence of termination event.2013. |
John E. Jerge
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Disability
| | | Change in
|
| | | Resignation
| | | Termination
| | | Retirement(1)
| | | Control
|
| | | ($) | | | ($) | | | ($) | | | ($) |
Compensation: | | | | — | | | | | — | | | | | — | | | | | — | |
Bonus(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Severance(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Long Term Incentives: | | | | — | | | | | — | | | | | — | | | | | — | |
Stock Options(3) | | | | — | | | | | — | | | | | 8,257 | | | | | 8,257 | |
PARS and RSUs(4) | | | | — | | | | | — | | | | | 147,890 | | | | | 147,890 | |
Restricted Stock(5) | | | | — | | | | | — | | | | | 90,020 | | | | | 90,020 | |
2009 Performance Award(6) | | | | — | | | | | — | | | | | 162,000 | | | | | 243,000 | |
2010 Performance Award(7) | | | | — | | | | | — | | | | | 76,000 | | | | | — | |
Other Benefits: | | | | — | | | | | — | | | | | — | | | | | — | |
Health care(8) | | | | — | | | | | — | | | | | 216,631 | | | | | — | |
Disability(9) | | | | — | | | | | — | | | | | 2,000,624 | | | | | — | |
Life Insurance(10) | | | | — | | | | | — | | | | | 36,246 | | | | | — | |
Use of Vehicles(2) | | | | — | | | | | — | | | | | — | | | | | — | |
280G TaxGross-Up(2) | | | | — | | | | | — | | | | | — | | | | | — | |
Total | | | | — | | | | | — | | | | | 2,737,668 | | | | | 489,167 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
(1) | | Assumes total and permanent disability on December 31, 2010. Because Mr. Jerge has more than 10 years of service, he is eligible to retire due to total and permanent disability and receive pension and postretiree health care benefits. Amount assumes continued employment (on leave) until retirement. |
|
(2) | | Benefit was previously provided under the continuity agreement that was terminated in 2009. |
50
| | |
(3) | | Generally, outstanding stock option awards vest upon termination of employment due to death, disability or upon a change in control. At December 31, 2010, the fair market value of the underlying shares was greater than the exercise price of certain unvested options. |
|
(4) | | Outstanding PARS and RSU awards vest upon termination of employment due to death, disability or upon a change in control. The value for PARS and RSUs reflects the fair market value of unvested awards |
|
(5) | | Vesting of outstanding restricted stock awards is accelerated upon disability, termination of employment by the Company pursuant to a reduction in force or similar program approved by the CEO or upon a change in control. The value for restricted stock reflects the fair market value of unvested awards. |
|
(6) | | The 2009 performance award payable to Mr. Jerge in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, two-thirds of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. Upon a change in control, the award is payable at target. |
|
(7) | | The 2010 performance award payable to Mr. Jerge in the event of a disability would be based on actual performance and on the pro-rata portion of his employment as compared to the performance period. As of December 31, 2010, one-third of the performance period would have lapsed. Reflects pro-rata award assuming target is achieved. The 2010 awards do not include a provision for payment upon change in control. |
|
(8) | | Under the disability scenario, reflects health care benefits to retirement. |
|
(9) | | Reflects benefits equal to 100% of base salary for year one and 60% of base salary to retirement. |
|
(10) | | Under the disability scenario, reflects basic and supplemental life insurance benefits to retirement. |
Patrick S. Lancaster
The following table shows estimated payments and other benefits for Mr. Lancaster as of December 31, 2010 in accordance with the Settlement Agreement between AAM and Mr. Lancaster effective July 12, 2010. Mr. Lancaster retired effective January 1, 2011.
| | | | | |
| | | Retirement
|
| | | ($) |
Compensation:
| | | | — | |
Bonus(1)
| | | | 704,000 | |
Retirement Plans:
| | | | — | |
Defined Benefit
| | | | — | |
Retirement Program(2)
| | | | 861,446 | |
SERP(2)
| | | | 727,786 | |
Welfare Benefit(3)
| | | | 182,338 | |
Long Term Incentives:
| | | | — | |
PARS and RSUs(4)
| | | | 154,320 | |
Restricted Stock(4)
| | | | 61,535 | |
2009 Performance Award(5)
| | | | 315,000 | |
2010 Performance Award(6)
| | | | 173,184 | |
Senior Executive Special Incentive Award(7)
| | | | 1,000,000 | |
Other Benefits:
| | | | — | |
Consulting Fees(8)
| | | | 420,000 | |
Total
| | | | 4,599,609 | |
| | | | | |
| | |
(1) | | Mr. Lancaster received a 2010 bonus payment of $704,000 in March 2011 in accordance with the Settlement Agreement. |
51
| | |
(2) | | Mr. Lancaster retired on January 1, 2011. His Salaried Pension Plan benefit commenced as a 65% Joint and Survivor annuity on January 1, 2011 and his SERP benefit will commence as a 65% Joint and Survivor annuity on July 1, 2011. The amounts presented reflect the actual commencement dates, form of payment elections and his spouse’s date of birth. |
|
(3) | | Mr. Lancaster is entitled to retiree medical account balance and executive life insurance. The amount presented reflects these benefits. |
|
(4) | | In accordance with the Settlement Agreement, Mr. Lancaster’s outstanding PARS, RSU awards and restricted stock vested upon his retirement effective January 1, 2011. |
|
(5) | | The 2009 performance award payable to Mr. Lancaster is based on actual performance through March 31, 2011 prorated for the portion of his employment as compared to the performance period. Reflects pro-rata award assuming target is achieved. |
|
(6) | | The 2010 performance award payable to Mr. Lancaster is based on actual performance through December 31, 2010 prorated for the portion of his employment as compared to the performance period. Mr. Lancaster received payment of the award in March 2011. |
|
(7) | | In accordance with the Senior Executive Special Incentive award, upon his retirement as of January 1, 2011, Mr. Lancaster will receive payment of $1 million in 2011. |
|
(8) | | Mr. Lancaster will receive consulting fees of $420,000, payable in monthly installments in 2011, for services provided pursuant to the Settlement Agreement. |
52
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (theDodd-Frank Act) requires AAM to seekis seeking a non-binding advisory vote from our stockholders to approve the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis (CD&A) and narrative and tabular disclosures in this Proxy Statement.proxy statement. In the CD&A, we have providedprovide a detailed description of our compensation programs, including our compensation philosophy and objectives, the individual elements of executive pay, and how the programs are administered. We encourage you to review the CD&A, together with the other narrative and tabular disclosures, in considering your advisory vote on our named executive officers’ compensation.
Our executive officer compensation program is designed to reward performance that supports the achievement of the Company’sour business objectives and creates long-term stockholder value. The Compensation Committee considers the following fundamental objectives, among others, in determining our compensation programs:
Compensation and benefit programs forshould attract, motivate and retain experienced executives who are vital to our short-term and long-term success, profitability and growth;
Compensation and benefit programs should reward Company and individual performance; and
Compensation and benefit programs should foster the long-term focus required to deliver value to our stockholders.
At our 2013 annual meeting, 58% of our stockholders voted in favor of the Company's say on pay proposal. This result was considerably less favorable than the level of support we received in prior years. As a result of this outcome, the Board directed senior management to conduct stockholder outreach to gain an understanding of stockholder concerns about our executive officers:
| | |
| • | Compensation and benefit programs should attract, motivate and retain experienced executives who are vital to our short-term and long-term success, profitability and growth. |
| • | Compensation and benefit programs should foster the long-term focus required for success in the global automotive industry. |
| • | Executive officers should be AAM stockholders. |
| • | The objectives of rewarding performance and retention should be balanced. |
Features of our compensation program and practices include the following:
| | |
| • | A significant portion of executive compensation is tied to Company performance. Payouts of annual and long-term incentive awards are based on the achievement of a mix of financial objectives. |
| • | Executive officers are required to comply with stock ownership guidelines established by the Compensation Committee and are prohibited from hedging/pledging Company stock. |
| • | There are no golden parachute agreements and no excise taxgross-ups. |
program. The Board and the Compensation Committee believe that AAM’sthe feedback we received from our stockholders was valuable in evaluating and implementing changes to our executive compensation programs have been effective in motivating our senior management team to successfully deliver on our strategic goals and achieve superior results for AAM and its stockholders and other key stakeholders. We believe the effectiveness of our compensation programs and policies is demonstrated by the recent accomplishments of AAM’s senior management team. Our senior management team led a comprehensive, multi-year restructuring of our business, yielding significant, permanent structural cost reductions and positioning us to significantly improve our profitability and free cash flow performance in 2010.program. We believe that the changes we made to AAM's executive compensation program and practices address the primary concerns raised by the 2013 advisory vote.
Key changes to our executive compensation programs are designed to continue to drive positive performanceprogram
As described in more detail in the achievementCD&A, we made the following changes to our compensation program:
Approved a new comparative peer group for benchmarking executive compensation;
Targeted the 50th percentile for total compensation of AAM’sexecutive officers;
Introduced a performance share award vehicle for long-term strategic goalsincentive compensation;
Re-designed the long-term incentive program to include 100% equity-based award vehicles;
Set a maximum payout for annual incentive pay opportunities for a key performance metric, which resulted in all performance metrics having stated maximum payouts;
Adopted a clawback policy; and provide value
Eliminated discretionary increases in bonuses for all NEOs.
We believe these changes strengthen the alignment of AAM's executive compensation program and practices with the objectives of our stockholders. The Board and the Compensation Committee are committed to further engagement with our stockholders regarding executive compensation matters.
For the reasons stated above, and more fully discussed in the CD&A, the Board unanimously recommends a vote for the approval of the compensation of our named executive officers.
Although the vote on this proposal is advisory vote is not binding,and non-binding, the Board and the Compensation Committee will consider the outcome of the advisory vote on executive compensationvoting results when making future compensation decisions.
The Board of Directors unanimously recommends a vote FOR the following non-binding resolution:
RESOLVED, that the stockholders approveapproval of the compensation of our named executive officers as described in the Compensation Discussion and Analysis, tables and related narrative disclosure in this proxy statement made pursuant to the compensation disclosure rulesofficers.
53
PROPOSAL 3: FREQUENCY OF ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION
Under the Dodd-Frank Act, AAM is also required to submit for stockholder vote a non-binding resolution to determine whether the advisory stockholder vote on executive compensation(say-on-pay) shall occur every one, two or three years. Although this vote is advisory and non-binding, the Board will review voting results and give consideration to the outcome of the vote when considering the frequency of futuresay-on-pay proposals.
The Board believes that submitting the advisory vote on executive compensation to stockholders on an annual basis is appropriate for AAM and its stockholders at this time. While the Board is recommending that you vote in favor of submitting advisory votes every year, you are not voting to approve or disapprove the Board’s recommendation. The proxy card provides you with a choice of voting to submit the vote every one, two or three years, or of abstaining from voting.
The Board unanimously recommends that you vote for the alternative of “one year” for future advisory votes on executive compensation.
54
20102013 COMPENSATION OF NON-EMPLOYEE DIRECTORS
Total 20102013 compensation of our non-employee directors is shown below.
| | | | | | | | | | | | |
| | | | Non-Equity
| | |
| | Fees Earned or
| | Incentive Plan
| | |
| | Paid in Cash
| | Compensation(2)
| | Total
|
Name(1) | | ($) | | ($) | | ($) |
|
Salvatore J. Bonanno, Sr. | | | 63,450 | | | | 84,000 | | | | 147,450 | |
Elizabeth A. Chappell | | | 71,250 | | | | 79,632 | | | | 150,882 | |
Forest J. Farmer | | | 86,150 | | | | 84,000 | | | | 170,150 | |
Richard C. Lappin | | | 71,450 | | | | 84,000 | | | | 155,450 | |
William P. Miller II | | | 75,450 | | | | 75,264 | | | | 150,714 | |
Larry K. Switzer | | | 79,250 | | | | 75,264 | | | | 154,514 | |
Thomas K. Walker | | | 97,250 | | | | 84,000 | | | | 181,250 | |
Dr. Henry T. Yang | | | 66,450 | | | | 79,632 | | | | 146,082 | |
|
| | | | | | | | |
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | All Other Compensation(3) ($) | Total ($) |
Salvatore J. Bonanno, Sr.(4) | 43,667 |
| — |
| — |
| 43,667 |
|
Elizabeth A. Chappell | 93,667 |
| 100,013 |
| — |
| 193,680 |
|
Forest J. Farmer | 114,667 |
| 100,013 |
| — |
| 214,680 |
|
Steven B. Hantler | 95,667 |
| 100,013 |
| — |
| 195,680 |
|
Richard C. Lappin | 113,667 |
| 100,013 |
| — |
| 213,680 |
|
James A. McCaslin | 99,667 |
| 100,013 |
| — |
| 199,680 |
|
William P. Miller II | 103,667 |
| 100,013 |
| — |
| 203,680 |
|
John F. Smith | 108,667 |
| 100,013 |
| — |
| 208,680 |
|
Larry K. Switzer | 111,667 |
| 100,013 |
| 1,500 |
| 213,180 |
|
Samuel Valenti III(5) | — |
| — |
| — |
| — |
|
Thomas K. Walker | 147,667 |
| 100,013 |
| — |
| 247,680 |
|
Dr. Henry T. Yang(4) | 42,667 |
| — |
| — |
| 42,667 |
|
| | |
(1) | For Mr. Walker, reflects an additional $10,000 paid for temporary services he provided in January 2013 as non-executive chairman. |
| James A. McCaslin |
(2) | Reflects the full grant date fair value of equity awards granted on May 2, 2013 calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture) as determined based on applying the assumptions used in our financial statements. The grant date fair value of equity awards is calculated using the closing market price of AAM common stock on the grant date of $13.74. See Note 7 to the audited consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2013 regarding assumptions underlying the valuation of equity awards. |
| |
(3) | The Company reimburses non-employee directors for their travel and related out-of-pocket expenses in connection with attending Board, committee and stockholder meetings. From time to time, the Company invites spouses of non-employee directors to attend Company events associated with these meetings. The Company pays for spousal travel and certain other expenses and reimburses non-employee directors for taxes attributable to the income associated with this benefit. Amounts reflect reimbursement of taxes on this income. |
| |
(4) | Mr. Bonanno and Dr. Yang served on the Board through May 2, 2013. |
| |
(5) | Mr. Valenti joined the Board effective February 8, 2011October 31, 2013 and received no compensation in 2010. |
|
(2) | | Reflects amounts earned under the 2009 deferred compensation unit (DCUs) award as described below. The 2009 annual awards were adjusted for certain directors based on the amount of restricted stock unit grants received in 2008.during 2013. |
No equity awards were granted to non-employee directors during 2010. As of December 31, 2010,2013, each non-employee director had the following number of outstanding options and restricted stock units (RSUs):RSUs, including RSUs deferred:
| | | | | | | | |
| | Option Awards
| | Restricted Stock
|
| | Outstanding
| | Units Outstanding
|
Name | | ($) | | ($) |
|
Salvatore J. Bonanno, Sr. | | | — | | | | — | |
Elizabeth A. Chappell | | | 5,000 | | | | 11,100 | |
Forest J. Farmer | | | 7,500 | | | | 4,600 | |
Richard C. Lappin | | | 7,500 | | | | 5,650 | |
William P. Miller II | | | 7,500 | | | | 14,350 | |
Larry K. Switzer | | | 7,500 | | | | 14,350 | |
Thomas K. Walker | | | 7,500 | | | | 7,850 | |
Dr. Henry T. Yang | | | 7,500 | | | | 11,100 | |
Elements |
| | |
Name | Option Awards Outstanding (#) | Restricted Stock Units Outstanding (#) |
Elizabeth A. Chappell | 5,000 | 27,113 |
Forest J. Farmer | — | 20,613 |
Steven B. Hantler | — | 16,013 |
Richard C. Lappin | — | 21,663 |
James A. McCaslin | — | 16,013 |
William P. Miller II | 7,500 | 30,363 |
John F. Smith | — | 16,013 |
Larry K. Switzer | 7,500 | 30,363 |
Samuel Valenti III | — | — |
Thomas K. Walker | — | 23,863 |
Narrative Description of Non-Employee Director Compensation
Our non-employee director compensation program in effect during 2010 consisted of annual retainer and meeting attendance fees and an annual award of deferred compensation units (DCUs) as described below. Employee directors do not receive compensation for service on the Board.
20102013 Annual Retainer and Meeting Attendance Fees
| | | | |
Annual retainer | | $ | 50,000 | |
Board meeting attendance fee | | | 1,500 | |
Committee meeting attendance fee: | | | | |
Committee chairman | | | 3,000 | |
Other committee members | | | 2,000 | |
Committee chairman attendance at meetings at the Company for Committee-related business | | | 1,000 | |
55
Deferred Compensation Units
|
| | | |
Annual retainer | $ | 80,000 |
|
Board meeting attendance fee | 1,500 |
|
Committee meeting attendance fee: | |
Committee chairman | 3,000 |
|
Other committee members | 2,000 |
|
Lead director annual retainer | 20,000 |
|
In April 2010, annual DCU awards of $70,000 were made to eachRestricted Stock Units (RSUs). Each non-employee director asis entitled to receive an annual award of RSUs equal to a grant date value of $100,000 on the date of the 2010 annual meeting of stockholders.stockholder meeting. The DCU awards are payable in stock and vest in one year, and the total payment will be based on AAM’s total shareholder return, with payments ranging from 80 percent to 120 percent of the DCU award amount.unless vesting is accelerated upon death, disability or a change in control.
2011 Non-Employee Director CompensationDeferral.
The Board of Directors, upon the recommendation of the Compensation Committee, approved an increase in the annual retainer and the annual DCU award amount for non-employee directors for 2011. Effective January 1, 2011, the retainer was increased to $60,000. Effective at the 2011 annual meeting of stockholders, non-employee directors will receive an annual DCU award in the amount of $80,000. These adjustments to AAM’s non-employee director compensation program were made in consideration of a market study of non-employee director compensation performed in 2010 by the Compensation Committee’s independent compensation consultant, Meridian Compensation Partners, LLC.
Deferral
Non-employee directors may elect to defer, on a pre-tax basis, a portion of their retainer and meeting fees and receive tax-deferred earnings (or losses) on the deferrals under AAM’s Executive Deferred Compensation Plan. The rate of return on deferred amounts is based on the performance of selected benchmark funds identified in the plan, which is described inNonqualified Deferred Compensationabove. Non-employee directors may also elect to defer settlement of RSUs and DCUs until after termination of service from the Board.
Stock Ownership GuidelinesGuidelines.
The Compensation Committee has adopted non-employee director stock ownership guidelines equal to a multiple of three times the annual retainer. Non-employee directors are expected to meet the guidelines within three years from April 2012 or, for non-employeenew directors, recommend a minimumwithin three years from the date of election to the Board. Current stock ownership of 4,000 shares of AAM common stock. Stock ownership of our non-employee directors is shown in theSecurity Ownership section below. Non-employee directors are also subject to our anti-hedging and anti-pledging restrictions.
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SECURITY OWNERSHIP
The following tables show the number of shares of AAM common stock beneficially owned as of March 3, 20114, 2014 (unless otherwise noted) by:
•each person known to us who beneficially owns more than 5% of AAM common stock;
| | |
| • | each person known to us who beneficially owns more than 5 percent of AAM common stock; |
| • | each of our non-employee directors and nominees; |
| • | our named executive officers;and |
| • | all directors, nominees and executive officers (as of March 3, 2011) as a group. |
•each of our non-employee directors and nominees;
•our named executive officers (unless otherwise noted); and
•all directors, nominees and executive officers as a group.
A beneficial owner of stock is a person who has voting power (the power to control voting decisions) or investment power (the power to cause the sale of the stock). All individuals listed in the tables have sole voting and investment power over the shares unless(unless otherwise noted.
noted).
The beneficial ownership calculation includes 75,301,26375,646,724 shares of AAM common stock outstanding on March 3, 2011.4, 2014.
MORE THAN 5% BENEFICIAL OWNERS
The following persons have filed reports withtable below shows the SEC for the period ending December 31, 2010, stating that they beneficially ownname, address and share ownership of each person or organization known by us to be a beneficial owner of more than five percent5% of AAM’s common stock.
| | | | | | | | |
| | Shares of
| | |
| | Common Stock
| | Percent of
|
| | Beneficially
| | Shares
|
Name and Address | | Owned | | Outstanding |
|
Barrow, Hanley, Mewhinney & Strauss, Inc.(1) | | | 4,529,426 | | | | 6.35 | |
2200 Ross Avenue, 31st Floor Dallas, TX 75201 | | | | | | | | |
Eagle Asset Management, Inc.(2) | | | 4,817,674 | | | | 6.75 | |
880 Carillon Parkway St. Petersburg, FL 33716 | | | | | | | | |
TIAA-CREF Investment Management, LLC(3) | | | 6,417,325 | | | | 8.99 | |
730 Third Avenue New York, NY 10017 | | | | | | | | |
|
| | |
Name and Address | Shares of Common Stock Beneficially Owned | Percent of Shares Outstanding |
Sandra J. Dauch(1) | 7,285,232 | 9.64 |
1430 Caxambas Court, Marco Island, FL 34145 | | |
JANA Partners LLC(2) | 6,663,698 | 8.80 |
767 Fifth Avenue, 8th Floor New York, NY 10153 | | |
Barrow, Hanley, Mewhinney & Strauss, LLC(3) | 4,982,055 | 6.59 |
2200 Ross Avenue, 31st Floor Dallas, TX 75201 | | |
Ameriprise Financial, Inc. and Columbia Management Investment Advisers LLC(4) | 4,883,368 | 6.46 |
145 Ameriprise Financial Center Minneapolis, MN 55474 | | |
| | |
(1) | | Based on the Schedule 13G filed on February 14, 2014 by Barrow, Hanley, Mewhinney & Strauss, Inc.,Sandra J. Dauch, reporting sole voting power over 7,243,522 shares, shared voting power over 2,628,40041,710 shares, sole voting power over 1,901,026 shares, and sole investment power over 4,529,4267,243,522 shares and shared investment power over 41,710 shares. |
| |
(2) | | Based on the Schedule 13G filed on February 14, 2014 by Eagle Asset Management, Inc.,JANA Partners, LLC, reporting sole voting power over 6,663,698 shares and sole investment power over 4,817,6746,663,698 shares. |
| |
(3) | Based on the Schedule 13G filed on February 12, 2014 by Barrow, Hanley, Mewhinney & Strauss, LLC, reporting shared voting power over 2,368,600 shares, sole voting power over 2,613,455 shares, and sole investment power over 4,982,055 shares. |
| |
(4) | Based on the Schedule 13G filed jointly on February 13, 2014 by TIAA-CREFAmeriprise Financial, Inc. and Columbia Management Investment Management,Advisers, LLC, reporting shared voting power over 204,753 shares and Teachers Advisors, Inc., reporting sole voting andshared investment power over 6,417,3254,883,368 shares. |
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DIRECTORS AND EXECUTIVE OFFICERS
| | | | | | | | | | | | |
| | | | | Percent
| | | | |
| | Shares
| | | of
| | | | |
| | Beneficially
| | | Shares
| | | | |
| | Owned(1)(2) | | | Outstanding | | | | |
|
Directors | | | | | | | | | | | | |
Salvatore J. Bonanno, Sr. | | | 25,000 | | | | * | | | | | |
Elizabeth A. Chappell | | | 17,100 | | | | * | | | | | |
Forest J. Farmer | | | 30,350 | | | | * | | | | | |
Richard C. Lappin | | | 21,950 | | | | * | | | | | |
James A. McCaslin | | | — | | | | * | | | | | |
William P. Miller II | | | 27,850 | | | | * | | | | | |
Larry K. Switzer | | | 22,850 | | | | * | | | | | |
Thomas K. Walker | | | 21,350 | | | | * | | | | | |
Dr. Henry T. Yang | | | 19,600 | | | | * | | | | | |
Named Executive Officers(3) | | | | | | | | | | | | |
Richard E. Dauch(4) | | | 7,249,187 | | | | 9.5 | | | | | |
Michael K. Simonte | | | 96,951 | | | | * | | | | | |
David C. Dauch(5) | | | 168,025 | | | | * | | | | | |
John J. Bellanti | | | 107,400 | | | | * | | | | | |
John E. Jerge | | | 116,900 | | | | * | | | | | |
Directors and Executive Officers as a Group (24 persons)(6) | | | 8,605,202 | | | | 11.1 | | | | | |
|
| | | |
| Shares Beneficially Owned(1)(2) | Percent of Shares Outstanding |
Directors | | |
Elizabeth A. Chappell | 33,113 |
| * |
Forest J. Farmer | 42,081 |
| * |
Steven B. Hantler | 21,013 |
| * |
Richard C. Lappin | 30,463 |
| * |
James A. McCaslin | 20,013 |
| * |
William P. Miller II | 43,863 |
| * |
John F. Smith | 21,013 |
| * |
Larry K. Switzer | 38,863 |
| * |
Samuel Valenti III | — |
| — |
Thomas K. Walker | 34,863 |
| * |
Named Executive Officers(3) | | |
David C. Dauch(4) | 91,131 |
| * |
Michael K. Simonte | 34,001 |
| * |
John J. Bellanti(5) | 70,245 |
| * |
Alberto L. Satine | 22,739 |
| * |
Norman Willemse | 25,291 |
| * |
Directors and Executive Officers as a Group (27 persons) | 734,959 |
| 1.0 |
(*) Less than 1% of the outstanding shares of AAM common stock.
| | |
(*) | | Less than 1 percent of the outstanding shares of AAM common stock. |
|
(1) | | Includes vested RSUs awarded to non-employee directors that have vested or will vest within 60 days.been deferred. For the number of RSUs held by each non-employee director, see table to the20102013 Compensation of Non-Employee Directors.Directors. |
| |
(2) | | Includes the following number of shares of common stock which may be acquired upon exercise of options that were exercisable or would become exercisable within 60 days: 5,000 for Ms. Chappell; 7,500 for Messrs. Farmer, Lappin,Mr. Miller Switzer, Walker and Yang; 1,399,500 for Mr. R.E. Dauch; 69,500 for Mr. Simonte; 117,865Switzer; 40,000 for Mr. D.C. Dauch; 77,70029,000 for Mr. Bellanti and 70,000Simonte; 36,700 for Mr. Jerge.Bellanti; 16,000 for Mr. Satine; and 9,700 for Mr. Willemse. |
| |
(3) | | Includes shares of restricted stock held by named executive officers over which they have sole voting power but no investment power: 39,215 forDoes not include Mr. R.E. Dauch; 17,200 for Mr. Simonte; 21,300 for Mr. D.C. Dauch; 16,200 for Mr. Bellanti and 13,900 for Mr. Jerge.Dauch, who passed away on August 2, 2013. |
| |
(4) | | Includes 1,938,060 shares of AAM common stock held in family trusts and 111,710 held in a charitable family foundation. Mr. R.E. Dauch shares voting and investment power over shares held by the family trusts and the charitable family foundation. Also includes 3,760,702 shares held by the Sandra J. Dauch Gift Trust, of which Mr. R.E. Dauch is trustee. |
|
(5) | | Includes 532548 shares held in trusts for the benefit of Mr. D.C. Dauch’s children. |
| |
(6) | (5) | Includes 10,000 shares held jointly with family members over which a director or executive officer shares voting and/or investment power.by Mr. Bellanti's spouse. |
.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10 percent10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Based solely on our review of these reports, and written representations from such reporting persons, we believe that allthe Section 16(a) filing requirements applicable to our executive officers, directors and owners of more than 10 percent of AAM’s common stockfor such reporting persons were met during 2010.2013.
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| |
PROPOSAL 4: | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011 |
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2014
The Audit Committee of the Board of Directors of AAM has appointed Deloitte & Touche LLP to serve as the independent registered public accounting firm to examine the Company’s consolidated financial statements for the year ending December 31, 2011.2014. Although ratification is not required by our bylaws or otherwise, the Board is submitting the appointment of Deloitte & Touche LLP to our stockholders as a matter of good corporate practice. If the appointment is not ratified, the Audit Committee will consider whether the appointment is appropriate and will use its discretion in determining whether the appointment of Deloitte & Touche LLP is in the best interests of the Company and its stockholders.
Representatives of Deloitte & Touche LLP will attend the 20112014 annual meeting and be available to make a statement or respond to appropriate questions.
The Board unanimously recommends a vote FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2011.2014.
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AUDIT COMMITTEE DISCLOSURE
Report of the Audit Committee
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to the Company’s financial reporting process by monitoring, among other matters, the quality and integrity of the Company’s financial statements, the independence and performance of Deloitte & Touche LLP (D&T), the Company’s independent registered public accounting firm, and the performance of the Company’s internal auditors. Management has primary responsibility for preparing the consolidated financial statements and for the reporting processes, including the design and maintenance of the Company’s system of internal controls. The independent registered public accounting firm is responsible for auditing the Company’s consolidated financial statements and opining upon the effectiveness of the internal control over financial reporting under the standards of the Public Company Accounting Oversight Board (PCAOB). The Audit Committee is solely responsible for the compensation, appointment and oversight of the Company’s independent registered public accounting firm.
In this context, the Audit Committee has met and held discussions with management, D&T and the internal auditors, separately and together, with and without management present, regarding the Company’s audited consolidated financial statements for the year ended December 31, 2010,2013, and the Company’s internal controls.controls over financial reporting. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the U.S. The Audit Committee also discussed with the independent registered public accounting firmD&T the matters required to be discussed by PCAOB Auditing StandardsStandard No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380)16, Communications with Audit Committees, as adopted byapplicable rules of the Public Company Accounting Oversight Board in Rule 3200T.SEC, and other relevant professional and regulatory standards, which include, among other items, matters related to the conduct of the audit of the Company’s consolidated financial statements. Further, the Audit Committee discussed with the internal auditors the Company’s plans for and scope of internal audits, identification of audit risks and results of audit activities.
The Audit Committee reviewed and discussed with the independent registered public accounting firmD&T the auditor’s independence from the Company and itsthe Company’s management. As part of that review, D&T submitted to the Audit Committee the written disclosures and the letter required by the applicable requirements of the PCAOB regarding D&T’s communication with the Audit Committee concerning independence from the Company.independence. Further, the Audit Committee discussed with D&T the firm’s independence and considered whether D&T’s provisionperformance of non-audit services to the Company was compatible with maintaining D&T’s independence. The Audit Committee concluded that D&T is independent from the Company and its management.
Based uponon the considerations described above and subject to the limitations uponof the role and responsibilities of the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial statements for the year ended December 31, 20102013 be included in the Company’s 2010 Annual Report2013 annual report onForm 10-K.
Audit Committee of the Board of DirectorsDirectors*
William P. Miller II, Chairman
John F. Smith
Larry K. Switzer
Thomas K. Walker
*Samuel Valenti III, whose service on the Audit Committee began in February 2014, did not participate in the preparation of this report.
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Policy for Pre-Approval of Audit and Non-Audit Services
The Audit Committee’s policy is to approve in advance all audit and permitted non-audit services (including scope, fee structure and the potential effect of the service on the auditor’s independence) to be performed for the Company by its independent registered public accounting firm. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on acase-by-case basis. The Chairman of the Audit Committee may pre-approve permissible non-audit services that arise between Audit Committee meetings, provided the fees do not exceed a limit established by the Audit Committee and the Audit Committee is informed of the decision to pre-approve the service at its next scheduled meeting. The Audit Committee received regular updates on the amount of fees and scope of audit, non-audit and tax services provided by D&T during 2010. During fiscal 2010, all2013. All services provided by D&T as noted in the table belowduring fiscal 2013 were authorized and approved by the Audit Committee in compliance with applicable pre-approval policies and procedures described herein.procedures.
Independent Registered Public Accounting Firm’s Fees
The aggregate amountfollowing table shows the fees for professional services rendered by D&T for the audit of the Company's financial statements for the years ended December 31, 2013 and December 31, 2012, and fees billed for other services rendered by D&T, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates during the previous two fiscal years is as follows:those periods.
| | | | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
|
Audit Fees(1) | | $ | 1,181,000 | | | $ | 1,353,000 | |
Audit Related Fees(2) | | | — | | | | — | |
Tax Fees(3) | | | 238,000 | | | | 32,000 | |
All Other Fees | | | — | | | | — | |
| | | | | | | | |
Total | | $ | 1,419,000 | | | $ | 1,385,000 | |
| | | | | | | | |
|
| | | | | | |
| December 31, |
| 2013 | 2012 |
Audit Fees(1) | $ | 1,615,877 |
| $ | 1,357,550 |
|
Audit Related Fees(2) | — |
| — |
|
Tax Fees(3) | 151,000 |
| 80,539 |
|
All Other Fees(4) | 90,000 |
| — |
|
Total | $ | 1,856,877 |
| $ | 1,438,089 |
|
| | |
(1) | | IncludesAudit fees include fees for the audit of annual consolidated financial statements and internal controls over financial reporting, reviews of quarterly consolidated financial statements, statutory audits, consents and comfort letters, reviews of documents filed with the SEC and other services related to SEC matters. Audit fees also include fees incurred in connection with an audit of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. |
| |
(2) | | Audit-related fees are for services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements. This category includesalso refers to fees related to internal control, financial accounting and reporting standards.for the audit of employee benefit plans. |
| |
(3) | | Fees for tax services in 20102013 and 20092012 consisted of fees for tax compliance, tax advice and tax planning services. |
| |
(4) | Other fees in 2013 are for advisory services provided to a foreign subsidiary in connection with a government grant application. |
61
OTHER MATTERS
Expenses of Solicitation
The Board is soliciting your proxy, and the expense of soliciting proxies will be borne by AAM. Proxy materials were distributed by mail by Computershare Trust Company, N.A. In addition, AAM will reimburse brokers, banks and other holders of record for their expenses in forwarding proxy materials to stockholders.
We have retained Georgeson Inc. to assist in the solicitation of proxies for an estimated fee of $10,000$11,000 plus reimbursement of certain out-of-pocket expenses. Georgeson may be contacted at(866) 432-2791. (888) 607-6511. In addition, our officers and certain other employees may solicit proxies personally or by telephone, fax ore-mail. They will receive no special compensation for these services.
Stockholder Proposals for 20122015 Annual Meeting
Under SEC rules, stockholder proposals for the 20122015 annual meeting of stockholders must be received by the Secretary of AAM at One Dauch Drive, Detroit, MI48211-1198, on or before November 20, 20112014 in order to be eligible for inclusion in the Company’s 20122015 proxy materials. In addition, AAM’s bylaws require stockholders intending to present any matter for consideration at the 20122015 annual meeting of stockholders, other than through inclusion in our proxy materials, to notify AAM’s Secretary in writing at the above address on or before February 19, 2012,20, 2015, but no earlier than January 30, 2012.31, 2015.
Obtaining a copy of 20102013 Form 10-K
AAM will furnish to stockholders without charge a copy of our Annual Reportannual report onForm 10-K for the year ended December 31, 2010.2013. Requests should be directed to American Axle & Manufacturing Holdings, Inc., Investor Relations Department, One Dauch Drive, Detroit, MI48211-1198, or bye-mail to investorrelations@aam.com. The 20102013 Annual Report onForm 10-K is available on our website athttp://investor.aam.com/sec.cfm.investor.aam.com.
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53
IMPORTANT ANNUAL MEETING INFORMATION |
| | |
| |
| Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on April 28, 2011. May 1, 2014. |
| | Vote by Internet • Log on Go to www.envisionreports.com/axl • Or scan the Internet and go towww.envisionreports.com/axlQR code with your smartphone • Follow the steps outlined on the secured website.secure website |
| Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There isNO CHARGEto you for the call.telephone • Follow the instructions provided by the recorded message. 000004 message |
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.Annual Meeting Proxy Card | x |
|
qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
|
| | | | | | | | | | | | |
A | Proposals — | The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, FOR Proposal 2, and FOR Proposal 3. |
1 | Election of Directors: | For | Withhold | | | | For | Withhold | | For | Withhold | + |
| 01 - James A. McCaslin | o | o | 02 - William P. Miller II | o | o | 03 - Samuel Valenti III | o | o |
| | | | For | Against | Abstain | | | | For | Against | Abstain |
2 | Approval, on an advisory basis, of the compensation of the Company’s named executive officers. | o | o | o | 3 | Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2014. | o | o | o |
| | | | | In their discretion, the proxies are authorized to the extent permitted by law to vote on any and all other matters as may properly come before the meeting, including the authority to vote to adjourn the meeting. |
1234 5678 9012 345 _IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE A Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, FOR Proposal 2, FOR an annual frequency on Proposal 3, and FOR Proposal 4. 1. Election of Directors:For Withhold For Withhold For Withhold 01 — Richard E. Dauch 02 — James A. McCaslin 03 — William P. Miller II 04 — Larry K. SwitzerFor Against Abstain 2. Approval, on a advisory basis, of the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis, tables and related narrative. 3. Approval, on an advisory basis, of frequency for future advisory votes on say-on-pay.1 Yr 2 Yrs 3 Yrs Abstain 4. Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for year ending December 31, 2011.For Against Abstain In their discretion, the proxies are authorized to the extent permitted by law to vote on any and all other matters as may properly come before the meeting, including the authority to vote to adjourn the meeting. |
| | | | | |
B | Non-Voting Items | | | | |
Change of Address— Please print new address belowbelow. | Meeting Attendance | |
| | | | Mark box to the right if you plan to attend the Annual Meeting. | ¬ |
|
| | | | |
C | Authorized Signatures — This section must be completed for your vote to be counted. C — Date and Sign Below |
| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.This section must be completed for your instructions to be executed. |
| Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
_IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — American Axle & Manufacturing Holdings, Inc. | | / / | | |
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PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON APRIL 28, 2011 SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Richard E. Dauch and Steven R. Keyes, or either of them, with full power of substitution, are authorized to vote all of your shares as if you were present at the Annual Meeting of Stockholders of American Axle & Manufacturing Holdings, Inc. to be held in the Auditorium at AAM’s World Headquarters Complex, One Dauch Drive, Detroit, Michigan, at 3:00 p.m. on April 28, 2011 or at any adjournments of the meeting.This proxy will be voted as you specify on the reverse side. If you do not make a choice, this proxy will be voted for the director nominees in Proposal 1, for the approval of the compensation of the Company’s named executive officers in Proposal 2, “1 year” for the frequency for future advisory votes in Proposal 3 and ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm in Proposal 4. Voting by the Internet or by telephone reduces costs to AAM. If you vote over the Internet or by telephone, please do not mail this card. (Items to be voted appear on reverse side.) |
01RYHA
qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Proxy — American Axle & Manufacturing Holdings, Inc.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON May 1, 2014
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
David C. Dauch and David E. Barnes, or either of them, with full power of substitution, are authorized to vote all of your shares as if you were present at the Annual Meeting of Stockholders of American Axle & Manufacturing Holdings, Inc. to be held in the Auditorium at AAM’s World Headquarters Complex, One Dauch Drive, Detroit, Michigan, at 3:00 p.m. on May 1, 2014 or at any adjournments of the meeting.
This proxy will be voted as you specify on the reverse side. If you do not make a choice, this proxy will be voted for the director nominees in Proposal 1, for the approval, on an advisory basis, of the compensation of the Company’s named executive officers in Proposal 2 and for ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm in Proposal 3.
Voting over the Internet or by telephone reduces costs to AAM. If you vote over the Internet or by telephone, please do not mail this card.
(Items to be voted appear on reverse side.)