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June 4, 2012March 24, 2015
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Tower International, Inc. (the “Company”), which will be held in the Laurel Park Office Complex located at 17672 Laurel Park Drive North, Livonia, Michigan at 9:008:30 a.m. local time on July 27, 2012.April 24, 2015.
This booklet includes the Notice of Annual Meeting and the Proxy Statement, which contain information about the formal business to be acted on by the Company’s stockholders, including the election of threetwo directors, a non-binding advisory vote on executive compensation, and ratification of the appointment of auditors. I urge you to read the accompanying Proxy Statement thoroughly. As described in greater detail in the Proxy Statement, the Board of Directors of the Company recommends a vote “FOR” each of the threetwo directors, approval of a non-binding resolution to approve the compensation of the Company’s executive officers, and the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2012.2015. The Annual Meeting will also feature a report on the operations of the Company and a discussion period at which management will respond to appropriate questions.
We hope that you will be able to attend the Annual Meeting. However, whether or not you plan to attend in person, we ask that you complete, sign, date and return the enclosed proxy or voting instruction card(s) promptly in the enclosed envelope to ensure that your shares will be represented. If you do attend the Annual Meeting and wish to vote your shares personally, you may revoke your proxy at or prior to the Annual Meeting.
Sincerely yours,
Mark Malcolm
President and Chief Executive Officer
To the Stockholders of Tower International, Inc.
NOTICE IS HEREBY GIVEN regarding the 20122015 Annual Meeting of Stockholders of Tower International, Inc. (the “Company”), as follows:
Date and Time | ||
Location | 17672 Laurel Park Drive North, Livonia, Michigan.Directions to attend the meeting in person may be obtained by contacting Investor Relations at (248) 675-6457. | |
Items of Business | Election of | |
Advisory vote on executive compensation; | ||
Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, | ||
Action upon such other business that may properly come before the Annual Meeting. | ||
Record Date | The stockholders of record at the close of business on | |
Proxy Voting | It is important that your shares of common stock be represented and voted at the Annual Meeting. You should have received either a proxy card or a voting instruction card with the Proxy Statement. If you hold your shares directly, you should have received a proxy card. If you are not the named holder of your shares, you should have received a voting instruction card. You can vote your shares by completing and returning your proxy card or voting instruction card to the Company or to your broker, as applicable. Voting instructions are printed on your proxy card or voting instruction card and are described in the accompanying Proxy Statement. You can revoke your proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the Proxy Statement. |
By Resolution of the Board of Directors,
Nanette Dudek
Secretary
June 4, 2012March 24, 2015
i
ii
These proxy materials are being provided in connection with the 20122015 Annual Meeting of Stockholders of Tower International, Inc. This Proxy Statement, the accompanying proxy card or voting instruction card, and our Form 10-K 20112014 Annual Report to Stockholders were first mailed to stockholders on or about June 4, 2012.March 24, 2015. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters to be brought before the Annual Meeting. Please read it carefully.
The Board of Directors of the Company is soliciting your vote in connection with the 20122015 Annual Meeting of Stockholders.
The Annual Meeting will be the Company’s regular, annual meeting of stockholders. You will be voting on the following matters at the Annual Meeting:
1. | election of |
2. | a non-binding resolution approving the compensation of the Company’s executive officers; |
3. | ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
4. | any other business that may properly come before the Annual Meeting. |
The Board of Directors recommends a vote:
1. For the election of James Chapman, Chan Galbato, and Scott Wille as directors;
2. For the non-binding resolution approving the compensation of the Company’s executive officers; and
3. For the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2012.
1. | Forthe election of Thomas K. Brown and James Chapman as directors for three year terms; |
2. | Forthe non-binding resolution approving the compensation of the Company’s executive officers; and |
3. | Forthe ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015. |
The Board of Directors has set May 29, 2012March 17, 2015 as the record date for the Annual Meeting (the “Record Date”). All stockholders who owned common stock of the Company at the close of business on the Record Date may attend and vote at the Annual Meeting.
Each share of our common stock is entitled to one vote. There is no cumulative voting. There were 20,246,44521,101,219 shares of our common stock outstanding and entitled to vote as of the close of business on the Record Date.
A quorum must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. A “quorum” is a majority of the outstanding shares of common stock as of the Record Date. Your shares are counted as present at the Annual Meeting if either you are present at the Annual Meeting and vote in person, or a proxy card or voting instruction card has been properly submitted by you or on your behalf to the Company or your broker, as applicable. Both abstentions and broker non-votes are counted as present for
the purpose of determining the presence of a quorum. A “broker non-vote” is a share of common stock that is beneficially owned by a person or entity and held by a broker or other nominee, but for which the broker or other nominee lacks the discretionary authority to vote on certain matters or has not received a completed voting instruction card providing voting instructions from the beneficial owner in respect of these specific matters.
Directors are elected by a plurality. Therefore, the threetwo nominees that receive the most votes will be elected. Abstentions and broker non-votes are not counted for purposes of the election of directors and, therefore, will have no effect on the outcome of such election.
The approval of the advisory (non-binding) proposal to approve executive compensation as disclosed in this Proxy Statement, and the ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm each requires the affirmative vote of a majority of the shares represented at the meeting and actually votedentitled to vote on the matter. Abstentions and brokermatter present in person or represented by proxy. Broker non-votes will have no effect on the outcome onof these matters.
As of Abstentions will have the Record Date, Tower International Holdings, LLC (the “Majority Stockholder”),same effect as votes cast against the Company’s principal stockholder, held approximately 66.3% of the Company’s outstanding common stock. Cerberus Capital Management, L.P. (“CCM”; and, together with the funds and accounts affiliated with CCM, “Cerberus”), the manager of the Majority Stockholder, has indicated that it will vote the shares of the Company’s common stock owned by the Majority Stockholder in favor of each of the proposals described in this Proxy Statement. If CCM votes as it has indicated, its vote is sufficient to satisfy the quorum and voting requirements necessary to adopt the proposals set forth in this Proxy Statement.proposals.
You should have received either a proxy card or a voting instruction card with the Proxy Statement. If you hold your shares directly, you should have received a proxy card. If you are not the named holder of your shares (i.e., you hold your shares through a broker or other nominee), you should have received a voting instruction card. You can vote your shares by completing your proxy card or voting instruction card and returning your proxy card to the Company or your voting instruction card to your broker, as applicable, in the envelope provided with this Proxy Statement. Please see your proxy card or voting instruction card, as applicable, for more information on how to vote.
If you sign and return your proxy card or voting instruction card in the enclosed envelope but do not mark selections, it will be voted by the proxies in accordance with the recommendations of the Board of Directors. The Board of Directors has designated Mark Malcolm Dev Kapadia and Nanette Dudek as proxies. If you sign and return your proxy card or voting instruction card and you indicate a choice with respect to any matter to be acted upon on your proxy card or voting instruction card, your shares will be voted by the proxies in accordance with your indicated choice.
If you are a beneficial owner and hold your shares through a broker or other nominee and do not return your voting instruction card to your broker, the broker or other nominee has the ability to vote your shares on each matter at the Annual Meeting for which he or she has the requisite discretionary authority. Under applicable rules, brokers have discretion to vote on routine matters, such as the ratification of the selection of independent registered public accounting firms. However, the uncontested election of directors at a stockholder meeting is not considered a routine matter. Therefore, brokers do not have discretion to vote on the uncontested election of directors. Similarly, brokers do not have discretion to vote your shares with respect to the advisory vote on executive compensation.
The Company bears the expense of printing and mailing proxy materials. In addition to this solicitation of proxies by mail, the Company’s directors, officers and other employees may solicit proxies by personal interview, telephone, facsimile or email. These individuals will not be paid any additional compensation for any such solicitation. The Company will request brokers and other nominees who hold shares of common
stock in their names to furnish proxy materials to the beneficial owners of such shares. The Company will reimburse such brokers and other nominees for their reasonable expenses incurred in forwarding solicitation materials to such beneficial owners.
Yes. Even if you sign and return the proxy card or voting instruction card in the form accompanying this Proxy Statement, you retain the power to revoke your proxy or change your vote. You can revoke your proxy or change your vote at any time before it is exercised at the Annual Meeting. If you hold your shares directly,
you may revoke your proxy by giving written notice to the Secretary of the Company, specifying such revocation. You may also change your vote by timely delivering a valid, later-dated proxy card to the Company or by voting in person at the Annual Meeting. If you do not hold your shares in your name, you may change your vote by complying with the instructions set forth in your voting instruction card. However, please note that if you would like to vote at the Annual Meeting and you are not the stockholder of record, you must request, complete and deliver a proxy from your broker or other nominee.
April 24, 2015:The Proxy Statement and the accompanying Form 10-K Annual Report to Stockholders are available at:www.proxyvote.com.
Stockholders will be asked to elect threetwo directors to serve on the Board of Directors at the Annual Meeting.Meeting for terms of three years. The Company’s Certificate of Incorporation provides that the Board of Directors shall consist of not fewer than three nor more than fifteen directors, with the exact number to be fixed by the Board of Directors (subject to modification by stockholders having the right to vote at least 50% in voting power of the Company’s outstanding voting stock so long as the Majority Stockholder, its affiliates and its transferees continue to own at least 50% of the Company’s outstanding common stock).Directors. The Board of Directors has fixed the current number of directors at ten. As of July 27, 2012, the number of directors will be reduced to nine.seven.
The Company’s Certificate of Incorporation divides the Board of Directors into three classes, as nearly equal in number as possible, with the terms of office of the directors of each Class ending in different years. Class I has two directors, Class II has two directors and Class III each has three directors and Class II currently has four directors. As of July 27, 2012, the size of Class II will be reduced to three directors. The terms of directors in Classes I, II, and III end at the Annual Meetings in 2014, 2012,2017, 2015, and 2013,2016, respectively.
The Board of Directors has nominated Thomas K. Brown and James Chapman Chan Galbato and Scott Wille for election as Class II directors for three-year terms expiring at the 20152018 Annual Meeting. Larry Schwentor, currently serving as one of the four Class II Directors, will not continue to serve as a Director after his term ends on July 27, 2012. When elected, directors hold office for a three-yearthree year term and until the election and qualification of their respective successors in office or until any such director’s earlier resignation or removal.
Please see “Directors and Executive Officers — Nominees and Continuing Directors” below for information about the nominees for election as directors and the current members of the Board of Directors who will continue serving following the Annual Meeting, including their respective business experience and other pertinent information.
Directors are elected by a plurality. Therefore, the threetwo nominees who receive the most votes will be elected. Proxies cannot be voted for a greater number of persons than the number of nominees named. There is no cumulative voting. If you sign and return the accompanying proxy card or voting instruction card, your shares will be voted for the election of the threetwo nominees recommended by the Board of Directors unless you choose to abstain or withhold authority to vote againstwith respect to any of the nominees. If any nominee for any reason is unable to serve or will not serve, proxies may be voted for such substitute nominee or nominees as the proxy holder may determine. The Company is not aware of any nominee who will be unable to or will not serve as a director.
The Board of Directors unanimously recommends that you voteFOR the election of Thomas K. Brown and James Chapman Chan Galbato and Scott Wille as directors.directors for three years terms.
In accordance with SEC rules, stockholders are being asked to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement.
The Company’s goal for its executive compensation program is to reward executives who provide leadership for and contribute to our financial success. The Company seeks to accomplish this goal in a way that is aligned with the long-term interests of the Company’s stockholders. The Company believes that its executive compensation program satisfies this goal.
The Compensation Discussion and Analysis, beginning on page 1715 of this Proxy Statement, describes the Company’s executive compensation program and the decisions made by our Compensation Committee regarding executive compensation in detail.
The Company requests stockholder approval of the compensation of the Company’s named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Committee Report, the Compensation Discussion and Analysis and the compensation tables).
As an advisory vote, this proposal is not binding. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders in their vote on this proposal, and will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs as the Compensation Committee deems appropriate. In 2011, 97%2014, 82.9% of the votes cast by our stockholders approved of our 20102013 executive compensation and there have not been any significant changes to the elements of our compensation program in 2011.compensation.
If no voting specification is made on a properly voted proxy card, the proxies named on the proxy card will vote “FOR” the approval of the compensation of the named executive officers as disclosed in this Proxy Statement and described in this Proposal 2.
The Board of Directors unanimously recommends that you voteFOR the approval of the compensation of the named executive officers as disclosed in this Proxy Statement.
The Audit Committee of the Company’s Board of Directors has selected Deloitte & Touche LLP to audit the consolidated financial statements of the Company as of December 31, 2012,2015, and for the fiscal year then ending. At the Annual Meeting, stockholders will be asked to ratify this selection. Deloitte & Touche LLP has audited the Company’s financial statements beginning with the fiscal period ended December 31, 2007.
The Company has been advised by Deloitte & Touche LLP that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors and tax advisors. The Company has also been advised that representatives of Deloitte & Touche LLP will be present at the Annual Meeting where they will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Assuming thatIf no voting specification is made on a quorum is present,properly voted proxy card, the affirmativeproxies named on the proxy card will vote of a majority of“FOR” the sharesratification of common stock voted at the Annual Meeting is necessary to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012. Abstentionsdisclosed in this Proxy Statement and broker non-votes will have no effect ondescribed in this proposal.Proposal 3.
The Board of Directors unanimously recommends that you voteFOR the ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.2015.
The following table sets forth the names and ages of the nominees for election as directors and the current members of the Board of Directors who will continue serving following the Annual Meeting, as well as background information relating to each individual’s business experience, qualifications, attributes and skills and why the Board of Directors and Nominating and Corporate Governance Committee believe each individual is a valuable member of the Board of Directors.
Name and Experience | Class | Director Since | ||
Thomas K. Brown,age 58, became a member of our Board on April 1, 2014. He retired from Ford Motor Company on August 1, 2013, after fourteen years of service in various leadership positions in global purchasing for Ford. In 2008, Mr. Brown became Ford’s Group Vice President, Global Purchasing, with responsibility for approximately $90 billion of production and non-production procurement for Ford operations worldwide. From 1997 to 1999, he served in leadership positions at United Technologies Corporation (a multi-national conglomerate), including its Vice President, Supply Management. From 1991 to 1997, Mr. Brown served as Executive Director, Purchasing and Transportation, at QMS Inc., a provider of office printers. From 1976 to 1991, he served in various managerial roles at Digital Equipment Corporation, a computer manufacturer. Mr. Brown also serves on the boards of directors of the 3M Company and ConAgra Foods. Mr. Brown was selected to our Board because of his knowledge of our industry and his experience in purchasing and corporate management. | II | 2014 | ||
James Chapman,age 52, serves as non-executive Chairman of CSC ServiceWorks, Inc., | ||||
II | 2010 |
Name and Experience | Class | Director Since | ||
Nicholas D. Chabraja, | III | 2010 | ||
I |
Frank E. English, Jr., | ||||
I |
Name and Experience | Class | Director Since | ||
Dev Kapadia, | III | 2007 | ||
Mark Malcolm, | III | 2007 |
Set forth below are the names and ages of the executive officers of the Company who do not also serve as directors, as well as background information relating to each such individual’s business experience.
James Gouin, age 52,55, has served as the Executive Vice President and Chief Financial Officer of the Company since November 1, 2007. Prior to joining the Company, Mr. Gouin served in 2007 as a senior managing director of the corporate financial practice of FTI Consulting, Inc., a business advisory firm. Prior to joining FTI, Mr. Gouin spent 28 years at Ford Motor Company in a variety of senior positions, including as the Vice President, Finance and Global Corporate Controller from 2003 to 2006 and as the Vice President of Finance, Strategy and Business Development of Ford Motor Company’s International Operations from 2006 to 2007.
Michael Rajkovic, age 50,53, has been the Executive Vice President and Chief Operating Officer of the Company since August 1, 2007. Prior to assuming that role, Mr. Rajkovic served as a senior member of CCM’sthe operations team of CCM from August 2006 to August 2007 and assisted Mr. Malcolm in various aspects of the 2007 acquisition of the Company from the Predecessor. Since April 11, 2011, Mr. Rajkovic has also served as the President of Tower Defense & Aerospace, LLC. Before joining CCM, Mr. Rajkovic was Executive Vice President and Chief Financial Officer of United States Can Corporation, a global packaging company, from May 2005 to March 2006. Prior to his service with U.S. Can Corporation, Mr. Rajkovic served as Vice President of Finance, North America and as Chairman of the Canadian subsidiary of The Goodyear Tire and Rubber Company, an automotive products manufacturer, from August 2003 to May 2005. Prior to that period, Mr. Rajkovic held a variety of manufacturing and finance positions within Visteon Corporation, a manufacturer of climate, interior, electronic and lighting products for automobiles, from January 2000 to August 2003.an automotive supplier.
James Bernard, age 48,51, has been President, Americas for the Company since August 15, 2011. Prior to being elected President, Americas, Mr. Bernard was the Company’s Senior Vice President, Global Sales and Business Development, a position held since March 2011. From 2007 to 2011 Mr. Bernard was the Company’s Vice President, North American Sales and Program Management and from 2003 to 2007 Mr. Bernard was the Company’s Vice President, North American Sales and Technology.
Pär Malmhagen, age 49,52, joined the Company on June 1, 2012 as President, Tower Europe. From 1992 to 2012, at Autoliv Inc., a leading global developer and manufacturer of automotive safety systems, Mr. Malmhagen held senior leadership positions in Europe and internationally, including, simultaneously, Vice President Sales Europe and Vice President Volkswagen Global Business Unit from 2009 to 2012, Senior Vice President European Seat Belt Division from 2006 to 2009, Vice President European Technology Center North from 2005 to 2006, Managing Director Eastern Europe, Hungary and South Africa from 1999 to 2005, General Manager China from 1997 to 1999, and Controller Global Ford Account from 1995 to 1997. In addition, Mr. Malmhagen was a supervisory member of Norma AG, a manufacturer of joining technology products, from May 2007 through June of 2012.
William Cook, age 60,63, has been the Company’s Senior Vice President, Global Human Resources since September 2007. From 2001 to 2007 he held senior human resource leadership positions at The Goodyear Tire & Rubber Company in Akron, Ohio, including four years as Vice President of Human Resources for Goodyear North American Tire. During a fifteen year career at United Technologies Corporation, Mr. Cook held key leadership positions, including four years as head of human resources for Carrier Corporation Residential and Light Commercial Systems, a supplier of heating and air conditioning equipment, and eight years as head of human resources for Otis Elevator Asia-Pacific, a supplier of elevators and escalators.
Jeffrey L. Kersten, age 44,47, has been the Company’s and Predecessor’s Senior Vice President and Corporate Controller since February 1, 2007. He transitioned2007 and effective September 1, 2014 he assumed responsibility for Business Development as well. From October 2006 to that position from the position ofFebruary 2007 Mr. Kersten was Senior Vice President, Restructuring, which he held since October 2006 withfor the Predecessor. From 2004 to 2006, Mr. Kersten was the Predecessor’s Senior Vice President, Strategy and Business Development. Mr. KerstenHe joined the Predecessor in 1997, holding financial positions within the Predecessor’s Grand Rapids, Michigan offices until 2001, when he relocated to France and became the Predecessor’s European Regional Finance Leader. Mr. Kersten began his career in 1990 with the accounting firm of Arthur Andersen, where he remained until 1997, specializing in mergers and acquisitions.
Paul Radkoski, age 52,55, has served as the Predecessor’s and the Company’s Senior Vice President, Global Purchasing, since March 2006. Prior to joining the Predecessor, Mr. Radkoski held various positions within Visteon Corporation, an automotive supplier, from 2000 until 2006, including the position of Vice President, North America Purchasing and Supplier Management from 2005 to 2006. Earlier in his career, Mr. Radkoski held various purchasing, manufacturing and logistics positions with Lear Corporation from 1997 to 2000 and automobile manufacturers BMW (from 1993 to 1997) and Honda of North America (from 1986 to 1993).
Mr. Kersten was an officer of the Predecessor when the Predecessor filed for bankruptcy protection in 2005. Mr. Radkoski joined the Predecessor after it filed for bankruptcy protection. Mr. Galbato was President and CEO of Armstrong Floor Products, the largest division of Armstrong World Industries, Inc. (2001 – 2003) after Armstrong World Industries filed for bankruptcy protection.
The Company’s Corporate Governance Principles adopted by the Board of Directors defines an “independent” director in accordance with the Listed Company Manual of the New York Stock Exchange (the “NYSE”). The Board of Directors has affirmatively determinedmade an affirmative determination that each of Thomas Brown, Nicholas Chabraja, James Chapman, Alison Davis-Blake, Frank English and Jonathan GallenDev Kapadia is independent as defined in accordance with the listing standards of the New York Stock Exchange (the “NYSE”).NYSE. Mark Malcolm is not independent due to his employment as the Company’s President and Chief Executive Officer. To be considered “independent,” a director must be determined by the Board of Directors to have no relevant material relationship with the Company, other than as a director of the Company. As the concern is independence from management, the Board of Directors does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.
The Majority Stockholder controls a majority of our outstanding common stock. As a result, the Company is a “controlled company” within the meaningCompany’s Corporate Governance Principles provide that each member of the NYSE corporate governance standards. UnderAudit Committee, the NYSE rules, a company of which more than 50% ofCompensation Committee and the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain NYSE corporate governance requirements, including:
The Company currently utilizes these exemptions, although the Board has adopted written charters for the Board’s Nominating and Corporate Governance Committee and formust be independent as determined by the Board’s Compensation Committee. The Board also intends to conduct annual performance evaluations of both committees. As a controlled company,Board. In addition, each committee member must satisfy the Company does not have a majority of independent directors and does not have a compensationmembership requirements set forth in the relevant committee or nominating and corporate governance committee consisting entirely of independent directors.charter.
The Company seeks to maintain an appropriate balance between management and the Board of Directors. The Company does not have a specific policy regarding the separation of the offices of Chairman of the Board and CEO. The Board believes that it is in the best interests of the Company for the Board to make a determination regarding whether or not to separate the roles of Chairman and CEO based upon the circumstances. The Board believes that presently it is in the best interests of the Company that the positions of Chairman of the Board and CEO are separate. The Board believes that this separation is presently appropriate as it allowed the Company to attract Mr. Chabraja to join the Board. The policy also allows the CEO to focus primarily on leading the day-to-day operations of the Company while the Chairman can focus on leading the Board in the performance of its duties. The Board acknowledges that there may be circumstances in the future when it is in the best interests of the Company to combine the positions of Chairman of the Board and CEO.
The Board is obligated to conduct periodic executive sessions of the directors without those directors who are also executive officers of the Company. These directors shall designate one of their number to preside at each session, although it need not be the same director at each session. The Chairman of the Board, as long as he or she is not a member of management, will chair these meetings.
The Board has delegated certain duties with respect to risk oversight for the Company to the Board’s Audit Committee. The Audit Committee’s charter identifies the following as falling within the Audit Committee’s purview:
“The Audit Committee shall discuss guidelines and policies developed by Company management and the Board with respect to risk assessment and risk management and the steps that the Company’s management has taken to monitor and control financial risk exposure, including anti fraudanti-fraud programs and controls. The Committee shall discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.”
The Audit Committee is charged with the responsibility of reporting back to the full Board with respect to its assessments.
In establishing appropriate compensation levels and programs, the Board’s Compensation Committee considers, among other things, the extent to which the Company’s compensation policies and programs encourage the monitoring and control of risk exposure. The Compensation Committee is also required to report back to the full Board with respect to its assessments.
Since the Company’s Initial Public Offering (“IPO”) in October, 2010, Allan Gilmour and Rande Somma have been engaged as advisors to assist Board members in performing their Board functions and responsibilities. Effective July 27, 2012, the Board advisor engagements of Messrs. Gilmour and Somma will end and, with the exception of Mr. Somma’s service agreement as set forth in “Non-Employee Director and Board Advisor Compensation” these individuals will have no further engagements with the Company.
Allan D. Gilmour, age 77, became a member of the Company’s Board on August 24, 2010 and transitioned to senior advisor status on September 30, 2010. In January 2011, Mr. Gilmour was named President of Wayne State University. Mr. Gilmour served as Vice Chairman of the board of directors of Ford Motor Company from 2002 to 2005, a position that he previously held from 1992 until his initial retirement in 1995. Mr. Gilmour began his career with Ford Motor Company in 1960. While at Ford, Mr. Gilmour served in a variety of roles, including: President of Ford Automotive Group; Executive Vice President, International Automotive Operations; Vice President, External and Personnel Affairs; Vice President and Controller; Chief Financial Officer; and President of Ford Motor Credit Company. From 1995 to May 2011, Mr. Gilmour served on the board of directors of DTE Energy Company. From 1990 to 2007, Mr. Gilmour served on the board of directors of Whirlpool Corporation and from 2006 to 2010 he served on the board of directors of Universal Technical Institute, Inc.
Rande Somma, age 60, became a member of the Company’s Board on August 1, 2007 and transitioned to senior advisor status on September 27, 2010. Mr. Somma has been President of his consulting company, Rande Somma and Associates LLC, since May 2004. Mr. Somma, through his consulting firm, has provided consulting services to the Company since December 1, 2007. Prior to establishing his consulting business, he was the President of Automotive Operations — Worldwide, at Johnson Controls, Inc. from 2002 – 2003 and was President of Automotive Operations — North America at Johnson Controls from 2000 – 2002. From 1988 to 2000, Mr. Somma held several different managerial positions in the Automotive Systems Group at Johnson Controls. Johnson Controls is a Tier 1 supplier of automotive systems and facility management and control products. In the automotive market, it is a major supplier of integrated seating and interior systems and batteries. Prior to joining Johnson Controls, Mr. Somma served in a variety of purchasing, manufacturing and sales positions within the automotive division of Rockwell International. From 2005 until May 2011, Mr. Somma served on the board of directors of Gentex Corporation, a supplier to the global automotive industry. Additionally, Mr. Somma is currently the Chairman of the Executive Board of the NewNorth Center for Design in Business, a nonprofit learning center for the delivery of intellectual and experiential training programs focused on the development and application of design centric innovation.
The Board held twelveseven meetings during the year ended December 31, 2011.2014. Each director attended at least 75%100% of all board and applicable committee meetings in 20112014 held while such director was a member of the Board or the applicable committee.
The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
The Audit Committee, among other things, assists the Board in its oversight responsibilities relating to the integrity of the Company’s financial statements, the qualifications, independence, compensation and performance of the Company’s independent auditors, the systems of internal accounting and financial controls utilized by the Company, the performance of the internal audit function, the compliance of the Company with legal and regulatory requirements and compliance with the Company’s Code of Business Conduct and Ethics. The Committee is governed by a charter adopted by the Board of Directors. The charter is available on the Company’s website atwww.towerinternational.comby following the links to “Investor Relations,” “Corporate Governance” and “Committee Charters” or upon written request to the Company, as set forth below under “Additional Information — Annual Report; Financial and Other Information.” The Audit Committee held eightnine meetings during 2011.2014.
The Audit Committee currently consists of Messrs. Chapman and English and Gallen.Ms. Davis-Blake. The Board of Directors has affirmatively determined that Messrs.Mr. Chapman, Mr. English and GallenMs. Davis-Blake all meet the audit committee independence requirements as defined in the applicable NYSE and SEC rules. Mr. Chapman is the Chairman of the Committee. During 2011 Mr. Schwentor also served on the Audit Committee until October 3, 2011. The Board of Directors has determined that each member of the Committee is “financially literate” as required by the listing standards of the NYSE, as such qualification is interpreted by the Board of Directors in its business judgment. In addition, the Board of Directors has determined that Mr. Chapman qualifies as an “audit committee financial expert” as defined by the rules and regulations of the SEC.
The Compensation Committee, among other things, facilitates our Board’s discharge of its responsibilities relating to the evaluation and compensation of our executives, oversees the administration of our compensation plans, reviews and determines board member compensation and prepares any report on executive compensation required by the rules and regulations of the SEC and the listing standards of the NYSE. The Committee is governed by a charter adopted by the Board of Directors. The charter is available on the Company’s website atwww.towerinternational.comby following the links to “Investor Relations,” “Corporate Governance” and “Committee Charters” or upon written request to the Company, as set forth below under “Additional Information — Annual Report; Financial and Other Information.” The Compensation Committee held sixfive meetings during 2011.2014.
The Compensation Committee currently consists of Messrs. Brown, Chabraja Donovan and Kapadia. Mr. Kapadia is the Chairman of the Committee. BecauseThe Board of Directors has affirmatively determined that Messrs. Brown, Chabraja and Kapadia meet the Company is a “controlled company”, there is no requirement that any member ofcompensation committee independence requirements as defined in the Compensation Committee satisfyapplicable NYSE or SEC independence requirements.rules.
Role of Compensation Consultants. During 2011,2014, the Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”) to assist in the development of the 20112014 equity awards under the Company’s 2010 Equity Incentive Plan and to provide advice and comparative analyses of the various elements of executive compensation. In retaining Meridian, the Compensation Committee assessed Meridian’s independence in accordance with applicable rules of the NYSE. Meridian does not provide any other services as an independent consultant to the Company.
The Nominating and Corporate Governance Committee is responsible for, among other things, (i) reviewing the qualifications of, and recommending to our Board, proposed nominees for election to our Board, consistent with criteria approved by our Board, (ii) selecting, or recommending that our Board select, the director nominees for the next annual meeting of stockholders, (iii) developing, evaluating and recommending to our Board corporate governance practices applicable to the Company and (iv) leading our Board in an annual review of the Board and management. The Committee is also responsible for establishing procedures for the consideration of Board candidates recommended by stockholders, including potential nominees for election, as described in greater detail below under “Director Nomination Process.” The Committee is governed by a charter adopted by the Board of Directors. The charter is available on the Company’s website atwww.towerinternational.comby following the links to “Investor Relations,” “Corporate Governance” and “Committee Charters” or upon written request to the Company, as set forth below under “Additional Information — Annual Report; Financial and Other Information.” The Nominating and Corporate Governance Committee held three meetings during 2011.2014.
The Nominating and Corporate Governance Committee consists of MessrsMessrs. Brown, Chabraja Galbato and Kapadia. Mr. Chabraja who has been determined by our Board to be independent, is Chairman of the Committee. BecauseThe Board of Directors has affirmatively determined that Messrs. Brown, Chabraja and Kapadia meet the Company is a “controlled company”, there is no requirement that any member ofnominating and corporate governance committee independence requirements as defined in the Nominating and Corporate Governance Committee satisfyapplicable NYSE or SEC independence requirements.rules.
Director Nomination Process. The Nominating and Corporate Governance Committee is responsible for identifying candidates for director nominees. The Board has adopted the following guidelines for the Committee:
“The Nominating and Corporate Governance Committee will consider (a) minimum individual qualifications, including strength of character, mature judgment, industry knowledge or experience and an ability to work collegially with the other members of the Board and (b) all other factors it considers appropriate, which may include age, gender and ethnic and racial background, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations such as antitrust issues, corporate governance background, financial and accounting background, executive compensation background and the size, composition and combined expertise of the existing Board. The Board should monitor the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure.”
The Nominating and Corporate Governance Committee will consider these criteria in the context of the perceived needs of the Board as a whole and intends to seek to achieve a diversity of experience and personal backgrounds on the Board. The Committee will use the same criteria in determining whether to recommend stockholder nominations of candidates for director made pursuant to the procedures set forth in the Company’s Bylaws and described in greater detail below under “Additional Information — Stockholder Proposals and Nominations for Director.”
During 2011From January to March 2014 the Company provided the following compensation to Board members and Board advisors who are neithernot employed by us nor parties (either individually or through entities controlled by them) to consulting agreements with us:
Effective March 6, 2014, upon recommendation from the Compensation Committee of the Board, committees.the Board revised its Board compensation package and adopted the following compensation to Board members who are not employed by us:
The Board has
Fifty percent of the annual retainer into equity interestsis paid to our Board members in the Company.form of cash and fifty percent is remunerated through a grant of Restricted Stock Units (as hereinafter defined). In addition, effective March 6, 2014, the Board adopted stock ownership guidelines for our Board members that provide for each non-employee Board member to achieve ownership in the Company’s common stock equivalent to three times their respective cash retainer. Such common stock ownership threshold must be obtained within five years from the date of appointment to our Board or five years from March 6, 2014, whichever is later.
The Company also reimburses each non-employee member of our Board and our Board Advisors for out-of-pocket expenses incurred in connection with attending our Board and committee meetings. Board members do not participate in a nonqualified deferred compensation plan and we do not pay any life insurance policies for our Board members.
In 2007, we entered into a service agreement with Mr. Somma. The service agreement was approved and authorized by our Board comprised at that time. Mr. Somma’s service agreement with the Company terminated on January 2, 2012. We made total payments of $300,000 in 2011 to Mr. Somma which was inclusive of amounts earned under his service agreement with the Company and for his role as a Board Advisor to the Company. We will make an additional payment to Mr. Somma of $249,000 in April 2012 for a bonus earned in 2011 under the terms of his service agreement. The service agreement also provided for reimbursement of certain tax, legal and other expenses incurred by Mr. Somma under the service agreement.
Effective January 3, 2012, Mr. Somma entered into a separate service agreement with Tower Defense & Aerospace, LLC (“TDA”), a wholly owned subsidiary of the Company, to provide sales and business development services to TDA. The TDA service agreement is for a term of 12 months, terminating on December 31, 2012, and provides for compensation of $150,000 and a potential bonus based on the 2012 financial performance of TDA.
Any stockholder or other interested party who desires to communicate with individual directors, a committee of the Board, the Board of Directors as a group, the directors who are not also executive officers as a group or the independent directors as a group, may do so by writing to the Board of Directors, c/o the Secretary of the Company, 17672 Laurel Park Drive North, Suite 400E, Livonia, Michigan 48152, or sending an e-mail toCorporate_Secretary@towerinternational.com. Corporate_Secretary@towerinternational.com. In either instance, the Secretary will forward such communications to the appropriate party. Such communications may be done confidentially.
All communications will be received and processed by the Secretary of the Company. Unless indicated otherwise, communications about accounting, internal control and audits will be referred to the Audit Committee.
All communications required by law or regulation to be relayed to the Board of Directors will be relayed immediately after receipt. Any communications received by management from stockholders or other interested parties which have not also been sent directly to the Board of Directors will be processed as follows: (1) if the party specifically requests that the communication be sent to the Board, the communication will then be promptly relayed to the Board of Directors; and (2) if the party does not request that the communication be sent to the Board of Directors, then management will promptly relay to the Board all communications that management, using its judgment, determines should be relayed to the Board.
Employees may also report misconduct, raise issues or simply ask questions, including with respect to any questionable accounting, internal control or auditing matters concerning the Company, without fear of dismissal or retaliation of any kind. Reports may be made confidentially and/or anonymously through the Company’s Whistleblower Hotline, 888-475-9498.
The Company will monitor developments in the area of corporate governance and routinely review its processes and procedures in light of such developments. Accordingly, the Company will review federal laws affecting corporate governance such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act as well as various rules promulgated by the SEC and the NYSE.
In furtherance of this practice, the Board of Directors has approved Corporate Governance GuidelinesPrinciples for the Company. The Corporate Governance GuidelinesPrinciples address, among other things: the role and responsibility of the Board of Directors; Board structure, composition and size; director independence; director qualifications; Board meetings; Board committees; and expectations of Board members. The full text of the Company’s Corporate Governance GuidelinesPrinciples is available on the Company’s websitewww.towerinternational.comby following links to “Investor Relations,” “Corporate Governance,” “Governance Documents” and “Corporate Governance Guidelines”Principles” or upon written request to the Company, as set forth below under “Additional Information — Annual Report; Financial and Other Information.”
The Board of Directors has also adopted a Code of Business Conduct and Ethics (“Code of Conduct”Conduct”) applicable to all of the Company’s employees as well as the members of the Board of Directors. The Code of Conduct, together with the Corporate Governance Guidelines,Principles, serves as the foundation for the Company’s system of corporate governance. Among other things, the Code of Conduct: provides guidance for maintaining ethical behavior; requires that directors and employees, including officers, comply with applicable laws and regulations; provides guidance for protecting confidential information and Company assets; regulates conflicts of interest; addresses the Company’s policies with respect to gifts and political contributions; and provides mechanisms for reporting violations of the Company’s policies and procedures, including the Code of Conduct. The full text of the Code of Conduct is available on the Company’s websitewww.towerinternational.comby following links to “Investor Relations,” “Corporate Governance,” “Governance Documents” and “Code of Business Conduct” or upon written request to the Company, as set forth below under “Additional Information — Annual Report; Financial and Other Information.”
The Audit Committee monitors the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility with respect to the financial statements and the reporting process of the Company. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements to generally accepted accounting principles. The Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 2011,2014, with the Company’s management.
2. The Audit Committee has discussed with Deloitte & Touche LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
3. The Audit Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with Deloitte & Touche LLP the independence of that firm.
Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011,2014, for filing with the SEC.
Respectfully submitted,
James Chapman, Chairman
Alison Davis-Blake
Frank E. English, Jr.Jonathan Gallen
The Audit Committee has adopted a written policy for the pre-approval of audit, audit-related and non-audit services to be provided by the Company’s independent registered public accounting firm. In general, the Company’s independent registered public accounting firm cannot be engaged to provide any audit or non-audit services unless the engagement is pre-approved by the Audit Committee in compliance with the Sarbanes-Oxley Act of 2002. Certain basic services may also be pre-approved by the Chairman of the Audit Committee under the policy. However, any service that is not specifically pre-approved under the policy must be specifically pre-approved by the Audit Committee if it is to be provided by the independent registered public accounting firm.
Set forth below are the fees paid by the Company to its independent registered public accounting firm, Deloitte & Touche LLP, for the years indicated, all of which were pre-approved by the Audit Committee or the Board of Directors of the Company (amounts in thousands).
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
Nature of the Fees | 2011 | 2010 | 2014 | 2013 | ||||||||||||
Audit fees (includes fees incurred during 2010 for services related to the Company’s IPO) | $ | 2,155 | $ | 2,678 | ||||||||||||
Audit fees | $ | 2,251 | $ | 2,271 | ||||||||||||
Audit-related fees | 210 | 140 | 30 | 0 | ||||||||||||
Tax fees | 40 | 319 | 356 | 60 | ||||||||||||
All other fees | — | — | 0 | 0 | ||||||||||||
Total | $ | 2,405 | $ | 3,137 | $ | 2,637 | $ | 2,331 |
Audit Fees — Consist of fees for professional services rendered for the audit of the Company’s annual consolidated financial statements, the audit of the Company’s internal control over financial reporting and the review of financial statements included in the Company’s FormsQuarterly Reports on Form 10-Q, or services that are normally provided by the Company’s independent registered public accounting firm in connection with statutory or regulatory filings or engagements for the applicable years. Such services include those associated with reports or other documents filed with the SEC, such as the issuance of consents, filings on Form 8-K, responding to SEC comment letters or other inquiries by regulators related to accounting or disclosure matters, as well as the issuance of comfort letters related to securities offerings, as applicable.
Audit-Related Fees — Consist of fees for services that are reasonably related to the performance of the audit or review of the Company’s financial statements, including fees for the performance of audits and attestation services not required by statute or regulations; audits of the Company’s employee benefit plans; due diligence activities related to mergers, acquisitions and investments; and accounting consultations about the application of generally accepted accounting principles to proposed transactions.
Tax Fees — Consist of fees for tax compliance, tax planning and tax advice. Corporate tax services encompass a variety of permissible services, including: technical tax advice related to U.S. and international tax matters; assistance with foreign income and withholding tax matters; assistance with sales tax, value added tax and equivalent tax related matters in local jurisdictions; preparation of reports to comply with local tax authority transfer pricing documentation requirements; and assistance with tax audits.
The following discusses the various components of compensation paid in 2011 to, or earned by, the Named Executive Officers (“NEOs”) of the Company.Company during 2014. As used in this Proxy Statement, the term “NEOs” refers to:
The primary objectives and philosophy of our compensation programs are to (i) drive executive behaviors that maximize long-term shareholder value creation, (ii) attract and retain talented executive officers with the skills necessary to successfully manage our business, and (iii) align the interests of our executive officers with stockholders by rewarding them for strong company performance. In support of these objectives, we:
The Company places high value on strong compensation governance practices. We believe our executive compensation practices align with our corporate values and provide a foundation for success. These governance practices include:
• | Pay is closely linked to performance |
• | Equity ownership guidelines for our NEOs |
• | Risk mitigation |
• | A recoupment (i.e., clawback) practice is in place |
• | Change-in-Control (“CIC”) severance requires a double trigger |
• | Our Compensation Committee reviews NEO pay annually |
• | Our Compensation Committee is comprised entirely of independent directors |
• | Our Compensation Committee engages an independent consultant |
• | Our Compensation Committee regularly has executive sessions without management present |
• | Hedging, pledging or short sales of stock is not permitted |
• | Dividends or dividend equivalents are not provided on unearned performance awards |
• | No excise tax gross-ups are provided to any executives |
• | We do not provide additional supplemental executive retirement service credit as a recruitment tool for executive hires |
The Compensation Committee of our Board has responsibility for oversight and review of our total executive compensation strategy, including the design and monitoring of certainour executive compensation plans such as our annual cashincentive bonus plan.plan and our 2010 Equity Incentive Plan. In addition, the Compensation Committee determinesreviews and approves the compensation of our Chief Executive Officer and reviews and approves the compensation of all officers, including each of our NEOs. In settingreviewing and reviewingapproving compensation for our NEOs, the Compensation Committee evaluates the compensation components that it believes support our compensation objectives and philosophy.
As part of its responsibilities, the Compensation Committee reviews the appropriateness and effectiveness of our compensation programs. The Compensation Committeeprograms and approves target award opportunities and performance criteria to be utilized in our annual cashincentive bonus plan. In addition, the Compensation Committee is responsible for determining equity-based awards,plan and establishing and monitoringour long-term incentive plans.
In 2011,awards under the Compensation Committee engaged an independent consultant, Meridian Compensation Partners, LLC (“Meridian”), to provide it with advice and comparative analyses of various elements of executive compensation, including annual salary, annual variable bonus, total targeted annual cash compensation and long-term incentives. Meridian does not provide any services as an independent compensation consultant to management and it had no relationship with management prior to its engagement by the Compensation Committee.2010 Equity Incentive Plan.
The Compensation Committee considers competitive market practices with respect to the compensation of our NEOs. In its discretion, the Compensation Committee also considers compensation levels of executives holding similar positions at other domestic and international manufacturing companies that the Compensation Committee views as comparable in size and complexity of business, with additional consideration given to individual credentials. For 2011, this2014, our peer group consisted of the following 1315 companies including similarly sized companies inwithin the automotive supplier and manufacturing sectors: American Axle & Manufacturing Holdings, Inc., BorgWarner Inc., Cooper Tire & Rubber Co., Dana Holding Corporation, Federal-Mogul Corporation, Linamar
TABLE OF CONTENTSsectors with median revenues and market capitalization of $3.70 billion and $2.34 billion, respectively:
Corporation, Martinrea International Inc., Meritor Inc., Modine Manufacturing Company, OshKosh Corporation, Tenneco Inc., Visteon Corporation, and Westinghouse Air Brake Technologies Corporation.
American Axle & Manufacturing Holdings, Inc. | Modine Manufacturing Company | |
BorgWarner Inc. | OshKosh Corporation | |
Cooper-Standard Holdings Inc. | Stoneridge, Inc. | |
Cooper Tire & Rubber Company | Tenneco Inc. | |
Dana Holding Corporation | The Timken Company | |
Federal-Mogul Corporation | Visteon Corporation | |
Martinrea International Inc. | Westinghouse Air Brake Technologies Corporation | |
Meritor Inc. |
Although the Compensation Committee reviews the compensation data and practices of our peer group, the Committee does not adhere to strict formulas or identify specific target percentiles with respect to such data and practices to determine the total compensation or mix of compensation elements for our executives. Instead, the Committee collectively considers various factors in exercising its discretion to determine overall compensation, including the experience, responsibilities and performance of individuals as well as the Company’s overall financial performance. In making compensation determinations, the Compensation Committee has not determined that compensation elements are to be set according to a pre-set or formulaic mix. The Compensation Committee retains full discretion to consider or disregard data collected through peer group studies in the course of settingevaluating executive total compensation levels.levels or mix of compensation elements. The Compensation decisionsCommittee has not determined that compensation elements are also consideredto be set according to pre-set formulas or specific target percentiles with respect to such peer group data and practices. Instead, the Compensation Committee collectively considers a variety of factors in the context of individual and Company performance, retention concerns,exercising its discretion with respect to overall compensation, including the importance of theeach position, retention concerns, each individual’s experience, responsibilities and performance and internal equity.equity, as well as the Company’s overall financial performance.
In 2014, the Compensation Committee engaged Meridian Compensation Partners LLC (“Meridian”) as its independent compensation consultant. Meridian provides consulting services solely relating to executive compensation and governance matters to the Compensation Committee. The Compensation Committee has determined that Meridian is independent under its charter and applicable NYSE rules and further, that no conflict of interest exists between Meridian and the Company.
A representative of Meridian attended Compensation Committee meetings in 2014 and advised the Compensation Committee on all principal aspects of executive compensation, including the competitiveness of program design and award values and specific analyses with respect to the Company’s executive officers.
While it is necessary for the consultant to interact with management to gather information and obtain recommendations, the Compensation Committee Chairperson governs the relationship. Meridian does not provide any services to management outside of its engagement by the Compensation Committee.
The Compensation Committee determines the total compensation for our Chief Executive Officer. Our Chief Executive Officer plays no role in determining his own compensation.
The Compensation Committee also determines the total compensation of our other NEOs acting with advice from our Chief Executive Officer. Although the Compensation Committee utilizes and considers comments, advice and recommendations of our Chief Executive Officer the final decision with respect to compensation levels and components of the other NEOs remains withNEOs.
The Compensation Committee believes that the compensation policies and practices of the Company do not create risks that are reasonably likely to have a material adverse effect on the Company. In establishing pay practices for the Company, the goal is to design a compensation structure that does not encourage inappropriate risk-taking by employees or executive officers. Therefore, enterprise risk management is integral to the overall compensation philosophy. The following features of the compensation structure reflect this approach:
Our compensation programs consist of several components, although particular individuals may not be eligible for each component. The guiding principles of our compensation programs remain consistent throughout the various components. In each instance, we seek to incentivize and retain our NEOs by providing competitive compensation while at the same time aligning the interests of our NEOs with those of our stockholders.
The principal components of our compensation programs for the NEOs are: annual base salary; annual incentive; long term equitylong-term incentive awards;awards (cash and equity); defined contribution plan retirement benefits; severance benefits; perquisites;benefits and employment agreements, which contain termination benefits.perquisites. The Compensation Committee considers all such components to be an appropriate compensation package for our NEOs. The charts below illustrate the general target mix of salary, annual incentive and long-term incentive awards among our NEOs in 2011.2014.
We use base salary to attract and retain highly qualified executive officers. When establishing base salaries for the NEOs, theThe Compensation Committee and the Chief Executive Officer (other than for himself) consider a number of factors, including the seniority, skills and experience of the individual, the individual’s prior salary, the functional role of the position, and the level of the Named Executive Officer’sNEO’s responsibilities. The leading factors in determining increases infor increasing base salary include the performance, experience and skills of the individuals, and market compensation levels for senior executives with similar levels of experience and skills.
None of our NEOs received an increase to his annual rate of base salary during 2011, except for Mr. Bernard who2014. Messrs. Malcolm, Gouin and Rajkovic have not received an increase in March when he became our Senior Vice President, Sales and Business Development, andbase salary since August, 2010. Mr. Bernard has not received an increase in base salary since August, 2011 when he became our President, Americas. For each of the other NEOs, the lastMr. Malmhagen has not received an increase to his annual rate ofin base salary wassince his employment commenced in August, 2010.June, 2012.
We believe that annual cash incentive awards motivate our NEOs and reward them for annual business results that help create value for our stockholders. Each year, the Compensation Committee establishes an annual incentive bonus plan for the NEOs based on one or more performance measures and determines the relative weighting of each factor,measure. Each year’s annual incentive bonus plan is a restatement of the same plan (which we refer to as determined by the Compensation Committee.our Tower Bonus Plan) that was adopted in 2010. Other hourly and salaried employees participate in our annual incentive bonus plan as well.
In January, 2011,February, 2014, the Compensation Committee approved the 20112014 Tower Bonus Plan and established the level of performance necessary for the NEOs to earn their targeted payouts andpayouts. Each NEO is assigned each NEO a target percentage of base salary.bonus. Cash incentive awards are permitted to the extent selected operating results meet or exceed threshold levels of performance established by the Compensation Committee for the performance year.
For 2011,2014, the Compensation Committee designated (1) Adjusted EBITDA, (2)(i) “Adjusted Free Cash Flow, (3) AdjustedFlow”, (ii) “Adjusted EBITDA” and (iii) “Adjusted EBITDA Change in Controllable FactorsFactors” (which excludes the impact of volume (customer demand), product mix and (4) Increase in 2013 Sales Backlogforeign exchange) as the fourthree financial measures used to determine payouts. Adjusted EBITDA performance accounted for 40% of the total award, Free Cash Flow performance accounted for 30%45% of the total award, Adjusted EBITDA performance accounted for 45% of the total award and Adjusted EBITDA Change in Controllable Factors performance accounted for 15% of the total award and Increase in 2013 Sales Backlog accounted for 15%10% of the total award.
The performance necessary for the NEOs to earn their targeted payouts werewas established by the Compensation Committee at levels intended to be challenging, yet attainable, and aligned with our 20112014 business plan. The Compensation Committee retained discretion to adjust the calculation of its financial measures to account for unanticipated events.
For purposes of the 2014 Tower Bonus Plan:
Adjusted Free Cash Flow is defined as net cash provided by continuing operating activities less cash disbursed for purchases of property, plant, and equipment described on page 42 of our 10-K filed with the SEC, excluding net cash provided from or disbursed for customer-funded tooling (which nets to zero over the program lifetime), and (for 2014) excluding cash flow for opportunistic growth initiatives regarding new
For purposes of the 2011 Tower Bonus Plan:
Adjusted EBITDA is defined as net income/loss before interest, taxes, depreciation, amortization, restructuring items and other adjustments described on pages 33 and 34 of our 10-K filed with the SEC. The Compensation Committee weighted this measure at 45% because it is an important driver of shareholder value and is consistent with how analysts and many investors evaluate the business.
Adjusted EBITDA Change in Controllable Factorsis defined as the change in Adjusted EBITDA in 20112014 versus 2010,2013, excluding the impact of volume (customer demand), product mix and foreign exchange.exchange described on page 34 of our 10-K filed with the SEC. For 2014, the impact of the Growth Initiatives is excluded. We determine the impact of volume, mix and foreign exchange on Adjusted EBITDA pursuant to policies that we utilize to manage our business and measure our performance throughout the year. The Compensation Committee excluded the impact of volume, mix and foreign exchange in order to focus management on those elements of cost and efficiency that management can most influence in the near term.
The 20112014 Tower Bonus Plan established a scale for each performance measure displayingthat displays the percent payout relative to a 100% target bonus payout at varying achievement levels. Each scale shows a threshold amount that must be satisfied to earn a payment and the amount necessary to achieve a 100% payout. The maximum payout under the plan is two (2) times the target payout and payout percentages are adjusted ratably between bands of payout percentages. The following scale showsscales show the payouts at various achievement levels:
Adjusted EBITDA 40% | Free Cash Flow 30% | Adjusted EBITDA Change in Controllable Factors 15% | Increase in 2013 Sales Backlog 15% | |||||||||||||||||||||||||
Achievement ($Mils) | Payout (%) | Achievement ($Mils) | Payout (%) | Achievement ($Mils) | Payout (%) | Achievement ($Mils) | Payout (%) | |||||||||||||||||||||
$190 | 0 | % | ($20 | ) | 0 | % | ($15 | ) | 0 | % | $ | 0 | 0 | % | ||||||||||||||
$210 | 100 | % | $ | 0 | 100 | % | ($5 | ) | 100 | % | $ | 100 | 100 | % | ||||||||||||||
$230 | 145 | % | $ | 20 | 145 | % | $ | 10 | 145 | % | $ | 200 | 145 | % | ||||||||||||||
$240 | 175 | % | $ | 30 | 175 | % | $ | 15 | 175 | % | $ | 250 | 175 | % |
Adjusted Free Cash Flow 45% | Adjusted EBITDA 45% | Adjusted EBITDA Change in Controllable Factors 10% | ||||||||||||||||||||||
Achievement ($Mils) | Payout (%) | Achievement ($Mils) | Payout (%) | Achievement ($Mils) | Payout (%) | |||||||||||||||||||
Threshold: | $ | 30 | 0 | % | $ | 200 | 0 | % | ($5 | ) | 0 | % | ||||||||||||
$ | 40 | 80 | % | $ | 210 | 80 | % | ($2 | ) | 80 | % | |||||||||||||
$ | 60 | 100 | % | $ | 220 | 100 | % | $ | 2 | 100 | % | |||||||||||||
$ | 70 | 110 | % | $ | 225 | 110 | % | $ | 4 | 110 | % | |||||||||||||
$ | 80 | 120 | % | $ | 230 | 120 | % | $ | 6 | 120 | % | |||||||||||||
Max: | $ | 90 | 200 | % | $ | 240 | 200 | % | $ | 9 | 200 | % |
For 2011, we met2014, it was determined by the Compensation Committee that performance for bonus purposes should include results from two China joint ventures held for sale at year-end 2014 and accounted for as discontinued operations, as these operations were managed for all of 2014. We achieved all performance thresholds necessaryrequired to pay bonusesbonus under the 20112014 Tower Bonus Plan for each metric exceptPlan. Adjusted Free Cash Flow was $59.0 million, Adjusted EBITDA was $219.2 million, and Adjusted EBITDA Change in Controllable Factors.Factors was $3.1 million. These results would have resulted in a payout of 99.4% for each of the NEOs.
Our Adjusted EBITDA for 2011 was $227.6 million. For 2011However, during 2014, Tower Bonus Plan purposes, however,incurred customer charges retroactive to 2010 – 2013 related to steel scrap. Considering the Compensation Committee elected to increase that amount by $0.2 million to offset the small negative impact of investingthese charges on bonus payouts in a new joint venture in China that was not contemplated whenprior years, the 2011 Adjusted EBITDA target was established. Therefore,Committee exercised its discretion under the Adjusted EBITDA usedplan to reduce the 2014 bonus payouts for 2011 Tower Bonus Plan calculations was $227.8 million, which was above the $190 million threshold required to generate a payout under this measure.
Our Free Cash Flow for 2011 was negative $19.6 million. For 2011 Tower Bonus Plan purposes, however, the Compensation Committee elected to increase that amount by $34.3 million. Of that amount, $4.9 million was due to acquisition payments that were included in cash flow from operations that were made related to Company’s purchase of W Industries (see Note 17each of the NotesNEOs from 99.4% to our 2011 year-end consolidated financial statements as set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 for information about the acquisition)96.5%. Such acquisition was not contemplated when the 2011 Cash Flow target was established. The second adjustment accounted for $6.9 million which was the cash paid for capital expenditures and other working capital items related to the new joint venture in China that was not contemplated when the 2011 Cash Flow target was established. The final adjustment was $22.5 million received from one of our customers in January 2012. Receipt of such amount was factored into the 2011 Cash
Flow target, and the Compensation Committee elected not to penalize bonus plan participants because of a short delay in receiving it. Therefore, the Cash Flow used for 2011 Tower Bonus Plan calculations was $14.7 million, which was above the negative $20 million threshold required to generate a payout under this measure.
Our calculated Adjusted EBITDA Change in Controllable Factors was negative $16.9 million, which was below the negative $15 million threshold required to generate a payout under this measure. Therefore, no payout was generated by this measure under the 2011 Tower Bonus Plan.
Our calculated Increase in 2013 Sales Backlog for 2011 was $121.7 million, which was above the $0 threshold required to generate a payout under this measure.
The Compensation Committee considers each of the adjustments noted above to be appropriate because the bonus plan participants would be otherwise penalized by factors which were outside of the influence of participants or which were not factored into the 2011 targeted results.
Each Named Executive Officer was assigned a target bonus, expressed as a percentage of such participant’s base salary. Mr. Malcolm’s target bonus was 130%. Messrs. Gouin and Rajkovic each had a target bonus of 105%. Mr. Bernard’s effective target bonus was 67.4%. Mr. Bernard’s target bonus was increased from 50% to 60% in March 2011 and from 60% to 80% in August 2011. Dr. Meleghy had a target bonus of 80%.
By applying the results for each measure to the 2011 Tower Bonus Plan table shown above, we calculated a final payout of 110.5% of the targeted bonus for each of the NEOs. We calculated Mr. Malcolm’s 20112014 Tower Bonus Plan payment as follows: (i) the payout percentage of 110.5%96.5%multiplied by (ii) Mr. Malcolm’s individual bonus target percentage of base salary (130%)multiplied by (iii) Mr. Malcolm’s base salary of $840,000, resulting in a $1,206,660$1,053,780 overall bonus award. We calculated the 20112014 Tower Bonus Plan payouts for the other NEOs in the same manner.
In February, 2012, the Compensation Committee approved the 2012 Tower Bonus Plan. The 2012 plan has been structured in a manner similar to the 2011 Tower Bonus Plan. The Compensation Committee established the level of performance necessary for the NEOs to earn their targeted payouts and assigned each Named Executive Officer a target percentage of base salary.
For 2012, the Compensation Committee designated (1) “Adjusted EBITDA”, (2) “Free Cash Flow”, (3) “Adjusted EBITDA Change in Controllable Factors” (which excludes the impact of volume, mix and foreign exchange) and (4) “Increase in 2014 Sales Backlog” as the four financial measures used to determine payouts. All four measures are similar to the ones used under the 2011 Tower Bonus Plan. Adjusted EBITDA performance will account for 40%determination of the totalbonus award Cash Flow performance will account for 30% ofpaid to each NEO is summarized in the total award, Adjusted EBITDA Improvement in Controllable Factors will account for 15% of the total award, and Increase in 2014 Sales Backlog will account for 15% of the total award.table below:
NEO | Salary | Target Bonus as % of Salary | Payout % of Target Bonus | Bonus Award | ||||||||||||
Mark Malcolm | $ | 840,000 | 130 | % | 96.5 | % | $ | 1,053,780 | ||||||||
James Gouin | $ | 472,500 | 105 | % | 96.5 | % | $ | 478,760 | ||||||||
Michael Rajkovic | $ | 577,500 | 105 | % | 96.5 | % | $ | 585,152 | ||||||||
James Bernard | $ | 400,000 | 80 | % | 96.5 | % | $ | 308,800 | ||||||||
Pär Malmhagen* | $ | 441,614 | 60 | % | 96.5 | % | $ | 256,862 |
* | Mr. Malmhagen’s salary of 365,000 Euro and target bonus of 220,000 Euro have been converted to United States Dollars (“USD”) using an exchange rate as of December 31, 2014 of 1 Euro equal to 1.2099 USD (220,000 Euro x 1.2099 x 96.5% = $256,862). |
We believe providing our NEOs with equity interests in our Company motivates them to make decisions that will build the long-term value of ourthe Company and aligns their interests with those of our stockholders.
During 2010, our Board adopted our 2010 Equity Incentive Plan — pursuant to which a total of 4,600,000 shares of our common stock are authorized for issuance in the form of stock options, restricted stock awards and other equity-based awards. During 2011,2014, we granted restricted stock unitsRSUs and Performance Awards to each of our NEOs and we granted stock options to Mr. Bernard, under the 2010 Equity Incentive Plan. The Compensation Committee set a target value for each NEO based upon a review of the competitive practices of our peer companies and the individual performance, skills and tenure of each NEO. This target value was delivered 70% in Performance Awards and 30% in RSUs.
We believe using a combination of RSUs and Performance Awards provides a balance between retaining our executives and motivating them to achieve specific business and value-creating objectives over a three-year performance period. No stock options were granted to NEOs during 2014.
On March 3, 20116, 2014 the Compensation Committee granted RSUs covering the following RSUsnumber of shares of Company common stock to our NEOs pursuant to our 2010 Equity Incentive Plan:
NEO | RSUs Granted | |||
Mr. Malcolm | 14,291 | |||
Mr. Gouin | 4,019 | |||
Mr. Rajkovic | 6,550 | |||
Mr. Bernard | 3,403 | |||
Mr. Malmhagen | 3,131 |
On March 10, 2011 the Compensation Committee granted 2,748These RSUs to Mr. Bernard, pursuant to our 2010 Equity Incentive Plan.
The RSUs granted on March 3, 2011 and March 10, 2011 will vest ratably on March 1, 2012,6, 2015, March 1, 20136, 2016 and March 1, 2014.
On August 15, 2011 the Board of Directors of the Company granted 2,988 RSUs to Mr. Bernard due to his promotion to President, Americas. These RSUs vest ratably on August 15, 2012, August 15, 2013 and August 15, 2014.
On December 20, 2011 the Board of Directors of the Company granted 295,858 RSUs to Mr. Malcolm, and 98,619 RSUs to each of Messrs. Gouin and Rajkovic. These RSUs cliff vest on December 31, 2014. The Board of Directors of the Company granted these RSUs upon each agreeing to extend his employment agreement through December 31, 2014.
All RSUs described above will vest on the vesting dates described above6, 2017 if the executive is employed by us on such vesting date. Suchdates (except that in Mr. Malcolm’s case, he will vest in any remaining unvested outstanding awards on January 1, 2017 pursuant to his employment agreement). The RSUs will also vest in full upon the occurrence of a change in control of ourthe Company, or in the event the executive’s employment terminates due to death or disability, as defined in our 2010 Equity Incentive Plan. In the case of the RSUs granted on December 20, 2011, vesting will also occur on December 31, 2014 if the executive’s employment is not terminated due to voluntary resignation or Cause, with Cause defined in each executive’s employment agreement described below.
On March 10, 20116, 2014, the Compensation Committee granted stock options covering 5,542 sharesthe following target Performance Awards to each NEO to tie a significant portion of NEO compensation to specific business performance results over the three-year performance period of January 1, 2014 through December 31, 2016:
NEO | Target Performance Award | |||
Mr. Malcolm | $ | 882,000 | ||
Mr. Gouin | $ | 248,063 | ||
Mr. Rajkovic | $ | 404,250 | ||
Mr. Bernard | $ | 210,000 | ||
Mr. Malmhagen | $ | 193,214 |
The specific business performance metrics are our Adjusted Earnings Per Share Growth Rate (“EPS Growth Rate”) and our Total Shareholder Return Percentile ranking among a group of peer companies (“TSR Percentile”). These two measures were selected based on the Compensation Committee’s review of the metrics used by our peers for similar awards and the desire to tie NEO rewards to the long-term interests of our shareholders.
50% of the Performance Award is earned based on our EPS Growth Rate for the performance period. Adjusted EPS is our diluted EPS for a fiscal year after adjusting to exclude the effect of extraordinary, unusual or nonrecurring items and is intended to be the same as reported in our fourth quarter earnings presentation for the relevant fiscal year. The EPS Growth Rate is our cumulative Adjusted EPS for the performance period stated in terms of an average annual percentage growth rate. Our NEOs will achieve the targeted amount of this portion of the Performance Award if our EPS Growth Rate is 10% for the performance period.
The remaining 50% of the Performance Award is earned based on our TSR Percentile for the performance period. Total Shareholder Return is the total percentage return per share of common stock based on the average stock price over the first 20 trading days of the performance period compared to Mr. Bernard due to his expanded role as Senior Vice President, Sales and Business Development. These optionsthe average stock price over the last 20 trading days of the performance period assuming the reinvestment of dividends. Our NEOs will vest ratably on March 1, 2012, March 1, 2013 and March 1, 2014. These options have an exercise priceachieve the targeted amount of $16.65.
On Augustthis portion of the Performance Award if our TSR Percentile is 50th for the performance period. TSR Percentile is the percentile ranking of our Total Shareholder Return among the Total Shareholder Returns of the following group of 15 2011peer companies over the same performance period. The Compensation Committee granted stock options covering 12,676 sharesbelieves these companies provide a good representation of our common stockthe competitive business environment in which the Company operates.
American Axle & Manufacturing Holdings, Inc. | Linamar Corporation | |
Autoliv, Inc. | Magna International, Inc. | |
BorgWarner Inc. | Martinrea International Inc. | |
Dana Holding Corporation | Meritor, Inc. | |
Delphi Automotive, PLC | Tenneco Inc. | |
Federal-Mogul Corporation | TRW Automotive Holdings Corp. | |
Johnson Controls, Inc. | Visteon Corporation | |
Lear Corporation |
The amount of the Performance Award paid is dependent upon achieved performance and may range from zero to Mr. Bernard due to his promotion to President, Americas. These options will vest ratably on August 15, 2012, August 15, 2013 and August 15, 2014. These options have an exercise price200% of $14.81.the target amount. The following scales show the payouts at various achievement levels:
All stock options described above will vest on
EPS Growth Rate (50% Weighting) | TSR Percentile (50% Weighting) | |||||||||
% | Pay Out (% of Target) | Percentile Rank vs. Peers | Pay-Out (% of Target) | |||||||
< 5% | 0% | < 25th | 0% | |||||||
5% | 50% | 25th | 50% | |||||||
10% | 100% | 50th | 100% | |||||||
20% | 200% | 75th | 200% |
Payment of the vesting dates described above ifPerformance Award is made after the executiveend of the performance period. A prorated target Performance Award is employed by us on such vesting date. Such options will also vest in full upon the occurrence ofpaid after a change in control of ourthe Company, orexcept Mr. Malcolm’s payment is not prorated. A prorated Performance Award (based on actual performance results through the end of the preceding year) is also paid after the termination of the executive without cause, except Mr. Malcolm’s payment is not prorated. A prorated Performance Award (based on actual performance results through the end of the preceding year) is also paid in the event the executive’s employment terminates due to death or disability, as defined in our 2010 Equity Incentive Plan.
In 2007, Tower Automotive Management, LLC, or Tower Management LLC, an affiliate of our Company, adopted the 2007 Management Incentive Plan, which we refer to as the MIP. In 2008, Tower Management, LLC sold units of its non-voting membership interests, which we refer to as the Management MIP Units, to eight of our executive officers, including each of the NEOs (except Mr. Bernard who was not an executive officer at the time), and to certain of our board members and consultants.
In 2008, Tower Management, LLC, in turn, purchased an equal number of equity interests in our Company. In connection with our conversion in 2010 from a limited liability company to a corporation, our Corporate Conversion, these units became equity interests in Tower International Holdings, LLC, our principal stockholder. We refer to these units as MIP Units. Tower International Holdings, LLC has the same capital structure as we had prior to the consummation of the Corporate Conversion. Tower Management, LLC has no assets other than the MIP Units. Accordingly, the Management MIP Units held by executive officers and certain of our board members and consultants represent indirect ownership interests in the MIP Units.
The MIP is designed to align the interests of Management MIP Unit holders with those of our stockholders by providing such holders with an indirect ownership interest in us.
The Management MIP Units sold to executive officers became vested ratably over four years. All such Management MIP Units are now 100% vested.
Holders of Management MIP Units will not be entitled to any distributions from Tower International Holdings, LLC until Cerberus receives distributions from Tower International Holdings, LLC of $205.9 million (which is referred to as the “Reference Amount”) plus a ten percent return on unpaid distributions, such return running from July 31, 2010 with respect to $180.9 million of such Reference Amount and from August 24, 2010 with respect to the balance. At the time of the Corporate Conversion, a total of 8,500 capital units of Tower International Holdings, LLC were owned by Cerberus and a total of 1,500 capital units of Tower International Holdings, LLC were owned by Tower Management, LLC. See “Outstanding Equity Awards at Fiscal Year-End Tables” below for additional information regarding the Management MIP Units.
We maintain a 401(k) Plan, a tax qualified defined contribution plan, and the NEOs other than Dr. Meleghy are eligible to participate in this plan. We match 100% of the first 1% of each participant’s compensation that is contributed to the plan and 50% of the next 5% of such participant’s compensation that is contributed to the plan.plan, subject to applicable limits imposed by law.
We have entered intoThe employment agreements with each of theour NEOs except Mr. Bernard. The employment agreements provide for the payment of severance benefits to the NEOs under specified circumstances. We believe severance benefits help us attract key executive talent. In entering into these agreements, we considered the benefit of receiving confidentiality, non-competition, non-solicitation and non-disparagement protections. The amount and type of benefits under the employment agreements in place during 2014 are described below under “— Potential“NEO Employment Agreements” and “Potential Payments Upon Termination — Severance —Termination”.
On July 28, 2014, the Company entered into an amended and restated employment agreement with Mr. Malcolm which supersedes his prior employment agreement. Under the agreement Mr. Malcolm was awarded a Retention Bonus, a Succession and Officer Transition Award and a Stock Appreciation Incentive, the details of which can be found in the NEO Employment Agreements.”Agreements section below. The Compensation Committee linked these incentives to key performance objectives. The majority of the value of these incentives can only be earned by Mr. Malcolm upon achievement of a high-level of company performance and through delivering significant incremental value to shareholders.
Messrs. Malcolm, Gouin, Rajkovic and Bernard each receive non-accountablea cash payment in lieu of perquisites in the annual gross amount of $25,000. Because Mr. Bernard began receiving this higher amount upon being promoted to President, AmericasMalmhagen receives perquisites in August, 2011, he actually received $16,909 during 2011.the form of reimbursed relocation expenses and a company vehicle. We consider such amounts to be market competitive and part of the compensation package we believe is necessary to attract key talent. There are no restrictions on how each Named Executive OfficerNEO may use such cash perquisites.
The NEOs participate in our other benefit plans on the same terms as other employees. These plans include medical, and dental insurance and life insurance.
There are currently noIn December 2014, the Compensation Committee established an equity ownership requirements or guidelines that anyguideline for our NEOs to further align the interests of our NEOs with stockholders. The equity ownership guideline is stated in terms of a multiple of base salary and is five (5) times base salary for our CEO and three (3) times base salary for our other NEOs. The NEOs have five (5) years to satisfy the guideline.
Pursuant to our insider trading policy, our directors and NEOs are subject to certain anti-hedging restrictions, including the prohibition from making pledges, short sales, or transactions including options and other employees must meet or maintain.derivatives related to Tower stock.
For 2011, we did not have a formal policy requiring a fixed course of action with respect to compensation adjustments following a restatement of financial results. If we were to consider a restatement of our financial statements for years through 2011, our Board or the Compensation Committee would evaluate whether future compensation adjustments were appropriate based upon the facts and circumstances surrounding the restatement.
The Compensation Committee will take appropriate action to comply with “clawback” regulations promulgated by the SEC pursuant to the Dodd-Frank Act in the event that we restate our financial statements due to material noncompliance with any financial reporting requirement under applicable securities laws.
Consistent withAs described elsewhere in this Proxy Statement, at least once every three years, our proposal at the 2011 Annual Meeting that was approved in an advisory vote by 94.82% of the votes cast by our stockholders, ourannual proxy materials will include on an annual basis a non-binding resolution seeking stockholder approval of the compensation paid to our NEOs (a say-on-pay vote). The first say-on-pay vote that occurred at the 20112014 Annual Meeting of stockholders. With 97%Stockholders resulted in 82.9% of the votes cast by our stockholders approving the compensation paid to our NEOs,NEOs. The vote confirmed the appropriateness of pay policies and programs, therefore, the Compensation Committee did not consider changing our compensation policies for 2011.
TABLE OF CONTENTSas a result of the vote. We include a non-binding resolution seeking stockholder approval in each year’s annual proxy materials.
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for compensation in excess of $1 million per year paid by a publicly held corporation to its chiefprincipal executive officer, chief financial officer and to each of its three other most highly compensated executive officers, unless the compensation qualifies as “performance-based” or is otherwise exempt from Section 162(m). Under a transition rule for a limited periodthat applied to Tower until the 2014 Annual Meeting of time after a company becomes publicly held,Stockholders, the deduction limits dolimit did not apply to any compensation paid pursuant to a compensation plan or agreement that existed during the period in which the corporationTower was not publicly held.held so long as such plan or agreement was properly disclosed at the time of its initial public offering. Because of the expiration of this transition rule, Tower submitted the amended and restated 2010 Equity Incentive Plan for stockholder approval at the 2014 Annual Meeting of Stockholders so that certain performance-based equity and cash based awards under the plan will be exempt from the Section 162(m) deduction limitation. Shareholders approved the amended and restated 2010 Equity Incentive Plan with a vote of 75.0%. The Compensation Committee willintends to consider the potential impact of Section 162(m) on compensation decisions and, intendswhere appropriate, to maintain flexibilitystructure certain compensation arrangements to be exempt from the deduction limitation, but reserves the right to approve compensation for an executive officer that does not meet the deductibility requirements of Section 162(m) in order to provide competitive compensation packages.
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on its review and discussion with management, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement, and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.2014.
By the Compensation Committee,
Dev Kapadia, Chairman
Nicholas ChabrajaDennis DonovanThomas K. Brown
The following table summarizes, for our three most recently completed fiscal years, the compensation of (1)(i) our Chief Executive Officer, (2)(ii) our Chief Financial Officer, and (3)(iii) each of our three other most highly compensated executive officers for services rendered in fiscal 20112014 who were serving as executive officers on December 31, 2011, which we2014. We refer to these individuals as our Named“Named Executive OfficersOfficers” or NEOs.“NEOs”.
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation | Total | ||||||||||||||||||||||||
Mark Malcolm President and Chief Executive Officer | 2011 | $ | 840,000 | $ | — | $ | 3,378,005 | $ | — | $ | 1,206,660 | $ | 36,787 | (4) | $ | 5,461,452 | ||||||||||||||||
2010 | $ | 816,667 | $ | — | $ | 6,608,056 | $ | 716,623 | $ | 2,964,850 | (5) | $ | 37,538 | (4) | $ | 11,143,734 | ||||||||||||||||
2009 | $ | 653,333 | (6) | $ | — | $ | — | $ | — | $ | 552,718 | $ | 34,835 | (4) | $ | 1,240,886 | ||||||||||||||||
James Gouin Executive Vice President and Chief Financial Officer | 2011 | $ | 472,500 | $ | — | $ | 1,106,307 | $ | — | $ | $548,218 | $ | 35,435 | (4) | $ | 2,162,460 | ||||||||||||||||
2010 | $ | 459,375 | $ | — | $ | 3,083,769 | $ | 201,551 | $ | $1,548,986 | (7) | $ | 35,391 | (4) | $ | 5,329,072 | ||||||||||||||||
2009 | $ | 408,750 | (8) | $ | — | $ | — | $ | — | $ | $281,565 | $ | 34,230 | (4) | $ | 724,545 | ||||||||||||||||
Michael Rajkovic Executive Vice President and Chief Operating Officer | 2011 | $ | 577,500 | $ | — | $ | 1,173,240 | $ | — | $ | 670,044 | $ | 34,458 | (4) | $ | 2,455,242 | ||||||||||||||||
2010 | $ | 561,458 | $ | — | $ | 4,405,375 | $ | 328,457 | $ | 2,020,983 | (9) | $ | 26,831 | (4) | $ | 7,343,104 | ||||||||||||||||
2009 | $ | 499,584 | (8) | $ | — | $ | — | $ | — | $ | 344,135 | $ | 27,062 | (4) | $ | 870,781 | ||||||||||||||||
James Bernard President, Americas | 2011 | $ | 337,182 | $ | — | $ | 90,006 | $ | 154,003 | $ | 363,446 | (10) | $ | 27,647 | (11) | $ | 972,284 | |||||||||||||||
Gyula Meleghy President, International Operations(8) | 2011(12) | $ | 435,456 | $ | — | $ | 106,310 | $ | — | $ | 384,943 | $ | 41,029 | (13) | $ | 967,738 | ||||||||||||||||
2010(14) | $ | 431,200 | $ | — | $ | 1,762,150 | $ | 201,551 | $ | 1,119,949 | (15) | $ | 40,752 | (16) | $ | 3,555,602 | ||||||||||||||||
2009(17) | $ | 418,560 | (8) | $ | — | $ | — | $ | — | $ | 216,242 | $ | 319,967 | (18) | $ | 954,769 |
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation | Total | ||||||||||||||||||||||||
Mark Malcolm President and Chief Executive Officer | 2014 | $ | 840,000 | $ | — | $ | 7,191,895 | (4) | $ | — | $ | 1,428,630 | (5) | $ | 38,800 | (16) | $ | 9,499,324 | ||||||||||||||
2013 | $ | 840,000 | $ | — | $ | 378,004 | $ | — | $ | 1,794,366 | (6) | $ | 38,639 | (16) | 3,051,009 | |||||||||||||||||
2012 | $ | 840,000 | $ | — | $ | 377,999 | $ | 882,001 | $ | 1,304,940 | $ | 37,026 | (16) | $ | 3,441,966 | |||||||||||||||||
James Gouin Executive Vice President and Chief Financial Officer | 2014 | $ | 472,500 | $ | — | $ | 106,303 | $ | — | $ | 584,187 | (7) | $ | 36,795 | (16) | $ | 1,199,785 | |||||||||||||||
2013 | $ | 472,500 | $ | — | $ | 106,306 | $ | — | $ | 732,032 | (8) | $ | 35,710 | (16) | $ | 1,346,548 | ||||||||||||||||
2012 | $ | 472,500 | $ | — | $ | 106,315 | $ | 248,065 | $ | 592,869 | $ | 35,517 | (16) | $ | 1,455,266 | |||||||||||||||||
Michael Rajkovic Executive Vice President and Chief Operating Officer | 2014 | $ | 577,500 | $ | — | $ | 173,248 | $ | — | $ | 756,958 | (9) | $ | 35,219 | (16) | $ | 1,542,924 | |||||||||||||||
2013 | $ | 577,500 | $ | — | $ | 173,244 | $ | — | $ | 949,785 | (10) | $ | 35,049 | (16) | $ | 1,735,578 | ||||||||||||||||
2012 | $ | 577,500 | $ | — | $ | 173,249 | $ | 404,253 | $ | 724,618 | $ | 34,696 | (16) | $ | 1,914,316 | |||||||||||||||||
James Bernard, President, Americas | 2014 | $ | 400,000 | $ | — | $ | 90,009 | $ | — | $ | 398,050 | (11) | $ | 37,071 | (16) | $ | 925,130 | |||||||||||||||
2013 | $ | 400,000 | $ | — | $ | 90,003 | $ | — | $ | 499,410 | (12) | $ | 36,895 | (16) | $ | 1,026,308 | ||||||||||||||||
2012 | $ | 400,000 | $ | — | $ | 90,003 | $ | 209,999 | $ | 494,900 | (13) | $ | 36,114 | (16) | $ | 1,231,016 | ||||||||||||||||
Pär Malmhagen(20) President, Europe(21) | 2014 | $ | 441,614 | $ | 60,495 | (19) | $ | 82,815 | $ | — | $ | 338,978 | (14) | $ | 93,810 | (17) | $ | 1,017,711 | ||||||||||||||
2013 | $ | 502,824 | $ | — | $ | 78,347 | $ | — | $ | 464,222 | (15) | $ | 44,245 | (18) | $ | 1,089,638 |
(1) | Represents the aggregate grant date fair value of stock awards. The assumptions used by us in making these calculations are described in Note |
(2) | Represents the dollar amount recognized by us for financial statement purposes as the aggregate grant date fair value of stock options. The assumptions used by us in making these calculations are described in the above-mentioned Note |
(3) |
(4) | This amount includes $377,997 related to RSUs granted on 3/6/14; and $6,813,898 related to the Stock Appreciation Incentive Award granted on 7/28/14, determined using a Monte Carlo valuation. No actual value has been paid to Mr. Malcolm in 2014 under this incentive. Company share price must exceed a threshold of $40.59 for this incentive to provide any value to Mr. Malcolm. |
(5) | Represents $1,053,780 earned pursuant to the Tower Bonus Plan and $374,850 representing the grant date value of the TSR portion of the Performance Award granted on 3/6/2014. The TSR portion of the Performance Award was valued at 85% of target, determined using a Monte Carlo valuation. |
(6) | Represents $1,313.676 earned pursuant to the Tower Bonus Plan and $480,690 representing the grant date value of the TSR portion of the Performance Award granted on 3/5/2013. The TSR portion of the Performance Award was valued at 109% of target, determined using a Monte Carlo valuation. |
(7) | Represents $478,760 earned pursuant to the Tower Bonus Plan and $105,427 representing the grant date value of the TSR portion of the Performance Award granted on 3/6/2014. The TSR portion of the Performance Award was valued at 85% of target, determined using a Monte Carlo valuation. |
(8) | Represents $596,838 earned pursuant to the Tower Bonus Plan and $135,194 representing the grant date value of the TSR portion of the Performance Award granted on 3/5/2013. The TSR portion of the Performance Award was valued at 109% of target, determined using a Monte Carlo valuation. |
(9) | Represents $585,152 earned pursuant to the Tower Bonus Plan and $171,806 representing the grant date |
value of the TSR portion of the Performance Award granted on 3/6/2014. The TSR portion of the Performance Award was valued at 85% of target, determined using a Monte Carlo valuation. |
(10) | Represents $729,469 earned pursuant to the Tower Bonus Plan and $220,316 representing the grant date value of the TSR portion of the Performance Award granted on 3/5/2013. The TSR portion of the Performance Award was valued at 109% of target, determined using a Monte Carlo valuation. |
(11) | Represents $308,800 earned pursuant to the Tower Bonus Plan and $89,250 representing the grant date value of the TSR portion of the Performance Award granted on 3/6/2014. The TSR portion of the Performance Award was valued at 85% of target, determined using a Monte Carlo valuation. |
(12) | Represents $384,960 earned pursuant to the Tower Bonus Plan and $114,450 representing the grant date value of the TSR portion of the Performance Award granted on 3/5/2013. The TSR portion of the Performance Award was valued at 109% of target, determined using a Monte Carlo valuation. |
(13) | Represents $112,500 earned pursuant to the SVCP and $382,400 earned pursuant to the 2012 Tower Bonus Plan. |
(14) | Represents $256,862 earned pursuant to the Tower Bonus Plan and $82,116 representing the grant date value of the TSR portion of the Performance Award granted on 3/6/2014. The TSR portion of the Performance Award was valued at 85% of target, determined using a Monte Carlo valuation. |
(15) | Represents $364,596 earned pursuant to the Tower Bonus Plan and $99,625 representing the grant date value of the TSR portion of the Performance Award granted on 3/5/2013. The TSR portion of the Performance Award was valued at 109% of target, determined using a Monte Carlo valuation. |
(16) | Represents non-accountable cash perquisites of $25,000, income associated with certain benefits and company paid |
(17) |
(18) | Amount represents company-paid benefits toward automobile, pension and other insurances and certain health-related subsidies (excludes reimbursed Relocation expenses). |
(19) | Represents |
(20) | Euro converted to USD using a foreign exchange rate as of 12/31/14 of 1 Euro equal to 1.2099 USD. |
(21) | Euro converted to USD using a |
The following sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 20112014 made to our NEOs.
Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares of Stock or Units(2) (#) | All Other Option Awards: Number of Securities Underlying Options(3) (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(4),(5) | |||||||||||||||||||||||||||
Name | Threshold | Target | Maximum | |||||||||||||||||||||||||||||
Mark Malcolm | 1/1/2011 | $ | 0 | $ | 1,092,000 | $ | 2,184,000 | |||||||||||||||||||||||||
3/3/2011 | 22,703 | $ | 378,005 | |||||||||||||||||||||||||||||
12/20/2011 | 295,858 | $ | 3,000,000 | |||||||||||||||||||||||||||||
James Gouin | 1/1/2011 | $ | 0 | $ | 496,125 | $ | 992,250 | |||||||||||||||||||||||||
3/3/2011 | 6,385 | $ | 106,310 | |||||||||||||||||||||||||||||
12/20/2011 | 98,619 | $ | 999,997 | |||||||||||||||||||||||||||||
Michael Rajkovic | 1/1/2011 | $ | 0 | $ | 606,375 | $ | 1,212,750 | |||||||||||||||||||||||||
3/3/2011 | 10,405 | $ | 173,243 | |||||||||||||||||||||||||||||
12/20/2011 | 98,619 | $ | 999,997 | |||||||||||||||||||||||||||||
James Bernard | 1/1/2011 | $ | 0 | $ | 227,100 | $ | 454,200 | |||||||||||||||||||||||||
3/10/2011 | 5,542 | $ | 16.65 | $ | 50,751 | |||||||||||||||||||||||||||
3/10/2011 | 2,748 | $ | 45,754 | |||||||||||||||||||||||||||||
8/15/2011 | 12,676 | $ | 14.81 | $ | 103,252 | |||||||||||||||||||||||||||
8/15/2011 | 2,988 | $ | 44,252 | |||||||||||||||||||||||||||||
Gyula Meleghy | 1/1/2011 | $ | 0 | $ | 348,365 | $ | 696,730 | |||||||||||||||||||||||||
3/3/2011 | 6,385 | $ | 106,310 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | Base Price of Stock Awards ($/Sh) | Grant Date Fair Value of Stock Awards(4) | ||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold # of Shares | Target # of Shares | Maximum # of Shares | |||||||||||||||||||||||||||||||||
Mark Malcolm(5) | 1/1/2014 | $ | 0 | $ | 1,092,000 | $ | 2,184,000 | |||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 441,000 | $ | 882,000 | ||||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 441,000 | $ | 882,000 | 14,291 | $ | 26.45 | $ | 377,997 | |||||||||||||||||||||||||||||
7/28/2014 | 0 | 123,183 | 359,777 | |||||||||||||||||||||||||||||||||||||
James Gouin | 1/1/2014 | $ | 0 | $ | 496,125 | $ | 992,250 | |||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 124,032 | $ | 248,063 | ||||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 124,032 | $ | 248,063 | 4,019 | $ | 26.45 | $ | 106,303 | |||||||||||||||||||||||||||||
Michael Rajkovic | 1/1/2014 | $ | 0 | $ | 606,375 | $ | 1,212,750 | |||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 202,125 | $ | 404,250 | ||||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 202,125 | $ | 404,250 | 6,550 | $ | 26.45 | $ | 173,248 | |||||||||||||||||||||||||||||
James Bernard | 1/1/2014 | $ | 0 | $ | 320,000 | $ | 640,000 | |||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 105,000 | $ | 210,000 | ||||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 105,000 | $ | 210,000 | 3,403 | $ | 26.45 | $ | 90,009 | |||||||||||||||||||||||||||||
Pär Malmhagen(6) | 1/1/2014 | $ | 0 | $ | 266,178 | $ | 532,356 | |||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 96,607 | $ | 193,214 | ||||||||||||||||||||||||||||||||||
3/6/2014 | $ | 0 | $ | 96,607 | $ | 193,214 | 3,131 | $ | 26.45 | $ | 82,815 |
(1) |
(2) | The target number of shares of our common stock assumes achievement of the minimum Stock Appreciation Incentive Award ($5,000,000) divided by the minimum price of our common stock per share needed to achieve it ($40.59 per share). The maximum number of shares of our common stock assumes achievement of the maximum Stock Appreciation Incentive Award ($20,000,000) divided by the price per share of our common stock needed to achieve it ($55.59 per share). The Stock Appreciation Incentive Award is payable in shares of our common stock or in cash. |
(3) | Awards reflect the number of RSUs granted to the Named Executive Officers. The RSUs granted on 3/ |
(4) | Grant date fair value of |
(5) | Any non-vested awards will become fully vested effective 1/1/17 per |
(6) | For amount granted on 1/1/2014, Euro converted to USD using a foreign exchange rate as of 12/ |
The stock optionsRSUs and RSUsPerformance Awards granted during 20112014 were granted pursuant to our 2010 Equity Incentive Plan. That plan authorizes the grant of the following types of awards: nonqualified stock options, or NSOs, incentive stock options, or ISOs, stock appreciation rights, or SARs, restricted stock, restricted stock units, or RSUs, performance shares, performance units, other cash-based awards and other stock-based awards. Awards may be granted to employees, officers, non-employee board members, consultants and other service providers of our Company and its affiliates. However, ISOs may be granted only to employees.
We have authorized a total of 4,600,000 shares of common stock for issuance pursuant to all awards granted under the 2010 Equity Incentive Plan. The number of shares issued or reserved pursuant to the 2010 Equity Incentive Plan (or pursuant to outstanding awards) is subject to adjustment as a result of mergers, consolidations, reorganizations, stock splits, stock dividends and other changes in our common stock. Shares subject to awards that have been terminated, expired unexercised, forfeited or settled in cash do not count as
shares issued under the 2010 Equity Incentive Plan. No person may receive awards of stock options or SARs during any calendar year for more than 500,000 shares of our common stock.
Vesting of awards granted under the 2010 Equity Incentive Plan may be subject to the satisfaction of one or more performance goals established by the Compensation Committee. The performance goals may vary from participant to participant, group to group, and period to period. Performance goals may be weighted for different factors and measures. The Compensation Committee will certify the degree of attainment of performance goals after the end of each year.
The Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in the 2010 Equity Incentive Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, or (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and SARs to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or SAR in exchange for a substitute option; (d) cancel any award of restricted stock, RSUs, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock, RSU, performance share or performance unit for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or SAR in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control, and cancel any option or SAR without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; or (g) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate. The grant agreements for the RSUs and stock options granted in connection with our IPO provide for accelerated vesting upon a change in control. The Compensation Committee currently anticipates that grants of stock options, RSUs, restricted stock and other equity-based awards in the future will contain similar accelerated vesting provisions.
The following 20112014 Outstanding Equity Awards at Fiscal Year-End table summarizestables summarize our NEOs’ outstanding equity awards under the 2010 Equity Incentive Plan at December 31, 2011.2014.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||||
Grant Date | OPTION AWARDS | Grant Date | OPTION AWARDS | |||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options(1) (#) Exercisable | Number of Securities Underlying Unexercised Options(1) (#) Unexercisable | Option Exercise Price(1) ($) | Option Expiration Date(1) | Number of Securities Underlying Unexercised Options(1) (#) Exercisable | Number of Securities Underlying Unexercised Options(1) (#) Unexercisable | Option Exercise Price(1) ($) | Option Expiration Date(1) | ||||||||||||||||||||||||||||||||
Mark Malcolm | 10/14/2010 | (4) | 0 | 100,227 | $ | 13.00 | 10/14/2020 | 10/14/2010 | 100,227 | 0 | $ | 13.00 | 10/14/2020 | |||||||||||||||||||||||||||
3/6/2012 | (4) | 97,503 | 48,750 | $ | 11.71 | 3/6/2022 | ||||||||||||||||||||||||||||||||||
James Gouin | 10/14/2010 | (4) | 0 | 28,189 | $ | 13.00 | 10/14/2020 | 10/14/2010 | 9,396 | 0 | $ | 13.00 | 10/14/2020 | |||||||||||||||||||||||||||
3/6/2012 | (4) | 13,712 | 13,710 | $ | 11.71 | 3/6/2022 | ||||||||||||||||||||||||||||||||||
Michael Rajkovic | 10/14/2010 | (4) | 0 | 45,938 | $ | 13.00 | 10/14/2020 | 10/14/2010 | 15,312 | 0 | $ | 13.00 | 10/14/2020 | |||||||||||||||||||||||||||
3/6/2012 | (4) | 22,345 | 22,343 | $ | 11.71 | 3/6/2022 | ||||||||||||||||||||||||||||||||||
James Bernard | 10/14/2010 | (4) | 0 | 6,364 | $ | 13.00 | 10/14/2020 | 3/6/2012 | (4) | 0 | 11,606 | $ | 11.71 | 3/6/2022 | ||||||||||||||||||||||||||
3/10/2011 | (4) | 0 | 5,542 | $ | 16.65 | 3/3/2021 | ||||||||||||||||||||||||||||||||||
8/15/2011 | (7) | 0 | 12,676 | $ | 14.81 | 8/15/2021 | ||||||||||||||||||||||||||||||||||
Gyula Meleghy | 10/14/2010 | (4) | 0 | 28,189 | $ | 13.00 | 10/14/2020 | |||||||||||||||||||||||||||||||||
Pär Malmhagen | 6/1/2012 | (8) | 0 | 5,161 | $ | 12.66 | 6/1/2022 |
STOCK AWARDS | STOCK AWARDS | |||||||||||||||||||||||
Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested(2) (#) | Market Value of Shares or Units of Stock That Have Not Vested(2),(3) ($) | Grant Date | Number of Shares or Units of Stock That Have Not Vested(2) (#) | Market Value of Shares or Units of Stock That Have Not Vested (2),(3) ($) | ||||||||||||||||||
Mark Malcolm | 10/15/2010 | (5) | 254,156 | $ | 2,729,635 | 3/6/2012 | (4) | 10,760 | $ | 274,918 | ||||||||||||||
3/5/2013 | (5) | 19,414 | $ | 496,028 | ||||||||||||||||||||
3/3/2011 | (4) | 22,703 | $ | 243,830 | 3/6/2014 | (6) | 14,291 | $ | 365,135 | |||||||||||||||
12/20/2011 | (6) | 295,858 | $ | 3,177,515 | 7/28/2014 | (7) | — | $ | 6,813,898 | |||||||||||||||
James Gouin | 10/15/2010 | (5) | 118,606 | $ | 1,273,828 | 3/6/2012 | (4) | 3,025 | $ | 77,289 | ||||||||||||||
3/3/2011 | (4) | 6,385 | $ | 68,575 | 3/5/2013 | (5) | 5,460 | $ | 139,503 | |||||||||||||||
12/20/2011 | (6) | 98,619 | $ | 1,059,168 | 3/6/2014 | (6) | 4,019 | $ | 102,685 | |||||||||||||||
Michael Rajkovic | 10/15/2010 | (5) | 169,437 | $ | 1,819,753 | 3/6/2012 | (4) | 4,931 | $ | 125,987 | ||||||||||||||
3/3/2011 | (4) | 10,405 | $ | 111,750 | 3/5/2013 | (5) | 8,898 | $ | 227,344 | |||||||||||||||
12/20/2011 | (6) | 98,619 | $ | 1,059,168 | 3/6/2014 | (6) | 6,550 | $ | 167,353 | |||||||||||||||
James Bernard | 3/10/2011 | (4) | 2,748 | $ | 29,514 | 3/6/2012 | (4) | 2,562 | $ | 65,459 | ||||||||||||||
8/15/2011 | (7) | 2,988 | $ | 32,091 | 3/5/2013 | (5) | 4,622 | $ | 118,092 | |||||||||||||||
Gyula Meleghy | 10/15/2010 | (5) | 67,775 | $ | 727,904 | |||||||||||||||||||
3/3/2011 | (4) | 6,385 | $ | 68,575 | 3/6/2014 | (6) | 3,403 | $ | 86,947 | |||||||||||||||
Pär Malmhagen | 6/1/2012 | (8) | 1,139 | $ | 29,101 | |||||||||||||||||||
3/5/2013 | (5) | 4,024 | $ | 102,813 | ||||||||||||||||||||
3/6/2014 | (6) | 3,131 | $ | 79,997 |
(1) | Refers to stock options. |
(2) | Refers to RSUs. |
(3) | Market Value is the number of RSUs granted on 3/6/12, 6/1/12, 3/5/13 and 3/6/14 multiplied by |
(4) |
(5) | Unvested RSUs vest ratably on March |
(6) |
(7) | Represents the grant date fair value of the Stock Appreciation Incentive Award. |
(8) | Unexercisable options and unvested RSUs vest on May 11, 2015. |
(9) | Any non-vested awards will become fully vested effective 1/1/17 per Mr. Malcolm's employment agreement. |
No stock options were exercised by any of the NEOs during 2011.
The table below shows the number of stock options exercised and RSUs acquired on vesting in 20112014 and the value realized by the NEOs.
Options Exercised and Stock Vested | ||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Number of RSUs Acquired on Vesting in 2011 | Value Realized on Vesting in 2011(1) | 2014 Exercise Date | Number of Shares Acquired on Exercise in 2014 (#) | Value Realized on Exercise in 2014(1) ($) | 2014 Vesting Date | Number of Shares Acquired on Vesting in 2014 (#) | Value Realized on Vesting in 2014(2) ($) | |||||||||||||||||||||||||
Mark Malcolm | 254,156 | $ | 4,340,984 | 3/1/2014 | 7,567 | $ | 194,321 | |||||||||||||||||||||||||
3/6/2014 | 20,468 | $ | 541,379 | |||||||||||||||||||||||||||||
12/31/2014 | 295,858 | $ | 7,721,894 | |||||||||||||||||||||||||||||
James Gouin | 118,607 | $ | 2,025,808 | 3/1/2014 | 2,128 | $ | 54,647 | |||||||||||||||||||||||||
3/6/2014 | 5,757 | $ | 152,273 | |||||||||||||||||||||||||||||
12/31/2014 | 98,619 | $ | 2,573,956 | |||||||||||||||||||||||||||||
Michael Rajkovic | 169,438 | $ | 2,894,001 | 3/1/2014 | 3,468 | $ | 89,058 | |||||||||||||||||||||||||
3/6/2014 | 9,381 | $ | 248,127 | |||||||||||||||||||||||||||||
12/31/2014 | 98,619 | $ | 2,573,956 | |||||||||||||||||||||||||||||
James Bernard | 0 | $ | — | 5/2/2014 | 17,972 | $ | 293,871 | 3/1/2014 | 916 | $ | 23,523 | |||||||||||||||||||||
Gyula Meleghy | 67,775 | $ | 1,157,597 | |||||||||||||||||||||||||||||
8/15/2014 | 12,618 | $ | 232,359 | 3/6/2014 | 4,874 | $ | 128,917 | |||||||||||||||||||||||||
8/18/2014 | 5,600 | $ | 108,640 | 8/15/2014 | 996 | $ | 33,944 | |||||||||||||||||||||||||
Pär Malmhagen | 6/9/2014 | 5,161 | $ | 104,777 | 5/11/2014 | 1,139 | $ | 31,983 | ||||||||||||||||||||||||
3/6/2014 | 2,012 | $ | 53,217 |
(1) |
The table below shows the Management MIP Units held by the NEOs that vested in 2011 as well as the total number of vested Management MIP Units held by the NEOs.
MIP Unit Awards | ||||||||||||||||||||
Name | Number of Management MIP Units Acquired on Vesting in 2011 | Value Realized on Vesting in 2011(1) | Total Vested Management MIP Units(2) | Market Value of Management MIP Units That Have Vested(3) | ||||||||||||||||
Mark Malcolm | 75 | — | 300 | $ | — | |||||||||||||||
James Gouin | 25 | — | 100 | $ | — | |||||||||||||||
Michael Rajkovic | 43.75 | — | 175 | $ | — | |||||||||||||||
James Bernard | 0 | — | 0 | $ | — | |||||||||||||||
Gyula Meleghy | 25 | — | 100 | $ | — |
(2) |
On July 28, 2014, Mr. Malcolm and Tower Automotive Operations USA I, LLC, a subsidiary of the Company, entered into an amended and restated employment agreement, which superseded Mr. Malcolm’s prior employment agreement which was entered into on March 4, 2013.
Under the new employment agreement, the term of Mr. Malcolm’s employment, which would have expired on December 31, 2014, has been extended through December 31, 2016 (the “Retirement Date”), at which time Mr. Malcolm will retire from employment with us. In addition to continuing Mr. Malcolm’s annual base salary of $840,000 and his eligibility for an annual target incentive of 130% of his annual base salary, the new employment agreement provides the incentives set forth below to encourage Mr. Malcolm to (i) continue his employment to the Retirement Date, or the consummation of a “change in control” occurring before the Retirement Date, (ii) facilitate a successful chief executive officer succession and other officer transition plan for the Company beyond his Retirement Date, and (iii) create shareholder value.
Mr. Malcolm will be entitled to receive a lump sum cash retention bonus in the amount of $3,000,000 if his employment is not terminated by the Company for cause or by Mr. Malcolm without good reason, in either case, prior to the earlier of (a) the Retirement Date, or (b) a “change in control” (as defined in the employment agreement). The retention bonus is payable on the earlier of January 16, 2017 or the date of a change in control.
Mr. Malcolm will be entitled to receive a lump sum special transition cash bonus in the amount of $3,000,000 if Mr. Malcolm successfully delivers to our Board’s satisfaction a comprehensive chief executive officer succession and other officer transition plan. This amount will not be paid if (i) a change in control is consummated prior to the Retirement Date, or (ii) Mr. Malcolm’s employment is terminated (a) by the Company for cause, or (b) by Mr. Malcolm without good reason, in either case, prior to the Retirement Date. The special transition bonus is payable on January 16, 2017.
Mr. Malcolm will be entitled to receive a stock appreciation incentive award payable in cash or shares of our common stock in the amount of $5,000,000 if a specific Appreciation Hurdle (as defined in the employment agreement) with respect to our common stock is achieved during the term of the employment agreement. This amount, even if the Appreciation Hurdle is achieved, will not be paid if (i) Mr. Malcolm’s employment is terminated by the Company for cause, or (ii) by Mr. Malcolm without good reason, in either case, prior to the earlier of (a) the Retirement Date, or (b) a change in control. In general, the Appreciation Hurdle will be met if the per share closing price of our common stock exceeds $40.59, an increase of at least $5.00 from our per share closing price on July 25, 2014. For each additional one dollar by which (i) the per share closing price of our common stock exceeds the $5.00 Appreciation Hurdle as of the Retirement Date, or (ii) the price per share of common stock payable in connection with a change in control consummated prior to the Retirement Date exceeds the $5.00 Appreciation Hurdle, up to a maximum of $15.00 above the $5.00 Appreciation Hurdle, the $5,000,000 payment will be increased by $1,000,000 (up to a maximum stock appreciation incentive award of $20,000,000). The stock appreciation incentive award is payable on the earlier of January 16, 2017 or the date of a change in control. The stock appreciation incentive award will be paid in cash or shares of our common stock, in the discretion of the Compensation Committee, unless a change in control occurs in which event it will be paid in cash.
All outstanding equity and cash-based performance awards granted to Mr. Malcolm will immediately become fully vested (i) upon a change in control (determined based on target level performance and without pro-ration for partially completed performance periods), and (ii) subject to Mr. Malcolm’s execution, delivery and non-revocation of a release, upon the termination of Mr. Malcolm’s employment (a) by the Company without cause, or (b) by Mr. Malcolm for good reason prior to the Retirement Date (determined based on actual performance through the end of the preceding fiscal year and without pro-ration for partially completed performance periods). Upon Termination
We haveDuring 2013, we entered into employment agreements with each of Messrs. Malcolm (dated August 1, 2007, as amended), Gouin, (dated November 1, 2007, as amended)Rajkovic, Bernard and Rajkovic (dated August 16, 2007, as amended) and Dr. Meleghy (dated February 15, 2000). Dr. Meleghy’s employment agreement terminated upon his retirement, effective April 30, 2012.Malmhagen. Each of the employment agreements was approved and authorized by the Compensation Committee orCommittee.
The term of our board (other than Dr. Meleghy’s agreement, which was assumed by the Predecessor). Our2013 employment agreements with Messrs. Malcolm, Gouin and Rajkovic have been extended such that their terms will continue untilexpired on December 31, 2014. In October, 2014, we entered into new amended and restated employment agreements with eachMessrs. Gouin and Rajkovic which became effective on January 1, 2015 and expire on December 31, 2017. Each agreement being extendableis subject to extension for
successive one-year periods or, if the executive agrees, two-year or three-year periods. Each of the employment agreements was approved and authorized by the Compensation Committee.
The term of our employment agreement with Mr. Bernard does not have anexpires December 31, 2015, but is also subject to extension for successive one-year periods or, if the executive agrees, two-year or three-year periods. Our employment agreement specifying a term of employment.with Mr. Malmhagen is for successive one-year terms ending each December 31st.
Each employment agreement in effect during 2014 provides for a minimum annual base salary ($840,000 for Mr. Malcolm, $472,500472,500 for Mr. Gouin, $577,500 for Mr. Rajkovic, $400,000 for Mr. Bernard and €336,000365,000 Euro for Dr. Meleghy),Mr. Malmhagen) and the agreements for Messrs. Malcolm, Rajkovic and Gouin provide that the executive’s base salary may be increased from time to time at our discretion. Each of the agreements also provide forprovides eligibility for an annual target incentive compensation, currently at the target level of 130% of base salary for Mr. Malcolm, 105% of annual base salary for Messrs. Gouin and Rajkovic, and 80% of annual base salary for Dr. Meleghy.Mr. Bernard and 220,000 Euro (approximately 60% of annual base salary) for Mr. Malmhagen. Effective January 1, 2015, the amended and restated employment agreements with Messrs. Gouin and Rajkovic provide for minimum base salaries of $525,000 and $625,000, respectively, and increase the annual target incentives of each to 110% of annual base salary.
If Messrs. Malcolm’s, Gouin’sThe employment agreements for Mr. Bernard and Mr. Malmhagen also include a cash retention bonus equal to $720,000 and 585,000 Euro, respectively, if the executive is still employed on December 31, 2015. The retention bonus vests earlier upon a change in control or Rajkovic’s employmentif the executive is terminated by us for “cause”,the Company without cause or if the executive’s employment terminates due to death or disability.
If Mr. Malcolm’s Mr. Gouin’s or Mr. Rajkovic’s employment is terminated due to the executive’shis death or disability,“disability” as that term is defined in his employment agreement, if we terminate the executive’shis employment without “cause,”“cause”, or if the executivehe terminates his employment for “good reason” (other than in the case of Mr. Rajkovic) or if the executive’s employment agreement terminates because we do not elect to extend the term of the agreement, the executive, he will receive the following benefits:
(a) an aggregate amount equal to (i) in the case of Mr. Malcolm, two (2) times his annualized base salary in effect as of the effective date of termination payable in 12 equal monthly installments, and (ii) in the case of Messrs. Gouin and Rajkovic, one times his annualized base salary in effect as of the effective date of termination payable in 12 equal monthly installments;
(b) COBRA premiums will be waived to the extent the cost of coverage exceeds the cost we charge for active employees for similar coverage, until the first to occur of (i) the first twelve12 months of COBRA coverage, or (ii) the date the executivehe is covered under another group health plan.
If Mr. Malcolm retires from employment on the Retirement Date of December 31, 2016, he will receive the following (in addition to certain accrued but unpaid amounts payable through his date of termination and amounts due, as described above, pursuant to the terms of his employment agreement related to the Retention Bonus, CEO Succession and Officer Transition Award, Stock Appreciation Incentive Award and Accelerated Vesting of Equity and Performance Awards), subject to execution of a release and compliance with confidentiality, non-solicitation, non-compete, non-disparagement and cooperation requirements:
(a) the annual bonus relating to the 2016 calendar year based on the actual awards earned and paid for the fiscal year, and
(b) full vesting of all 2010 Equity Incentive Plan awards effective as of January 1, 2017 (determined in the case of cash performance awards, based on the total amount of the performance award that would have been earned had the relevant performance period ended on the Retirement Date (based on Actual Performance results for that period), without proration.
If Messrs. Gouin’s, Rajkovic’s or Bernard’s employment is terminated involuntarily anddue to his death or “disability” as that term is defined in each employment agreement, if we terminate any such executive’s employment without cause,“cause”, if he terminates his employment for “good reason” (other than in the case of Mr. Bernard) or if his
employment agreement terminates because we do not elect to extend the term of the agreement, he will be entitledreceive the following (in addition to receive, pursuantcertain accrued but unpaid amounts payable through the executive’s date of termination), subject to our executive severance policy,execution of a release and compliance with confidentiality, non-solicitation, non-compete, non-disparagement and cooperation requirements:
(a) an aggregate amount equal to (i) one (1) times his annualized base salary, in effect as of the effective date of termination.termination payable in 12 equal monthly installments, (ii) a pro-rated portion (based on the number of days in the calendar year up to and including the date of termination) of the annual bonus relating to the calendar year of termination based on the actual awards for the plan year of termination, and (iii) the average of the respective executive’s bonuses paid for the three consecutive years immediately prior to the year of termination; and
(b) COBRA premiums will be waived to the extent the cost of coverage exceeds the cost we charge for active employees for similar coverage, until the first to occur of (i) the first twelve12 months of COBRA coverage or (ii) the date the executive is covered under another group health plan.
If Mr. BernardMalmhagen’s employment agreement (also known as his service agreement) is terminated or not extended by the Company before his attainment of age 65 for reasons other than cause as defined in his service agreement or disability as defined in his service agreement he will also receive any other payments duebe entitled, as severance, to him according(i) the payment of his fixed salary for 12 months following the termination of his service agreement, (ii) a payment of one (1) times his target bonus for the year of termination, (iii) a pro-rated portion (based on the number of days in the calendar year up to and including the date of termination) of the annual bonus relating to the Company’s policies atcalendar year of termination based on the timeactual awards for the plan year of termination.
TABLE OF CONTENTStermination, and (iv) the payment of the cash value of fringe benefits (excluding any long-term incentive arrangements) for 12 months following the termination of his service agreement.
The following tables set forth the payments and benefits potentiallythat would have been payable to each Named Executive Officer in the event of a termination of such person’s employment other than in connection with a change in control, assuming that such events occurred as ofon December 31, 2011:2014:
Mark Malcolm | Severance Amounts(1) | Benefits Continuation | Vested RSUs | Total | Severance Amounts(1) | Benefits Continuation | Vested Equity/ Performance Awards | Total | ||||||||||||||||||||||||
Termination by us for any reason (other than by us for cause) or because we do not extend the term of Mr. Malcolm’s employment agreement | $ | 1,680,000 | (2) | — | (3) | $ | 5,907,150 | (4) | $ | 7,587,150 | ||||||||||||||||||||||
Termination by us (other than for cause) | $ | 7,680,000 | (2) | — | (3) | $ | 4,694,921 | (4) | $ | 12,374,921 | ||||||||||||||||||||||
Termination by Mr. Malcolm for good reason | $ | 1,680,000 | (2) | — | (3) | — | $ | 1,680,000 | $ | 7,680,000 | (2) | — | (3) | $ | 4,694,921 | (4) | $ | 12,374,921 | ||||||||||||||
Termination by us for cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination by Mr. Malcolm without good reason | — | — | — | — | — | — | — | — |
(1) | In the event of any termination either by us or by the executive, the executive is entitled to the accrued benefits as described under |
(2) | Aggregate amount represents two times Mr. Malcolm’s annualized rate of base salary as of the effective date of termination plus the $3 million Retention Bonus and the $3 million CEO Succession and Officer Transition Award in accordance with the terms of his employment agreement. Aggregate amount does not include |
(3) | Pursuant to Mr. Malcolm’s employment agreement, COBRA premiums will be waived to the extent the cost exceeds the cost we charge for active employees for similar coverage for 12 months. Mr. Malcolm has waived health coverage. |
(4) | Represents the sum of the value of |
James Gouin | Severance Amounts(1) | Benefits Continuation | Vested RSUs | Total | Severance Amounts(1) | Benefits Continuation | Vested Equity/ Performance Awards | Total | ||||||||||||||||||||||||
Termination by us for any reason (other than by us for cause) or because we do not extend the term of Mr. Gouin’s employment agreement | $ | 472,500 | (2) | $ | 11,866 | (3) | $ | 2,332,996 | (4) | $ | 2,817,362 | |||||||||||||||||||||
Termination by us (other than for cause) or because we do not extend the term of Mr. Gouin’s employment agreement | $ | 1,051,808 | (2) | $ | 12,618 | (3) | — | $ | 1,064,426 | |||||||||||||||||||||||
Termination by Mr. Gouin for good reason | $ | 472,500 | (2) | $ | 11,866 | (3) | — | $ | 484,366 | $ | 1,051,808 | (2) | $ | 12,618 | (3) | — | 1,064,426 | |||||||||||||||
Termination by us for cause | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination by Mr. Gouin without good reason | — | — | — | — | — | — | — | — |
(1) | In the event of termination either by us or by the executive, the executive is entitled to the accrued benefits as described under |
(2) | Aggregate amount represents one times Mr. Gouin’s annualized rate of base salary as of the effective date of termination of $472,500 plus the average of bonuses paid for the three (3) consecutive years immediately prior to the year of termination of $579,308 in accordance with the terms of his employment agreement. Aggregate amount does not include |
(3) | Pursuant to Mr. Gouin’s employment agreement, COBRA premiums will be waived to the extent the cost exceeds the cost we charge for active employees for similar coverage for 12 months. |
Michael Rajkovic | Severance Amounts(1) | Benefits Continuation | Vested RSUs | Total | ||||||||||||
Termination by us for any reason (other than by us for cause) or because we do not extend the term of Mr. Rajkovic’s employment agreement | $ | 577,500 | (2) | $ | 11,911 | (3) | $ | 2,878,921 | (4) | $ | 3,468,332 | |||||
Termination by us for cause or resignation by Mr. Rajkovic | — | — | — | — |
Michael Rajkovic | Severance Amounts(1) | Benefits Continuation | Vested Equity/ Performance Awards | Total | ||||||||||||
Termination by us (other than for cause) or because we do not extend the term of Mr. Rajkovic’s employment agreement | $ | 1,285,544 | (2) | $ | 13,175 | (3) | — | $ | 1,298,719 | |||||||
Termination by Mr. Rajkovic for good reason | $ | 1,285,544 | (2) | $ | 13,175 | (3) | — | $ | 1,298,719 | |||||||
Termination by us for cause | — | — | — | — | ||||||||||||
Termination by Mr. Rajkovic without good reason | — | — | — | — |
(1) | In the event of termination either by us or by the executive, the executive is entitled to the accrued benefits as described under |
(2) | Aggregate amount represents one times Mr. Rajkovic’s annualized rate of base salary as of the effective date of termination of $577,500 plus the average of bonuses paid for the three (3) consecutive years immediately prior to the year of termination of $708,044 in accordance with the terms of his employment agreement. Aggregate amount does not include |
(3) | Pursuant to Mr. Rajkovic’s employment agreement, COBRA premiums will be waived to the extent the cost exceeds the cost we charge for active employees for similar coverage for 12 months. |
James Bernard | Severance Amounts | Benefits Continuation | Supplemental Value Creation Plan | Total | Severance Amounts(1) | Benefits Continuation | Retention Bonus | Total | ||||||||||||||||||||||||
Termination by us for any reason (other than by us for cause) | $ | 400,000 | (1) | $ | 11,866 | (2) | $ | 112,500 | (3) | $ | 524,366 | |||||||||||||||||||||
Termination by us (other than for cause) or because we do not extend the term of Mr. Bernard’s employment agreement | $ | 739,435 | (2) | $ | 12,618 | (3) | $ | 720,000 | (4) | $ | 1,472,053 | |||||||||||||||||||||
Termination by us for cause or by Mr. Bernard | — | — | — | — | — | — | — | — |
(1) | In the event of termination either by us or by the executive, the executive is entitled to the accrued benefits as described under “Potential Payments Upon Termination”. |
(2) | Aggregate amount represents one times Mr. Bernard’s annualized rate of base salary as of the effective date of termination of $400,000 plus the average of bonuses paid for the three (3) consecutive years immediately prior to the year of termination of $339,435 in accordance with the terms of |
Pursuant to |
(4) | Represents the lump sum amount due to Mr. Bernard in the case of such termination prior to December 31, 2015 and paid on or after December 31, 2015. |
Par Malmhagen | Severance Amounts | Benefits Continuation | Retention Bonus | Total(1) | ||||||||||||
Termination by (other than for cause) or because we do not extend the term of Mr. Malmhagen’s employment agreement | $ | 707,792 | (2) | $ | 39,234 | (3) | $ | 707,792 | (4) | $ | 1,454,818 | |||||
Termination by us for cause or by Mr. Malmhagen | — | — | — | — |
(1) | Euro is converted to USD using a foreign exchange rate as of December 31, 2014 of 1 Euro equal to 1.2099 USD. |
(2) | Aggregate amount represents one times Mr. Malmhagen’s annualized rate of base salary of $441,614 plus one times Mr. Malmhagen’s annual target bonus of $266,178 as of the effective date of termination in accordance with the terms of his employment agreement. Aggregate amount does not include the 2014 annual bonus Mr. Malmhagen would be entitled to receive in the event of such a termination, as more fully described above. |
(3) | Amount represents the cost of 12 months of fringe benefits. |
(4) | Represents the lump sum amount due to Mr. Malmhagen in the case of such termination prior to December 31, 2015 and paid on or after December 31, 2015. |
If within two (2) years following a “change in control”, Mr. Malcolm is terminated by the Company without “cause” or if he terminates his employment for “good reason”, he will receive the following (in addition to certain accrued but unpaid amounts payable through his date of termination and amounts due, as described above, pursuant to the terms of his employment agreement related to the Retention Bonus, CEO Succession and Officer Transition Award, Stock Appreciation Incentive Award and Accelerated Vesting of Equity and Performance Awards), subject to execution of a release and compliance with confidentiality, non-solicitation, non-compete, non-disparagement and cooperation requirements:
(a) an aggregate amount equal to (i) three (3) times his annualized base salary in effect as of the effective date of termination payable in 36 equal monthly installments, and (ii) an amount equal to three (3) times his target bonus for the year of termination, plus a pro-rated portion (based on the number of days in the calendar year up to and including the date of termination) of the annual bonus relating to the calendar year of termination based on the actual awards for the plan year of termination, payable by March 15 of the year after the year of termination; and
(b) COBRA premiums will be waived to the extent the cost of coverage exceeds the cost we charge for active employees for similar coverage, until the first to occur of (i) the first 18 months of COBRA coverage or (ii) the date he is covered under another group health plan.
Mr. Malcolm’s employment agreement permits his aggregate change in control payments to exceed the Internal Revenue Code Section 280G cap if, after his payment of all taxes and penalties, he has an after-tax benefit that exceeds his after-tax benefit capped at the Code Section 280G limit.
If within two (2) years following a “change in control”, Messrs. Gouin, Rajkovic, Bernard or Malmhagen is terminated by the Company without “cause” or if any such executive terminates his employment for “good reason”, such executive will receive the following (in addition to certain accrued but unpaid amounts payable through the executive’s date of termination), subject to execution of a release and compliance with confidentiality, non-solicitation, non-compete, non-disparagement and cooperation requirements:
(a) an aggregate amount equal to (i) two (2) times his annualized base salary in effect as of the effective date of termination payable in 24 equal monthly installments, and (ii) two (2) times his target bonus for the year of termination, plus a pro-rated portion (based on the number of days in the calendar year up to and including the date of termination) of the annual bonus relating to the calendar year of termination based on the actual awards for the plan year of termination, payable by March 15 of the year after the year of termination; and
(b) COBRA premiums will be waived to the extent the cost of coverage exceeds the cost we charge for active employees for similar coverage, until the first to occur of (i) the first 18 months of COBRA coverage or (ii) the date the executive is covered under another group health plan, except in the case of Mr. Malmhagen who will be entitled to the benefits set forth in his service agreement until the first to occur of (i) the first 18 months following the change in control or (ii) the termination of the service agreement.
Each of the employment agreements provide that all equity awards will vest upon a change in control, and permit an executive’s aggregate change in control payments to exceed the Internal Revenue Code Section 280G cap if, after an executive’s payment of all taxes and penalties, the executive has an after-tax benefit that exceeds the executive’s after-tax benefit capped at the Code Section 280G limit.
The following table sets forth the benefits that would have been payable to each NEO, assuming that a change in control occurred as of December 31, 2014:
Estimated Value Upon Change in Control | ||||||||||||||||||||
Option Awards(1) | Stock Awards(2) | Performance Awards(3) | Cash Retention Bonus(4) | Total | ||||||||||||||||
Mark Malcolm(5) | $ | 674,700 | $ | 1,136,081 | $ | 1,764,000 | $ | 3,000,000 | $ | 6,574,781 | ||||||||||
James Gouin | $ | 189,746 | $ | 319,477 | $ | 248,063 | $ | 757,287 | ||||||||||||
Michael Rajkovic | $ | 309,227 | $ | 520,683 | $ | 404,250 | $ | 1,234,161 | ||||||||||||
James Bernard | $ | 160,627 | $ | 270,498 | $ | 210,000 | $ | 720,000 | $ | 1,361,125 | ||||||||||
Pär Malmhagen(6) | $ | 66,525 | $ | 211,912 | $ | 186,270 | $ | 707,792 | $ | 1,172,498 |
(1) | Represents the number of unvested options from each grant, multiplied by (i) the closing sale price of our common stock on the New York Stock Exchange on December 31, 2014 ($25.55) minus (ii) the exercise price from each grant. |
(2) | Represents the number of unvested stock awards multiplied by the closing sale price of our common stock on the New York Stock Exchange on December 31, 2014 ($25.55). |
(3) | For Mr. Malcolm, represents the target performance awards granted. For all other NEOs, represents the pro-rated portion of the target performance awards granted. |
(4) | Represents a |
(5) | Does not include any amount attributable to the Stock Appreciation Incentive Award payable to Mr. Malcolm in the event of a Change in Control since, as of December 31, 2014, the “Appreciation Hurdle” had not been achieved. |
(6) | Malmhagen Cash Retention of 585,000 Euro is converted to USD using a foreign exchange rate as of 12/31/14 of 1 Euro equal to 1.2099 USD. |
The following table sets forth a summary of our non-employee board members’ compensation for fiscal 2011.2014.
Name | Fees Earned or Paid in Cash | Total | ||||||
Nicholas Chabraja | $ | 305,000 | $ | 305,000 | ||||
James Chapman | $ | 160,000 | $ | 160,000 | ||||
Frank English | $ | 153,763 | $ | 153,763 | ||||
Dennis Donovan | $ | 150,000 | $ | 150,000 | ||||
Jonathan Gallen | $ | 150,000 | $ | 150,000 | ||||
Larry Schwentor(1) | $ | 150,000 | $ | 150,000 | ||||
Dev Kapadia | $ | 118,333 | $ | 118,333 | ||||
Chan Galbato | $ | 116,667 | $ | 116,667 | ||||
Scott Wille | $ | 116,667 | $ | 116,667 | ||||
Greg Powell(2) | $ | 56,452 | $ | 56,452 |
Fees Earned or Paid in Equity | ||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash | Grant Date | Number of Shares of Stock or Units(3) | Base Price of Stock Awards | Grant Date Fair Value of Stock Awards(4) | Total Cash and Grant Value | ||||||||||||||||||
Thomas K. Brown(1) | $ | 75,000 | 4/1/2014 | 3,674 | $ | 27.22 | $ | 100,006 | $ | 175,006 | ||||||||||||||
Nicholas Chabraja | $ | 202,513 | 3/6/2014 | 6,616 | $ | 26.45 | $ | 174,993 | $ | 377,507 | ||||||||||||||
James Chapman | $ | 123,105 | 3/6/2014 | 3,781 | $ | 26.45 | $ | 100,007 | $ | 223,112 | ||||||||||||||
Alison Davis-Blake(2) | $ | 21,875 | 10/17/2014 | 2,167 | $ | 21.00 | $ | 45,507 | $ | 67,382 | ||||||||||||||
Frank English | $ | 113,105 | 3/6/2014 | 3,781 | $ | 26.45 | $ | 100,007 | $ | 213,112 | ||||||||||||||
Dev Kapadia | $ | 104,099 | 3/6/2014 | 3,781 | $ | 26.45 | $ | 100,007 | $ | 204,107 |
(1) |
(2) |
(3) | Awards reflect the number of RSUs granted to the Director. The RSUs granted have a one-year vesting requirement. A Director who voluntarily resigns before vesting will forfeit the award. Directors will only be issued shares related to vested RSUs when they leave the service of the Board. |
(4) | Grant date fair value of RSUs is the base price of stock awards, multiplied by the number of RSUs awarded. |
The following table sets forth as of May 29, 2012,March 17, 2015, certain information with respect to the beneficial ownership of our common stock by:
The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the SEC’s rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. In addition, a person who has the right to acquire beneficial ownership of securities within sixty days after a specified date is deemed to be the beneficial owner of those securities as of that date. Unless otherwise indicated below, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.
The number of shares of common stock outstanding used in calculating the percentage for each listed person or entity excludes shares reserved for issuance under our 2010 Equity Incentive Plan. Non-employee directors who receive RSUs granted pursuantgenerally do not have rights as stockholders with respect to onevested RSUs until the earlier of our benefit plans.the date when they cease their service with the Company or the date of consummation of a change in control (as defined). We have not treated such RSUs as being beneficially owned by such directors because of the delay in settlement, but in the footnotes to the following table we have distinguished between RSUs that (i) are vested or will vest within sixty days of March 17, 2015 and (ii) those that will not vest within sixty days of March 17, 2015.
Unless otherwise indicated, the address of each beneficial owner is c/o Tower International, Inc., 17672 Laurel Park Drive North, Suite 400E, Livonia, MI 48152.
Shares Beneficially Owned | ||||||||
Name of Beneficial Owner | Number | Percent | ||||||
Named Executive Officers and Directors: | ||||||||
Mark Malcolm(1) | 357,610 | 1.8 | % | |||||
James Gouin(2) | 145,552 | * | ||||||
Michael Rajkovic(3) | 228,995 | 1.1 | % | |||||
James Bernard(4) | 633 | * | ||||||
Gyula Meleghy(5) | 172,468 | * | ||||||
Nicholas Chabraja | 2,000 | * | ||||||
James Chapman | — | — | ||||||
Dennis Donovan | — | — | ||||||
Frank English | 500 | * | ||||||
Chan Galbato | — | — | ||||||
Jonathan Gallen | — | — | ||||||
Dev Kapadia | — | — | ||||||
Larry Schwentor(6) | 55,530 | * | ||||||
Scott Wille | — | — | ||||||
Executive officers and directors as a group (17 persons)(7) | 1,033,923 | 5.3 | % | |||||
5% Stockholders | ||||||||
Stephen Feinberg(8) | 13,049,310 | 66.3 | % | |||||
Ameriprise Financial, Inc. (“AFI”)/Columbia Management Investment Advisers, LLC (“CMIA”)(9) | 1,074,091 | 5.5 | % | |||||
Robeco Investment Management, Inc.(10) | 1,259,010 | 6.4 | % | |||||
The Bank of New York Mellon Corporation and its direct and indirect subsidiaries(11) | 929,681 | 4.7 | % |
Shares Beneficially Owned | ||||||||
Name of Beneficial Owner | Number | Percent | ||||||
Named Executive Officers and Directors: | ||||||||
Mark Malcolm(1) | 888,521 | 4.2 | % | |||||
James Gouin(2) | 141,376 | * | ||||||
Michael Rajkovic(3) | 133,436 | * | ||||||
James Bernard(4) | 16,324 | * | ||||||
Par Malmhagen(5) | 9,558 | * | ||||||
Thomas K. Brown(6) | 0 | * | ||||||
Nicholas Chabraja(7) | 4,000 | * | ||||||
James Chapman(8) | 0 | * | ||||||
Alison Davis-Blake(9) | 0 | * | ||||||
Frank English(10) | 1,500 | * | ||||||
Dev Kapadia(11) | 0 | * | ||||||
Executive officers and directors as a group (14 persons)(12) | 1,267,202 | 5.9 | % | |||||
5% Stockholders | ||||||||
BlackRock, Inc.(13) | 2,127,194 | 10.3 | % | |||||
The Vanguard Group(14) | 1,355,537 | 6.53 | % |
* | Less than 1%. |
(1) | Includes options to purchase 246,480 shares that are exercisable within 60 days of March 17, 2015. Excludes |
(2) | Includes options to purchase 36,818 shares that are exercisable within 60 days of March 17, 2015. Excludes |
(3) | Includes options to purchase 60,000 shares that are exercisable within 60 days of March 17, 2015. Excludes |
(4) | Includes options to purchase 11,606 shares that are exercisable within 60 days of March 17, 2015. Excludes |
(5) | Includes options to purchase 5,161 shares that are exercisable within 60 days of March 17, 2015 and 1,139 shares subject to restricted stock units that will vest within 60 days of March 17, 2015. Excludes 2,012 shares of common stock underlying unvested RSUs granted on |
(6) | Excludes |
(7) | Excludes |
(8) | Excludes 3,781 vested RSUs and 3,823 RSUs which will not vest until March 6, 2016. |
(9) | Excludes 2,167 RSUs which will not vest until October 17, 2015 and 3,823 RSUs which will not vest until March 6, 2016. |
(10) | Excludes 3,781 vested RSUs and 3,823 RSUs which will not vest until March 6, 2016. |
(11) | Excludes 3,781 vested RSUs and 3,823 RSUs which will not vest until March 6, 2016. |
(12) | Includes options to purchase 403,569 shares that are exercisable within 60 days of March 17, 2015 and 1,139 shares subject to RSUs held by an executive officer that will vest within 60 days of March 17, 2015. Excludes 24,949 shares of common stock underlying |
Based on information set forth in a Schedule 13G/A filed February |
Based on information set forth in a Schedule |
Cerberus does not charge us a quarterly or annual management or sponsor fee. During 2011 we reimbursed COAC, an affiliate of CCM, less than $100,000 for consulting services. If we request COAC, an affiliate of Cerberus, to provide consulting services in the future, we would expect to reimburse COAC for the salaries and benefits of the individuals providing such services on behalf of COAC.
We made pension payments of 200,000 Euro (or $300,000 based on the average exchange rate during 2011) in 2011 to the mother of Gyula Meleghy, our President, International Operations, as required pursuant to the terms of the acquisition by the Predecessor, of Dr. Meleghy & Co. GmbH on January 1, 2000.
In connection with the IPO, Tower entered into a registration rights agreement with the Majority Stockholder. The agreement provides the Majority Stockholder with certain demand and piggyback registration rights, as well as indemnification protection and expense reimbursement in the event that shares of the Majority Stockholder’s common stock are sold pursuant to a registration statement covered by that agreement.
Also in connection with the IPO, the individuals who received RSUs from the Company entered into voting agreements with Cerberus. Those voting agreements enable Cerberus to direct the voting of the shares of Tower common stock that such individuals receive pursuant to the RSU grants and upon exercise of stock option grants. However, such voting agreements do not restrict the transferability of the underlying shares of common stock.
Our Board recognizes that related person transactions, as defined in our related person transaction policy, present a risk of actual or perceived conflicts of interest that could damage the reputation and public trust of our Company. It is our policy that all related partyRelated person transactions shall beare subject to approval or ratification to the extent provided in accordance with our related person transaction policy, which was adopted in connection with the IPO.policy.
The Audit Committee will review this policy annually and will recommend amendments, if any, to the Board for its consideration. In addition, the Board has determined that the Audit Committee shall consider, approve or ratify each related person transaction.transaction to the extent provided in our related person transaction policy. The Audit Committee will, in determining whether to approve or ratify a related person transaction, take into account, among other factors it deems appropriate: (i) the benefits to our Company; (ii) the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer; (iii) the availability of other sources for comparable products or services; (iv) the terms of the proposed related person transaction; (v) whether the transaction is on terms no less favorable to the Company than terms generally available with respect to an unaffiliated third party; and (vi) the extent of the related person’s interest in the transaction. No member of the Audit Committee will participate in any review, consideration or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.
None of the transactions described above under “Related Party Transactions” were approved pursuant to this policy as the policy was implemented subsequent to the transactions. However, each transaction was approved by Tower’s Board comprised at that time. All future transactions of this nature will be approved pursuant to the Company’s written policy now in effect, as required by the specific terms of the policy.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securitiessecurities.
Other than as stated below, toTo the Company’s knowledge, based solely on a review of the copies of such filings furnished to the Company and written representations from its directors and executive officers, all Section 16(a) filing requirements applicable to the Company’s directors, executive officers and greater than 10 percent beneficial owners were complied with on a timely basis during the year ended December 31, 2011. Dr. Meleghy failed to file a Form 4 Report for four transactions (with respect to the acquisition of common stock), which were subsequently reported by Dr. Meleghy on a Form 5. In addition, Form 4s for each of Messrs. Malcolm, Rajkovic, Gouin, Meleghy, Kersten, Radkoski, and Cook each reporting one transaction (with respect to a grant of restricted stock units) were filed late.2014.
Deadlines to Have Matters Considered at a Meeting. Under the Company’s Bylaws, for nominations or other business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely written notice of the nomination or such other business to the Company’s Corporate Secretary and such business must be a proper subject for stockholder action. To be timely, a stockholder’s notice must be delivered to the Corporate Secretary not later than the ninetieth (90th)(90th) day nor earlier than the one hundred twentieth (120th)(120th) day prior to the first anniversary of the preceding year’s annual meeting. However, if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after the anniversary of the prior year’s meeting, notice must be delivered not later than the later of the ninetieth (90th)(90th) day prior to such annual meeting or the tenth (10th)(10th) day following the date on which the Company makes public announcement of the date of the meeting. For purposes of the 2013 annual meeting,2016 Annual Meeting, assuming it is not moved more than thirty (30) days before or more than sixty (60) days after July 27, 2013,April 24, 2016, to be timely, a stockholder’s notice must be delivered to the Corporate Secretary not later than April 28, 2013,Monday, January 25, 2016, nor earlier than March 29, 2013.Saturday, December 26, 2015. Any such notice must include the applicable information required pursuant to Section 2.10 of the Company’s Bylaws. Nominations or proposals not meeting these requirements will not be entertained at the annual meeting.Annual Meeting.
Deadlines for Inclusion of Matters in the Company’s Proxy Materials. Stockholders interested in submitting a proposal for inclusion in the Company’s proxy statementProxy Statement and form of proxy for the 20132016 Annual Meeting of Stockholders may do so by following the procedures prescribed in SEC Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended. Under Rule 14a-8, to be eligible for inclusion in the
Company’s proxy statementProxy Statement and form of proxy for the 20132016 Annual Meeting of Stockholders, among other things, a proposal must qualify as a proper subject matter under SEC Rule 14a-8 and be received no later than February 8, 2013.Wednesday, November 25, 2015.
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials unless contrary instructions have been received from the affected stockholders. Once a stockholder has received notice from the stockholder’s broker or the Company that they or the Company will be householding materials to the stockholder’s address, householding will continue until the stockholder is notified otherwise or until the stockholder revokes the stockholder’s consent. If, at any time, the stockholder no longer wishes to participate in householding and would prefer to receive a separate proxy statement, or if the stockholder is receiving multiple copies of the proxy statement and wishes to receive only one, the stockholder should notify the stockholder’s broker if the stockholder’s shares are held in a brokerage account or the Company if the stockholder holds common stock directly. The
Company will deliver promptly upon request a separate copy of the 20112014 Annual Report to Stockholders or Proxy Statement, as applicable, to a stockholder at a shared address to which a single copy of the document was delivered. Requests in writing should be addressed to: Tower International, Inc., 17672 Laurel Park Drive North, Suite 400E, Livonia, Michigan 48152, Attention: Investor Relations.
The Company’s annual audited financial statements and review of operations for 20112014 can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.2014. A copy of the 20112014 Form 10-K is included in the 20112014 Annual Report to Stockholders, which is being mailed concurrently with this Proxy Statement to each stockholder. The Company will furnish without charge a copy of the 20112014 Form 10-K (including the financial statements, schedules and a list of exhibits), as well as a copy of any of the documents referenced in this Proxy Statement as being available upon written request, to any person requesting in writing and stating that he or she was the beneficial owner of the Company’s common stock on the Record Date.The Company’s Annual Report on Form 10-K may be obtained without charge over the Internet at the Company’s website atwww.towerinternational.comor at the Securities and Exchange Commission’s website atwww.sec.gov. The Company’s Annual Report to Stockholders may be obtained without charge over the Internet at the Company’s website atwww.towerinternational.com. The Company will also furnish copies of any exhibits to the 20112014 Form 10-K to eligible persons requesting exhibits at a cost of $0.50 per page, paid in advance. The Company will indicate the number of pages to be charged for upon written inquiry. Requests should be addressed to: Tower International, Inc., 17672 Laurel Park Drive North, Suite 400E, Livonia, Michigan 48152, Attention: Investor Relations.
Our Board members are encouraged, but not required by any specific Board policy, to attend our Annual Meeting of stockholders. All Board members attended the Company’s 20112014 Annual Meeting of its stockholders.stockholders.
The Board of Directors does not know of any other matter that will be brought before the Annual Meeting. However, if any other matter that may properly be acted upon properly comes before the Annual Meeting or any adjournment or postponement thereof, the proxies solicited hereby will be voted on such matter in accordance with the discretion of the proxy holders named therein.
By Resolution of the Board of Directors,
Nanette Dudek
Secretary
June 4, 2012
March 24, 2015