UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
VALVOLINE INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
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| 9. | Date Filed:
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100 Valvoline Way
Lexington, KY 40509
December 15, 201716, 2019
Dear Valvoline Inc. Shareholder:
On behalf of our Board of Directors and management, we cordially invite you to attend the 20182020 Annual Meeting of Shareholders of Valvoline Inc. The meeting will be held on Wednesday,Thursday, January 31, 2018,30, 2020, at 11:8:00 a.m. (ET), at Valvoline’s principal office, 100 Valvoline Way, Lexington, KY 40509.
We are pleased to provide access to our proxy materials via the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials (“Notice”) instead of a paper copy of this Proxy Statement, a proxy card and our 20172019 Annual Report. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how to request a paper copy of our proxy materials. All shareholders who do not receive a Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail. We believe that this approach provides a convenient way for you to access our proxy materials and vote your shares, while reducing the costs of printing and distributing our proxy materials and conserving natural resources.
The attached Notice of Annual Meeting and Proxy Statement describe the business to be conducted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. We encourage you to promptly vote and submit your proxy via the Internet or by telephone using the instructions on the Notice, or, if you received paper copies of the proxy materials, you may also vote by following the instructions on the proxy card and signing and returning it in thepre-addressed postage-paid envelope provided for your convenience. If you attend the Annual Meeting, you can vote in person even if you previously submitted your proxy.
We appreciate your continued confidence in Valvoline and look forward to seeing you at the meeting.
Sincerely,
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Samuel J. Mitchell, Jr. Chief Executive Officer | Stephen F. Kirk Chairman of the Board |
Notice of Annual Meeting of Shareholders
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Date
Wednesday,Thursday, January 31, 201830, 2020
Time
11:8:00 a.m. (ET)
Place
Valvoline Inc.
100 Valvoline Way
Lexington, KY 40509
Record Date
December 4, 20172, 2019
| Agenda | ||
| ➊ | Election of | |
| ➋ | Ratification of the appointment of our independent registered public accounting firm; | |
| ➌ | Non-binding advisory resolution approving our executive compensation; and | |
| ➍ | ||
| Consideration and transaction of any other business properly brought before the meeting. | ||
| You can vote one of the following ways |
Internet
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Visit the website listed on your proxy card to vote VIA THE INTERNET |
Telephone
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Call the telephone number specified on your proxy card to vote BY TELEPHONE |
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Sign, date and return your proxy card in the enclosed envelope to vote BY MAIL |
In Person
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Attend the Annual Meeting to vote IN PERSON |
To Our Shareholders:
Your vote is very important. Please submit your vote as soon as possible. Follow voting instructions in your proxy materials when voting via the internet, by telephone or by mail. Submitting your proxy by one of these methods ensures your representation at the Annual Meeting regardless of whether you attend.
Only shareholders of record at the close of business on December 4, 2017,2, 2019, are entitled to notice of, and to vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
Julie M. O’Daniel
Senior Vice President, General CounselChief Legal Officer
and Corporate Secretary
Lexington, Kentucky
December 15, 201716, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON JANUARY This Proxy Statement and our http://investors.valvoline.com/financial-reports/proxy.
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| Compensation Discussion and Analysis
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| 22 | |||
| 23 | ||||
| 23 | Compensation Philosophy | |||
| 24 | Pay for Performance | |||
| 27 | What We Do vs. What We Don’t Do | |||
| 27 | Elements of Valvoline’s Executive Compensation Program | |||
| 28 | Role of Consultant | |||
| 29 | Peer Group | |||
| 30 | Benchmarking / Survey Data | |||
| 30 | Internal Pay Equity | |||
| 30 | “Say on Pay” | |||
| 30 | Base Salary | |||
| 31 | Annual Incentive | |||
| 33 | Long-term Incentive | |||
| 35 | Health and Welfare Benefits | |||
| 36 | Executive Perquisites | |||
| 36 | Retirement Benefits | |||
| 36 | Severance Benefits | |||
| 37 | ||||
| 39 | Clawback Policy | |||
| 39 | Stock Ownership Guidelines | |||
| 39 | Anti-Hedging / Anti-Pledging Policy | |||
| 40 | Risk Assessment | |||
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Questions and Answers About the Annual Meeting
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| ∎ | Why did I receive these proxy materials? |
You are invited to attend the 20182020 Annual Meeting of Shareholders (the “Annual Meeting”) of Valvoline Inc. (“Valvoline,” the “Company,” “we,” “us,” and “our”) and vote on the proposals described in this Proxy Statement because you were a shareholder of record of Valvoline common stock, par value $0.01 per share (“Valvoline Common Stock”), as of the close of business on December 4, 20172, 2019 (the “Record Date”), the record date for determination of shareholders entitled to notice of and to vote at the Annual Meeting. Valvoline is soliciting proxies for use at the Annual Meeting, including any postponements or adjournments.
The Annual Meeting is being held at 11:8:00 a.m. (ET) on January 31, 2018,30, 2020, at Valvoline’s principal office, 100 Valvoline Way, Lexington, KY 40509.
| ∎ | What is included in these proxy materials? |
If you received printed versions by mail, these printed proxy materials also include the proxy card or voting instruction form for the Annual Meeting.
| ∎ | Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set of printed proxy materials? |
In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials, including this Notice of Annual Meeting of Shareholders and Proxy Statement, together with our 20172019 Annual Report, by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they have specifically requested them. Instead, a Notice of Internet Availability of Proxy Materials (“Notice”) will be mailed to shareholders starting on or around December 15, 2017.16, 2019.
| ∎ | How do I access the proxy materials? |
The Notice will provide you with instructions regarding how to view Valvoline’s proxy materials for the Annual Meeting, including this Proxy Statement and the 20172019
Annual Report, on the Internet. The Notice also instructs you on how you may submit your vote. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.
| ∎ | Who can attend the Annual Meeting? |
Each shareholder of record of Valvoline as of the Record Date is invited to attend the Annual Meeting, although seating is limited. If your shares are held in the name of a broker, bank or other nominee, you will need to bring valid photo identification, such as a driver’s license or passport, and an account statement, proxy or letter from that nominee that confirms you are the beneficial owner of those shares as of the Record Date.
| ∎ | Who may vote at the Annual Meeting? |
Only shareholders of record of Valvoline as of the Record Date are entitled to receive the Notice of Annual Meeting of Shareholders and to vote their shares at the Annual Meeting. As of the Record Date, there were 201,836,337188,441,162 shares of Valvoline Common Stock issued and outstanding and entitled to vote. Each share of Valvoline Common Stock entitles the shareholder to one vote on each matter properly brought before the Annual Meeting.
| ∎ | What am I voting on? |
At our Annual Meeting, shareholders will consider and vote on the following matters:
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| ∎ | How can I vote? |
If you are a registered shareholder as of the Record Date, you can vote (i) by attending the Annual Meeting, (ii) by following the instructions on the proxy card for voting by telephone or Internet or (iii) by signing, dating and mailing in your proxy card. If you hold shares through a broker, bank or other nominee, that institution will instruct you as to how your shares may be voted by proxy, including whether telephone or Internet voting options are available. If you hold your shares through a broker, bank or other nominee and would like to vote in person at the meeting, you must first obtain a proxy issued in your name from the institution that holds your shares.
All shares represented by validly executed proxies will be voted at the Annual Meeting, and such shares will be voted in accordance with the instructions provided. If no voting specification is made on your returned proxy card, Samuel J. Mitchell, Jr. or Julie M. O’ Daniel,O’Daniel, as individuals named on the proxy card, will cast the votes represented by such proxy card (i) FOR the election of each of the sevennine director nominees, (ii) FOR the ratification of EY as our independent registered public accounting firm for the 20182020 fiscal year, and (iii) FOR thenon-binding advisory resolution approving our executive compensation, and (iv) FOR the approval of the Valvoline Inc. Employee Stock Purchase Plan.compensation.
| ∎ | How do I vote shares attributable to the units of Valvoline Common Stock Fund credited to my account in the Valvoline |
If you are a participant in the Valvoline Inc. 401(k) Plan, Ashland Savings Plan, Ashland ISP 401(k) Plan, or the Ashland Union Plan and are invested in the Valvoline Common Stock Fund within such plansplan as of the Record Date, you are entitled to instruct the trustee, of such plans, Fidelity Management Trust Company, on how to vote any shares attributable to the units of Valvoline Common Stock credited to your account. The trustee will vote such shares as you instruct.To allow sufficient time for the trustee to vote, your voting instructions must be received by no later than 6:00 a.m. (ET) on January 29, 2018. 28, 2020. If you do not provide instructions by that time, the shares attributable to the units of Valvoline Common Stock credited to your account will be voted by the trustee in accordance with the rules of each plan.same proportion as it votes all the shares for which it has received timely voting instructions.
| ∎ | What shares are included on the proxy card? |
Your proxy card represents all shares of Valvoline Common Stock that are registered in your name. If your shares are held through a broker, bank or other nominee, you will receive either a voting instruction form or a proxy card from your broker, bank or other nominee instructing you on how to vote your shares.
| ∎ | Can I change my vote once I vote by mail, by telephone or over the Internet? |
Yes. You have the right to change or revoke your proxy (1) at any time before the Annual Meeting by (a) notifying our Corporate Secretary in writing, (b) returning a later-dated proxy card or (c) entering a later dated telephone or Internet vote; or (2) by attending the Annual Meeting and voting in person, which will automatically cancel any proxy previously given, or by revoking your proxy in person, but attendance alone will not revoke any proxy that you have previously given.
If your shares are held through a broker, bank or other nominee, you must contact your broker, bank or other nominee to change your vote.
| ∎ | Who will count the vote? |
A representative of Corporate Election ServicesBroadridge Financial Solutions, Inc. will serve as the inspector of election for the Annual Meeting. The inspector of election will determine whether a quorum is present and will tabulate the votes cast by proxy and in person.
| ∎ | Is my vote confidential? |
Yes. Your vote is confidential.
| ∎ | What constitutes a quorum? |
As of the Record Date, 201,836,337188,441,162 shares of Valvoline Common Stock were outstanding and entitled to vote at the Annual Meeting. A majority of the shares issued and outstanding and entitled to be voted at the Annual Meeting must be present in person or by proxy to constitute a quorum to transact business at the Annual Meeting. If you vote in person, by telephone, over the Internet or by returning a properly executed proxy card, you will be considered a part of that quorum. Abstentions and brokernon-votes (i.e., when a broker does not have authority to vote on a specific issue) will be treated as present for the purpose of determining whether a quorum exists.
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| ∎ | What vote is required for approval of each matter to be considered at the Annual Meeting? |
| • | Election of directors—Pursuant to Article V of our Amended and Restated Articles of Incorporation (“Articles”), a director nominee will be deemed elected if the number of votes cast “for” that director nominee exceeds the number of votes cast “against” that director nominee. |
| • | Ratification of independent registered public accounting firm—The appointment of EY will be deemed ratified if the number of votes cast “for” its ratification exceeds the number of votes cast “against” it. |
| • | Non-binding advisory resolution approving our executive compensation—Thenon-binding advisory resolution approving our executive compensation will be deemed passed if the number of votes cast “for” the resolution |
| ∎ | What is a BrokerNon-Vote? |
If your shares are held by a broker, you must instruct the broker on how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal for which the broker does not have discretionary authority to vote. This is referred to as a “brokernon-vote.” Brokernon-votes are counted as present in determining whether a quorum exists at the Annual Meeting, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).
Under the NYSE rules, your broker has discretionary authority to vote your shares on the ratification of Valvoline’s independent registered public accounting firm, even if your broker does not receive voting
instructions from you. However, your broker does not have discretionary authority to vote on the election of Directors or the advisory vote on executive
compensation, or the approval of the Employee Stock Purchase Plan, without instructions from you. If you do not instruct your broker on these discretionary matters, a brokernon-vote will occur and your shares will not be voted on these matters.
| ∎ | Who will pay for the cost of this Proxy Solicitation? |
The Company is making this proxy solicitation and will bear the cost of soliciting proxies. In addition to these proxy materials, the solicitation of proxies may be made in person, by telephone or by other electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We have also retained Georgeson LLC to assist in the solicitation for estimated fees of $10,500 plus reasonableout-of-pocket expenses. We may also reimburse brokers, banks, or other agents for the cost of forwarding proxy materials to beneficial owners.
| ∎ | Can I access the Company’s Proxy Statement and Annual Report electronically? |
Yes. This Proxy Statement and the 20172019 Annual Report are available on our investor relations website athttp://investors.valvoline.com/investors.valvoline.com/financial-reports/proxy, and at the SEC’s website,http://www.sec.gov.
| ∎ | Does the Company offer an opportunity to receive future proxy materials electronically? |
Yes. If you wish to view Valvoline’s future proxy materials and annual reports over the Internet instead of receiving copies in the mail, follow the instructions provided when you vote through the Internet. If you vote by telephone, by mail or in person, you will not have the option to elect electronic delivery while voting. If you elect electronic delivery, we will discontinue mailing our proxy materials and annual reports to you beginning next year and will instead send you ane-mail message notifying you of the Internet address or addresses where you may access such proxy materials and annual reports and vote your shares.
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| ∎ | Where can I find the voting results of the meeting? |
We intend to announce preliminary voting results at the Annual Meeting. We will report the final results on a Current Report onForm 8-K filed with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form8-K to
disclose preliminary voting results and, within four business days after the final results are known, we will file an amended Form8-K with the SEC to disclose the final voting results. You can obtain a copy of theForm 8-K from our investor relations website athttp://investors.valvoline.com/sec-filings, by calling the SEC at1-800-SEC-0330 for the location of the nearest public reference room or through the SEC’s EDGAR system athttp://www.sec.gov.
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Proposal One - Election of Directors
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Proposal and Required Vote
Our Board of Directors (the “Board”) currently consists of the following eight members all of whom were elected at the 2017 Annual Meeting of Shareholders:nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem and William A. Wulfsohn. At the endTwinem. Other than Mr. Evans, each member of Valvoline’s fiscal year on September 30, 2017, Mr. Wulfsohn retired as Chairman of our Board and notified the Board that he would not stand forre-election upon the expiration of his term as a directorwas elected at the 2019 Annual Meeting.Meeting of Shareholders. Mr. Evans was elected by the Board, effective December 1, 2019. Each of the other seven directors on the current members of our Board has been nominated for election at the Annual Meeting. The Board has resolved to reduce its size from eight to seven members effective as of the date of the Annual Meeting to eliminate the vacancy that would otherwise result from Mr. Wulfsohn’s decision not to stand forre-election. See the “Corporate Governance—Valvoline’s Board of Directors” section of this Proxy Statement for further information about the structure, operations and roles of our Board. The Governance and Nominating Committee (“G&N Committee”) of our Board has confirmed that all sevennine nominees will be available to serve as directors upon election and recommends their election.
Directors are elected at each annual meeting of shareholders and hold office until the following annual meeting of shareholders and until their successors have been duly elected and qualified. Pursuant to our Articles, a director nominee in an uncontested election must receive the affirmative vote of a majority of votes cast with respect to that director nominee in order to be elected to our Board. Therefore, to be elected at the Annual Meeting, a director nominee must receive more votes cast “for” his or her election than votes cast “against” his or her election. Abstentions and brokernon-votes will not be counted as votes cast. Nominees elected at the Annual Meeting will serve until our 20192021 Annual Meeting of Shareholders and will hold office until their successors are duly elected and qualified.
Pursuant to the Board’s resignation policy in our Corporate Governance Guidelines (published on our website athttp://investors.valvoline.com/governance), any nominee who is serving as a director at the time of an uncontested election who fails to receive a greater number of votes “for” his or her election than votes “against” his or her election will tender his or her resignation for consideration by the Board no later than two weeks following the certification of the shareholder vote. The Board will decide, through a process managed by the G&N Committee, whether to accept the resignation within 90 days following the shareholder meeting.annual meeting of shareholders. The Company will then promptly disclose the Board’s decision and reasons therefor. As a condition to his or her nomination, each person nominated by the G&N Committee must agree in advance to abide by the policy. Each of the current members of our Board, other than Mr. Wulsohn, has been nominated for election at the Annual Meeting andnominee has agreed to abide by this policy.
If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR each of the sevennine nominees named in this Proxy Statement. Should any of the nominees be unable or unwilling to stand for election at the time of the Annual Meeting, the proxies may vote for a replacement nominee recommended by the Board, or the Board may reduce the number of directors to be elected at the Annual Meeting.
Information Concerning Director Nominees
The sevennine individuals nominated for election as directors at the Annual Meeting are Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem. Each of these nominees is currently a member of our Board and has agreed to stand for election. Background information about each director nominee is set forth below, including information regarding the specific experiences, characteristics, attributes and skills considered in connection with the nomination of each director nominee, all of which the Board believes provide the Company with the perspective and judgment needed to guide, monitor and execute its strategies.
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Gerald W. Evans, Jr. Chief Executive Officer of Hanesbrands Inc. Director since: 2019 Age: 60 Committees: • Compensation • Governance & Nominating | Professional Experience: Mr. Evans has served as a director of Valvoline since December 2019. Mr. Evans has also served as Chief Executive Officer of Hanesbrands Inc., a leading global marketer of basic apparel, since October 2016. From 2013 to 2016, Mr. Evans served as Chief Operating Officer of Hanesbrands and asCo-Chief Operating Officer from 2011 to 2013. Prior to that, he served asCo-Operating Officer, President International of Hanesbrands from 2010 to 2011. He was President of Hanesbrands’ International Business and Global Supply Chain from 2009 to 2010 and served as President of its Global Supply Chain and Asia Business Development from 2008 to 2009. Mr. Evans served as Executive Vice President, Chief Supply Chain Officer of Hanesbrands from 2006 to 2008. Prior to that, he spent more than 20 years in various leadership positions at Sara Lee Corporation. Mr. Evans is also a member of the Business Roundtable. Education: Mr. Evans holds a Bachelor of Science in marketing and a Master of Business Administration from the University of South Carolina. Public Company Board: Mr. Evans has served as a director of Hanesbrands Inc. since 2016. |
Qualifications: As the Chief Executive Officer of Hanesbrands, Mr. Evans’ experience and knowledge in the areas of consumer products, managing international operations and global supply chains, leading omnichannel expansion, building brands, executing acquisition strategies and marketing and sales provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of Hanesbrands. | ||
Richard J. Freeland Retired President and Chief Operating Officer of
Director since:2016
Age:
Committees: •Governance & Nominating •Compensation
| Professional Experience: Mr. Freeland has served as a
Education: Mr. Freeland holds a Bachelor of Science Public Company Boards: Mr. Freeland served as a director of Cummins Inc. from July 2017 to October 2019. |
Qualifications: As the former President and Chief Operating Officer of Cummins Inc., Mr. Freeland’s significant experience and knowledge in the areas of product development, manufacturing, international operations, sales and marketing, as well as his experience in the automotive and
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| 6 | | PROXY STATEMENT |
Stephen F. Kirk Chairman of
Director since:2016
Age:
Committees: •Governance & Nominating •Compensation
| Professional Experience: Mr. Kirk is Valvoline’s Chairman of the Board, effective October 2017, and has served as a
Education: Mr. Kirk holds a
Public Company Boards: Mr. Kirk served as a director of Ashland Global Holdings Inc. from November 2013 until January
Non-Profit Boards: Mr. Kirk serves as Executive in Residence at the Monte Ahuja College of Business at Cleveland State University. He is also a member of the board of trustees of Cleveland State University Board |
Qualifications: As the former Senior Vice President and Chief Operating Officer of The Lubrizol Corporation, Mr. Kirk’s experience and knowledge in the areas of international operations, sales and marketing, and corporate leadership, as well as his experience in the automotive and transportation industry, provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of other publicly-traded companies.
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Carol H. Kruse Former Chief Marketing Officer of ESPN and Cambia Health Solutions Director since:2018 Age:57 Committees: • Governance & Nominating • Compensation | Professional Experience: Ms. Kruse has served as a director of Valvoline since December 2018. Ms. Kruse served as Senior Vice President and Chief Marketing Officer of Cambia Health Solutions, a health solutions company, from December 2014 to January 2019. Prior to joining Cambia Health Solutions, she was Senior Vice President and Chief Marketing Officer at ESPN, a global omni-channel sports programming and content company, from October 2010 until October 2013. Prior to that position, she served as Vice President, Global Digital Marketing, at The Coca-Cola Company from July 2007 until October 2010 and as Coca-Cola’s Vice President, North America Interactive Marketing from August 2001 to July 2007. Education: Ms. Kruse holds a Bachelor of Arts in international relations from Pomona College and a Master of Business Administration from the University of Southern California. Privately-Held Company Boards: Ms. Kruse has served as a director of Unified, Inc. and as Chair of its Compensation Committee since 2014. Non-Profit Boards: Ms. Kruse serves on the board of directors and as Portland Chapter President of The CMO Club. She is also a member of the board of trustees of Portland’s Pioneer Courthouse Square and on the Executive Committee of Go Red for Women/American Heart Association for Oregon. |
Qualifications: Ms. Kruse’s significant experience and knowledge in the areas of digital marketing, sports and entertainment marketing, technology platform design and development, and consumer acquisition, retention and engagement through digital, mobile and social channels provide her with the qualifications and skills to serve as a director on our Board. | ||||||
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Stephen E. Macadam
Director since:2016
Age:
Committees: •Governance & Nominating •Compensation | Professional Experience: Mr. Macadam has served as a
Education: Mr. Macadam holds a Bachelor of Science
Public Company Boards: Mr. Macadam has served as a director of EnPro Industries, Inc. since 2008 and Louisiana-Pacific Corp since February 2019. Within the past five years, Mr. Macadam also served as a director of Axiall Corporation from |
Qualifications: As the former President and Chief Executive Officer of EnPro Industries, Inc., Mr. Macadam’s experience and knowledge in the areas of
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Vada O. Manager President and Chief
Director since: 2016
Age:
Committees: •Audit •Governance & Nominating(Chair) •Compensation
| Professional Experience: Mr. Manager has served as a
Education: Mr. Manager holds a Bachelor of Science
Public Company Mr. Manager served as a director of Ashland Global Holdings Inc. from 2008 until January
Non-Profit Boards: Mr. Manager serves on the board of trustees of ASU and previously served as the chair of |
Qualifications: As the President and
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Samuel J. Mitchell, Jr. Chief Executive Officer and Director of Valvoline Inc.
Director since:2016
Age:
Committees: N/A
| Professional Experience: Mr. Mitchell has served as a
Education: Mr. Mitchell holds a
Non-Profit Boards: Mr. Mitchell serves on the
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Qualifications: Mr. Mitchell has led the Valvoline business for the past 18 years and over that time has gained extensive knowledge of the Valvoline business and the automotive maintenance products and services markets. As our
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Charles M. Sonsteby Former Vice Chairman of The Michaels Companies
Director since:2016
Age:
Committees: •Audit(Chair) •Governance & Nominating •Compensation
| Professional Experience: Mr. Sonsteby has served as a
Education: Mr. Sonsteby holds a Bachelor of Science
Public Company Boards: Mr. Sonsteby
Non-Profit Boards: Mr. Sonsteby is a member of the University of Kentucky Gatton College of Business Dean’s Advisory |
Qualifications: As the former Vice Chairman and former Chief Financial Officer and Chief Administrative Officer of The Michaels Companies, Mr. Sonsteby’s experience and knowledge in the areas of retail operations, mergers and acquisitions, supply chain, international, finance, accounting, tax, treasury and investor relations provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of Darden Restaurants.
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Mary J. Twinem
Director since:2016
Age:
Committees: •Audit •Governance & Nominating •Compensation
| Professional Experience: Ms. Twinem has served as a
Education: Ms. Twinem holds a Bachelor of Science Public Company Boards: Ms. Twinem has served as a trustee of Investors Real Estate Trust (IRET), a real estate investment trust, since February 2018.
Privately-Held Company
Ms. Twinem Non-Profit Boards: Ms. Twinem has served as a director of Medica Holdings Company |
Qualifications: Ms. Twinem’s significant experience and knowledge in the areas of accounting, financial reporting, financial planning and analysis, mergers and acquisitions, investor relations and supply chain provide her with the qualifications and skills to serve as a director on our Board. She also brings significant franchise operations experience gained from her more than 20 years of service as an executive officer of Buffalo Wild
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The Board unanimously recommends that shareholders voteFOR the election of each director nominee.
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Proposal Two - Ratification of Independent Registered Public Accounting Firm
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The Audit Committee of our Board of Directors (the “Audit Committee”) reviews our accounting firm’s qualifications, performance and independence in accordance with regulatory requirements and guidelines to determine whether to reappoint such firm as our independent registered public accounting firm. We refer to the fiscal years ending September 30, 2016, 20172018, 2019 and 20182020 as “fiscal 2016,2018,” “fiscal 2017”2019” and “fiscal 2018,2020,” respectively. Based on its review, the Audit Committee has recommended to the Board, and the Board has approved, the appointment of Ernst & Young LLP to audit Valvoline’s Consolidated Financial Statements and Internal Control Over Financial Reporting for fiscal 2018.2020. See the “Corporate Governance—Valvoline’s Board of Directors—Committees” section of this Proxy Statement for further information about the role and responsibilities of our Audit Committee.
The following table presents the aggregate fees (includingout-of-pocket costs) for professional services rendered by the member firms of Ernst & Young LLP and their respective affiliates (collectively, “EY”) for fiscal 2017. All audit fees incurred by Valvoline during2019 and fiscal 2016 were included in the consolidated financial statements of our former parent, Ashland Global Holdings Inc. (“Ashland”), as reflected in the Form10-K filed by Ashland for its fiscal year ended September 30, 2016.2018. The fees paid to EY shown in the table below were allpre-approved in accordance with Audit Committee procedures discussed in the “Audit Committee Matters” section of this Proxy Statement.
| 2017 | 2016 | |||||||
Audit Fees (1) | $ | 3,327,000 | $ | N/A | ||||
Audit-Related Fees (2) | $ | 17,000 | $ | N/A | ||||
Tax Fees (3) | $ | 113,000 | $ | N/A | ||||
All Other Fees (4) | $ | 0 | $ | N/A | ||||
Total | $ | 3,457,000 | $ | N/A | ||||
(in thousands) | 2019 | 2018 | ||||||
Audit Fees(1) | $ | 2,939 |
| $ | 3,037 |
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Audit-Related Fees(2) | $ | 15 |
| $ | 30 |
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Tax Fees(3) | $ | 74 |
| $ | 14 |
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All Other Fees(4) | $ | 61 |
| $ | — |
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Total | $ | 3,089 |
| $ | 3,081 |
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| (1) | Audit fees include fees and expenses associated with the annual audit of Valvoline’s consolidated financial statements and internal controls over financial reporting and review of Valvoline’s interim consolidated financial statements. Audit fees also include fees associated with various audit requirements of Valvoline’s foreign subsidiaries (statutory audit requirements). |
| (2) | Audit-related fees |
| (3) | Tax fees |
| (4) | Other fees in fiscal 2019 relate to permitted risk management advisory services. |
Our shareholders are being asked to ratify the appointment of EY as Valvoline’s independent registered public accounting firm for fiscal 2018.2020. The appointment of EY will be deemed ratified if the number of votes cast “for” ratification exceed the number of votes cast “against” it. Abstentions and brokernon-votes will not be counted as votes cast “for” or “against” ratification. If our shareholders fail to ratify the appointment of EY, the Audit Committee may, but is not required to, reconsider the selection of such firm. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.
The Company has been advised by EY that neither the firm, nor any covered person of the firm, has any financial interest, direct or indirect, in any capacity in Valvoline or its subsidiaries.
One or more representatives of EY will be present at the Annual Meeting to respond to questions from shareholders and will be given the opportunity to make a statement.
If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the ratification of EY as Valvoline’s independent registered public accounting firm for fiscal 2018.2020.
The Board unanimously recommends that shareholders voteFOR the ratification of | ||||
✓ | ||||
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Proposal Three -Non-Binding Advisory Resolution Approving Executive Compensation
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As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are seeking your vote, on anon-binding advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables and narrative disclosure, as provided in this Proxy Statement. Specifically, shareholders are being asked to vote upon, and the Board has approved and unanimously recommends, the followingnon-binding advisory resolution:
RESOLVED, that the compensation paid to Valvoline’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
The Board believes that our executive compensation program is well-designed, appropriately aligns executive pay with companyCompany performance and incentivizes desirable executive performance. This proposal gives you an opportunity to express your own view of our 2017fiscal 2019 executive compensation practices. While the vote does not address any specific item of compensation and is not binding on the Board, the Board and its Compensation Committee (the “Compensation Committee”) value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.
The advisory resolution approving our executive compensation shall be deemed approved if the number of votes cast “for” the resolution exceed the number of votes cast “against” the resolution. Abstentions and brokernon-votes will not be counted as votes cast “for” or “against” the resolution.
If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the approval of the resolution.
The Board unanimously recommends that shareholders voteFOR the advisory resolution on our | ||||
✓ | ||||
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We are seeking your vote to approve the Valvoline Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved and adopted by our Board on November 14, 2017, subject to approval by the shareholders at the Annual Meeting, and will become effective upon receiving shareholder approval at the Annual Meeting.
The purpose of the ESPP is to provide eligible employees of the Company and certain of its subsidiaries an opportunity to use payroll deductions to purchase shares of our common stock and thereby acquire an ownership interest in the Company. The ESPP is intended to qualify as an “employee stock purchase plan” meeting the requirements of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).
The maximum aggregate number of shares of our common stock that may be purchased under the ESPP will be 2,000,000 shares, subject to adjustment as provided for in the ESPP. The share pool for the ESPP represents 1% of the total number of shares of our common stock outstanding as of December 4, 2017. In determining the number of shares to reserve for the ESPP, our Board of Directors considered the potential dilutive impact to shareholders, the projected participation rate over theten-year term of the ESPP, equity plan guidelines established by certain proxy advisory firms and advice provided by Deloitte, the compensation consultant to the Compensation Committee.
Summary of Material Terms of the ESPP
A summary of the material terms of the ESPP is set forth below. The summary is qualified in its entirety by reference to the full text of the ESPP, which is filed with this Proxy Statement as Appendix A.
Authorized Shares
Subject to adjustment as provided in the ESPP, a total of 2,000,000 shares of our common stock will be made available for sale under the ESPP. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company’s capitalization, or other distribution with respect to our shareholders other than normal cash dividends, an automatic adjustment will be made in a manner that complies with Section 423 of the Code in the number and kind of shares as to which outstanding options then unexercised will be exercisable, in the available shares reserved for sale under the ESPP, and in the purchase period limit, in order to maintain the proportionate interest of the participants before and after the event.
As of December 4, 2017, the closing price of our common stock on the NYSE was $24.43 per share.
Plan Administration
Our Compensation Committee will administer the ESPP, and will have full and exclusive authority to interpret the terms of the ESPP and determine eligibility to participate, subject to the conditions of the ESPP.
Eligibility
Generally, employees of the Company and any of its designated subsidiaries are eligible to participate in the ESPP, subject to the procedural enrollment and other requirements in the ESPP. However, our Compensation Committee may, in its discretion, determine on a uniform basis prior to the beginning of an offering period that employees will not be eligible to participate if they: (i) have not completed at least two years of service since their last hire date (or such lesser period of time as may be determined by our Compensation Committee in its discretion), (ii) customarily work not more than twenty hours per week (or such lesser period of time as may be determined by our Compensation Committee in its discretion), (iii) customarily work not more than five months per calendar year (or such lesser period of time as may be determined by our Compensation Committee in its discretion), or (iv) are highly compensated employees within the meaning of Section 414(q) of the Code.
No employee may be granted options to purchase shares of our common stock under the ESPP if such employee (i) immediately after the grant would own capital stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock, or (ii) holds rights to purchase shares of our common stock under all of our employee stock purchase plans (as defined in Section 423 of the Code) that accrue at a rate that exceeds $25,000 worth of shares of our common stock for each calendar year.
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For purposes of the ESPP, designated subsidiaries include any subsidiary (within the meaning of Section 424(f) of the Code) of the Company that has been designated by our Compensation Committee as eligible to participate in the ESPP.
As of September 30, 2017, approximately 4,850 employees would be eligible to participate in the ESPP, including all of the Company’s executive officers.
Offering Periods
Pursuant to the terms of the ESPP, on the first trading day of an offering period, each eligible employee will be granted an option to purchase shares of our common stock on the last day of such offering period. Unless and until our Compensation Committee determines otherwise in its discretion, offering periods will be consecutive six month periods. If the ESPP is approved at the Annual Meeting, it is anticipated that the first offering period will commence during 2018.
Contributions
The ESPP permits each participant to purchase shares of our common stock through payroll deductions of up to 15% of his or her eligible compensation; provided, however, that a participant may not purchase more than 1,500 shares of our common stock during each offering period, subject to adjustment as provided in the ESPP. No interest will accrue on a participant’s contributions to the ESPP. A participant may decrease (but not increase) the rate of his or her contributions once per offering period. A participant’s payroll deduction authorization will remain in effect for subsequent offering periods unless the participant’s participation in the ESPP terminates or the participant withdraws from an offering period, as described below.
Purchases
Unless a participant terminates employment or withdraws from the ESPP or an offering period before the last trading day of an offering period, the participant’s option will automatically be exercised on the last trading day of each offering period. The number of shares of our common stock purchased will be determined by dividing the payroll contributions accumulated in the participant’s account by the applicable purchase price; provided, however, that a participant may not purchase more than 1,500 shares of our common stock during each offering period, subject to adjustment as provided in the ESPP. No fractional shares of our common stock will be purchased. Any contributions accumulated in a participant’s account which are not sufficient to purchase a full share of our common stock will be refunded to the participant, without interest.
Until otherwise determined by our Compensation Committee, the purchase price of the shares during each offering period will be 85% of the lower of (i) the fair market value per share of our common stock on the first trading day of each offering period or (ii) the fair market value per share of our common stock on the last trading day the offering period (which we refer to as the “purchase date”).
Withdrawals; Termination of Employment
A participant may end his or her participation at any time during an offering period and all, but not less than all, of his or her accrued contributions not yet used to purchase shares of our common stock will be returned to him or her, as soon as administratively practicable. If a participant withdraws from an offering period, he or she mustre-enroll in the ESPP in order tore-commence participation in a subsequent offering period.
If a participant ceases to be an eligible employee for any reason, he or she will be deemed to have elected to withdraw from the ESPP and his or her contributions not yet used to purchase shares of our common stock will be returned to him or her, as soon as administratively practicable.
Stockholders Rights
No participant will have any voting, dividend, or other stockholder rights with respect to shares of common stock subject to any option granted under the ESPP until such shares have been purchased and delivered to the Participant.
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Holding Period
Unless otherwise determined by our Compensation Committee, participants in the ESPP will be required to hold the shares of our common stock acquired under the ESPP for theone-year period after the purchase date. During such holding period, a participant may not sell or transfer shares of common stock acquired under the ESPP.
Non-Transferability
A participant may not assign, transfer, pledge or otherwise dispose of in any way (other than by will or the laws of descent and distribution) his or her rights with regard to options granted under the ESPP or contributions credited to his or her account.
Corporate Transactions
The ESPP provides that in the event of a reorganization, merger, or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation (or survives as a direct or indirect subsidiary of such other constituent corporation or its parent), or upon a sale of substantially all of the property or stock of the Company to another corporation, a successor corporation may assume or substitute each outstanding option. If the successor corporation refuses to assume or substitute for the outstanding option, the offering period then in progress will be shortened, and a new purchase date will be set. The Company will notify each participant that the purchase date has been changed and that the participant’s option will be exercised automatically on the new purchase date unless prior to such date the participant has withdrawn from the offering period.
Amendment; Termination
Our Compensation Committee, in its sole discretion, may amend, suspend, or terminate the ESPP at any time and for any reason. If the ESPP is terminated, our Compensation Committee, in its discretion, may elect to terminate the outstanding offering period either immediately or upon completion of the purchase of shares of our common stock on the next purchase date (which may be sooner than originally scheduled, if determined by our Compensation Committee in its discretion), or may elect to permit the offering period to expire in accordance with its terms. If the offering period is terminated prior to expiration, all amounts then credited to participants’ accounts that have not been used to purchase shares of our common stock will be returned to the participants as soon as administratively practicable.
Our Compensation Committee may change the offering periods, designate separate offerings, limit the frequency and/or number of changes in the amount withheld during an offering period, permit contributions in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed contribution elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of our common stock for each participant properly correspond with contribution amounts, and establish such other limitations or procedures as our Compensation Committee determines in its sole discretion advisable that are consistent with the ESPP. Such modifications will not require shareholder approval or the consent of any ESPP participants.
In addition, if our Compensation Committee determines that the ongoing operation of the ESPP may result in unfavorable financial accounting consequences, our Compensation Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the ESPP to reduce or eliminate such accounting consequence. Such modifications or amendments will not require shareholder approval or the consent of any ESPP participants.
The ESPP automatically terminates on January 31, 2028, unless terminated earlier by the Compensation Committee.
Sub-Plans
Consistent with the requirements of Section 423 of the Code, our Compensation Committee may amend the terms of the ESPP, or an offering, or provide for separate offerings under the ESPP to, among other things, reflect the impact of local law outside of the United States as applied to one or more eligible employees of a designated subsidiary and may, where appropriate, establish one or moresub-plans to reflect such amended provisions.
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Certain Federal Income Tax Effects
The following summary briefly describes U.S. federal income tax consequences of options granted under the ESPP, but is not a detailed or complete description of all U.S. federal tax laws or regulations that may apply, and does not address any local, state or other country laws. Therefore, no one should rely on this summary for individual tax compliance, planning or decisions. Participants in the ESPP should consult their own professional tax advisors concerning tax aspects of options granted under the ESPP. The discussion below concerning tax deductions that may become available to the Company under U.S. federal tax law is not intended to imply that the Company will necessarily obtain a tax benefit from those deductions. Taxation of equity-based payments in other countries is complex, does not generally correspond to U.S. federal tax laws, and is not covered by the summary below.
The ESPP is intended to qualify as an “employee stock purchase plan” meeting the requirements of Section 423 of the Code. Under these provisions, a participant will not recognize taxable income until he or she sells or otherwise disposes of the shares purchased under the ESPP. If a participant disposes of the shares acquired under the ESPP more than two years from the option grant date (i.e., the first day of the offering period) and more than one year from the date the stock is purchased, then the participant must treat as ordinary income the amount by which the lesser of (i) the fair market value of the shares at the time of disposition, or (ii) the fair market value of the shares at the option grant date, exceeds the purchase price. Any gain in addition to this amount will be treated as a capital gain. If a participant holds shares at the time of his or her death, the holding period requirements are automatically deemed to have been satisfied and he or she will realize ordinary income in the amount by which the lesser of (i) the fair market value of the shares at the time of death, or (ii) the fair market value of the shares at the option grant date, exceeds the purchase price. The Company will not be allowed a deduction if the holding period requirements are satisfied.
If a participant disposes of shares before expiration of two years from the date of grant and one year from the date the stock is purchased, then the participant is deemed to have a disqualifying disposition and must treat as ordinary income the excess of the fair market value of the shares on the purchase date over the purchase price. Any additional gain or loss will be treated as long-term or short-term capital gain or loss, depending on the participant’s holding period with respect to such shares. The Company will be allowed a deduction equal to the amount of ordinary income recognized by the participant in a disqualifying disposition.
New Plan Benefits
As of the date of this Proxy Statement, no employee has been granted any options under the proposed ESPP. Accordingly, the benefits to be received pursuant to the ESPP by the Company’s executive officers and employees are not determinable at this time.
If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the approval of the Valvoline Inc. Employee Stock Purchase Plan.
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Valvoline’s Board of Directors
Our business and affairs are managed under the direction of our Board. Our Corporate Governance Guidelines require thattwo-thirds of our directors be independent, as defined in our Director Independence Standards (published on our investor relations website athttp://investors.valvoline.com/governance) (“Independence Standards”), which incorporate the requirements of SEC rules and NYSE listing standards. Within this framework, the G&N Committee is charged with determining and refreshing, as appropriate, the composition of our Board. The G&N Committee seeks to fill our Board with exceptionally talented and diverse directors, with expertise and leadership experience in the markets in which we operate.
Our Board currently consists of the following eight members, all of whom were elected at the 2017 Annual Meeting of Shareholders:nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby, and Mary J. TwinemTwinem. All of the directors, other than Mr. Evans, were elected at the 2019 Annual Meeting of Shareholders. At its meeting on November 14, 2019, the Board increased its size from eight to nine members and William A. Wulfsohn. At the end of fiscal 2017,elected Mr. Wulfsohn resignedEvans, effective December 1, 2019, to serve as Chairmana member of the Board and notifiedwith a term expiring at the Board that he would not stand forre-election upon the expiration of his term as a Director at the2020 Annual Meeting. Each of the other sevencurrent directors on the Board has been nominated forre-election at the 2020 Annual Meeting. The Board expresses its gratitude to Mr. Wulfsohn for his dedicated service and counsel to the Company as it transitioned from a long-time business unit of Ashland to an independent, publicly traded company. The Board has resolved to reduce its size from eight to seven members effective as of the date of the Annual Meeting to eliminate the vacancy that would otherwise result from Mr. Wulfsohn’s decision not to stand forre-election. See the “Proposal One—Election of Directors” section of this Proxy Statement.
During fiscal 2017, nine2019, seven meetings of the Board were held. Each director attended at least 75% of the total meetings of the Board and the Committee(s) on which he or she served. Overall attendance at Board and Committee meetings was 100%.
Our Amended and RestatedBy-Laws (“By-Laws”) provide the Board flexibility in determining the appropriate leadership structure for the Company. Currently, Mr. Mitchell serves as our Chief Executive Officer and Mr. Kirk serves as Chairman of the Board. The Board (Mr. Wulfsohn served in that role from the date of our IPO through fiscal 2017). With the Company’s recent IPO and separation from Ashland, the Boardcurrently believes that separating the roles of Chairman and Chief Executive Officer is in the best interest of the Company because it allows Mr. Mitchell to guide our newly public company and focus on operating and managing theday-to-day activities of our business, while Mr. Kirk can focus on Board leadership independent of management.
The Board will periodically review and reassess our Board leadership structure and determine whether it is in the Company’s and our shareholders’ best interest to continue the separate roles of Chairman and Chief Executive Officer. In the event that the Board combines the role of Chairman and Chief Executive Officer, our Corporate Governance Guidelines require the Board to appoint a lead independent director.
Our Corporate Governance Guidelines require thattwo-thirds of our directors be independent, as defined in the Independence Standards. The Independence Standards incorporate the requirements of SEC rules and NYSE listing standards, and were adopted by our Board to assist in its determination of director independence. Pursuant to these rules, our Board must make an affirmative determination that those members of the Board who serve as independent directors have no material relationship with our companythe Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company)Company). Members of the Audit and Compensation Committees are also subject to heightened standards for independence under SEC rules and NYSE listing standards.
Our Board annually reviews director independence in accordance with these requirements. In making its independence determinations, the Board considered relationships and transactions between each director, on the one hand, and Valvoline, its subsidiaries and its affiliates, on the other hand, including the director’s commercial, economic, charitable and familial relationships. As a result of this review, the Board affirmatively determined that
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Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby and Ms. Twinem are each independent of Valvoline and its affiliates. Mr. Mitchell was determined not to be independent because he currently serves as Chief Executive Officer of the Company, and Mr. Wulfsohn was determined not to be independent because he serves as Chief Executive Officer of Ashland, Valvoline’s controlling shareholder through May 12, 2017.
In determining the independence of Mr. Freeland, our Board considered transactions entered into in the ordinary course of business with Cummins Inc., a company in which Mr. Freeland serves as an executive officer. In Cummins’ last fiscal year, Valvoline paid $1.64 million to Cummins and Valvoline received $36.59 million from Cummins, representing 0.01% and 0.2%, respectively, of Cummins’ consolidated gross revenues of $17.5 billion for such fiscal year. Similarly, the amount the Company paid to Cummins and the amount received by the Company from Cummins in each of the two preceding fiscal years did not exceed the greater of $1 million or 2% of Cummins’ consolidated gross revenues in such fiscal years. All transactions with Cummins were made at arms-length, included standard commercial terms, and Mr. Freeland did not personally benefit from any of such transactions. The Board concluded that Mr. Freeland was independent, because the transactions were not material to Cummins such that Mr. Freeland could be unduly influenced by, and thus not independent of, Valvoline management. The G&N Committee determined that the transactions with Cummins were not “Related Person Transactions” as defined in the Company’s Related Person Transaction Policy.Company.
In addition, the Board determined that Ms. Twinem and Messrs. Manager and Sonsteby and Ms. Twinem each satisfy the heightened independence standards applicable to audit committee members, including those under Exchange Act Rule10A-3. Similarly, the Board determined that Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager
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and Sonsteby and Ms. Twinem each satisfy the heightened independence standards applicable to compensation committee members as set forth in NYSE listing standards.
Our Board of Directors has established three standing committees: an Audit Committee, a Compensation Committee and a G&NGovernance & Nominating Committee (each a “Committee” and, collectively, the “Committees”) to assist in the performance of the Board’s various functions. All committeeCommittee members are appointed by our Board upon recommendation of the G&N Committee.
Listed below are the members of each of the three standing committees.Committees. As discussed above in “—Independence,” our Board has determined that all of the members of these Committees are independent as defined by our Independence Standards, including, in the case of Audit and Compensation Committee members, the heightened standards for independence under SEC rules and NYSE listing standards.
Audit Committee | ||||||
Vada O. Manager | Charles M. Sonsteby* | Mary J. Twinem | ||||
Compensation Committee(1)(2) | ||||||
Gerald W. Evans, Jr. | Richard J. Freeland | Stephen F. Kirk | ||||
Carol H. Kruse | Stephen E. Macadam | Vada O. Manager | ||||
Charles M. Sonsteby | Mary J. Twinem* | |||||
Governance and Nominating Committee(1)(2) | ||||||
Gerald W. Evans, Jr. | Richard J. Freeland | Stephen F. Kirk | ||||
Carol H. Kruse | Stephen E. Macadam | |||||
Vada O. Manager* | ||||||
Charles M. Sonsteby | Mary J. Twinem | |||||
| * | Chair |
| (1) | Effective December 4, 2018, Ms. |
| (2) | Effective December 1, 2019, Mr. |
The responsibilities of each of our Committees are described below. Each of the Committees operates under a written charter; must meet at least four times a year, plus additional meetings as circumstances require; has authority to retain independent legal, accounting or other advisors; makes regular reports to the Board; and reviews its own performance annually. TheEach Committee’s charter of each Committee is available on our investor relations website athttp://investors.valvoline.com/governance.
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Audit Committee |
Number of Meetings in Fiscal |
The Board has established the Audit Committee in accordance with Section 3(a)(58) of the Exchange Act. The Audit Committee is currently composed of three members and the Board has determined that each member of the Audit Committee is “independent” and “financially literate,” as such terms are defined by NYSE listing standards. In addition, the Board has determined that each member of the Audit Committee is an “audit committee financial expert” as that term is defined by SEC rules. A director may not serve on the Audit Committee if he or she serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service and time commitment would not impair the director’s ability to effectively serve on the Audit Committee.
The Audit Committee is responsible for, among other things, assisting the Board in fulfilling its oversight responsibilities with respect to:
overseeing the integrity of our financial reporting process, including earnings releases and the filing of financial reports;
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reviewing the quality and adequacy of accounting and financial controls;
selecting and evaluating the performance of our internal auditors, who report directly to the Audit Committee;
approving fees and services of our independent registered public accounting firm;
overseeing our internal audit function, including the head of internal audit;
reviewing the effectiveness of our legal and regulatory compliance programs;
reviewing, at least annually, our enterprise risk assessment and management policies, including the Company’s major enterprise and financial risk exposures and steps taken by management to monitor and mitigate such risks;
evaluating significant financial matters and decisions, such as capital structure, dividend policy, offerings of corporate securities, major borrowings, credit facilities, derivatives and swaps policies (including entry into swaps in reliance on
overseeing funding and investment policy related to employee benefit plans.plans;
reviewing and investigating any matters pertaining to the integrity of executive management, and overseeing compliance by management with laws, regulations and our Global Standards of Business Conduct;
reviewing, at least annually, the Company’s policies, programsinsurance program, including casualty, property, cyber and practices with respect to environmental, healthdirectors’ and safety risks;officers’ liability insurance;
reviewing, at least annually, the Company’s cyber security risks and programs established to manage such risks; and
establishing and maintaining procedures for handling complaints regarding accounting, internal auditing controls and auditing matters, including procedures for confidential, anonymous submission of such complaints.
Compensation Committee |
Number of Meetings in Fiscal |
The Compensation Committee is currently composed of sixeight members and the Board has determined that each member of the Compensation Committee is “independent” as such term is defined by NYSE listing standards and SEC rules and qualifies as a“non-employee director” pursuant to Rule16b-3 under the Exchange Act and as an “outside director” pursuant to Section 162(m) of the Code.Act.
The Compensation Committee is responsible for, among other things:
overseeing the implementation and administration of the Company’s compensation plans;
adopting, amending, terminating and otherwise designing employee benefits plans;
ensuring that Valvoline’s executive compensation programs are appropriately competitive, support organizational objectives and shareholder interests and emphasize pay for performance linkage;
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reviewing compensation policies and practices for all employees, and assessing risks associated with such policies and practices;
approving any employment agreements, consulting arrangements, severance or retirement arrangements,change-in-control change in control agreements and/or special or supplemental benefits covering any current or former executive officer;
overseeing the execution of CEO and senior management development and succession plans;
reviewing and approving any perquisites provided to executive officers;
reviewing and recommending to the Board of Directors’ the form and amount of director compensation;
overseeing regulatory compliance on compensation matters, including the Company’s policies on structuring compensation programs to preserve tax deductibility;
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reviewing and approving the preparation of the annual report on executive compensation;“Compensation Discussion and Analysis” section and “Compensation Committee Report” included in this Proxy Statement;
overseeing compliance with NYSE requirements relating to shareholder approval of equity compensation plans; and
determining the independence and compensation of, and overseeing the work completed by, any compensation consultant, independent legal counsel or other advisor that it retains.
Governance and Nominating Committee |
Number of Meetings in Fiscal |
The G&N Committee is currently composed of sixeight members and the Board has determined that each member is “independent” as such term is defined by NYSE listing standards. The G&N Committee is responsible for, among other things:
identifying qualified nominees (i) for shareholder election and (ii) for election by the Board to fill any vacancies that occur between annual meetings of shareholders, in each case, consistent with criteria approved by the Board relating to personal and professional integrity, ability, judgment, expertise, experience and diversity;
reviewing potential director candidates and nominations forre-election and reporting the results of such reviews to the Board;
identifying board members qualified to fill any vacancies on a committee of the Board;
reviewing appropriateness of directors’ continued service on the Board or the committees of the Board;
reviewing transactions pursuant to the Company’s Related Person Transaction Policy set forth in the Company’s Corporate Governance Guidelines;
recommending stock ownership guidelines for employees andnon-employee directors and programs and procedures relating to director evaluation, retention and retirement;
defining and reviewing the responsibilities of the Board with respect to the Company’s corporate governance, including review of proposed amendments to the Company’s articles orArticles,by-lawsBy-laws and Corporate Governance Guidelines of the Company and the conduct of the meetings of the Board, the committees of the Board and the Company’s shareholders;
reviewing and recommending policies and procedures to ensure the Board and its committees are properly constituted and organized;
reviewing all Board committee charters;
reviewing and, if necessary, making recommendations as to shareholder proposals; and
reviewing the succession process for senior management.
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Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee (Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby) (i) was an officer or employee of Valvoline at any time during or prior to fiscal 20172019 or (ii) is or was a participant in a “related person” transaction with Valvoline since the beginning of fiscal 2017.2019. No executive officer of the Company served on the compensation committee or board of any company that employed any member of Valvoline’s Compensation Committee or Board of Directors.
Chairman of the Board. During fiscal 2017, Mr. Wulfsohn served as ourNon-Executive Chairman of the Board. In connection with Mr. Wulfsohn’s resignation as Chairman, Mr. Kirk was unanimously appointed by the Board to serve as ourNon-Executive Chairman, effective October 1, 2017.2017 and was reappointed to that role on January 30, 2019. The Chairman of the Board organizes Board activities to effectively provide guidance to, and oversight and accountability of,
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management. To fulfill that role, the Chairman of the Board, among other things, creates and maintains an effective working relationship with the Chief Executive Officer and the other members of senior management and the Board, assures that the Board agenda is appropriately directed to the matters of greatest importance to the Company and provides senior management with the Board’s advice, direction and opinions. TheNon-Executive Chairman preserves the distinction between management and oversight, maintaining the responsibility of management to develop corporate strategy and the responsibility of the Board to review and express its views on corporate strategy.
Board and Committee Meetings. The Board and Committees must hold regularly scheduled meetings. Directors are expected to attend all meetings of the Board and of the Committees on which they serve.Non-management directors meet in executive session at each regularly scheduled meeting of the Board, and at other times as they may determine appropriate.
Evaluation of Board Effectiveness. The Board must conduct annual self-evaluations to determine whether it and its Committees are functioning effectively. The G&N Committee receives comments from all directors and reports to the Board with an annual assessment of the Board’s performance, with a focus on the Board’s contribution to the Company and areas in which the Board or its Committees can improve. We may also engage independent, third-party governance experts from time to time to conduct interviews and/or assessments regarding the structure and effectiveness of our Board and its committees. The Committees of our Board of Directors have all adopted charters defining their respective purposes and responsibilities. Pursuant to these charters, the Committees must review their respective performances at least annually and each of the Committees has authority to engage independent legal, accounting or other advisors.
The Board’s Role in Risk Oversight
The Board has an active role, as a whole, and also at the committee level, in overseeing management of the Company’s risk. The Board approves and monitors the fundamental financial and business strategies of the Company and maintains policies and procedures designed to ensure that the assets of the Company are properly safeguarded and enterprise risks are properly managed, that appropriate financial and other controls are maintained, that processes are in place for maintaining the integrity of the Company and that the Company’s business is conducted in compliance with applicable laws and regulations. Management is responsible for theday-to-day management of risk, and members of our senior management regularly report to the Board and its Committees on current and emerging risks and the Company’s approach to avoiding and mitigating risk exposure. The Board reviews in detail the Company’s most significant risks and whether management is responding consistently within the Company’s overall risk management and mitigation strategy. While the Board is ultimately responsible for overall risk oversight at our Company, the Committees assist the Board in fulfilling its oversight responsibilities in certain areas. In particular, the Audit Committee has primary responsibility for monitoring the Company’s major financial risk exposures and the steps the Company has taken to control such exposures, including the Company’s risk management policies and processes. ThePrior to September 2019, the Audit Committee also assistsassisted the Board in fulfilling its oversight responsibility with respect to environmental, health and safety (“EH&S”) risks and programs. Given the importance of EH&S matters, the Board amended the Audit Committee charter to move this oversight function to the full Board. EH&S risks and programs are now reviewed by the Board at least twice per year. The Compensation Committee monitors the risks associated with our compensation policies and procedures. The G&N Committee is charged with reviewing and recommending governance policies and procedures, including Board and Committee structure,
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leadership and membership, that ensure independence of the Board as it exercises its corporate governance and risk oversight roles. The G&N Committee also reviews transactions pursuant to our Related Person Transaction Policy (which is further described in “—Other Governance Policies and Practices—Related Person Transaction Policy”).
Other Governance Policies and Practices
Overview of Governance Principles
We are committed to adhering to sound corporate governance practices. We have adopted Corporate Governance Guidelines, which include our Related Person Transaction Policy. These Guidelines provide the framework for our Board of Directors’ governance of the Company and include a general description of our Board’s purpose,
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responsibilities and member qualification standards. As further discussed in “—Valvoline’s Board of Directors—Independence,” our Corporate Governance Guidelines require that at leasttwo-thirds of our directors be independent. Our Related Person Transaction Policy requires our directors and executive officers to identify annually and on an as needed basis potential transactions with related persons or their firms that meet certain criteria set forth in our Related Person Transaction Policy.
We also require compliance with our code of business conduct, entitled “Global Standards of Business Conduct,” which applies to all of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions, as well as employees of Valvoline Instant Oil Change (“VIOC”) stores.functions. Our Global Standards of Business Conduct promote honest and ethical conduct, compliance with applicable laws, rules and regulations, prompt reporting of violations of the standards set forth therein and full, fair, accurate, timely and understandable disclosure in reports filed with the SEC.
Our Corporate Governance Guidelines (including our Related Person Transaction Policy), Global Standards of Business Conduct and Committee charters are published on our investor relations website athttp://investors.valvoline.com/governance. These documents are also available in print at no cost to any shareholder who requests them. We intend to post any amendments or waivers to our Global Standards of Business Conduct (to the extent applicable to our directors and executive officers) on our investor relations website or in a Current Report on Form8-K.
Related Person Transaction Policy
Federal securities laws require us to describe any transaction since the beginning of the last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Related persons are directors and executive officers, nominees for director and any immediate family members of directors, executive officers or nominees for director. We are also required to describe our policies and procedures for the review, approval or ratification of any Related Person Transaction.
Pursuant to our written Related Person Transaction Policy (the “Policy”), the G&N Committee is responsible for reviewing the material facts of all transactions that could potentially be “transactions with related persons.” The Policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, (2) the Company is a participant, and (3) any related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). Transactions between the Company and any firm, corporation or entity in which a related person is an executive officer or general partner, or in which any related persons collectively hold more than 10% of the ownership interests, are also subject to review under the Policy.
Under the Policy, our directors and executive officers are required to identify annually potential transactions with related persons or their firms that meet the criteria set forth in the Policy, and management is required to forward all such disclosures to the G&N Committee. The G&N Committee reviews each disclosed transaction. The G&N Committee has discretion to approve, disapprove or otherwise act if a transaction is deemed to be a Related Person Transaction subject to the Policy. Only disinterested members of the G&N Committee may participate in the determinations made with regard to a particular transaction. If it is impractical to convene a meeting of the G&N
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Committee, the Chair of the G&N Committee is authorized to make a determination and promptly report such determination in writing to the other G&N Committee members. All determinations made under the Policy are required to be reported to the full Board of Directors.
Under the Policy and consistent with SEC regulations, certain transactions are not Related Person Transactions, even if such transactions exceed $120,000 in a fiscal year. Those exceptions are:
Compensation to a director or executive officer which is or will be disclosed in our Proxy Statement;
Compensation to an executive officer which is approved by the Compensation Committee and would have been disclosed in our Proxy Statement if the executive officer was a “named executive officer”;
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A transaction in which the rates or charges involved are determined by competitive bids, or which involves common, contract carrier or public utility services at rates or charges fixed in conformity with law or governmental authority;
A transaction that involves services as a bank depository of funds, transfer agent, registrar, indenture trustee or similar services; and
A transaction in which the related person’s interest arises solely from the ownership of Valvoline stock and all shareholders receive the same benefit on a pro rata basis.
Other than the transactions with Ashland described in the “Certain Relationships and Related Person Transactions” section, below, theThe G&N Committee determined that there were no other Related Person Transactions that were required to be reported under Item 404(a) ofRegulation S-K since the beginning of fiscal 2019, nor are there any currently proposed.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Pursuant to Section 16 of the Exchange Act, the Company’s directors and certain executive officers are required to report, within specified due dates, their initial ownership of the Company’sValvoline Common Stock and all subsequent acquisitions, dispositions or other transfers of interest in such securities, if and to the extent reportable events occur which require reporting by such due dates. The Company is required to identify in its Proxy Statement whether it has knowledge that any person required to file such a report may have failed to do so in a timely manner. Based on that review, all of the Company’s directors and all executive officers subject to the reporting requirements satisfied such requirements in full, except for the filings on either Form 3,one Form 4 or Form 5 which werewas filed late by the Company, on behalf of the following directors:Mr. Macadam, for Richard J. Freeland, one Form 4; for Stephen F. Kirk, one Form 4; for Stephen E. Macadam, one Form 4; for Vada O. Manager, three Forms 4; for Charles M. Sonsteby, three Forms 4; and Mary J. Twinem one Form 4. These transactions that were reported late pertaina single transaction related to the deferral of his Board fees and retainersretainer that is invested in the Valvoline Common Stock Fund available within the Company’s 2016 Deferred Compensation Plan forNon-Employee Directors or the payment of dividend equivalents on holdings under the aforementioned stock fund.Directors.
As set forth in our Corporate Governance Guidelines, the Board believes that management is responsible for communicating on behalf of the Company. However, at the request of management, individual Board members may meet or otherwise communicate with shareholders and other interested parties. Persons interested in communicating with the Board, or with a specific member or Committee of the Board, may do so by writing to the General CounselChief Legal Officer of Valvoline, 100 Valvoline Way, P.O. Box 55270, Lexington, KY 40555-1000.40509. Communications directed to our General CounselChief Legal Officer will be reviewed and distributed to individual directors, as appropriate, depending on the subject matter and facts and circumstances outlined in the correspondence. Communications that are not related to the duties and responsibilities of the Board, or are otherwise inappropriate, will not be forwarded to the directors, although all communications directed to the Board will be available to any director upon request.
Although Valvoline does not have a formal policy regarding attendance by directors at Valvoline’s annual meetings of shareholders, Valvoline strongly encourages all directors to attend. All of Valvoline’s then current directors were present at the prior year’s annual meeting of shareholders.
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ShareholderNomination of Directors
G&N Committee Recommendations for and Nominations of DirectorsDirectors.
Pursuant to our Corporate Governance Guidelines and the G&N Committee’s charter, the G&N Committee is responsible for reviewing allleading the search for and recommending qualified director nominees and making recommendationsfor shareholder election to the full Board. Shareholders who wish to do so may recommend candidatesBoard for considerationthe next annual meeting of shareholders and for proposing director nominees for election by the G&N Committee. Shareholders also have the right under ourBy-lawsBoard to directly nominate candidates to stand for election atfill vacancies which occur between annual meetings of shareholders, without any actionshareholders. The G&N Committee does not set specific, minimum qualifications that director nominees must meet to be nominated for election to the Board, but rather believes that each nominee should be evaluated on his or recommendation onher individual merits, taking into account the partneeds and composition of the Board at the time. The G&N Committee considers candidates who bring a wide range of attributes to the Board. The general criteria the G&N Committee looks for in selecting an individual as a director nominee is someone who exhibits the highest personal and professional integrity, who has demonstrated exceptional ability and judgment and who shall be effective in serving the interests of the Company’s shareholders. The G&N Committee shall seek director candidates
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who exhibit the following personal and professional qualifications: (1) significant experience in the lubricants, automobile or our Board.consumer marketing industries; (2) product or process innovation experience; (3) international business expertise; (4) diverse experience in policy-making in business, government, education and/or technology, or in areas that are relevant to the Company’s global business and strategy; (5) possess an inquisitive and objective nature, practical wisdom and mature judgment; and (6) the ability to work with the Company’s existing directors and management. The G&N Committee also believes that diversity of race, ethnicity, gender and age are important factors in evaluating candidates for Board membership. The G&N Committee has from time to time retained the services of Russell Reynolds Associates, a third party search firm, to assist the G&N Committee in identifying and evaluating candidates for Board membership who best match the personal and professional criteria described above.
Shareholder Recommendations for Directors. Shareholders who wishwishing to recommend candidates for consideration by the G&N Committee or to directly nominate candidates for election may do so pursuant to the applicable procedures summarized below.
Shareholder Recommendations for Directors. The G&N Committee considers director candidates recommended by other directors, employees and shareholders, and is authorized, at its discretion, to engage a professional search firm to identify and suggest director candidates. Written suggestions for director candidates should be sentsend their recommendation via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, P.O. Box 55270, Lexington, KY 40555-1000.40509. Recommendations should be received no later than September 1, 2018,2020, to be considered by the G&N Committee in connection with its review of candidates for election at our 20192021 Annual Meeting of Shareholders. Suggestions for director candidates should include the information described in Section 3.03 of our Amended and RestatedBy-laws(“By-laws”),By-laws, and any other relevant information, as to the proposed candidate. The G&N Committee will review all director candidates in accordance with its charter and Valvoline’s Corporate Governance Guidelines, and it will identify qualified individuals consistent with criteria approved by the Board of Directors. As further described in its charter, the G&N Committee seeks candidates of the highest personal and professional integrity who exhibit the following personal and professional qualifications: (1) significant experience in the lubricants, automobile or consumer marketing industries, (2) experience in product or process innovation, (3) international business expertise, (4) diverse experience in policy-making in business, government, education and/or technology, or in areas that are relevant to the Company’s global business and strategy, (5) an inquisitive and objective nature, practical wisdom and mature judgment and (6) the ability to work with the Company’s existing directors and management.criteria described above. Individuals recommended by shareholders in accordance with these procedures will be evaluated by the G&N Committee in the same manner as individuals who are recommended through other means.
Shareholder Nominations of Directors. OurBy-laws permit eligible shareholders to directly nominate candidates for election at annual meetings of shareholders. OurBy-laws require that the Company be given advance written notice of shareholder nominations for election to the Board of Directors. Such notice must contain the information required by ourBy-laws with respect to the nominee and the shareholder and must be timely. To be timely for purposes of an annual meeting, such notice must be received at least 90 but not more than 120 days before the first anniversary of the prior year’s annual meeting; provided, however, if the annual meeting is to be held more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting and (ii) the 10th day following the day on which public announcement of such meeting is first made. Based on the January 31, 2018,30, 2020, date for our upcoming Annual Meeting, shareholder nominations must be received no earlier than October 3, 2018,2, 2020, and no later than November 2, 2018,1, 2020, to be considered timely for our 20192021 annual meeting of shareholders, assuming such meeting will be held no more than 30 days before and no more than 60 days after January 31, 2019.30, 2021. The chairman of an annual meeting of shareholders may refuse to acknowledge the nomination of any person not made in compliance with ourBy-laws. Shareholders should send all director nominations for the 20192021 Annual Meeting of Shareholders via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, P.O. Box 55270, Lexington, KY 40555-1000.40509.
A copy of ourBy-laws has been filed with the SEC and is available on the SEC’s website,http://www.sec.gov, and the Company’s website,http://investors.valvoline.com/governance, or may be obtained by written request to: Valvoline’s Corporate Secretary, 100 Valvoline Way, Lexington, KY 40509.
Certain Relationships and Related Person Transactions
On September 22, 2015, Ashland announced that its board of directors approved proceeding with a plan to split Ashland into two independent, publicly traded companies comprised of its Valvoline business and its specialty
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chemical business. Valvoline was incorporated in May 2016 as a subsidiary of Ashland in connection with the Separation. Following a series of restructuring steps, prior to the initial public offering of Valvoline (the “IPO”), Ashland contributed its Valvoline business to Valvoline including substantially all of the historical Valvoline business previously reported by Ashland as well as certain other assets and liabilities. On September 28, 2016, Valvoline completed the IPO at which time Valvoline issued and sold 34,500,000 shares of its common stock to the public and Ashland continued to hold 170,000,000 shares or approximately 83% of the outstanding shares of common stock of Valvoline. On May 12, 2017, Ashland distributed all of its remaining interest in Valvoline to Ashland stockholders (the “Stock Distribution”), marking the completion of Valvoline’s Separation from Ashland. Effective upon the Stock Distribution, Ashland no longer owns any shares of Valvoline common stock.
Immediately prior to the completion of the IPO, we and Ashland entered several agreements relating to the IPO and our relationship with Ashland after the IPO. These agreements, the material terms of which are summarized below, include a separation agreement, a transition services agreement, a reverse transition services agreement, a tax matters agreement, a registration rights agreement and an employee matters agreement. These agreements were prepared while we were still a wholly owned subsidiary of Ashland. Accordingly, during the period in which the terms of those agreements were prepared, we did not have an independent board of directors or a management team that was independent of Ashland. As a result, the terms of the agreements may not reflect terms that would have resulted fromarm’s-length negotiations between unaffiliated third parties. Copies of these agreements have been incorporated by reference as exhibits to our Annual Report on Form10-K for fiscal 2016, which was filed with the SEC on December 19, 2016. The following descriptions are qualified in their entirety by reference to the full text of such agreements.
Separation Agreement
On September 22, 2016, Valvoline entered into a separation agreement with Ashland to facilitate the separation of Valvoline and Ashland into two separate companies (the “Separation”). The separation agreement sets forth the agreements between Valvoline and Ashland regarding the principal actions to be taken in connection with the Separation. It also sets forth other agreements that govern aspects of the relationship between Valvoline and Ashland following the Separation.
Transfer of Assets and Assumption of Liabilities.The separation agreement identifies certain transfers of assets and assumptions of liabilities that were necessary in advance of the Separation so that Valvoline and Ashland retain the assets of, and the liabilities associated with, their respective businesses. However, certain liabilities that are not associated with Ashland’s and Valvoline’s respective businesses have been allocated regardless of which business they are associated with (if any). For example, Valvoline has assumed responsibility for certain Ashland qualified and nonqualified pension and retirement plans as well as a portion of the trusts or other funding vehicles that have been established to fund such plans. Ashland has retained, or assumed from Valvoline, substantially all liabilities arising from or relating to the exposure of any person to asbestos from the manufacture, production, sale, distribution, conveyance or placement in the stream of commerce on or prior to the date of the Separation of any product or other item, as well as from repair, use, abatement or disposal on or prior to the date of the Separation of any building material or equipment containing asbestos, regardless of whether related to Ashland’s business or Valvoline’s business. In addition, Ashland has retained, or assumed from Valvoline, all environmental liabilities, known or unknown, arising from or relating to Ashland’s business or any other historical business of Ashland, other than Valvoline’s business, arising or relating to events, conduct or conditions occurring prior to, or after, the date of the Separation.
The separation agreement also provides for the settlement or extinguishment of certain liabilities and other obligations between Valvoline and Ashland.
Intercompany Arrangements.All agreements, arrangements, commitments and understandings, including most intercompany accounts payable or accounts receivable, between Valvoline, on the one hand, and Ashland, on the other hand, have terminated effective as of the Separation, except specified agreements and arrangements that are intended to survive the Separation.
Shared Liabilities.The tax matters agreement, employee matters agreement and shared environmental liabilities agreement describe certain liabilities that will be shared between Valvoline and Ashland following the Separation.
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These agreements respectively specify the portion of the economic costs of such liabilities between Valvoline and Ashland and establish a process for managing, defending and resolving, as well as sharing the costs related to, such liabilities between Valvoline and Ashland.
Representations and Warranties.In general, neither Valvoline nor Ashland have made any representations or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in connection with these transfers or assumptions, the value or freedom from any lien or other security interest of any assets transferred, the absence of any defenses relating to any claim of either party or the legal sufficiency of any conveyance documents. Except as expressly set forth in the separation agreement, all assets have been transferred on an “as is,” “where is” basis.
Further Assurances.Valvoline and Ashland have agreed to use reasonable best efforts to affect any transfers contemplated by the separation agreement that have not been consummated prior to the Separation as promptly as practicable. In addition, Valvoline and Ashland have agreed to use reasonable best efforts to affect any transfer orre-transfer of any asset or liability that was improperly transferred or retained as promptly as practicable following the Separation.
Exchange of Information.Valvoline and Ashland have agreed to provide each other with information reasonably necessary to comply with reporting, disclosure, filing or other requirements of any national securities exchange or governmental authority, for use in judicial, regulatory, administrative and other proceedings and to satisfy audit, accounting, regulatory, litigation and other similar requests. Valvoline and Ashland also have agreed to use reasonable best efforts to retain such information in accordance with Ashland’s record retention policies as in effect on the date of the separation agreement. Each party also has agreed to use its reasonable best efforts to assist the other with its financial reporting and audit obligation for an agreed period of time.
Release of Claims.Valvoline and Ashland each have agreed to release the other and its affiliates, successors and assigns, and all persons that prior to the Separation have been the other’s shareholders, directors, officers, agents and employees, and their respective heirs, executors, administrators, successors and assigns, from any claims against any of them that arise out of or relate to events, circumstances or actions occurring or failing to occur or any conditions existing at or prior to the time of the Separation. These releases are subject to exceptions set forth in the separation agreement.
Indemnification.Valvoline and Ashland each have agreed to indemnify the other and each of the other’s current and former directors, officers and employees, and each of the heirs, executors, successors and assigns of any of them, against certain liabilities incurred in connection with the Separation and Valvoline’s and Ashland’s respective businesses. The amount of either Valvoline’s or Ashland’s indemnification obligations will be reduced by any insurance proceeds the party being indemnified receives. The separation agreement also specifies procedures regarding claims subject to indemnification.
Transition Services Agreement
In order to help ensure an orderly transition, on September 22, 2016, Valvoline entered into a transition services agreement pursuant to which Ashland provides Valvoline with various corporate support services, including certain accounting, human resources, information technology, office and building, risk, security, tax and treasury services. Ashland may also provide Valvoline with additional services that Valvoline and Ashland may identify from time to time in the future. In general, the services began following the completion of the IPO and cover a period not expected to exceed 24 months.
Ashland agreed to perform the services with the same standard of quality and care as it uses in servicing its own business, and in any event with at least the same level of quality and care as such services were provided to the Valvoline business during the preceding year. Valvoline and Ashland agreed to cooperate in connection with the performance of the services, provided that such cooperation does not unreasonably disrupt Valvoline’s or Ashland’s operations, and Ashland agreed to use commercially reasonable efforts, at Valvoline’s expense, to obtain any third-party consents required for the performance of the services.
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The services are being provided by Ashland without representation or warranty of any kind. Ashland has no liability with respect to its furnishing of the services except to the extent occasioned by its bad faith, willful misconduct, fraud, gross negligence or willful breach of the agreement.
Under the transition services agreement, Valvoline and Ashland are each obligated to maintain the confidentiality of the other’s confidential information for five years following the termination of the transition services agreement, subject to certain exceptions. Valvoline and Ashland retain all rights, title and interest in and to their respective intellectual property used in the provision of services under the agreement.
The transition services agreement specifies the costs to Valvoline for the services. These costs are consistent with expenses that Ashland has historically allocated or incurred with respect to such services, plus amark-up of five percent.
Reverse Transition Services Agreement
In order to help ensure an orderly transition, on September 22, 2016, Valvoline entered into a reverse transition services agreement pursuant to which Valvoline provides Ashland with various corporate support services, including certain human resources, information technology, office and building, security and tax services, as well as certain regulatory compliance services required during the period in which Valvoline remains a majority-owned subsidiary of Ashland. Valvoline may also provide Ashland with additional services that Valvoline and Ashland may identify from time to time in the future. In general, the services began following the completion of the IPO and cover a period not expected to exceed 24 months.
Valvoline agreed to perform the services with the same standard of quality and care as it uses in servicing its own business, and in any event with at least the same level of quality and care as such services were provided to Ashland’s specialty ingredients and performance materials businesses (collectively, the “Chemicals business”) during the preceding year. Valvoline and Ashland agreed to cooperate in connection with the performance of the services, provided that such cooperation does not unreasonably disrupt Valvoline’s or Ashland’s operations, and Valvoline agreed to use commercially reasonable efforts, at Ashland’s expense, to obtain any third-party consents required for the performance of the services.
The services are being provided by Valvoline without representation or warranty of any kind. Valvoline has no liability with respect to its furnishing of the services except to the extent occasioned by Valvoline’s bad faith, willful misconduct, fraud, gross negligence or willful breach of the agreement.
Under the reverse transition services agreement, Valvoline and Ashland are each obligated to maintain the confidentiality of the other’s confidential information for five years following the termination of the reverse transition services agreement, subject to certain exceptions. Valvoline and Ashland retain all rights, title and interest in and to their respective intellectual property used in the provision of services under the agreement.
The reverse transition services agreement specifies the costs to Ashland for the services. These costs are consistent with expenses that Ashland has historically allocated or incurred with respect to such services, plus amark-up of five percent.
Tax Matters Agreement
On September 22, 2016 Valvoline entered into a tax matters agreement with Ashland that governs the rights, responsibilities and obligations of Valvoline and Ashland with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests) (the “Tax Matters Agreement”).
Valvoline was included in the U.S. federal consolidated group tax return, and possibly certain combined or similar group tax returns, with Ashland (the “Ashland Group Returns”) for the period starting approximately on the date of the closing of the IPO and through the date of the Stock Distribution. This period is referred to as the “Interim Period.” Under the Tax Matters Agreement, Ashland will generally make all necessary tax payments to the relevant tax authorities with respect to the Ashland Group Returns, and Valvoline will make tax sharing payments to Ashland. The amount of Valvoline’s tax sharing payments will generally be determined as if Valvoline and each of its relevant subsidiaries included in the Ashland Group Returns filed its own consolidated, combined or separate tax returns for the Interim Period that include only Valvoline and/or its relevant subsidiaries, as the case may be.
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For taxable periods that begin on or after May 13, 2017, the day after the Stock Distribution, Valvoline is no longer included in any Ashland Group Returns and files tax returns that include only Valvoline and/or its subsidiaries, as appropriate. Valvoline is not be required to make tax sharing payments to Ashland for those taxable periods. Nevertheless, Valvoline has joint and several liability with Ashland to the Internal Revenue Service for the consolidated U.S. federal income taxes of the Ashland consolidated group for the taxable periods in which Valvoline was part of the Ashland consolidated group.
The Tax Matters Agreement also generally provides that Valvoline will indemnify Ashland for the following taxes:
The Tax Matters Agreement also provides that Valvoline will indemnify Ashland for any taxes (and reasonable expenses) resulting from the failure of the Stock Distribution to qualify fornon-recognition of gain and loss or certain reorganization transactions related to the Separation or the Stock Distribution to qualify for their intended tax treatment (“Transaction Taxes”), where the taxes result from (1) breaches of covenants that Valvoline has agreed to in connection with these transactions (including covenants containing the restrictions described below that are designed to preserve thetax-free nature of the stock distribution), (2) the application of certain provisions of U.S. federal income tax law to the stock distribution with respect to acquisitions of Common Stock or (3) any other actions that Valvoline knows or reasonably should expect would give rise to such taxes. The Tax Matters Agreement also requires Valvoline to indemnify Ashland for a portion of certain other Transaction Taxes allocated to Valvoline based on its market capitalization relative to the market capitalization of Ashland.
Valvoline will generally have either sole control, or joint control with Ashland, over any audit or examination related to taxes for which Valvoline is required to indemnify Ashland.
The Tax Matters Agreement imposes certain restrictions on Valvoline and its subsidiaries (including restrictions on share issuances or repurchases, business combinations, sales of assets and similar transactions) that are designed to preserve thetax-free nature of the stock distribution. These restrictions will apply for thetwo-year period after the Stock Distribution. However, Valvoline will be able to engage in an otherwise restricted action if Valvoline obtains an appropriate opinion from counsel or ruling from the IRS.
Employee Matters Agreement
On September 22, 2016, Valvoline entered into an employee matters agreement with Ashland that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities relating to Valvoline’s employees and the compensation and benefit plans and programs in which Valvoline’s employees participated prior to the Stock Distribution, as well as other human resources, employment and employee benefit matters.
Employment-Related Liabilities.Valvoline generally has assumed responsibility for all employment-related liabilities of or relating to Valvoline’s current and former employees and, to the extent incurred prior to August 1, 2016, former employees who were employed by a terminated, divested or discontinued Valvoline business, former U.S. employees of any other terminated, divested or discontinued business and former U.S. employees of a shared resource group.
Benefit and Welfare Plans.Following the completion of the IPO and prior to the Stock Distribution, Valvoline established benefit plans for its employees that generally recognize all service, compensation and other factors affecting benefit determinations to the same extent recognized under the corresponding Ashland benefit plan.
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Pension and Retirement Plans.Valvoline has assumed responsibility for certain Ashland qualified and nonqualified pension and retirement plans as well as a portion of the trusts or other funding vehicles that have been established to fund such plans. Specifically, Valvoline has assumed all liabilities and assets relating to the Ashland Hercules Pension Plan, other than liabilities and assets relating to active employees who are covered by the Hopewell collective bargaining agreement. In addition, Valvoline has assumed responsibility for certain excess and supplemental pension plans and, has assumed responsibility for the portions of the Ashland nonqualified deferred compensation plans that relate to its employees andnon-employee directors. Valvoline has established a 401(k) Plan and received atrust-to-trust transfer of its employees’ account balances from the Ashland 401(k) plan.
Labor Matters. Valvoline has assumed and will comply with any collective bargaining arrangements that cover its employees.
Registration Rights Agreement
On September 22, 2016, Valvoline entered into a registration rights agreement with Ashland pursuant to which Valvoline granted Ashland registration rights with respect to shares of Common Stock, including customary demand and piggyback registration rights. This registration rights agreement terminated during fiscal 2017 following the Stock Distribution. Ashland may transfer these rights to any Ashland entity, or, in connection with anequity-for-debt exchange, to a third-party lender or any transferee that acquires at least 5% of the issued and outstanding shares of Common Stock and executes an agreement to be bound by the registration rights agreement.
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This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy, policies, and practices. This section also details the 20172019 compensation paid to those individuals who served as our principal executive officer (“CEO”) and principal financial officer (“CFO”) during the fiscal year ended September 30, 2017,2019, as well as the three next most highly compensated executive officers as of September 30, 2017.2019. The individuals listed below are collectively referred to as Valvoline’s “Named Executive Officers” or “NEOs”:
Samuel J. Mitchell, Jr.
Chief Executive Officer
Mary E. Meixelsperger
Chief Financial Officer
Julie M. O’DanielAnthony R. Puckett
Senior Vice President General Counsel and
Corporate Secretary President, Quick Lubes
Craig A. Moughler
Senior Vice President and Chief Supply Chain Officer (Senior Vice President, International &
and Product Supply prior to March 2019)
Anthony R. PuckettJulie M. O’Daniel
Senior Vice President, QuicklubesChief Legal Officer and Corporate Secretary
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Impact of SeparationFiscal 2019 Highlights
Prior toDriven by the IPO in September 2016, Valvoline was a wholly-owned subsidiary of Ashland. The final separation occurred on May 12, 2017, at which time we became an independent public company. Based on the shares of Ashland common stock outstanding as of May 5, 2017, the record date for the distribution, each share of Ashland common stock received 2.745338 shares of Valvoline common stock.
Due to the timingcontinuing strong performance of the IPO,Quick Lubes segment, Valvoline delivered modest growth in adjusted EBITDA in fiscal 2017 compensation for2019, despite challenging market dynamics in the Named Executive Officers was largely determined byretail channel that are continuing to impact the Personnel & Compensation Committee of Ashland’s Board of Directors (the “Ashland P&C Committee”) based on recommendations from Ashland senior leadership (including Mr. Mitchell, in his capacity prior to IPO as Senior Vice President and President, Valvoline). However, following the IPO and establishment of the Valvoline Compensation Committee, a thorough review of current compensation practices was conducted and a number of changes were made to more closely reflect Valvoline’s philosophy as an independent public company:Company’s Core North America segment. The Company’s fiscal 2019 highlights are summarized below:
FY19 Financial Highlights | FY19 Operational Highlights | FY19 Strategic Highlights | ||||||
• Sales grew 5% year-over-year to $2.4 billion, while lubricant volume declined 2% to 178.4 million gallons | • | Quick Lubes – Record system-wide Same Store Sales(2) (SSS) growth of 10.1% year-over-year, the 13th consecutive year of SSS growth | • | Added 143 net Quick Lube stores, including Oil Changers acquisition in Canada | ||||
• Net Income of $208 million and EPS of $1.10 • Adjusted EBITDA(1) grew 3% to $478 million and adjusted EPS(1) grew 8% to $1.39 | • | Core North America – lubricant volume of 92.1 million gallons down year-over-year due to challenging market dynamics in the retail channel | • | Expanded Vehicle Recall Awareness program and launched Electric Vehicle fluid product line | ||||
• Full-year cash flow from operations of $325 million • Free cash flow(1) generation of $217 million | • | International – Volume growth in Europe throughout the year and a return to growth in Latin America in the fourth quarter, offset volume declines in China, leading to flat International volume of 58.2 million gallons | • | Acquired manufacturing facility in Eastern Europe,opening-up new markets and enhancing our supply chain capabilities and customer service | ||||
| (1) | For a reconciliation of adjusted EBITDA, adjusted EPS and free cash flow,non-GAAP measures, refer to Appendix A. |
| (2) | Valvoline determines same store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation. Valvoline does not recognize sales from franchised stores as Quick Lubes segment revenue. Quick Lubes segment revenue is limited to sales at Company-owned stores, sales of lubricants and other products to franchisees, and royalties and other fees from franchised stores. For more information on management’s use of key business metrics, including same store sales, refer to the “Key Business Measures” section on Page 33 of the Company’s Form10-K for fiscal 2019. |
| 22 | | PROXY STATEMENT |
Changes to the 2017Fiscal 2019 Compensation Program
The Compensation Committee annually reviews the components of the Company’s executive compensation program to ensure that it aligns with the compensation philosophy and shareholder interests. In fiscal 2019, the Compensation Committee made a few modifications to the Company’s annual incentive plan, as described below:
| What We Did | Why We Did It | |||||||||
Annual Incentive Plan | • | Changed weighting of | ||||||||
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At the time of final separation, all outstanding Ashland-denominated equity awards held by Valvoline employees were converted to Valvoline stock in a manner that preserved thepre-separation value of the award. The awards were converted using the volume-weighted average price (“VWAP”) for the 10 trading days starting on May 15, 2017 (first trading day following final separation). This resulted in an exchange ratio of 1 Ashland share to 5.380395 Valvoline shares, and an adjustment to the exercise price of outstanding SARs of 1/5.380395. A sample adjustment is shown below:
Example of Conversion of Outstanding Equity Awards
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Valvoline delivered strong results for fiscal 2017. Below are a few of our significant accomplishments:
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| • | Increased threshold payout opportunities to 50% of target from 20% of target | • | |||||||||
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During the year, theThe Compensation Committee has adopted a new Compensation Philosophy that is intended to more closely reflect Valvoline’s status as an independent public company and to align our compensation program with the interests of our shareholders. This newly adopted philosophy supports our business strategy, key financial objectives, and corporate vision to deliver profitable growth.
Objectives | • | Attract, retain, and motivate a high-performing employee population. | ||
• | Link a meaningful portion of compensation to sustained long-term performance that will create | |||
• | Provide transparency to key stakeholders. | |||
• | Mitigate risk through sound design and decision making. | |||
Supports Profitable Growth | • | Balance short-term financial goals with long-term shareholder value creation. | ||
• | Routinely | |||
• | Ensure participants are not motivated to take excessive risk. | |||
• | Recognize individual and team contributions and potential through pay decisions. | |||
Use of Multiple
Total Compensation | • | Base salary attracts and retains by providing a market competitive fixed income. | ||
• | Annual incentive programs focus executives on short-term financial performance. | |||
• | Long-term incentive awards align executive with shareholder interests, link compensation with key business objectives and earnings per share | |||
Pay Positioning | • | Benchmark pay levels and practices against an appropriate peer group and the competitive market. | ||
• | Targets the |
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This section describes how Valvoline’s short-term and long-term performance is linked to the NEOs’ fiscal 20172019 compensation.
How do we link | • | A substantial portion of our NEOs’ pay is tied to | ||||
• | The performance metrics balance key short-term financial goals with long-term shareholder value | |||||
• | For fiscal | |||||
• | ||||||
Performance-based long-term incentive awards made during fiscal | ||||||
How did we perform? |
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• | Operating Income, as adjusted under the plan, of | |||||
• | Lubricant Volume of | |||||
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• | Valvoline EPS of $1.357 for | |||||
• | Valvoline’s TSR of | |||||
• | With the TSR modifier, the total payout of the 2017-2019 PSUs was 30.20% of target. | |||||
2017 Annual Incentive Plan(1)
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2019 Annual Incentive Plan(1)(2)
Executive
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Incentive Metric
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Weighting
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Threshold
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Target
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Max
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Actual
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Payout%
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Mr. Mitchell Ms. Meixelsperger Ms. O’Daniel |
Valvoline Operating Income Valvoline Total Lubricant Volume |
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85.00% 15.00% |
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$ 402.1 184.2 |
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$ 432.4 189.9 |
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$ 449.7 197.9 |
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$ 416.9 178.4 Weighted
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74.4% 0.0% 63.2% |
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Mr. Puckett(3) |
Valvoline Incentive Plan Metrics | |||||||||||||||||||||||||||||||
Valvoline Operating Income Quick Lubes Operating Income Quick Lubes Same Store Sales Quick Lubes Express Care Store Unit Growth Quick Lubes Franchise Store Unit Growth Valvoline Incentive Plan Metrics (Total) | | 40.00% 45.00% 9.00% 4.50% 1.50% 100.00% |
| | $ 402.1 $ 157.6 $1,159.6 15 25 |
| | $ 432.4 $ 169.4 $1,195.5 30 34 |
| | $ 449.7 $ 176.2 $1,231.5 15 50 |
| | $ 416.9 $ 179.5 $1,241.0 12 37 Weighted |
| | 74.4% 150.0% 150.0% 0.0% 109.4% 115.7% |
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| Quick Lubes Strategic Initiatives | 100.00% | | Partially Achieved | | Fully Achieved | N/A | | Fully Achieved | 100.0% | |||||||||||||||||||||||
Mr. Moughler(4) | Valvoline Incentive Plan Metrics | |||||||||||||||||||||||||||||||
Valvoline Operating Income Valvoline Total Lubricant Volume International Operating Income International Lubricant Volume Valvoline Incentive Plan Metrics (Total) | | 64.29% 8.10% 20.71% 6.90% 100.00% |
| | $ 402.1 184.2 $ 90.3 66.5 |
| | $ 432.4 189.9 $ 97.1 68.6 |
| | $ 449.7 197.9 $ 101.0 71.3 |
| | $ 416.9 178.4 $ 90.9 62.8 Weighted Total |
| | 74.4% 0.0% 54.1% 0.0% 59.04% |
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| International Strategic Initiatives | 100.00% | | Partially Achieved | | Fully Achieved | N/A | | Fully Achieved | 100.0% | |||||||||||||||||||||||
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For fiscal |
| (3) | Mr. Puckett’s fiscal 2019 target annual incentive opportunity was 60% of his base salary in effect at the end of the performance period. Of such amount, 50% is measured according to Valvoline Incentive Plan metrics and the other 10% is measured onpre-established strategic initiatives approved by the Compensation Committee, including the rollout and pilot of the Company’s OEM recall and tire referral program initiatives and finalizing the Company’s SuperPro execution platform. At its meeting in November 2019, the Compensation Committee certified target performance for the rollout and pilot of the referral programs and finalizing the SuperPro execution platform, resulting in full achievement and a 100% payout of Mr. Puckett’s strategic initiatives for fiscal 2019. |
| (4) | Mr. Moughler’s fiscal 2019 target annual incentive opportunity was 60% of his base salary in effect at the end of the performance period. Of such amount, 50% is measured according to Valvoline Incentive Plan metrics and the other 10% is measured onpre-established strategic initiatives approved by the Compensation Committee, including the implementation of supply chain improvements and developing OEM business. At its meeting in November 2019, the Compensation Committee certified target performance for the implementation of supply chain improvements and OEM business development, resulting in full achievement and a 100% payout of Mr. Moughler’s strategic initiatives for fiscal 2019. |
In March 2019, Mr. Moughler transitioned into his current role as Senior Vice President and Chief Supply Chain Officer, and his Valvoline Incentive Plan metrics for the remainder of the fiscal year were based on corporate metrics. Prior to such time, Mr. Moughler’s Valvoline Incentive Plan metrics were based on International metrics. The table above, reflects Mr. Moughler’s blended weightings for the Valvoline Incentive Plan metrics. Mr. Moughler’s strategic initiatives did not change. |
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Payouts for 2015-20172017-2019 PSUs
Metric | Weighting | Adjusted Performance Measurement Period | Performance Target | Actual Achievement | Actual Payout as a Percentage of Target Payout | |||||
| Ashland Return on Investment | 50% | October 1, 2014 through March 31, 2017 (latest quarter prior to separation) | 9.9% | 10.1% | 111.6% | |||||
| Ashland Total Shareholder Return | 50% | October 1, 2014 through May 12, 2017 (latest trading date prior to separation) | 50th percentile | 53rd percentile | 106.7% | |||||
| Weighted Performance Results: 109.2% | ||||||||||
EPS Performance Targets
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TSR Modifier
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Payout
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FY17 (25%) EPS
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FY18 (25%) EPS
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FY19 (25%) EPS
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FY17 - FY19 (25%) EPS
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Relative TSR
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Adjustment
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25%
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$1.323
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$1.350
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$1.377
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$4.049
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50%
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$1.341
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$1.386
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$1.433
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$4.159
| 26th – 74th %ile | 0% | ||||||||
100%
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$1.376
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$1.458
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$1.546
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$4.379
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150%
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$1.408
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$1.536
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$1.677
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$4.621
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200%
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$1.441
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$1.614
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$1.808
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$4.863
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Actual Achievement
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$1.357
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$1.385
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$1.365
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$4.108
| TSR: -2.0% | |||||||||
Payout
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74%
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49%
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0%
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Total Payout | 40.27% | -25% Adjustment | ||||||||||||
Total Payout (as adjusted for Relative TSR Performance): 30.20% | ||||||||||||||
To reinforce ourpay-for-performance philosophy, the total compensation program for the NEOs is highly incentive-based and therefore fluctuates based on financial results and stock price performance. This approach motivates executives to consider the impact of their decisions on both the short-short-term and long-term performance of the Company and shareholder value creation, while taking appropriate types and amounts of risk.
For fiscal 2017,seventy-one2019, approximately eighty percent (71%(80%) of the CEO’s target compensation and fifty-nineapproximately sixty percent (59%(60%) of the other NEOs’ target compensation, on average, wasat-risk.
Pay Mix of CEO and Other NEOs(1)
| (1) | Totals may not foot due to rounding. Excludes one-time special recognition RSU award made to Mr. Puckett. |
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What We Do vs. What We Don’t Do
What We Do | What We Don’t Do | |
✓ Emphasizepay-for-performance ✓ Utilize a balance of ✓ Engage in rigorous goal-setting process for all incentive metrics ✓ Apply ✓ Subject all equity awards to double-trigger ✓ Maintain a ✓ Use a representative and relevant peer group ✓ Use an independent compensation consultant ✓ Provide Board oversight of incentive compensation risk |
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Elements of Valvoline’s Executive Compensation Program
Valvoline’s executive compensation program for 2017fiscal 2019 consisted of the following elements for our NEOs:
Element of Compensation | Purpose | |||||||
| Annual Cash Compensation | Base Salary | To provide | Fixed | |||||
Annual Incentive Compensation | To provide performance-based annual cash award based on Valvoline (Operating Income and Lubricant Volume) and Operating Segment performance in order to motivate and reward key employees for achieving our short-term business objectives. | Variable | ||||||
| Long-Term Incentive | Stock Appreciation Rights | To align participants’ interests with shareholders. | Value only realized if stock price increases | |||||
Time-Vested Restricted Stock Units | To enhance the program’s ability to retain | |||||||
Performance Stock Units | To provide performance-based equity compensation based on Valvoline’s EPS growth with a relative TSR modifier in the form of performance stock units to drive Valvoline’s long-term performance. | |||||||
| Benefits and Perquisites | Retirement Benefits | To providetax-efficient means for building savings for retirement over the term of employment. | Includes a 401(k) plan with matching company contributions. | Fixed | ||||
Health and Welfare Benefits | To provide access to medical care for employees and their families, as well as financial security to the families of employees who may become ill, disabled, or die during active employment. | |||||||
Executive Perquisites – Financial Planning | To address the complex tax and financial situations of our senior executives. | |||||||
Severance Pay Plan | To provide for protection of compensation in the event of a covered termination and secure restrictive covenants to protect the Company’s interests. | |||||||
Change in Control Agreements | To attract and retain highly skilled management talent, provide |
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The Compensation Committee directly engages Deloitte Consulting LLP (“Deloitte” or the “compensation consultant”) to serve as the outside advisor on executive compensation matters. Deloitte’s role includes, but is not limited to, assessment of the following items:
The competitiveness of total compensation provided to Valvoline’s key executives;
Executive stock ownership guidelines;
Change in control severance agreements for key executives;
Incentive compensation programs forprogram design and risk;
Composition of the peer group used to benchmark executive compensation;
The degree of difficulty of the performance targets under incentive compensation plans;
Compensation-related disclosures, including this CD&A; and
The competitiveness of Valvoline’snon-employee director compensation program;
The impact of new regulations on Valvoline’s executive compensation programs; and
The alignment of actual pay and performance.
In addition to the compensation services provided by Deloitte to the Compensation Committee, Deloitte affiliates provided certain services at the request of management consisting of (i) tax accounting assistance and compliance; (ii) valuationtax planning assistance; (iii) advisory and modeling services.assurance services on behalf of our internal audit department; and (iv) a review of the Company’s self-insurance reserves. The total fees of compensation-related services and other services are shown in the table below.
Fees Paid to Consultant
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FY19
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%
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Executive Compensation Fees | $ | 329,949 | 54 | % |
$
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195,171
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34
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%
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All Other Fees | $ | 285,069 | 46 | % |
$
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373,297
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66
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Total | $ | 615,018 | 100 | % |
$
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568,468
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100
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%
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The Compensation Committee believes that, given the nature and scope of these projects, these additional services did not raise a conflict of interest and did not impair Deloitte’s ability to provide independent advice to the Compensation Committee concerning executive compensation matters.
In making this determination, the Compensation Committee considered, among other things, the following factors:
The types ofnon-compensation services provided by Deloitte;
The amount of fees for suchnon-compensation services, noting in particular that such fees are negligible when considered in the context of Deloitte’s total revenues for the period;
Deloitte’s policies and procedures concerning conflicts of interest;
Deloitte representatives who advise Valvoline’s Compensation Committee do not provide anynon-compensation related services to Valvoline;
There are no other business or personal relationships between Valvoline management or members of the Valvoline Compensation Committee and the Deloitte representatives who provide compensation services to Valvoline; and
Neither Deloitte nor any of the Deloitte representatives who provide compensation services to Valvoline own any common stockValvoline Common Stock or other securities of Valvoline.
| 28 | | PROXY STATEMENT |
As detailed in our compensation philosophy, we benchmark pay levels and practices against a peer group for the purposes of evaluating NEO compensation. PriorAnnually, the Compensation Committee utilizes the services of Deloitte to prepare a peer group analysis and make recommendations on the final separation of Valvoline from Ashland, a preliminary
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group was usedcompanies to make compensation decisionsbe included in the peer group. To establish the peer group for fiscal 2017. The group was comprised of the following companies: Dr. Pepper Snapple Group, Energizer Holdings, Fortune Brands Home & Security, Inc., Innospec, Inc., LKQ Corporation, Monro Muffler Brake, Inc., Newell Brands, NewMarket Corporation, Olin Corporation, Pep Boys—Manny Moe & Jack, ScottsMiracle-Gro Company,Snap-On Inc., Spectrum Brands Holdings, The Church and Dwight Company, The Clorox Company, Tupperware Brands Corporation, and Valspar Corporation.
In June 2017,2019 compensation decisions, Deloitte performed a comprehensive review of our peer group in June 2018 using the following criteria:
Industry; specifically, companies that market consumer (durable andnon-durable) goods, focus on the automotive industry, operate in the lubricants / chemical space, and/or maintain a large retail footprint or market primarily through retail channels.channels;
Size;
Complexity;
Peer group similarity (including a “peer of peer” analysis); and
Competitive market for talenttalent.
The peer group was reviewed and approved by the Compensation Committee, with assistance from management, at its meeting in July 2019, and is comprised of the following companies:
Peer Group
Company | Size(1) | Consumer Brand /Retail(2) | Chemical(3) | Automotive(4) | ||||||||||||
Valvoline | ✓ | ✓ | ✓ | ✓ | ||||||||||||
The Clorox Company | ✓ | ✓ | ||||||||||||||
Spectrum Brands Holdings, Inc. | ✓ | ✓ | ✓ | |||||||||||||
Snap-on Incorporated | ✓ | ✓ | ✓ | |||||||||||||
Church & Dwight Co., Inc. | ✓ | ✓ | ✓ | |||||||||||||
Cooper Tire & Rubber Company | ✓ | ✓ | ✓ | |||||||||||||
The ScottsMiracle-Gro Company | ✓ | ✓ | ✓ | |||||||||||||
Revlon, Inc. | ✓ | ✓ | ✓ | |||||||||||||
Edgewell Personal Care Company | ✓ | ✓ | ✓ | |||||||||||||
Tupperware Brands Corporation | ✓ | ✓ | ||||||||||||||
Nu Skin Enterprises, Inc. | ✓ | ✓ | ✓ | |||||||||||||
NewMarket Corporation | ✓ | ✓ | ✓ | |||||||||||||
Central Garden & Pet Company | ✓ | ✓ | ✓ | |||||||||||||
Energizer Holdings, Inc. | ✓ | ✓ | ||||||||||||||
W. R. Grace & Co. | ✓ | ✓ | ✓ | |||||||||||||
Monro Muffler Brake, Inc. | ✓ | ✓ | ✓ | |||||||||||||
Innospec Inc. | ✓ | ✓ | ||||||||||||||
Quaker Chemical Corporation | ✓ | ✓ | ||||||||||||||
WD-40 Company | ✓ | ✓ |
| (1) | Generally, betweenone-half and two times the size of Valvoline’s revenue |
| (2) | Markets durable andnon-durable consumer products and/or maintains a large retail footprint or markets primarily through retail channels |
| (3) | Operates in lubricants / chemical space |
| (4) | Focuses on the automotive industry |
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Over the course of the year, our Compensation Committee analyzes the total compensation of our executive officers. To facilitate this analysis, management works with the independent compensation consultant to provide the Compensation Committee with data that include base salaries, and short-short-term and long-term incentive opportunities. The independent compensation consultant also provides information on performance metrics, long-term incentive vehicles and weightings of those vehicles, post-employment benefits, such as severance and retirement vesting provisions, and compensation trends, as necessary. This data reflects recent publicly available information for our peer group and other market survey data discussed further below. We believe that it provides the Compensation Committee with a sufficient basis to analyze both the level and design of the total compensation provided to our executive officers. As stated in our compensation philosophy, we target the 50th50th percentile of the competitive range for target total direct compensation, with a significant element of compensation“at-risk”. Therefore, actual compensation levels are highly dependent on company, operating segment, and / or individual performance.
Where sufficient benchmark data is not available from public filings, we utilize published survey data as a supplementary source. The survey data focuses on consumer products, retail and general industry companies and issize-adjusted based on revenues and a statistical regression analysis that is consistent with the corporate or business segment responsibilities for each executive.
In addition to being competitive with the external market, we believe that our executive compensation program should be internally consistent and equitable. In its review of total compensation, our Compensation Committee considers the relationship between our CEO’s total compensation and that of our other Named Executive Officers, as well as the consistency and pay equity among those Named Executive Officers. For 2017,fiscal 2019, the Compensation Committee concluded that our CEO’s compensation was reasonable compared to that of our other Named Executive Officers, and the 2017fiscal 2019 compensation of each of ournon-CEO Named Executive Officers was internally consistent and equitable in light of their respective roles, responsibilities, experience, and reporting relationships.
WeAt our 2019 Annual Meeting of Shareholders held our first annual meeting of shareholders on January 24, 2017. At this meeting,31, 2019, Valvoline shareholders voted on two proposals related to executive pay. The first proposal was anon-binding advisory vote on our fiscal 2018 executive compensation (“Say on Pay”) as disclosed in. Our shareholders approved the Proxy Statement for fiscal 2016. The Say on Pay proposal received a FOR vote from 99.8%with more than 98% of votes cast.cast in favor of the proposal. The second proposal wasCompensation Committee considered the Say on Pay voting results and believes that the significant level of shareholder support is a recommendation to include anon-binding advisory vote onpositive endorsement of our executive compensation as disclosedprogram. Accordingly, the Compensation Committee did not make any material changes to our executive compensation program in fiscal 2019. We value the Proxy Statement every year, which passed with over 99% of the votes cast. Based upon the strong shareholder support of the Board’s recommendation that shareholders befeedback provided the option to vote on Say on Pay annually, our Board will hold a Say on Pay vote annually.
We anticipate ongoing dialogue withby our shareholders regarding Valvoline’s executive compensation programs. Weprograms and will consider any and allshareholder feedback pertaining to these programs in future decision making and program design.
Compensation Decisions for Fiscal 20172019
Valvoline utilizes meritcompensation increase guidelines based on an individual’s performance and his or her position relative to the competitive market median to formulate recommendations. All employees, including the Valvoline NEOs, are generally subject to the same meritsalary increase guidelines, and increases have historically been effective in SpringApril of each year. In preparation for the separation of Valvoline as an independent, publicly-traded company, theThe compensation consultant preparedprepares a competitive assessment of Valvoline’s NEOs. TheNEOs for the Compensation Committee on an annual basis. At its meeting in December 2018, the Compensation Committee reviewed the analysis for fiscal 2019 and approved 2.5% increases to the base salariessalary of each NEO, as reflected in the table below, effective OctoberApril 1, 2016, to recognize the size and scope of each executive’s respective role and motivate a continued high level of performance through and after the separation. In the case of Mr. Mitchell, he was provided an increase effective October 1, 2016 to recognize his promotion to Chief Executive Officer of Valvoline, prior to the completion of our initial public offering on September 28, 2016. The subsequent increase on May 1, 2017 was made in conjunction with the final separation, after which Mr. Mitchell became Chief Executive Officer of an independent, publicly-traded company.2019.
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Fiscal 20172019 Base Salary
Executive | Effective Date | Base Salary |
FY18 Base Salary
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Increase
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FY19 Base Salary
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Samuel J. Mitchell, Jr. | 10/1/2016 | $ | 800,000 |
$950,000
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$23,750
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$973,750
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| 5/1/2017 | $ | 950,000 | |||||||||||||||||||||
Mary E. Meixelsperger | 10/1/2016 | $ | 535,000 |
$551,000
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$13,780
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$564,780
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Anthony R. Puckett
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$340,000
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$ 8,500
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$348,500
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Craig A. Moughler
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$365,000
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$ 9,130
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$374,130
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Julie M. O’Daniel | 10/1/2016 | $ | 380,000 |
$400,000
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$10,000
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$410,000
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Craig A. Moughler | 10/1/2016 | $ | 350,000 | ||||||||||||||||||||
Anthony R. Puckett | 10/1/2016 | $ | 310,000 | ||||||||||||||||||||
Under the annual incentive plan,Valvoline Incentive Plan, target annual incentive opportunities for all Valvoline NEOs are expressed as a percentage of the base salary in effect at the end of the performance period. Mr. Mitchell’sFor fiscal 2019, Ms. O’Daniel’s target was increased by 10 percentage pointspoints. The incremental 10% target opportunity is aligned to reflect his new role as CEO of an independent, publicly-traded company and Ms. O’Daniel’s target was increased by 8 percentage points to reflect her new role as General Counsel.the competitive market. All other NEOs’ target opportunities remained the same following final separation.for fiscal 2019.
Changes in Target Annual Incentive Opportunity
Executive | FY16 Target Opportunity (% of Salary) | Increase | FY17 Target Opportunity (% of Salary) |
FY18 Target
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Increase
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FY19 Target
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Samuel J. Mitchell, Jr. | 90 | % | +10 | % | 100 | % |
100%
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—
|
100%
| ||||||||||||||||||
Mary E. Meixelsperger | 75 | % | — | 75 | % |
75%
|
—
|
75%
| |||||||||||||||||||
Anthony R. Puckett
|
60%
|
—
|
60%
| ||||||||||||||||||||||||
Craig A. Moughler
|
60%
|
—
|
60%
| ||||||||||||||||||||||||
Julie M. O’Daniel | 42 | % | +8 | % | 50 | % |
50%
|
+10%
|
60%
| ||||||||||||||||||
Craig A. Moughler | 50 | % | — | 50 | % | ||||||||||||||||||||||
Anthony R. Puckett | 50 | % | — | 50 | % | ||||||||||||||||||||||
For fiscal 2017,2019, the primary corporate metrics for the annual incentive planValvoline Incentive Plan were Valvoline Operating Income and Working Capital Efficiency,Valvoline Total Lubricant Volume, weighted 90%85% and 10%15%, respectively. Operating Income is a key indicator of Valvoline corporate and Operating Segment profitability. Operating Income may be adjusted by the Compensation Committee for unplanned orone-time items, such as gains or losses on the disposition of assets, impairment or restructuring charges or gains on divestitures of major businesses. Working Capital Efficiency focuses on three key cash flow drivers (accounts receivable, inventoryLubricant volume highlights the importance of growing the business at both the operating segment and accounts payable) and is measured as a percentage of sales.overall corporate levels. This measurement was chosen because Working Capital Efficiency, like Operating Income,volume is an important measure of Valvoline’s ability to optimize cash flow. For the Operating Income metric,drive profitability. The annual incentive opportunity for each of Mr. Mitchell and Mses. Meixelsperger and O’Daniel are measuredis based on corporate performance, whilethese metrics.
For our operating segment leaders, including Messrs. Puckett and Moughler, and Puckett are measured on performance at both the corporate andmetrics for fiscal 2019 for the Valvoline Incentive Plan were Valvoline Operating Income, weighted 40%; Operating Segment levels, 30%Operating Income, weighted 45%; and an Operating Segment metric (Same Store Sales Growth and Franchise/Express Care Unit Growth for the Quick Lubes segment and International Lubricant Volume for the International segment). The Valvoline Incentive Plan metrics represent 50% of the 60% target opportunity for operating segment leaders. Mr. Moughler transitioned from International operating segment metrics to corporate metrics in March 2019, in connection with his new role as Senior Vice President and Chief Supply Chain Officer.
In addition, each of our operating segment leaders’ annual incentive opportunity is tied to the achievement ofpre-established strategic initiatives (the rollout and pilot of the Company’s OEM recall and tire referral program initiatives and finalizing the SuperPro execution platform for Mr. Puckett and the implementation of supply chain improvements and developing OEM business for Mr. Moughler), respectively.representing 10% of the 60% target opportunity for operating segment leaders.
| |
Performance Against 2017 ICFiscal 2019 Metrics(1)(2)(3)
Metric | Threshold | Target | Maximum | Actual Achievement | Payout as a % of Target | |||||||||||||||
Corporate Operating Income(1)(3)(4) | $ | 371.3M | $ | 412.6M | $ | 443.5M | $ | 410.5M | 95.9 | % | ||||||||||
International Operating Segment Operating Income(1)(3)(4) | $ | 78.9M | $ | 87.7M | $ | 94.3M | $ | 86.1M | 84.8 | % | ||||||||||
Quicklubes Operating Segment Operating Income(1)(3)(4) | $ | 111.0M | $ | 123.4M | $ | 132.6M | $ | 130.5M | 142.7 | % | ||||||||||
Corporate Working Capital Efficiency(2)(3) | 13.59% | 12.94% | 12.94% | 12.67% | 100.0 | % | ||||||||||||||
Metric
|
Threshold
|
Target
|
Maximum
|
Actual
|
Payout
| ||||||||||||||||||||
Valvoline Operating Income(4)
|
$
|
402.1
|
|
$
|
432.4
|
|
$
|
449.7
|
|
$
|
416.9
|
|
|
74.4
|
%
| ||||||||||
Valvoline Total Lubricant Volume
|
|
184.2
|
|
|
189.9
|
|
|
197.9
|
|
|
178.4
|
|
|
0.0
|
%
| ||||||||||
International Operating Income(4)
|
$
|
90.3
|
|
$
|
97.1
|
|
$
|
101.0
|
|
$
|
90.9
|
|
|
54.1
|
%
| ||||||||||
International Lubricant Volume(5)
|
|
66.5
|
|
|
68.6
|
|
|
71.3
|
|
|
62.8
|
|
|
0.0
|
%
| ||||||||||
Quick Lubes Operating Income(4)
|
$
|
157.6
|
|
$
|
169.4
|
|
$
|
176.2
|
|
$
|
179.5
|
|
|
150.0
|
%
| ||||||||||
Quick Lubes Same Store Sales Growth
|
$
|
1,159.6
|
|
$
|
1,195.5
|
|
$
|
1,231.5
|
|
$
|
1,241.0
|
|
|
150.0
|
%
| ||||||||||
Quick Lubes Express Care Store Growth
|
|
15
|
|
|
30
|
|
|
45
|
|
|
12
|
|
|
0.0
|
%
| ||||||||||
Quick Lubes Franchise Store Growth(6)
|
|
25
|
|
|
34
|
|
|
50
|
|
|
37
|
|
|
109.4
|
%
| ||||||||||
| (1) | In millions, except store counts. Lubricant volume in gallons. |
| (2) | Threshold performance for Valvoline Incentive Plan metrics results in payout of |
| (3) | At its meeting in November 2019, the Compensation Committee certified (i) target performance for the rollout and pilot of referral programs and finalizing the SuperPro execution platform, resulting in full achievement and a 100% payout |
| (4) | For fiscal |
| (5) | Includes specialty volume of 4.6 million gallons. |
| (6) | Excludes acquisitions. |
Actual annual incentive awards are calculated as follows:
Payouts Under 2017Fiscal 2019 Annual Incentive Plan
Executive | FY17 Salary | FY17 Target Opportunity (% of Salary) | Target Annual Cash Incentive Opportunity | Actual as a % of Target Payout | Amount Earned for 2017 |
FY19 Salary
|
FY19 Target
|
Target
|
Actual as a
|
Amount
| |||||||||||||||||||||||||||||||||||
Samuel J. Mitchell, Jr. | $ | 950,000 | 100 | % | $ | 950,000 | 96.3 | % | $ | 914,945 |
$973,750
|
100%
|
$973,750
|
63.2%
|
$615,800
| ||||||||||||||||||||||||||||||
Mary E. Meixelsperger | $ | 535,000 | 75 | % | $ | 401,250 | 96.3 | % | $ | 386,444 |
$564,780
|
75%
|
$423,585
|
63.2%
|
$267,876
| ||||||||||||||||||||||||||||||
Anthony R. Puckett
|
$348,500
|
60%
|
$209,100
|
113.1%
|
$236,423
| ||||||||||||||||||||||||||||||||||||||||
Craig A. Moughler
|
$374,130
|
60%
|
$224,478
|
65.4%
|
$146,712
| ||||||||||||||||||||||||||||||||||||||||
Julie M. O’Daniel | $ | 380,000 | 50 | % | $ | 190,000 | 96.3 | % | $ | 182,989 |
$410,000
|
60%
|
$246,000
|
63.2%
|
$155,571
| ||||||||||||||||||||||||||||||
Craig A. Moughler | $ | 350,000 | 50 | % | $ | 175,000 | 89.7 | % | $ | 156,888 | |||||||||||||||||||||||||||||||||||
Anthony R. Puckett | $ | 310,000 | 50 | % | $ | 155,000 | 124.4 | % | $ | 192,805 | |||||||||||||||||||||||||||||||||||
| 32 | | PROXY STATEMENT |
Target long-term incentive opportunities for the NEOs are shown below. Mr. Mitchell’sThe target long-term incentive opportunity was increased to reflect his new role as CEO of an independent, publicly-traded company. Foropportunities remained unchanged for fiscal 2017, we revised the long-term incentive opportunities2019 for Messrs. Moughler and Puckett and Ms. O’Daniel from a fixed dollar amount to a percentage of base salary to align more closely with Valvoline leadership and market practice. The absolute change in value was negligible for Messrs. Moughler and Puckett. The increase for Ms. O’Daniel reflects her promotion to General Counsel.each NEO.
Changes in Target Long-term Incentive Opportunity
Executive | FY16 Target Opportunity (% of Salary) | Change | FY17 Target Opportunity (% of Salary) |
FY18 Target
|
Change
|
FY19 Target
| |||||||||||||||||||
Samuel J. Mitchell, Jr. | 135 | % | 40% | 175 | % |
$2,850,000
|
—
|
$2,850,000
| |||||||||||||||||
Mary E. Meixelsperger | 140 | % | — | 140 | % |
$ 750,000
|
—
|
$ 750,000
| |||||||||||||||||
Anthony R. Puckett
|
$ 225,000
|
—
|
$ 225,000
| ||||||||||||||||||||||
Craig A. Moughler
|
$ 225,000
|
—
|
$ 225,000
| ||||||||||||||||||||||
Julie M. O’Daniel | $ | 75,000 | Approximately 40% | 75 | % |
$ 300,000
|
—
|
$ 300,000
| |||||||||||||||||
Craig A. Moughler | $ | 142,000 | — | 50 | % | ||||||||||||||||||||
Anthony R. Puckett | $ | 142,000 | — | 50 | % | ||||||||||||||||||||
In fiscal 2017,2019, our long-term incentive program for the NEOs consisted of 25% stock appreciation rights (“SARs”), 25% restricted stock units (“RSUs”), and 50% performance stock units (“PSUs”). The Compensation Committee
| |
chose these vehicles and weightings to (a) align executive pay with shareholder value creation, (b) provide PSUs that directly link executive pay with the Company’s long-term goals, and (c) facilitate stock ownership and retention. Pursuant to the terms of the Awards, each recipient is subject tonon-compete andnon-solicitation covenants during employment and for24-months following termination.
Prior
Equity Mix for Fiscal 2019 SARs 25% 3-year vesting; 50% on 1-year anniversary and 25% on 2nd and 3rd anniversaries 10-year term Exercise price equal to the final Separation of Valvoline, the Ashland P&C Committee approved the acceleration of performance certification for the 2015-2017 PSUs. The performance of the 2016-2018 PSUs and Mr. Mitchell’s award made under the Executive Performance Incentive and Retention Plan (“EPIRP”) in November of 2015 were also certified by Ashland’s P&C Committee and our Compensation Committee during fiscal 2017 pursuant to the award agreements.
2015-2017 PSUs
The 2015-2017 PSUs were designed to measure performance from October 1, 2014 to September 30, 2017. The Ashland P&C Committee determined that a sufficient portion of the performance period had elapsed as of final separation on May 12, 2017 to measure performance. Performance was certified as shown below, with all outstanding awards converted to RSUs that vested and settled in sharesclosing price of Valvoline common stock on November 12, 2017,date of grant RSUs 25% (Time-vested) 3 year vesting; 33-1/3% per year Settled in Valvoline common stock PSUs 50% (Performance-Based) Vests at the original vesting date. Basedend of the 3-year performance period based on above-target ROI andgoal achievement 100% of award based on earnings per share can be modified 25% up or down based on relative TSR performance,total shareholder return against the overall award was earned at 109.2% of target.
Payouts for 2015-2017 PSUsS&P Midcap 400 index
Metric | Weighting | Adjusted Performance Measurement Period | Performance Target | Actual Achievement | Payout as a % of Target | |||||
| Ashland Return on Investment | 50% | October 1, 2014 through March 31, 2017 (latest quarter prior to separation) | 9.9% | 10.1% | 111.6% | |||||
| Ashland Relative TSR | 50% | October 1, 2014 through May 12, 2017 (last trading date prior to separation) | 50th percentile | 53rd percentile | 106.7% | |||||
| Weighted Performance Results: 109.2% | ||||||||||
| |
2016-20182017-2019 PSUs
In anticipationNovember 2016, the Compensation Committee (with the approval of the final Separation,P&C Committee of the 2016-2018Company’s former parent, Ashland) awarded PSUs to the NEOs for the 2017-2019 performance period. The PSUs were granted pursuant to Ashland’s equity incentive plan, and converted to Valvoline PSUs, when Valvoline separated from Ashland, and are designed to measurebe settled in cash at the end of the performance from October 1, 2015 through 120 days afterperiod, based on the final Separation. achievement of the EPS performance metrics with a relative TSR modifier, as described below:
Performance Against 2017-2019 PSU Metrics
EPS Performance Targets
|
TSR Modifier
| |||||||||||||
Payout
|
FY17 (25%) EPS
|
FY18 (25%) EPS
|
FY19 (25%) EPS
|
FY17 - FY19 (25%) EPS
|
Relative TSR
|
Adjustment
| ||||||||
25%
|
$1.323
|
$1.350
|
$1.377
|
$4.049
|
£ 25th %ile
|
-25%
| ||||||||
50%
|
$1.341
|
$1.386
|
$1.433
|
$4.159
|
26th – 74th %ile
|
0%
| ||||||||
100%
|
$1.376
|
$1.458
|
$1.546
|
$4.379
| ||||||||||
150%
|
$1.408
|
$1.536
|
$1.677
|
$4.621
| ||||||||||
200%
|
$1.441
|
$1.614
|
$1.808
|
$4.863
|
³ 75th %ile
|
+25%
| ||||||||
Actual Achievement
|
$1.357
|
$1.385
|
$1.365
|
$4.108
|
TSR: -2.0%
| |||||||||
Payout
|
74%
|
49%
|
0%
|
38%
|
23rd %ile of S&P 500
| |||||||||
Total Payout
|
40.27%
|
-25% Adjustment
| ||||||||||||
Total Payout (as adjusted for Relative TSR Performance): 30.20%
| ||||||||||||||
Based on the timingperformance results set forth above, PSUs at 40.27% of final Separation,one-thirdtarget were earned by each of the NEOs, and reduced to 30.20% of target award was converted to time-based RSUs, withbased on the remainingtwo-thirds subject to performance conditions. The converted RSUs will vest and be settled in shares of Valvoline common stock on November 18, 2018, the original vesting date. ROI performance was slightly below target performance whileCompany’s relative TSR performance was belowas measured against the 35th percentile threshold. BasedTSR of the S&P 500 index over the three-year performance period. The earned units will be paid in cash based on the combined performance results, the portionclosing price of the award subject to performance-criteria was earned at 48.4% of target.Valvoline Common Stock on November 15, 2019, as follows:
Payouts for 2016-20182017-2019 PSUs
Metric | Weighting | Adjusted Performance Measurement Period | Performance Target | Actual Achievement | Payout as a % of Target | |||||
| Ashland Return on Investment | 50% | October 1, 2014 through March 31, 2017 (latest quarter prior to separation) | 8.9% | 8.8% | 96.8% | |||||
| Combined Ashland/Valvoline relative TSR | 50% | October 1, 2014 through September 8, 2017 (120 trading days after separation) | 50th percentile | 22nd percentile | 0% | |||||
| Weighted Performance Results: 48.4% | ||||||||||
EPIRP
The EPIRP was designed in a similar manner to the 2016-2018 PSUs, but the entire performance component of the award was based on relative Total Shareholder Return. The awards were granted at the maximum level, and the portion of the award subject to the performance condition was determined by the timing of Valvoline’s final separation from Ashland. Based on the final separation date, a total ofone-sixth of the shares awarded converted to time-based RSUs. TSR performance was below the threshold performance level of the 35th percentile, resulting in no earned shares for the performance-based portion of the award.
Payouts for EPIRP
|
| |||||||
|
|
Executive
|
Target (Units)
|
Payout
|
Total Earned
| |||||||||
Samuel J. Mitchell, Jr.
|
|
31,744
|
|
|
30.20
|
%
|
| 9,587
|
| |||
Mary E. Meixelsperger
|
|
16,948
|
|
|
30.20
|
%
|
| 5,119
|
| |||
Anthony R. Puckett
|
|
3,766
|
|
|
30.20
|
%
|
| 1,138
|
| |||
Craig A. Moughler
|
|
4,035
|
|
|
30.20
|
%
|
| 1,219
|
| |||
Julie M. O’Daniel
|
|
6,456
|
|
|
30.20
|
%
|
| 1,950
|
| |||
| |
Design of 2017-20192019-2021 PSUs
In November 2016,2018, consistent with our regular grant cycle, the Compensation Committee (with the approval of Ashland’s P&C Committee) awarded PSUs to the NEOs for the 2017-2019fiscal 2019-2021 performance period. These awards were granted out of Ashland’s equity incentive planpursuant to the 2016 Valvoline Inc. Incentive Plan, as amended (the “2016 Incentive Plan”) and designed to the extent earned will be settled in cashshares of Valvoline Common Stock at the end of the performance period. The awards are based solely on EPS growth with a relative TSR modifier, as shown below:
Design | Rationale | |||||
EPS 100% of award | • 25% for each fiscal year during the performance period
• 25% for
• All EPS goals set at the beginning of the three-year performance period.
• All awards vest at the end of the three-year performance period.
• Actual payouts can range from 0% to 200% of target based on performance versuspre-established goals. | • Requiring annual and cumulative goals ensures that EPS growth is measured both annually and cumulatively over the three-year period, rewarding sustained performance.
• | ||||
Relative TSR +/- 25% Modifier | • Measured against S&P 2021 • Applies to entire award • Maximum payout is 250% of target | • While focus is on financial and operational goals, relative TSR is still important to ensure alignment with shareholders over the entire performance period | ||||||||
Relative TSR Performance | Adjustment | |||||||||
£25th %ile | -25% | |||||||||
26th – 74th %ile | No Impact | |||||||||
³75th %ile | +25% | |||||||||
In order to increase alignment with shareholders, on September 14, 2017,Special Recognition RSU Award
At its meeting in July 2019, the Compensation Committee granted 25,000 time-based RSUs to certain senior executive officersMr. Puckett, effective August 1, 2019, in recognition of Valvoline, including Messrs. Moughlerthe continued strong performance of the Quick Lubes segment and to enhance retention. The RSUs will become 100% vested on August 1, 2022, provided that Mr. Puckett and Mses. Meixelsperger and O’Daniel, but excluding Mr. Mitchell. Each executive was granted an award representing 12,500 shares of Valvoline’s common stock that cliff vestis employed on September 14, 2020, subject to the executive officer remaining continuously employed by Valvoline through the vestingsuch date.
Other Benefits and Perquisites
The health of all employees is important to Valvoline, as is the need to provide for financial security to the families of employees who may become ill, disabled or die during active employment. Valvoline provides a wide variety of health and welfare benefit plans to a majority of its active U.S. workforce, including the NEOs. These plans include medical, dental, vision, life, accidental death and dismemberment, disability and business travel and accident coverage. These benefits are targeted at market competitive levels. Valvoline’s NEOs are eligible and participate in the same plans and are eligible for the same coverage as other employees.
| |
Valvoline provides financial planning services (including tax preparation) for the NEOs.
Valvoline offers a combination oftax-qualified andnon-qualified retirement plans designed to assist executives in building savings for retirement over the term of their employment.
| 401(k) Plan | • | Tax-qualified defined contribution plan with company matching contributions generally available to | ||
Valvoline Non- Qualified Defined Contribution Plan (“NQDC Plan”) | • | Unfunded,non-qualified defined contribution plan | ||
| • | Provides a contribution equivalent to Valvoline’s match and supplemental company contributions | |||
Ashland Hercules Pension Plan (“Pension Plan”) | • | Tax-qualified defined benefit plan | ||
| • | Closed to new participants in January 2011 | |||
| • | Benefit accruals frozen September 30, 2016 | |||
Non-Qualified Excess Defined Benefit Pension Plan (“Excess Plan”) | • | Unfunded,non-qualified defined benefit plan | ||
| • | Provides benefit equal to the difference between the benefit under the Pension Plan in the absence of the Code limits (the gross benefit) and the actual benefit that would be payable under the Pension Plan | |||
| • | Closed to new participants in January 2011 | |||
| • | Benefit accruals frozen September 30, 2016 | |||
Supplemental Early Retirement Plan (“SERP”) | • | Unfunded,non-qualified plan | ||
| • | Closed to new participants in November 2015 | |||
| • | Benefit accruals frozen September 30, 2016 | |||
| • | Provides supplemental retirement arrangement for select group of management |
Our NEOs are covered by the Severance Pay Plan, which provides benefits in the event of a covered termination from employment absent achange-in-control. change in control.
Conditions for Severance Benefits
Covered Terminations | Post-employment Covenants | |
• Permanent closing of a location or plant;
• Job discontinuance;
• Resignation for good reason (defined as a reduction of 15% or more of the sum of base salary and target annual bonus or relocation of principal place of business by more than 50 miles); or
• Any circumstances in which | • Agree to a general release of liability;
• Refrain from competitive activity;
• Not disclose confidential information; and
• Refrain from soliciting customers or employees of Valvoline or otherwise interfere with Valvoline’s business for a stated period of time following termination |
| |
Our NEOs are eligible for the following severance benefits:
Executive | Cash | Annual | Outplacement | Health Benefit | Equity | ||||||||||||||||||||
Samuel J. Mitchell, Jr. | 104 weeks of base pay | Pro-rata based on employment during fiscal year and actual performance | $25,000 | 104 weeks of | All outstanding equity awards forfeited except vesting if the NEO is retirement eligible | ||||||||||||||||||||
Mary E. Meixelsperger | 78 weeks of base pay | 78 weeks of continued coverage | |||||||||||||||||||||||
Anthony R. Puckett | |||||||||||||||||||||||||
Craig A. Moughler | |||||||||||||||||||||||||
Julie M. O’Daniel | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Change-in-ControlChange in Control Benefits
All of our NEOs have a double-triggerchange-in-control change in control agreement with us that have substantially the same terms and conditions as summarized below:
Summary ofChange-in-Control Change in Control Provisions
Mr. Mitchell | All Other NEOs | |||||
Protection Period |
| • Two years following | • Two years following change in control for cash severance payments; and
• | |||
Benefits (only paid upon a | • Payment of three times the sum of highest annual base
• Continued participation in medical, dental and group life plans through December 31 of the third calendar year following the calendar year of termination;
• Full payment of any PSUs outstanding as of termination date, assuming target performance (less any amounts already paid because of the change in control);
• Payment of all prior existing incentive compensation not already paid and apro-rata payment of the target annual incentive for the fiscal year in which termination occurs;
• Outplacement services and financial planning services for one year after termination;
• Payment of all unused, earned and accrued vacation in a lump sum in the seventh month following termination; and
• | • Payment of two times the sum of annual base
• Continued participation in group health plans for two
• Full payment of any PSUs outstanding as of termination date, assuming target performance (less any amounts already paid because of the change in control);
• Payment of all prior existing incentive compensation not already paid and apro-rata payment of the target annual incentive for the fiscal year in which termination occurs;
• Outplacement services up to $25,000;
• Payment of all unused, earned and accrued vacation; and
• |
| |
Mr. Mitchell | All Other NEOs | |||
Definition of Cause | • Willfully failing to substantially perform duties after a written demand for such performance (except in the case of disability);
• Willfully engaging in gross misconduct demonstrably injurious to Valvoline after a written request to cease such misconduct; or
• Conviction or plea of nolo contendere for a felony
• To be terminated for cause, the Board of Directors must pass a resolution by three quarters vote finding that the termination is for cause | • Willfully failing to substantially perform duties (except in the case of disability);
• Willfully engaging in gross misconduct demonstrably injurious to Valvoline; or
• Conviction or plea of nolo contendere for a felony | ||
Definition of | • The consolidation or merger of Valvoline into an unrelated entity in which the former Valvoline shareholders own less than 50% of the outstanding shares of the new entity, except for a merger under which the shareholders before the merger have substantially the same proportionate ownership of shares in the entity immediately after the merger;
• The sale, lease, exchange or other transfer of 80% or more of Valvoline’s assets;
• A shareholder approved liquidation or dissolution;
• The acquisition of 20% or more of the outstanding shares of Valvoline by an unrelated person without approval of the board of directors; or
• Changes to the Valvoline board of directors during two consecutive years that result in a majority of the Valvoline board of directors changing from its membership at the start of such two consecutive year period, unlesstwo-thirds of the remaining directors at the start of such two consecutive year period voted to approve such changes | |||
Definition of Good Reason | • Significant diminution of positions, duties, responsibilities or status, or a diminution in titles or offices
• Reduction to base salary of 15% or more;
• Relocation exceeding 50 miles;
• Failure to continue incentive plans, whether cash or equity, or any other plan or arrangement to receive Valvoline securities; or
• Material breach of the executive change in control agreement or a failure to assume such agreement | • Significant diminution of positions, duties, responsibilities or status
• Reduction of 15% or more of the sum of (i) annual base salary plus (ii) target annual bonus;
• Relocation exceeding 50 miles;
• Failure to continue incentive plans, whether cash or
• Material breach of the executive change in control agreement or a failure to assume such agreement | ||
Definition of Qualifying Termination | • Termination after a change in control, for any reason other than death or disability; by Valvoline for cause; or by the NEO other than for Good Reason | |||
Taxgross-ups | • None, benefits scaled back using a | |||
Post-employment Covenants | • Non-compete,non-solicit of customers,non-solicit of employees, andnon-interference for 36 months andnon-disclosure of confidential information indefinitely | • Non-compete,non-solicit of customers,non-solicit of employees, andnon-interference for 24 months andnon-disclosure of confidential information indefinitely | ||
| |
Governance Policies and Practices
Valvoline adopted a clawback policy for executive officers, including the NEOs. This policy further strengthens the risk mitigation of our incentive programs by defining the economic consequences that misconduct has on the executive officers’ incentive based compensation. In the event of a financial restatement due to fraudulent activity or intentional misconduct as determined by the Board of Directors, the culpable executive officer is required to reimburse Valvoline for incentive-related compensation paid to him or her. In addition, the Board of Directors has the discretion to determine whether an executive will be required to repay incentive-related compensation, whether or not such officer was involved in the fraudulent activity or misconduct. Valvoline has a period of three years after the payment or award is made to seek reimbursement.
Valvoline maintains stock ownership guidelines that align the interests of leadership, including the NEOs andnon-employee directors, with those of its stockholders,shareholders, by requiring each of the NEOs and directors to maintain a minimum ownership stake in the company.Company. Each Covered Individual (defined asnon-employee members of the Board of Directors and all U.S. employees designated as Section 16 Officers and/or in positions at the Senior Vice President level and above) by the guidelines will have 5 years from the later of (i) the effective date of the guidelines or (ii) the date such individual is hired or promoted into a covered role before they will be required to meet the requirements under the Valvoline Stock Ownership Guidelines. In the event that a Covered Individual is promoted to a new role within the organization and, as a result of such promotion, is subject to a higher guideline, the impacted individual shall have an additional 3 years from the date of promotion to achieve the new ownership guidelines.
Stock Ownership Guidelines
Role | Multiple of Salary | ||||||
Chief Executive Officer | 5x | ||||||
Chief Financial Officer | 3x | ||||||
Other Executive Officers | 2x | ||||||
Non-Employee Directors | 5x | ||||||
Covered Individuals are required to retain 50% of the net share proceeds from any vesting or exercise activity to the extent they have not met their applicable stock ownership guideline. Once met, the ownership guideline will convert to a share equivalent in order to mitigate the impact of future share price fluctuations.
The following types of equity will count towards the ownership guidelines:
Unvested restricted stock and/or restricted stock units;
Shares awarded to or purchased by a Covered Individual pursuant to a Company employee benefit plan;
Shares owned by an immediate family member who shares the same household as the Covered Individual, including: child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law orsister-in-law and also includes adoptive relationships;
Shares held in the dividend reinvestment plan;
Phantom shares (e.g., Deferral Plan Units); and
Shares of common stockValvoline Common Stock held by Covered Individuals.
Anti-Hedging / Anti-Pledging Policy
Valvoline’s insider trading policy prohibits any director, or executive officer including the NEOs,or employee, from purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that
| |
are designed to hedge or offset any decrease in the market value of equity securities of Valvoline: (i) granted to such
| | PROXY STATEMENT 39 |
person by Valvoline as part of the person’s compensation or (ii) held, directly or indirectly, by such person. Valvoline also prohibits all of its directors and officers from directly or indirectly pledging equity securities of Valvoline. Under the policy, the term “pledging” includes the intentional creation of any form of pledge, security interest, deposit, lien or other hypothecation, including the holding of shares in a margin account, that entitles a third party to foreclose against, or otherwise sell, any equity securities, whether with or without notice, consent, default or otherwise. The equity securities attributable to a director or officer for these purposes shall include equity securities attributable to the director or officer under applicable securities laws.
Valvoline’s compensation program is designed to motivate and reward employees and executive officers for their performance during the fiscal year and over the long term, while taking appropriate business risks. The Compensation Committee asked its independent compensation consultant to conduct a risk assessment of Valvoline’s incentive compensation plans in May 2017.January 2019. Based on its review of the consultant’s risk assessment, a review of Valvoline’s internal controls and the risk mitigating components of Valvoline’s compensation programs, the Compensation Committee determined that Valvoline’s compensation programs do not encourage executives or other employees to take inappropriate risks that are reasonably likely to have a material adverse effect on Valvoline.
Compensation Decisions for Fiscal 20182020
Looking forward to fiscal 2018,2020, the Compensation Committee continued to review and refine the compensation program to better align with our compensation philosophy and interests of our shareholders. As a result, the compensation actions below were made effective for fiscal 2018:2020:
Changes to the 20182020 Compensation Program
What We Did |
Why We Did It | |||||||
Annual Incentive Plan
|
• |
Changed |
• |
To establish better alignment among all participants with the | ||||
| • | Changed metrics and weightings for operating segment employees from Valvoline Operating Income (40%); Operating Segment | |||||||
| • | The increased weighting of | ||||||
| ||||||||
| |
Valvoline attempts to maximize the tax deductibility of the compensation paid to its executives. However, tax rules may limit the tax deductibility of certain types ofnon-performance based compensation paid to the NEOs.
Valvoline considers the tax deductibility of compensation awarded to the NEOs, and weighs the benefits of awarding compensation that may benon-deductible against the conditions required by the tax law to obtain tax deductibility. The Compensation Committee believes that in certain circumstances the benefits of awarding nondeductible compensation exceed the benefits of awarding deductible compensation that is subject to limitations imposed by the applicable tax laws.
In addition, Valvoline also considers various other tax rules governing compensation for our NEOs including (but not limited to) tax rules relating to fringe benefits, qualified andnon-qualified deferred compensation, and compensation triggered by a change in control.
| 40 | | PROXY STATEMENT |
Report of the Compensation Committee
The Compensation Committee has reviewed the Compensation Discussion and Analysis included in this Proxy Statement and discussed it with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Valvoline’s Proxy Statement for its 20182020 Annual Meeting of Shareholders. This report is provided by the following independent directors who comprise the Compensation Committee:
COMPENSATION COMMITTEE
Mary J. Twinem, Chair
Richard J. Freeland
Stephen F. Kirk
Richard J. FreelandCarol H. Kruse
Stephen E. Macadam
Vada O. Manager
Charles M. Sonsteby
The Compensation Committee report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Valvoline specifically incorporates the Compensation Committee report by reference.
| |
The following table and footnotes is a summary of the total compensation information for the fiscal 2017 for the Valvolineof each Named Executive Officers.Officer for fiscal 2019, 2018 and 2017.
| Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock ($) (e) | Option ($) (f) | Non-Equity sation(3) ($) (g) | Change in ($) (h) | All Other sation(5) ($) (i) | Total ($) (j) | |||||||||||||||||||||||||||
Samuel J. Mitchell Jr. Chief Executive Officer | 2017 | 855,562 | — | 1,075,339 | 613,787 | 914,945 | 21,984 | 79,714 | 3,561,331 | |||||||||||||||||||||||||||
| 2016 | 504,154 | — | 2,352,864 | 224,352 | 582,336 | 786,486 | 55,117 | 4,505,309 | ||||||||||||||||||||||||||||
| 2015 | 427,652 | — | 1,444,723 | 181,071 | 485,816 | 578,176 | 53,845 | 3,171,283 | ||||||||||||||||||||||||||||
Mary E. Meixelsperger Chief Financial Officer | 2017 | 535,000 | — | 860,793 | 328,758 | 386,444 | — | 172,831 | 2,283,826 | |||||||||||||||||||||||||||
| 2016 | 144,038 | — | 517,365 | — | 135,505 | — | 20,838 | 817,746 | ||||||||||||||||||||||||||||
Julie M. O’Daniel Senior Vice President, General Counsel and Corporate Secretary | 2017 | 375,843 | — | 502,338 | 126,318 | 182,989 | 914 | 41,585 | 1,229,987 | |||||||||||||||||||||||||||
Craig A. Moughler Senior Vice President, International & Product Supply | 2017 | 355,619 | — | 423,367 | 77,730 | 156,888 | — | 32,737 | 1,046,341 | |||||||||||||||||||||||||||
| 2016 | 304,296 | — | 116,183 | 47,232 | 151,822 | 335,827 | 21,184 | 976,544 | ||||||||||||||||||||||||||||
| 2015 | 286,019 | — | 124,828 | 44,501 | 175,436 | 118,295 | 21,446 | 770,524 | ||||||||||||||||||||||||||||
Anthony R. Puckett President, Quicklubes | 2017 | 309,080 | — | 411,208 | 68,014 | 192,805 | — | 31,613 | 1,012,720 | |||||||||||||||||||||||||||
Name and Principal Position (a) | Year (b) | Salary(1) ($) (c) | Bonus ($) (d) | Stock ($) (e) | Option ($) (f) | Non-Equity sation(4) ($) (g) |
Change in and Non- ($) (h) | All Other sation(6) ($) (i) | Total ($) (j) | |||||||||||||||||||||||||
Samuel J. Mitchell, Jr. Chief Executive Officer |
|
2019
|
|
|
960,961
|
|
—
|
|
2,180,160
|
|
|
712,505
|
|
|
615,800
|
|
|
—
|
|
|
132,188
|
|
|
4,601,614
|
| |||||||||
|
| 2018
|
|
| 950,000
|
| —
|
| 2,065,942
|
|
| 712,514
|
|
| 536,750
|
|
| —
|
|
| 171,440
|
|
| 4,436,646
|
| ||||||||||
|
| 2017
|
|
| 855,562
|
| —
|
| 1,075,339
|
|
| 613,787
|
|
| 914,945
|
|
| 21,984
|
|
| 79,714
|
|
| 3,561,331
|
| ||||||||||
Mary E. Meixelsperger Chief Financial Officer |
|
2019
|
|
|
557,360
|
|
—
|
|
573,871
|
|
|
187,546
|
|
|
267,876
|
|
|
—
|
|
|
78,684
|
|
|
1,665,337
|
| |||||||||
|
| 2018
|
|
| 543,000
|
| —
|
| 543,942
|
|
| 187,539
|
|
| 233,487
|
|
| —
|
|
| 86,525
|
|
| 1,594,493
|
| ||||||||||
|
| 2017
|
|
| 535,000
|
| —
|
| 860,793
|
|
| 328,758
|
|
| 386,444
|
|
| —
|
|
| 172,831
|
|
| 2,283,826
|
| ||||||||||
Anthony R. Puckett Senior Vice President and President, Quick Lubes |
|
2019
|
|
|
343,923
|
|
—
|
|
713,493
|
|
|
56,280
|
|
|
236,423
|
|
|
340,366
|
|
|
55,032
|
|
|
1,745,517
|
| |||||||||
|
| 2018
|
|
| 325,000
|
| —
|
| 163,326
|
|
| 56,267
|
|
| 215,288
|
|
| —
|
|
| 50,254
|
|
| 810,135
|
| ||||||||||
|
| 2017
|
|
| 309,080
|
|
| 411,208
|
|
| 68,014
|
|
| 192,805
|
|
| —
|
|
| 31,613
|
|
| 1,012,720
|
| |||||||||||
Craig A. Moughler Senior Vice President and Chief Supply Chain Officer |
|
2019
|
|
|
376,233
|
|
—
|
|
172,243
|
|
|
56,280
|
|
|
146,712
|
|
|
366,410
|
|
|
50,910
|
|
|
1,168,788
|
| |||||||||
|
| 2018
|
|
| 364,231
|
| —
|
| 163,326
|
|
| 56,267
|
|
| 124,812
|
|
| —
|
|
| 43,253
|
|
| 751,889
|
| ||||||||||
|
| 2017
|
|
| 355,619
|
| —
|
| 423,367
|
|
| 77,730
|
|
| 156,888
|
|
| —
|
|
| 32,737
|
|
| 1,046,341
|
| ||||||||||
Julie M. O’Daniel Senior Vice President, |
|
2019
|
|
|
404,615
|
|
—
|
|
229,587
|
|
|
75,040
|
|
|
155,571
|
|
|
989
|
|
|
51,137
|
|
|
916,939
|
| |||||||||
|
| 2018
|
|
| 390,000
|
| 150,000
|
| 217,766
|
|
| 75,004
|
|
| 113,001
|
|
| 951
|
|
| 54,653
|
|
| 1,001,375
|
| ||||||||||
| 2017 | 375,843 | — | 502,338 | 126,318 | 182,989 | 914 | 41,585 | 1,229,987 | ||||||||||||||||||||||||||
| (1) | The amount in this column for Mr. Moughler includes a payment of $7,019 received in lieu of accrued, unused vacation. |
| (2) | The values in column (e) represent the aggregate grant date fair value of fiscal |
The grant date fair value for the fiscal |
The values in column (f) represent the aggregate grant date fair value of SARs computed in accordance with FASB ASC Topic 718. |
The values in column (g) represent the amounts earned with respect to fiscal |
Valvoline’snon-qualified deferred compensation arrangements do not provide above-market or preferential earnings; therefore, for fiscal |
Amounts reported in column (i) for fiscal |
401(k) (a) | Matching Contributions (b) | Valvoline to Non- (c) | Financial Planning | Moving Expenses | Other (d) | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Executive | 401(k) Plan Employer | Matching (a) | Non-Qualified (b) | Financial Planning | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
S.J. Mitchell | $ | 40,272 | $ | 19,688 | $ | 3,659 | $ | 15,000 | $ | — | $ | 1,095 | $ | 79,714 | $22,400 | $8,560 | $86,228 | $15,000 | $132,188 | ||||||||||||||||||||||||||||||||||
M.E. Meixelsperger | $ | 21,600 | $ | 3,750 | $ | 10,787 | $ | 15,000 | $ | 121,225 | $ | 469 | $ | 172,831 | $21,457 | $7,294 | $34,933 | $15,000 | $ 78,684 | ||||||||||||||||||||||||||||||||||
A.R. Puckett | $19,359 | $1,849 | $18,824 | $15,000 | $ 55,032 | ||||||||||||||||||||||||||||||||||||||||||||||||
C.A. Moughler | $22,400 | $1,300 | $14,575 | $12,635 | $ 50,910 | ||||||||||||||||||||||||||||||||||||||||||||||||
J.M. O’Daniel | $ | 26,844 | $ | 394 | $ | 5,602 | $ | 8,507 | $ | — | $ | 238 | $ | 41,585 |
| $19,908
|
|
| $ 271
|
|
| $15,958
|
|
| $15,000
|
|
| $ 51,137
|
| ||||||||||||||||||||||||
C.A. Moughler | $ | 31,545 | $ | — | $ | 335 | $ | 195 | $ | — | $ | 662 | $ | 32,737 | |||||||||||||||||||||||||||||||||||||||
A.R. Puckett | $ | 25,073 | $ | 721 | — | $ | 5,450 | $ | — | $ | 369 | $ | 31,613 | ||||||||||||||||||||||||||||||||||||||||
| |
The amounts in this column represent matching charitable contributions made by Valvoline on behalf of the NEO through a program available to all salaried |
The amounts in this column represent Valvoline contributions made on behalf of the NEO to the ValvolineNon-Qualified Defined Contribution |
| |
Grants of Plan-Based Awards for Fiscal 20172019
The following table sets forth certain information regarding the annual and long-term (SARs, RSUs and PSUs) incentive awards SARs and RSUs awardedgranted during fiscal 20172019 to each of the Valvoline Named Executive Officers.
Estimated Possible 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 | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#)(3) | Options (#)(4) | Awards ($/Sh) | Awards ($)(5) | Grant Date |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of or Units(3) (#) (i)
| All Other Option Awards: Number of Securities Underlying Options(4) (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(5) ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | (b)
| (c)
| (d)
| (e)
| (f)
| (g)
| (h)
| (j)
| (k)
| (l)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S.J. Mitchell | 190,000 | 950,000 | 1,425,000 | 486,875 | 973,750 | 1,460,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/19/18 | 12,842 | 68,490 | 171,225 | 1,453,358 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 5,952 | 31,744 | 79,361 | 715,835 | 11/19/18 | 35,680 | 726,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 15,872 | 359,505 |
| 11/19/18
|
|
| 132,930
|
|
| 20.37
|
|
| 712,505
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 101,958 | 20.29 | 613,787 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
M.E. Meixelsperger | 80,250 | 401,250 | 601,875 | 211,793 | 423,585 | 635,378 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 3,178 | 16,948 | 42,371 | 382,183 | 11/19/18 | 3,381 | 18,030 | 45,075 | 382,597 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 8,609 | 194,986 | 11/19/18 | 9,390 | 191,274 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 54,611 | 20.29 | 328,758 |
| 11/19/18
|
|
| 34,990
|
|
| 20.37
|
|
| 187,546
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 09/14/17 | 12,500 | 283,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J.M. O’Daniel | 38,000 | 190,000 | 285,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A.R. Puckett | 104,550 | 209,100 | 313,650 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/19/18 | 1,014 | 5,410 | 13,525 | 114,800 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 1,211 | 6,456 | 16,141 | 145,593 | 11/19/18 | 2,820 | 57,443 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 3,228 | 73,120 | 11/19/18 | 10,500 | 20.37 | 56,280 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 20,983 | 20.29 | 126,318 |
| 08/01/19
|
|
| 25,000
|
|
| 541,250
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 09/14/17 | 12,500 | 283,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C.A. Moughler | 35,000 | 175,000 | 262,500 | 112,239 | 224,478 | 336,717 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 757 | 4,035 | 10,088 | 90,996 | 11/19/18 | 1,014 | 5,410 | 13,525 | 114,800 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 2,152 | 48,746 | 11/19/18 | 2,820 | 57,443 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 12,912 | 20.29 | 77,730 |
| 11/19/18
|
|
| 10,500
|
|
| 20.37
|
|
| 56,280
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 09/14/17 | 12,500 | 283,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A.R. Puckett | 31,000 | 155,000 | 232,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J.M. O’Daniel | 123,000 | 246,000 | 369,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 706 | 3,766 | 9,416 | 84,930 | 11/19/18 | 1,352 | 7,210 | 18,025 | 152,996 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 1,883 | 42,653 | 11/19/18 | 3,760 | 76,591 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/16/16 | 11,298 | 20.29 | 68,014 |
| 11/19/18
|
|
| 14,000
|
|
| 20.37
|
|
| 75,040
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 09/14/17 | 12,500 | 283,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The dollar amounts in these columns represent the potential annual incentive payouts for fiscal |
| (2) | The amounts in these columns represent the potential payments for the fiscal |
| (3) | The RSUs granted to each of the NEOs on November |
| (4) | The amounts in column (j) represent the number of shares of Valvoline |
| (5) | The dollar amounts in column (l) are calculated in accordance with FASB ASC Topic 718 and assume (i) payment of PSUs at target using a Monte Carlo simulation valuation model to reflect the impact of the TSR modifier, incorporating the following assumptions: (a) range of risk-free interest rates between 2.66% to 2.82% based on the U.S. Treasury yield curve in effect on the date of grant date; (b) expected dividend yield of 1.3%; (c) expected volatility of 26.8%, based on the average volatility across a group of peer companies for the three-year period prior to the grant date; (d) expected term of 3.0 years, and (d) an initial TSR of-5.8%;(ii) valuation of all SARs using the Black-Scholes valuation model, incorporating the following assumptions: (a) risk free interest rate of 2.91% based on the U.S. Treasury yield curve in effect on the grant date; (b) expected dividend yield of 1.47%; (c) expected volatility of 26.8% based on comparable companies’ historical daily equity volatilities with look-back periods commensurate with the expected term; and (d) expected term of 5.88 years; (iii) the |
| |
Outstanding Equity Awards at Fiscal 20172019Year-End
The following table sets forth certain information regarding SARs, PSUs restricted shares and RSUs held by each of the Valvoline Named Executive Officers as of September 30, 2017.2019.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name (a) | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (1) (#) (b) | Number of Securities Underlying Unexercised Options Unexercisable (1) (#) (c) | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Number of or Units of Stock That Have Not Vested (2) (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested (2) ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (3) (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) ($) (j) | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (1) (#) (b) | Number of Securities Underlying Unexercised Options Unexercisable (1) (#) (c) | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) (e) | Option Expiration Date (f) | Number of or Units of Stock That Have Not Vested (2) (#) (g) | Market Value of Shares or Units of Stock That Have Not Vested (3) ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) ($) (j) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S.J. Mitchell | 11/16/16 | — | 101,958 | 20.29 | 12/16/2026 | 11/19/18 | — | 132,930 | 20.37 | 11/19/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/18/15 | 23,001 | 23,001 | 20.80 | 12/18/2025 | 11/13/17 | 64,075 | 64,075 | 23.08 | 11/13/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/12/14 | 23,808 | 7,936 | 20.99 | 12/12/2024 | 11/16/16 | 76,465 | 25,493 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/13/13 | 33,358 | 16.67 | 12/13/2023 | 11/18/15 | 46,002 | — | 20.80 | 12/18/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/14/12 | 61,874 | 13.08 | 12/14/2022 | 11/12/14 | 31,744 | — | 20.99 | 12/12/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/02/11 | 52,189 | 10.33 | 01/02/2022 | 11/13/13 | 33,358 | — | 16.67 | 12/13/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/17/10 | 50,037 | 9.64 | 12/17/2020 | 11/14/12 | 61,874 | — | 13.08 | 12/14/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 125,452 | 2,941,848 | 12/02/11 | 52,189 | — | 10.33 | 01/02/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31,744 | 744,405 | 11/17/10 | 50,037 | — | 9.64 | 12/17/2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 72,228
|
|
| 1,591,183
|
|
| 126,260
|
|
| 2,781,508
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
M.E. Meixelsperger | 11/16/16 | — | 54,611 | 20.29 | 12/16/2026 | 11/19/18 | — | 34,990 | 20.37 | 11/19/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 45,753 | 1,072,897 | 11/13/17 | 16,865 | 16,865 | 23.08 | 11/13/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 16,948 | 397,436 | 11/16/16 | 40,955 | 13,656 | 20.29 | 12/16/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J.M. O’Daniel | 11/16/16 | — | 20,983 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 36,102
|
|
| 795,327
|
|
| 33,240
|
|
| 732,277
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A.R. Puckett | 11/19/18 | — | 10,500 | 20.37 | 11/19/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/13/17 | 5,060 | 5,060 | 23.08 | 11/13/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/18/15 | 2,555 | 2,556 | 20.80 | 12/18/2025 | 11/16/16 | 8,473 | 2,825 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/12/14 | 3,023 | 1,012 | 20.99 | 12/12/2024 | 11/18/15 | 9,684 | — | 20.80 | 12/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/13/13 | 4,304 | — | 16.67 | 12/13/2023 | 11/12/14 | 7,801 | — | 20.99 | 12/12/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18,276 | 428,575 | 11/13/13 | 8,070 | — | 16.67 | 12/13/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,456 | 151,404 |
| 44,372
|
|
| 977,515
|
|
| 9,980
|
|
| 219,859
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C.A. Moughler | 11/16/16 | — | 12,912 | 20.29 | 12/16/2026 | 11/19/18 | — | 10,500 | 20.37 | 11/19/2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/18/15 | 4,842 | 4,842 | 20.80 | 12/18/2025 | 11/13/17 | 5,060 | 5,060 | 23.08 | 11/13/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/12/14 | 5,847 | 1,954 | 20.99 | 12/12/2024 | 11/16/16 | 9,684 | 3,228 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/13/13 | 8,070 | — | 16.67 | 12/13/2023 | 11/18/15 | 9,684 | — | 20.80 | 12/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/14/12 | 5,649 | — | 13.08 | 12/14/2022 | 11/12/14 | 7,801 | — | 20.99 | 12/12/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/02/11 | 6,456 | — | 10.33 | 01/02/2022 | 11/13/13 | 8,070 | — | 16.67 | 12/13/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23,200 | 544,046 | 11/14/12 | 5,649 | — | 13.08 | 12/14/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4,035 | 94,628 |
| 19,432
|
|
| 428,087
|
|
| 9,980
|
|
| 219,859
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A.R. Puckett | 11/16/16 | — | 11,298 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J.M. O’Daniel | 11/19/18 | — | 14,000 | 20.37 | 11/19/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/18/15 | 4,842 | 4,842 | 20.80 | 12/18/2025 | 11/13/17 | 6,745 | 6,745 | 23.08 | 11/13/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/12/14 | 5,847 | 1,954 | 20.99 | 12/12/2024 | 11/16/16 | 15,736 | 5,247 | 20.29 | 12/16/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/13/13 | 8,070 | — | 16.67 | 12/13/2023 | 11/18/15 | 5,111 | — | 20.80 | 12/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/14/12 | 8,339 | — | 13.08 | 12/14/2022 | 11/12/14 | 4,035 | — | 20.99 | 12/12/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/02/11 | 7,263 | — | 10.33 | 01/02/2022 | 11/13/13 | 4,304 | — | 16.67 | 12/13/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/17/10 | 3,362 | — | 9.64 | 12/17/2020 |
| 22,039
|
|
| 485,519
|
|
| 13,300
|
|
| 292,999
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 22,928 | 537,668 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,766 | 88,319 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The numbers in columns (b) and (c) relate to SARs, 50% of which vest on the first anniversary of the grant date and 25% of which vest on each of the second and third anniversaries of the grant date. |
| (2) | The numbers in column (g) represent unvested RSUs and earned PSUs. Specifically, for: |
| (i) | Mr. Mitchell, the amounts in column (g) include the following: 9,587 earned PSUs awarded on November 16, 2016 for the fiscal 2017-2019 performance period which vested on November 16, 2019 and were settled in cash; 5,544 RSUs awarded on November 16, 2016 which vested and were settled on November 16, 2019; 20,637 RSUs awarded on November 13, 2017 and vesting in equal installments on each of the first three anniversaries of the grant date; and 36,460 RSUs awarded on November 19, 2018 and vesting in equal installments on the first three anniversaries of the grant date; |
| |
Ms. Meixelsperger, the amounts in |
| (iii) | Mr. Puckett, the amounts in column (g) include the following: 1,138 earned PSUs awarded on November 16, 2016 for the fiscal 2017-2019 performance period which vested on November 16, 2019 and were settled in cash; 659 RSUs awarded on November 16, 2016 which vested and were settled on November 16, 2019; 12,945 RSUs awarded on September 14, 2017 and cliff vesting on |
| (iv) | Mr. Moughler, the amounts in column (g) include the following: 1,219 earned PSUs awarded on November |
| (v) | Ms. O’Daniel, the amounts in column (g) include the following: 1,950 earned PSUs awarded on November 16, 2016 for the fiscal 2017-2019 performance period which vested on November 16, 2019 and were settled in cash; 1,127 RSUs awarded on November 16, 2016 which vested and were settled on November 16, 2019; 12,945 RSUs awarded on September 14, 2017 and cliff vesting on |
| (3) | The dollar amounts in |
| (4) | The numbers in column (i) represent the PSUs granted for the fiscal 2018-2020 and fiscal 2019-2021 performance periods assuming target performance goals for each performance period are achieved. Specifically, for: |
| (i) | Mr. Mitchell, the amounts in column (j) include: 57,770 PSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period and 68,490 PSUs granted on November 19, 2018 for the fiscal 2019-2021 performance period; |
| (ii) | Ms. Meixelsperger, the amounts in column (j) include: 15,210 PSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period and 18,030 PSUs granted on November 19, 2018 for the fiscal 2019-2021 performance period; |
| (iii) | Mr. Puckett, the amounts in column (j) include: 4,570 PSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period and 5,410 PSUs granted on November 19, 2018 for the fiscal 2019-2021 performance period; |
| (iv) | Mr. Moughler, the amounts in column (j) include: 4,570 PSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period and 5,410 PSUs granted on November 19, 2018 for the fiscal 2019-2021 performance period; and |
| (v) | Ms. O’Daniel, the amounts in column (j) include: 6,090 PSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period and 7,210 PSUs granted on November 19, 2018 for the fiscal 2019-2021 performance period. |
Option Exercises and Stock Vested for Fiscal 20172019
The following table sets forth certain information regarding the value realized by each Valvoline Named Executive Officer during fiscal 20172019 upon the exercise of SARs and the vesting of PSUs, restricted shares and RSUs.
Name (a) | Option Awards | Stock Awards | ||||||||||||||
Number of Shares Acquired on Exercise(1) | Value Realized on Exercise(1) | Number of Shares Acquired on Vesting(2)(3) | Value Realized on Vesting(2)(3) | |||||||||||||
| (#) | ($) | (#) | ($) | |||||||||||||
| (b) | (c) | (d) | (e) | |||||||||||||
S.J. Mitchell | 66,178 | 586,337 | 29,767 | 604,091 | ||||||||||||
M.E. Meixelsperger | — | — | — | — | ||||||||||||
J.M. O’Daniel | 5,923 | 42,586 | 1,085 | 22,029 | ||||||||||||
C.A. Moughler | — | — | 7,103 | 144,109 | ||||||||||||
A.R. Puckett | — | — | 7,103 | 144,109 | ||||||||||||
Name (a) | Option Awards | Stock Awards | ||||||||||||||||||
Number of Shares Acquired on Exercise | Value Realized on Exercise(1) | Number of Shares Acquired on Vesting | Value Realized on Vesting(2) | |||||||||||||||||
| (#) | ($) | (#) | ($) | |||||||||||||||||
| (b) | (c) | (d) | (e) | |||||||||||||||||
S.J. Mitchell | —
| —
| 59,573
| 1,209,019
| ||||||||||||||||
M.E. Meixelsperger
| —
| —
| 24,584
| 475,078
| ||||||||||||||||
A.R. Puckett
| —
| —
| 4,581
| 92,957
| ||||||||||||||||
C.A. Moughler
| 6,456
| 70,564
| 4,669
| 94,753
| ||||||||||||||||
J.M. O’Daniel
| —
| —
| 3,954
| 79,978
| ||||||||||||||||
| |
The |
The |
relevant vesting date.
Pension Benefits for Fiscal 20172019
The following table shows the actuarial present value of the Valvoline Named Executive Officers’ (other than Ms. Meixelsperger) accumulated benefits under each of Valvoline’s qualified andnon-qualified pension plans, calculated as of September 30, 2017.2019. Ms. Meixelsperger is not eligible to participate in the qualified andnon-qualified pension plans.
Name (a) | Plan (b) | Number of Years Credited (#) (c) | Present Value of Accumulated Benefit ($) (d) | Payments During Fiscal Year ($) (e) | ||||||||||||||||||
| ||||||||||||||||||||||
S.J. Mitchell | Ashland | 18 years 5 months | 254,049 | |||||||||||||||||||
Ashland Inc. | ||||||||||||||||||||||
| ||||||||||||||||||||||
| 93,868 | |||||||||||||||||||||
Ashland Inc. Retirement Plan for Certain Employees | 4,164,945 | |||||||||||||||||||||
A.R. Puckett | Ashland Hercules Pension Plan | 29 years | 1,348,384 | |||||||||||||||||||
Ashland Inc. Nonqualified Excess | 29 years | 89,492 | ||||||||||||||||||||
Ashland Inc. Supplemental Early | 20 years | 815,107 | ||||||||||||||||||||
C.A. Moughler | Ashland Hercules Pension Plan | 27 years 6 months | 1,770,840 | |||||||||||||||||||
Ashland Inc. Nonqualified Excess | 27 years 6 months | 79,931 | ||||||||||||||||||||
Ashland Inc. Supplemental Early | 20 years | 872,047 | ||||||||||||||||||||
J.M. O’Daniel | Ashland Hercules Pension Plan | 8 years 2 months | 25,711 | |||||||||||||||||||
| (1) | The Ashland Hercules Pension Plan (the “Pension Plan”) is atax-qualified plan under Section 401(a) of the Code. The Ashland Inc. Nonqualified Excess Benefit Pension Plan (the “Excess Plan”) is anon-qualified plan that is coordinated with thetax-qualified plan. The Ashland Inc. Supplemental Early Retirement Plan for Certain Employees (the “SERP”) is anon-qualified plan. The material terms of each of these plans are described in the narrative below. |
| (2) | The maximum number of years of credited service under the SERP is 20 years. The number of years of service for the SERP is measured from the date of hire. The number of years of service under the Pension Plan and the Excess Plan is measured from the date the NEO began participating in the Pension Plan. |
| |
Assumptions
The present values of the accumulated benefits were calculated as of September 30, 2017,2019, based on the earliest age a participant could receive an unreduced benefit under the qualified Pension Plan and the Excess Plan because his or her qualified Pension Plan benefits are calculated under the cash balance pension formula.
The SERP provides an umbrella (or gross) benefit that is subject to certain reductions. The amount in the Pension Benefits table for the SERP benefit for applicable Valvoline Named Executive Officers is the net benefit under the SERP, after
| | PROXY STATEMENT 47 |
applicable reductions. The reductions referred to in this paragraph are described in the “Ashland Inc. Supplemental Early Retirement Plan for Certain Employees (SERP)” section below.
Under the SERP, the earliest age a Valvoline named executive officerNamed Executive Officer could receive aan unreduced benefit is the earlier of age 55 or when the sum of the officer’sNEO’s age and service equals at least 80, provided that the officerNEO has at least 20 years of service under the plan.SERP.
The following table sets forth for fiscal 2019 the valuation method and all material assumptions applied in quantifying the present value of the accumulated benefits described in the Pension Benefits table.
Pension Plan | Excess Plan | SERP | ||||
Discount rate and mortality assumptions (nopre-retirement mortality is assumed) | 3.16%;PRI-2012 Generational Mortality Tables, projected generationally with the MSS2019 scale (to follow the 2019 Trustees Report of the Social Security Administration Intermediate Alternative) | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715 disclosure rate of 2.89% | 3.00%;PRI-2012 Generational Mortality Tables projected generationally with the MSS2019 scale (to follow the 2019 Trustees Report of the Social Security Administration Intermediate Alternative) | |||
Present value of Pension Plan and Excess Plan benefits for SERP determination (nopre-retirement mortality is assumed) | 8.00%; GATT mortality at SERP retirement age, discounted from SERP retirement age back to current age using ASC715 disclosure rate of 3.00% | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715 disclosure rate of 3.00% | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715 disclosure rate of 3.00% | |||
Post-Employment Obligations Following Separation
In conjunction with the Separation of Valvoline from Ashland, sponsorship of several qualified andnon-qualified plans previously sponsored by Ashland were transferred to Valvoline as of September 1, 2016. As of September 30, 2016, benefits under these plans were frozen with regard to future accruals. The Ashland Hercules Pension Plan, the Ashland Inc. nonqualifiedNonqualified Excess Benefit Pension Plan, and the Ashland Inc. Supplemental Early Retirement Plan for Certain Employees are discussed below based on the fact that each of the Valvoline Named Executive Officers, other than Ms. Meixelsperger, were participants in and accumulated additional benefits under these plans during fiscal 2017.2019.
Ashland Hercules Pension Plan (Pension Plan)
The Pension Plan is atax-qualified defined benefit pension plan under Code Section 401(a). The Pension Plan provides retirement income for eligible participants. Beginning in January 2011, the Pension Plan was closed to new participants and to additional credits in the retirement growth account. Benefit accruals were frozen effective as of September 30, 2016.
The Pension Plan has two benefit formulas—a traditional formula, referred to as the annuity benefit, and a cash balance formula, referred to as the retirement growth account. The traditional formula produces an annuity benefit at retirement based on a percentage of final average compensation multiplied by years of plan service (see the description in the “—Traditional Benefit/Annuity Formula” section below). The cash balance formula produces a hypothetical account balance based on the sum of contribution credits and interest on those contribution credits (see the description in the “—Retirement Growth Account Benefit/Cash Balance Formula” section below). In general, participants who were actively employed by Ashland on June 30, 2003, with at least 10 years of service remained in the annuity benefit formula. All other participants moved to the retirement growth account formula. The formula under which a participant’s benefit is computed is a matter of plan design and not participant election.
The Pension Plan operated in conjunction with the Ashland Inc. Leveraged Employee Stock Ownership Plan (the “LESOP”) for eligible participants. The LESOP transferred to Valvoline upon separation from Ashland. Effective
| 48 | | PROXY STATEMENT |
May 1, 2017, Valvoline merged the LESOP into the Valvoline Inc. 401(k) Plan. Provisions for coordination with the Pension Plan remained unchanged.
Traditional Benefit/Annuity Formula
Under this formula, for certain highly compensated employees, compensation only includes base compensation, up to the maximum amount allowed under Code Section 401(a)(17). For all other participants, compensation includes base compensation and bonus amounts. This applies to both the annuity formula and the cash balance formula.
The final average compensation formula is the average for a48-consecutive month period producing the highest average for the last 120 months of credited service. For participants who were employees of Hercules prior to the acquisition of Hercules, the final average compensation is the average for the60-consecutive month period producing the highest average for the last 120 months of credited service.
| |
The annual annuity benefit formula is:
(1.08% x final average compensation up to $10,700) + (1.5% x final average compensation exceeding $10,700)
×
(years of credited service, which means years as a participant in the plan up to a maximum of 35 years)
For participants who were employees of Hercules prior to the acquisition, the annual annuity benefit formula is:
(1.2% x final average compensation up to $53,400) + (1.6% x final average compensation exceeding $53,400)
×
(years of credited service)
The normal form of benefit payment under the annuity benefit is a single life annuity. However, as required by federal law, the normal form of benefit for a married participant is a joint and survivor annuity, unless the spouse consents to a different benefit distribution. A participant may also elect anon-spousal joint and survivor annuity or a10-year term certain annuity. All payment forms are actuarially equivalent.
The normal retirement age is 65, but an unreduced benefit is paid for retirement at age 62. A participant may retire early once the participant is either at least age 55 or when the sum of the participant’s age and service equals at least 80.
Retirement Growth Account Benefit/Cash Balance Formula
Under this formula, contribution credits are accumulated in a notional account. Interest credits are allocated to each participant’s account monthly. The interest rate is from a minimum of 4.0% to a maximum of 7.0% and is set at the beginning of each plan year. The interest rate for fiscal 20162019 was 4.25%.
The accrued benefit under this formula is the balance in the retirement growth account. The benefit is payable in the same forms that apply to the annuity benefit formula or may be paid as a single lump sum.
The normal retirement age under the retirement growth account formula is also age 65. The earliest that a participant can receive an unreduced benefit is at age 55 with at least five years of service.
Non-Qualified Excess Defined Benefit Pension Plan (“Excess Plan”) andNon-Qualified Defined Contribution Plan (“NQDC Plan”)
The Excess Plan is an unfunded,non-qualified pension plan providing a benefit payable, based on the applicable Named Executive Officer’s pension plan eligibility, equal to the difference between the benefit under the Pension Plan in the absence of the Code limits (the gross benefit) and the actual benefit that would be payable under the Pension Plan.
The Excess Plan covers employees (i) who are eligible for the Pension Plan and whose benefit under the Pension Plan were limited because of either Code Section 401(a)(17) or Section 415(b) and (ii) who are not terminated for cause as defined in the Excess PlanPlan. For purposes of computing the Excess Plan benefits, a participant’s compensation is defined the same as it is for the Pension Plan. However, the limits on the compensation under the Pension Plan that are imposed by the Code do not apply under the Excess Plan.
| | PROXY STATEMENT 49 |
The benefit under the Excess Plan is payable in a lump sum and may be transferred to the Employees’ Deferral Plan.Valvoline Inc. 2016 Deferred Compensation Plan for Employees. A benefit payable to certain highly compensated participants cannot be paid for six months following separation from service. Messrs. Mitchell, MoughlerPuckett and PuckettMoughler participate in the Excess Plan. The Excess Plan was frozen effective September 30, 2016, in conjunction with the freezing of the Pension Plan.
The NQDC Plan is an unfunded,non-qualified plan that provides a contribution equivalent to Valvoline’s match and supplemental company contributions on annual incentive compensation paid and eligible earnings in excess of limits established under Code Section 401(a)(17) not permitted in the qualified 401(k) plan. The account balance may be invested in the mutual funds available in the Employees’ Deferral Plan (see “—Employee Deferral Plans”
| |
section below). The benefit payable under the NQDC Plan will be made in installments or as a lump sum based on a participant’s distribution election. Named Executive Officers and certain other highly compensated participants are subject to asix-month delay on distributions on account of their separation from service.
Supplemental Early Retirement Plan for Certain Employees (“SERP”)
The SERP is an unfunded,non-qualified plan allowing designated employees to retire prior to their sixty-fifth birthday without an immediate substantial loss of income. The SERP is a supplemental retirement arrangement for a select group of management participating in the SERP as of December 31, 2010. Beginning January 1, 2011, the eligibility for this program was restricted to employees with a traditional Pension Plan benefit who were subsequently promoted into an executive level position, on or after January 1, 2011. On November 18, 2015, the SERP was closed to all new participants.
In conjunction with the Separation of Valvoline from Ashland, sponsorship of the SERP was transferred to Valvoline as of September 1, 2016. As of September 30, 2016, benefits under the SERP were frozen with regard to future accruals. The final average compensation used in determining the value of a participant’s benefit was fixed as of this date. Final average bonus as defined under the plan will include fiscal 2016 annual incentive payments made in December 2016.
The SERP benefit formula covering the applicable Named Executive Officers and certain other designated executive level participants provides a benefit of 25% of final average compensation multiplied by the participant’s years of service up to 20 years. For this purpose, the final average compensation formula for participants as of December 30, 2010, is total compensation (base plus incentive compensation) for the 36 months out of the 84 months before retirement that produces the highest average. For Participants who became eligible on or after January 1, 2011, final average compensation is total compensation for the 60 months out of the 120 months before retirement that produces the highest average.
The applicable Named Executive Officers may retire on the earlier of age 55 with three years of service or when the sum of the executive’s age and service equals at least 80. The benefit produced by the above described formula is subject to proportionate reduction for each year of service credited to the participant that is less than 20 years of service. Additionally, the benefit is reduced by the sum of the following:
the participant’s qualified Pension Plan benefit (assuming the LESOP offset account is transferred to the Pension Plan); and
the participant’s Excess Plan benefit.
SERP benefits become vested upon attaining three years of service. Messrs. Mitchell, MoughlerPuckett and Mr. PuckettMoughler are vested in the SERP. Mses. Meixelsperger and O’Daniel are not eligible to participate in the SERP.
The SERP benefit is payable in a lump sum and may be transferred to the Employees’Employee Deferral Plan.Plan, as defined below. Distributions to the Named Executive Officers and certain other highly compensated participants are subject to asix-month delay after separation from service.
| |
Non-Qualified Deferred Compensation for Fiscal 20172019
The following table sets forth certain information for each of the Valvoline Named Executive Officers regardingnon-qualified deferred compensation for fiscal 2017.2019.
Name (a) | Executive Contributions in Last FY(1) ($) (b) | Registrant Contributions in Last FY(2) ($) (c) | Aggregate Earnings/ Change) in Last FY(3) ($) (d) | Aggregate Withdrawals/ Distributions in Last FY ($) (e) | Aggregate Balance at September 30, 2017 ($) (f) | Executive Contributions in Last FY(1) ($) (b)
| Registrant Contributions in Last FY(2) ($) (c)
| Aggregate Earnings in Last FY(3) ($) (d)
|
Aggregate Withdrawals/ Distributions in Last FY ($) (e)
|
Aggregate Balance at September 30, 2019 ($) (f)
| |||||||||||||||||||||||||||||||||||
S.J. Mitchell | 63,942 | 3,659 | 700,805 | 7,974,820 |
|
—
|
|
|
86,228
|
|
|
347,318
|
|
|
—
|
|
|
8,553,632
|
| ||||||||||||||||||||||||||
M.E. Meixelsperger | 10,209 | 881 | 11,090 |
|
—
|
|
|
34,933
|
|
|
3,140
|
|
|
—
|
|
|
99,933
|
| |||||||||||||||||||||||||||
A.R. Puckett
|
|
29,375
|
|
|
18,824
|
|
|
3,810
|
|
|
—
|
|
|
1,118,180
|
| ||||||||||||||||||||||||||||||
C.A. Moughler
|
|
—
|
|
|
14,575
|
|
|
3,717
|
|
|
(4,208
|
)
|
|
801,966
|
| ||||||||||||||||||||||||||||||
J.M. O’Daniel | 4,758 | 243 | 19,286 |
|
—
|
|
|
15,958
|
|
|
1,117
|
|
|
—
|
|
|
56,985
|
| |||||||||||||||||||||||||||
C.A. Moughler | 48,288 | 335 | 87,417 | (4,074 | ) | 709,846 | |||||||||||||||||||||||||||||||||||||||
A.R. Puckett | 85,255 | 129,261 | 875,414 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | The values in column (b) relate to the deferral of a portion of compensation in fiscal |
| (2) | The values in column (c) relate to a contribution equivalent to the company match and supplemental company contributions on annual incentive compensation and base pay in excess of limits established under Code Section 401(a)(17) and not permitted in the qualified 401(k) plan. This amount is reported in column (i) of the Summary Compensation Table (inclusive of taxes). |
| (3) | Aggregate earnings are composed of interest, dividends, capital gains and appreciation/depreciation of investment results. These earnings are not included in the Summary Compensation Table in this Proxy Statement. |
Non-Qualified Defined Contribution Plan (“NQDC Plan”)
The NQDC Plan is an unfunded,non-qualified defined contribution plan that provides a contribution equivalent to Valvoline’s match and supplemental company contributions on annual incentive compensation paid and eligible earnings in excess of limits established under Code Section 401(a)(17) not permitted in the qualified 401(k) plan. The account balance may be invested in the mutual funds available in the Employee Deferral Plan, as described below. The benefit payable under the NQDC Plan will be made in installments or as a lump sum based on a participant’s distribution election. Named Executive Officers and certain other highly compensated participants are subject to asix-month delay on distributions on account of their separation from service.
Employee Deferral PlansPlan
In September 2016, our Board approved the Valvoline Inc. 2016 Deferred Compensation Plan for Employees (the “Valvoline Employee“Employee Deferral Plan”), which is described below.
Participants elect how to invest their account balances from among a diverse set of mutual fund offerings and a hypothetical Valvoline common stockCommon Stock fund. No guaranteed interest or earnings are available and there are no above market rates of return on investments in the plan.Employee Deferral Plan. New investments in the Valvoline common stock unitsCommon Stock fund must remain so invested and must be distributed as Valvoline common stock.Common Stock. In all other events, participants may freely elect to change their investments. Withdrawals are allowed for an unforeseeable emergency (lump sum payment sufficient to meet the emergency), disability (lump sum payment), upon separation from employment (payable as a lump sum or installments per election) and at a specified time (paid as a lump sum).
| |
Potential Payments Upon Termination or Change in Control for Fiscal 20172019 Table
The following table summarizes the estimated amounts payable to each Valvoline Named Executive Officer in the event of a termination from employment or change in control of Valvoline as of September 30, 2017.2019. A narrative description follows the table. Different termination events are identified in columns (b)-(g). Column (a) enumerates the types of potential payments for each Valvoline Named Executive Officer. As applicable, each payment or benefit is estimated across the table under the appropriate column or columns.
These estimates are based on the assumption that the various triggering events occur on September 30, 2017,2019, the last day of fiscal 2017.2019. The equity incentive-based components are based on the closing price of Valvoline’s common stockValvoline Common Stock as of September 29, 201730, 2019 ($23.45)22.03). Other material assumptions used in calculating the estimated compensation and benefits under each triggering event are noted below. The actual amounts that would be paid to a Valvoline named executive officer upon certain terminations of employment or upon a change in control can only be determined at the time an actual triggering event occurs.
Name/Kinds of Payments (a) | Termination prior to a Cause ($) (b) | Disability(6) ($) (c) | Voluntary Resignation or Involuntary Termination for Cause (7) ($) (d) | Retirement(8) ($) (e) | Change in Control (9) ($) (f) | Termination after of Company Cause or by Executive Reason (10) ($) (g) | ||||||||||||||||||
S. J. Mitchell | ||||||||||||||||||||||||
Cash severance | 2,041,587 | 5,841,587 | ||||||||||||||||||||||
Accelerated SARs (1) | 19,523 | 402,662 | ||||||||||||||||||||||
RS / RSUs | 61,298 | 1,618,822 | ||||||||||||||||||||||
Performance-Restricted Stock (9) | 681,996 | 681,996 | 681,996 | |||||||||||||||||||||
PSUs (2) | 889,164 | 889,164 | 372,011 | 1,385,434 | ||||||||||||||||||||
Incentive compensation (3) | 914,945 | 914,945 | 914,945 | 914,945 | 950,000 | |||||||||||||||||||
Welfare benefit | 26,354 | 42,825 | ||||||||||||||||||||||
Outplacement | 25,000 | 142,500 | ||||||||||||||||||||||
Financial planning | 15,000 | |||||||||||||||||||||||
280G excise taxgross-up (4) | ||||||||||||||||||||||||
Present value of retirement benefits (5) | ||||||||||||||||||||||||
Total | $ | 3,689,882 | $ | 2,486,105 | $ | 1,804,109 | $ | 1,367,777 | $ | 11,080,826 | ||||||||||||||
M.E. Meixelsperger | ||||||||||||||||||||||||
Cash severance | 837,481 | 1,907,481 | ||||||||||||||||||||||
Accelerated SARs (1) | 172,571 | |||||||||||||||||||||||
RS / RSUs | 1,072,897 | |||||||||||||||||||||||
PSUs(2) | 132,479 | 397,436 | ||||||||||||||||||||||
Incentive compensation (3) | 386,444 | 386,444 | 386,444 | 401,250 | ||||||||||||||||||||
Welfare benefit | 19,765 | 26,354 | ||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | ||||||||||||||||||||||
Financial planning | ||||||||||||||||||||||||
280G excise taxgross-up (4) | ||||||||||||||||||||||||
Present value of retirement benefits (5) | ||||||||||||||||||||||||
Total | $ | 1,268,690 | $ | 518,923 | $ | 386,444 | $ | 4,002,989 | ||||||||||||||||
Name/Kinds of Payments (a)
| Termination prior to a Cause ($) (b)
| Disability (3) ($) (c)
| Voluntary Resignation or Involuntary Termination for Cause (4) ($) (d)
| Retirement (5) ($) (e)
| Change in Control ($) (f)
|
Termination after of Company Cause or by Executive Reason ($) (g)
| ||||||||||||||||||||||||
S. J. Mitchell
| ||||||||||||||||||||||||||||||
Cash Severance
|
|
2,022,404
|
|
|
5,917,404
|
| ||||||||||||||||||||||||
Accelerated SARs
|
|
265,022
|
| |||||||||||||||||||||||||||
RSUs
|
|
1,379,980
|
| |||||||||||||||||||||||||||
PSUs(1)
|
|
1,088,779
|
|
|
1,088,779
|
|
|
1,088,779
|
|
|
2,283,189
|
| ||||||||||||||||||
Incentive Compensation(2)
|
|
615,800
|
|
|
615,800
|
|
|
615,800
|
|
|
615,800
|
|
|
973,750
|
| |||||||||||||||
Welfare Benefit
|
|
34,446
|
|
|
55,975
|
| ||||||||||||||||||||||||
Outplacement
|
|
25,000
|
|
|
146,063
|
| ||||||||||||||||||||||||
Financial Planning
|
|
15,000
|
| |||||||||||||||||||||||||||
Total
|
$
|
2,697,650
|
|
$
|
1,704,579
|
|
$
|
1,704,579
|
|
$
|
1,704,579
|
|
$
|
11,036,382
|
| |||||||||||||||
M.E. Meixelsperger
| ||||||||||||||||||||||||||||||
Cash Severance
|
|
868,892
|
|
|
1,998,452
|
| ||||||||||||||||||||||||
Accelerated SARs
|
|
81,845
|
| |||||||||||||||||||||||||||
RSUs
|
|
682,568
|
| |||||||||||||||||||||||||||
PSUs(1)
|
|
343,795
|
|
|
343,795
|
|
|
658,230
|
| |||||||||||||||||||||
Incentive Compensation(2)
|
|
267,876
|
|
|
267,876
|
|
|
267,876
|
|
|
423,585
|
| ||||||||||||||||||
Welfare Benefit
|
|
25,835
|
|
|
34,446
|
| ||||||||||||||||||||||||
Outplacement
|
|
25,000
|
|
|
25,000
|
| ||||||||||||||||||||||||
Total
|
$
|
1,187,603
|
|
$
|
611,671
|
|
$
|
611,671
|
|
$
|
3,904,126
|
| ||||||||||||||||||
| |
Name/Kinds of Payments (a) | Termination prior to a Cause ($) (b) | Disability(6) ($) (c) | Voluntary Resignation or Involuntary Termination for Cause (7) ($) (d) | Retirement(8) ($) (e) | Change in Control (9) ($) (f) | Termination after of Company Cause or by Executive Reason (10) ($) (g) | ||||||||||||||||||
J.M. O’Daniel | ||||||||||||||||||||||||
Cash severance (10) | 783,885 | 1,353,885 | ||||||||||||||||||||||
Accelerated SARs (1) | 2,490 | 75,569 | ||||||||||||||||||||||
RS / RSUs | 8,442 | 395,440 | ||||||||||||||||||||||
PSUs (2) | 83,603 | 184,539 | ||||||||||||||||||||||
Incentive compensation (3) | 182,989 | 182,989 | 182,989 | 190,000 | ||||||||||||||||||||
Welfare benefit | 12,495 | 16,660 | ||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | ||||||||||||||||||||||
Financial planning | ||||||||||||||||||||||||
280G excise taxgross-up (4) | ||||||||||||||||||||||||
Present value of retirement benefits (5) | ||||||||||||||||||||||||
Total | $ | 1,004,369 | $ | 266,592 | $ | 193,921 | $ | 2,241,093 | ||||||||||||||||
C.A. Moughler | ||||||||||||||||||||||||
Cash severance | 576,827 | 1,101,827 | ||||||||||||||||||||||
Accelerated SARs (1) | 4,807 | 58,440 | ||||||||||||||||||||||
RS / RSUs | 15,055 | 389,651 | ||||||||||||||||||||||
PSUs (2) | 185,937 | 185,937 | 96,450 | 249,022 | ||||||||||||||||||||
Incentive compensation (3) | 156,888 | 156,888 | 156,888 | 156,888 | 175,000 | |||||||||||||||||||
Welfare benefit | 14,021 | 18,695 | ||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | ||||||||||||||||||||||
Financial planning | ||||||||||||||||||||||||
280G excise taxgross-up (4) | ||||||||||||||||||||||||
Present value of retirement benefits (5) | ||||||||||||||||||||||||
Total | $ | 772,736 | $ | 342,825 | $ | 342,825 | $ | 273,200 | $ | 2,017,635 | ||||||||||||||
A.R. Puckett | ||||||||||||||||||||||||
Cash severance | 508,519 | 973,519 | ||||||||||||||||||||||
Accelerated SARs (1) | 4,807 | 53,340 | ||||||||||||||||||||||
RS / RSUs | 15,055 | 383,273 | ||||||||||||||||||||||
PSUs (2) | 183,835 | 183,835 | 96,450 | 242,714 | ||||||||||||||||||||
Incentive compensation (3) | 192,805 | 192,805 | 192,805 | 192,805 | 155,000 | |||||||||||||||||||
Welfare benefit | 19,765 | 26,354 | ||||||||||||||||||||||
Outplacement | 25,000 | 25,000 | ||||||||||||||||||||||
Financial planning | ||||||||||||||||||||||||
280G excise taxgross-up (4) | ||||||||||||||||||||||||
Present value of retirement benefits (5) | ||||||||||||||||||||||||
Total | $ | 746,089 | $ | 376,640 | $ | 376,640 | $ | 309,117 | $ | 1,859,200 | ||||||||||||||
Name/Kinds of Payments (a)
| Termination prior to a Cause ($) (b)
| Disability(3) ($) (c)
| Voluntary Resignation or Involuntary Termination for Cause (4) ($) (d)
| Retirement(5) ($) (e)
| Change in Control ($) (f)
|
Termination after of Company Cause or by Executive Reason ($) (g)
| ||||||||||||||||||||||||
A.R. Puckett
| ||||||||||||||||||||||||||||||
Cash Severance
|
|
544,866
|
|
|
1,137,316
|
| ||||||||||||||||||||||||
Accelerated SARs
|
|
22,346
|
| |||||||||||||||||||||||||||
RSUs
|
|
952,445
|
| |||||||||||||||||||||||||||
PSUs(1)
|
|
94,421
|
|
|
94,421
|
|
|
94,421
|
|
|
188,789
|
| ||||||||||||||||||
Incentive Compensation(2)
|
|
236,423
|
|
|
236,423
|
|
|
236,423
|
|
|
236,423
|
|
|
209,100
|
| |||||||||||||||
Welfare Benefit
|
|
25,835
|
|
|
34,446
|
| ||||||||||||||||||||||||
Outplacement
|
|
25,000
|
|
|
25,000
|
| ||||||||||||||||||||||||
Total
|
$
|
832,124
|
|
$
|
330,844
|
|
$
|
330,844
|
|
$
|
330,844
|
|
$
|
2,569,442
|
| |||||||||||||||
C.A. Moughler
| ||||||||||||||||||||||||||||||
Cash Severance
|
|
585,657
|
|
|
1,221,678
|
| ||||||||||||||||||||||||
Accelerated SARs
|
|
23,047
|
| |||||||||||||||||||||||||||
RSUs
|
|
401,227
|
| |||||||||||||||||||||||||||
PSUs(1)
|
|
96,211
|
|
|
96,211
|
|
|
96,211
|
|
|
190,579
|
| ||||||||||||||||||
Incentive Compensation(2)
|
|
146,712
|
|
|
146,712
|
|
|
146,712
|
|
|
146,712
|
|
|
224,478
|
| |||||||||||||||
Welfare Benefit
|
|
16,073
|
|
|
21,431
|
| ||||||||||||||||||||||||
Outplacement
|
|
25,000
|
|
|
25,000
|
| ||||||||||||||||||||||||
Total
|
$
|
773,442
|
|
$
|
242,923
|
|
$
|
242,923
|
|
$
|
242,923
|
|
$
|
2,107,439
|
| |||||||||||||||
J.M. O’Daniel
| ||||||||||||||||||||||||||||||
Cash Severance
|
|
633,923
|
|
|
1,330,923
|
| ||||||||||||||||||||||||
Accelerated SARs
|
|
32,370
|
| |||||||||||||||||||||||||||
RSUs
|
|
442,577
|
| |||||||||||||||||||||||||||
PSUs(1)
|
|
135,394
|
|
|
135,394
|
|
|
261,159
|
| |||||||||||||||||||||
Incentive Compensation(2)
|
|
155,571
|
|
|
155,571
|
|
|
155,571
|
|
|
246,000
|
| ||||||||||||||||||
Welfare Benefit
|
|
14,683
|
|
|
19,577
|
| ||||||||||||||||||||||||
Outplacement
|
|
25,000
|
|
|
25,000
|
| ||||||||||||||||||||||||
Total
|
$
|
829,177
|
|
$
|
290,965
|
|
$
|
290,965
|
|
$
|
2,357,606
|
| ||||||||||||||||||
| (1) |
| |
| The PSU amounts identified in all of the columns except for column (g) are based on: |
If one of the events represented by columns (b), (c) or (e) occurred, thepro-rata payments would be based on actual results, rather than target. Pursuant to the |
| |
The PSU amounts identified in column (g) are based on the full value of (i) the outstanding |
The amounts identified in the Incentive Compensation row of columns (b), (c) and (e) represent a payment of the fiscal |
| For purposes of column (c), it is assumed that the NEO incurred a disabling event and termination on September 30, |
Valvoline does not maintain any plans or arrangements that would provide additional or enhanced benefits to the NEOs |
The values in this column represent benefits under the 2016 |
| |
Severance Pay Plan
The Valvoline Named Executive Officers are covered by the Valvoline Severance Pay Plan, which provides benefits in the event of a covered termination from employment in the absence of a change in control. A termination for which benefits under the plan will be considered include those directly resulting from the permanent closing of a facility, job discontinuance, termination by a participant for Good Reason (as defined in the plan), or other termination at Valvoline’s initiative for which Valvoline elects to provide benefits. Certain terminations are excluded from coverage by the Severance Pay Plan (for example, refusal to sign a severance agreement and release; discharge for less than effective performance, absenteeism or misconduct; or voluntary resignation). In order for any executive to receive benefits and compensation payable under the Severance Pay Plan, the executive must agree to a general release of liability which relates to the period of employment and the termination.
The benefit payable under the Severance Pay Plan to the Valvoline Named Executive Officers is 78 weeks of base pay, except for Mr. Mitchell, whose benefit is 104 weeks of base pay. Payments will be made inbi-weekly increments over the severance period in accordance with the Company’s regular payroll. Any executive who receives benefits under the plan is also entitled to continued coverage under the Company’s group health plans via company-paid COBRA during the severance period.
Executive Change in Control Agreements
Mr. Mitchell has a change in control agreement, effective May 15, 2017. If, within two years after a Change in Control (as defined in the agreement), Mr. Mitchell’s employment is terminated as a result of a Qualifying Termination (as defined in the agreement) he would be entitled to the following payments and benefits:
payment of three times the sum of his highest annual base compensation and highest target percentage annual incentive compensation in respect of the prior three fiscal years preceding the fiscal year in which the termination occurs in a lump sum paid in the seventh month following termination;
continued participation in Valvoline’s medical, dental and group life plans through December 31 of the third calendar year following the calendar year in which he was terminated;
full payment at target in cash of any outstanding PSUs as of his termination (less any amounts already paid with regard to the PSUs because of the change in control);
payment in cash of all prior existingearned and unpaid incentive compensation not already paid andpro-rata payment of any incentive compensation for the fiscal year in which he terminates at target level;
outplacement services and financial planning services for one year after termination;
payment of all unused, earned and accrued vacation in a lump sum in the seventh month following termination; and
| 54 | | PROXY STATEMENT |
vesting of all outstanding restricted shares, RSUs, SARs and stock options.
As a condition to receiving the benefits and compensation payable under the agreement, Mr. Mitchell has agreed for a period of 36 months following a Qualifying Termination, absent prior written consent of Valvoline’s General Counsel,Chief Legal Officer, to refrain from engaging in competitive activity against Valvoline; and to refrain from soliciting persons working for Valvoline, soliciting customers of Valvoline or otherwise interfering with Valvoline’s business relationships. Pursuant to the agreement, Mr. Mitchell has also agreed not to disclose confidential information. If Mr. Mitchell breaches the agreement, Valvoline has the right to recover benefits that have been paid to him. Finally, Mr. Mitchell may recover legal fees and expenses incurred as a result of Valvoline’s unsuccessful legal challenge to the agreement or Mr. Mitchell’s interpretation of the agreement.
Mr. Mitchell’s change in control agreement excludes all excise tax“gross-up” provisions and instead provides for a“best-after-tax” cutback.
| |
Each of the other Valvoline Named Executive Officers entered into change in control agreements, effective May 15, 2017. In the event of a Qualifying Termination (as defined within the agreements) within two years following a Change in Control (as defined within the agreements), these benefits would include:
payment of two times the sum of the NEO’s annual base salary and target annual bonus
continued participation in Valvoline’s group health plans during the24-month period immediately following a Qualifying Termination;
payment in cash of all prior existingearned and unpaid incentive compensation not already paid andpro-rata payment of any incentive compensation for the fiscal year in which the NEO terminates at target level;
outplacement services and financial planning services for two years after termination;
payment of all unused, earned and accrued vacation
outstanding equity awards shall be treated in accordance with the terms of the 2016 Incentive Plan (as described below)
As a condition to receiving the benefits and compensation payable under the agreements, the NEOs have agreed for a period of 24 months following a Qualifying Termination to refrain from engaging in competitive activity against Valvoline, including but not limited to solicitation of Valvoline employees and customers andnon-disclosure of confidential information. Each NEO’s change in control agreement excludes all excise tax“gross-up” provisions and instead provides for a“best-after-tax” cutback.
2016 Valvoline Inc. Incentive Plan Change in Control Provisions
Participants who have been granted long-term incentive awards (restricted stock, RSUs, PSUs and SARs) pursuant to the 2016 Incentive Plan, shall be entitled to accelerated vesting of such awards if a change in control occurs and the participant is terminated without cause (as defined in the 2016 Incentive Plan) during the protection period described below. With respect to PSUs, if a change in control occurs (i) during the first 12 months of the performance period, apro-rata portion of the PSUs will become vested at target as of the date of the change in control or (ii) after the first 12 months of the performance period, apro-rata portion of the PSUs will become vested as of the date of the change in control based on the actual achievement of the performance goals through the date of the change in control and the remaining PSUs, afterpro-rating the award, will be converted at target to time-based, stock settled RSUs and continue to vest, subject to the participant’s continued employment through the vesting date. In the event the participant’s employment or service is terminated without cause within thetwo-year period immediately following the change in control, any portion of the restricted stock, RSUs, SARs and converted PSUs that are unvested as of the date of such termination will immediately vest and become free of all restrictions.
The potential payments and benefits referenced above are reflected in the “Potential Payments upon Termination or Change in Control for Fiscal 2017”2019” section of this Proxy Statement.
| | PROXY STATEMENT 55 |
Under rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), Valvoline discloses the ratio of the annual total compensation of our Chief Executive Officer (CEO) to the annual total compensation of our median employee. We identified our median employee utilizing data as of September 30, 2019 for individuals who were employed by us on September 30, 2019.
For purposes of identifying the Company’s median employee, we calculated total compensation for each employee, other than the CEO, by including base salary, including overtime for hourly employees, paid in fiscal 2019 and target annual incentive compensation. The results of our finding are as follows:
Total Annual Compensation | |||||
Chief Executive Officer | $4,601,614 | ||||
“Median Employee” | $ 31,075 | ||||
CEO Pay Ratio(1) | 148 | ||||
| (1) | Excluding retail hourly employees, the median employee’s total annual compensation is $58,295, resulting in a CEO Pay Ratio of 79 to 1. |
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies, including our compensation peer group, may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
| 56 | |
|
Fiscal 20172019 Director Compensation Program
The Compensation Committee is responsible for reviewing and making recommendations to the Board on the compensation ofnon-employee directors. To assist with this duty, the Compensation Committee has engaged Deloitte to perform periodic reviews of the Company’snon-employee director compensation program, including an analysis of market trends and benchmarking the Company’snon-employee director compensation program versus the Company’s peer group. In December 2018, the Compensation Committee reviewed the competitiveness of the Company’snon-employee director compensation program utilizing market data provided by Deloitte and, based on this review, recommended that no change be made to the Company’s director compensation program for fiscal 2019.
The following is a description of our director compensation program for eligiblenon-employee directors for fiscal 2017. Until Valvoline’s final separation from Ashland, Mr. Wulfsohn was not compensated for his service as a Valvoline director.2019. Mr. Mitchell, Valvoline’s Chief Executive Officer, does not receive additional compensation for his service on the Board.
Annual Retainer
Valvoline’snon-employee director compensation program fornon-employee directors provides that eachnon-employee director receives an annual retainer of $100,000. In addition, the Chair of the Audit Committee receives an annual retainer of $20,000, and the Chairs of the Compensation and G&N Committees each receive an annual retainer of $15,000. Effective for fiscal 2018, the Thenon-executive Chairman of the Board will receivereceives an additional annual retainer of $40,000 for such services. Cash payments are made to each director on a quarterly basis.
Eachnon-employee director has the opportunity to participate in Valvoline’sthe Valvoline Inc. 2016 Deferred Compensation Plan forNon-Employee Directors (the “Directors’“Director Deferral Plan”). Under the Directors’Director Deferral Plan,non-employee directors may elect to receive all or a portion of each retainer in cash or in shares of Valvoline Common Stock. They may also elect to have all or a portion of each retainer deferred into the Directors’Director Deferral Plan. The directorsDirectors who make an election to defer part of any retainer may have the deferred amounts held as common stock units (share equivalents) in the hypothetical Valvoline Common Stock fund or invested in the other available investment options within the Directors’Director Deferral Plan. Payments from the Directors’Director Deferral Plan may commence upon a Director’s separation from the Board. Plan ParticipantsDirectors may elect to have the payout in a single lump sum or in installments not to exceed 15 years. Distributions for deferrals will be made pursuant to each director’s election and valued at the time of the distribution.
One-Time Equity Award
In connection with their election to the Board of Directors as the Company’s inaugural Board members, eachnon-employee director received aone-time grant of 4,937 restricted shares of Common Stock under the 2016 Incentive Plan on October 1, 2016, representing the number of shares of Common Stock equal to the value of 1,000 shares of Ashland common stock on the date of grant. The restricted shares may not be sold, assigned, transferred or otherwise encumbered until the earliest to occur of: (i) retirement from the Board of Directors; (ii) death or disability of the director; (iii) any removal or involuntary separation following a change in control (as defined in the 2016 Incentive Plan); or (iv) voluntary early retirement to enter governmental service. The Compensation Committee has discretion to accelerate vesting of these restricted shares if thenon-employee director leaves the Board of Directors for reasons other than those listed above. Effective for fiscal 2018, the Board, upon the recommendation of the independent compensation consultant, eliminated initial equity awards for new directors based upon market practices for director compensation.
Annual Equity Award
Under the Directors’Director Deferral Plan, eachnon-employee director is also eligible to receive an annual award of deferred stock units. The number of deferred stock units to be granted to eachnon-employee director shall be determined by dividing $110,000(pro-rated as applicable for less than a full-year of service) by the grant date value of a share of Valvoline Common Stock. The deferred stock units vest one year after the date of grant or, if the director does not seekre-election as a director, upon the date of the annual shareholder meeting that precedes suchone-year anniversary, in each case subject to the director’s continued service. Dividends are credited and reinvested in additional deferred stock units. The deferred stock units immediately vest upon a director’s termination of service on or after a change in control (as defined in the Directors’Director Deferral Plan) of Valvoline. Any vested deferred stock units will be paid in cash or shares of Valvoline Common Stock at the time specified in the director’s election, or if no election is made, within 60 days after the director’s termination of service. Effective for fiscal 2018, eachEach director will havehas the option to have his or her annual deferred stock unit award distributed in shares of common stockValvoline Common Stock upon vesting.
Stock Ownership Guidelines for Directors
The Board of Directors considers Valvoline Common Stock ownership by directors to be of utmost importance. The Board believes that such ownership enhances the commitment of directors to Valvoline’s future and aligns their interests
| |
with those of Valvoline’s other shareholders. The Board has therefore established minimum stock ownership guidelines fornon- employee directors which require each director to own Valvoline Common Stock having a value of at least five times his or her base annual cash retainer. Each currentnon-employee director of Valvoline has five years from the year elected to reach this ownership level. As of September 30, 2017,2019, Ms. Twinem and Messrs. Kirk, Sonsteby,Macadam, Manager and ManagerSonsteby had achieved ownership in excess of the guidelineminimum stock ownership guidelines fornon-employee directors.
| | PROXY STATEMENT 57 |
Director Compensation Table
The following table is a summary of compensation information for fiscal 2017,2019 for Valvoline’snon-employee directors.
Name (a) | Fees ($) (b) | Stock ($) (c) | Total ($) (d) |
Fees ($) (b)
| Stock ($) (c)
| Total ($) (e)
| ||||||||||||||||||
Richard J. Freeland | 100,000 | 110,013 | 210,013 |
| 100,000
|
|
| 110,019
|
|
| 210,019
|
| ||||||||||||
Stephen F. Kirk | 115,000 | 110,013 | 225,013 |
| 140,000
|
|
| 110,019
|
|
| 250,019
|
| ||||||||||||
Carol H. Kruse
|
| 82,609
|
|
| 127,814
|
|
| 210,423
|
| |||||||||||||||
Stephen E. Macadam | 100,000 | 110,013 | 210,013 |
| 100,000
|
|
| 110,019
|
|
| 210,019
|
| ||||||||||||
Vada O. Manager | 115,000 | 110,013 | 225,013 |
| 115,000
|
|
| 110,019
|
|
| 225,019
|
| ||||||||||||
Charles M. Sonsteby | 120,000 | 110,013 | 230,013 |
| 120,000
|
|
| 110,019
|
|
| 230,019
|
| ||||||||||||
Mary J. Twinem | 100,000 | 110,013 | 210,013 |
| 115,000
|
|
| 110,019
|
|
| 225,019
|
| ||||||||||||
William A. Wulfsohn (3) | 37,637 | — | 37,637 | |||||||||||||||||||||
| (1) | The values reflected in column (b) include annual retainers paid for service as anon-employee director |
| (2) | The values reflected in column (c) represent the grant date value of the |
The following table identifies the aggregate outstanding number of shares of restricted stock and unvested deferred stock units held by eachnon-employee director as of September 30, 2017.2019.
Name | Shares of (#) | Unvested Stock (#) |
Shares of (#)
|
Deferred Stock (#)
| ||||||||||||
Richard J. Freeland | 4,937 | 6,567 |
| 4,937
|
|
| 11,859
|
| ||||||||
Stephen F. Kirk | 4,937 | 6,567 |
| 4,937
|
|
| 32,458
|
| ||||||||
Carol H. Kruse
|
| —
|
|
| 5,935
|
| ||||||||||
Stephen E. Macadam | 4,937 | 6,567 |
| 4,937
|
|
| 25,103
|
| ||||||||
Vada O. Manager | 4,937 | 6,567 |
| 4,937
|
|
| 161,763
|
| ||||||||
Charles M. Sonsteby | 4,937 | 6,567 |
| 4,937
|
|
| 21,525
|
| ||||||||
Mary J. Twinem | 4,937 | 6,567 |
| 4,937
|
|
| 16,468
|
| ||||||||
William A. Wulfsohn | — | — | ||||||||||||||
| (1) | Includes credit for reinvested dividends allocated since grant date for all directors. |
| |
|
Policy onPre-Approval of Audit Firm Services
The Audit Committee of our Board (the “Audit Committee”) has responsibility for appointing, determining compensation of and overseeing the work of the independent registered public accounting firm that audits our financial statements.
The Audit Committee has adopted strict guidelines on the use of the independent registered public accounting firm to provide audit andnon-audit services. The Audit Committee mustreviews andpre-approvepre-approves all audit andnon-audit services performed by the independent registered public accounting firm.firm in the fiscal year. These services may include audit services, audit-related services, tax services and other permissiblenon-audit services. In circumstances where the engagement of the independent registered public accounting firm to perform work beyond the scope of and not contemplated in the originalpre-approval occurs, specificpre-approval of the additional services and fees (not exceeding $500,000) is required by the Audit Committee Chair prior to the engagement of the independent registered public accounting firm for those services and must be presented to the Audit Committee at its next meeting. For each proposed service, the independent registered public accounting firm provides detailed supporting documentation at the time of approval to permit the Audit Committee to make a determination whether the provision of such service would impair the independence of the independent registered public accounting firm.
Professional services provided by EY as our independent registered accounting firm in fiscal 20172019 were subject topre-approval under the guidelines discussed above. Under these guidelines, prior to engagement, the Audit Committeepre-approved the audit andnon-audit services to be rendered by EY in fiscal 2017,2019, in each case, including all engagement fees and termsterms.
The Audit Committee is currently composed of three independent directors and operates under a written charter adopted by the Board. A copy of the Audit Committee’s charter may be obtained from the Company’s Investor Relations website at http://investors.valvoline.com. The Board, after reviewing the qualifications of the Audit Committee members and any relationships that such members may have with the Company that might affect their independence, determined that all current Audit Committee members—Messrs. Manager and Sonsteby and Ms. Twinem—are “independent” as that term is defined by Rule10A-3 of the Exchange Act, the listing standards of the NYSE, and Valvoline’s Director Independence Standards. The Board also determined that each member of the Audit Committee is an “audit committee financial expert” as defined by SEC rules. A description of each Audit Committee member’s financial experience is contained in their biographies under Proposal One—Election of Directors.
The Audit Committee assists in fulfilling the oversight responsibilities of the Board relating to the integrity of the Company’s financial statements and financial reporting process; the integrity of the Company’s systems of internal accounting and financial controls; the performance of the Company’s internal audit function and independent auditors; the independent auditors’ qualifications and independence and the independent auditors’ audit of the Company’s financial statements and effectiveness of internal control over financial reporting; the Company’s risk management policies and processes; the Company’s ethical compliance programs, including the Company’s Codes of Business Conduct; the Company’s financial affairs; legal and regulatory compliance requirements; and the Company’s policies, programs and practices with respect to environmental, health and safety risks. The Audit Committee also oversees the Company’s enterprise risk management (“ERM”) program and has direct oversight over financial reporting and control and several other risks, noted below, within the ERM framework. In fiscal 2017,2019, the Audit Committee met 1110 times, including teleconferences to discuss and review Valvoline’s quarterly financial performance and associated news releases.
The Company’s management has primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. The independent auditors are responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on management’s assessment of the effectiveness of the Company’s internal control over financial reporting.
| |
EY, an independent registered public accounting firm, was engaged to audit Valvoline’s consolidated financial statements for fiscal 20172019 and to issue an opinion on whether such statements present fairly, in all material respects, Valvoline’s consolidated financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. EY was also engaged to audit and to issue an opinion on the effectiveness of Valvoline’s internal control over financial reporting. Prior to any engagement of EY by Valvoline, the engagement was preapproved in accordance with established policies and procedures. The Audit Committee reviewed and discussed with management and EY the audited financial statements, management’s assessment of the effectiveness of Valvoline’s internal control over financial reporting and EY’s evaluation of Valvoline’s internal control over financial reporting. The Audit Committee further reviewed EY’s judgment as to the quality and acceptability of Valvoline’s accounting principles, financial reporting process and controls and such other matters as are required to be discussed with the Audit Committee under applicable requirements of the Public Company Accounting Oversight Board (United States) (the “PCAOB”). In addition, the Audit Committee received and reviewed EY’s independence from management and Valvoline including the matters in the written disclosures regarding EY’s independence required by the PCAOB, and has discussed such matters with EY. The Audit Committee considered with EY whether the provision ofnon-audit services provided by them to the Company during 2017fiscal 2019 was compatible with their independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that Valvoline’s consolidated financial statements be included in its Annual Report on Form10-K for the fiscal year ended September 30, 2017,2019, for filing with the SEC.
AUDIT COMMITTEE
Charles M. Sonsteby, Chair
Vada O. Manager
Mary J. Twinem
The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that Valvoline specifically incorporates the Audit Committee Report by reference therein.
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|
Stock Ownership of Directors, Director Nominees and Executive Officers
The following table presents, as of the Record Date, December 4, 2017,2, 2019, information relating to the beneficial ownership of Valvoline Common Stock by (i) each of our current directors, (ii) each of our named executive officers and (iii) all of our current directors and executive officers as a group. The address of each person listed below is the address of the Company. A person is deemed to have beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares except as described below.
Name of Beneficial Owner | Number of Shares of Beneficially Owned | Percentage of Class* |
Number of Shares of Valvoline Common Beneficially Owned
| Percentage of Class*
| ||||||||||||||
Samuel J. Mitchell, Jr. | 541,297 | * | (1)(2)(3) | 503,293
|
| *
|
| (1)(2)
| ||||||||||
Mary E. Meixelsperger | 58,091 | * | (2)(3) | 46,061
|
| *
|
| (2)
| ||||||||||
Anthony R. Puckett
| 12,903
|
| *
|
| (1)(2)
| |||||||||||||
Craig A. Moughler
| 41,152
|
| *
|
| (1)(2)
| |||||||||||||
Julie M. O’Daniel | 6,620 | * | (2) | 8,866
|
| *
|
| (2)
| ||||||||||
Craig A. Moughler | 42,431 | * | (1)(2) | |||||||||||||||
Anthony R. Puckett | 25,337 | * | (1)(2) | |||||||||||||||
Richard A. Freeland | 12,085 | * | (1)(3) | |||||||||||||||
Gerald W. Evans, Jr.
| 0
|
| *
|
|
| |||||||||||||
Richard J. Freeland
| 21,911
|
| *
|
| (1)(3)
| |||||||||||||
Stephen F. Kirk | 36,066 | * | (1)(3) | 44,295
|
| *
|
| (1)(3)
| ||||||||||
Carol H. Kruse
| 5,934
|
| *
|
| (1)
| |||||||||||||
Stephen E. Macadam | 17,522 | * | (1)(3) | 36,057
|
| *
|
| (1)(3)
| ||||||||||
Vada O. Manager | 154,125 | * | (1)(3) | 166,171
|
| *
|
| (1)(3)
| ||||||||||
Charles M. Sonsteby | 22,550 | * | (1)(3) | 33,461
|
| *
|
| (1)(3)
| ||||||||||
Mary J. Twinem | 16,504 | * | (1)(3) | 26,404
|
| *
|
| (1)(3)
| ||||||||||
William A. Wulfsohn | 157,124 | * | (1) | |||||||||||||||
All directors and executive officers as a group (18 people) | 1,196,373 | 0.59 % | ||||||||||||||||
All directors and executive officers as a group (19 people)
| 1,066,858
|
|
0.57%
| |||||||||||||||
| * | The percentage of shares beneficially owned does not exceed 1% of the class. |
As of December |
| (1) | Includes common stock units and/or restricted stock units (share equivalents) held by executive officers in the Valvoline Common Stock Fund under |
| (2) | Includes shares of Valvoline Common Stock with respect to which the executive officers have the right to acquire beneficial ownership within 60 calendar days after December |
| (3) | Includes restricted shares of Valvoline Common Stock: as to |
| |
Stock Ownership of Certain Beneficial Owners
The following table presents, as of December 4, 2017,2, 2019, information relating to the beneficial ownership of Valvoline Common Stock by each person known by Valvoline to own more than 5% of the outstanding shares of Valvoline Common Stock. A person has beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares except as described below.
Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Class* |
Number of Shares of Common Stock Beneficially Owned
| Percentage of
| ||||||||
T. Rowe Price Associates, Inc. | 26,982,848 | 13.37 | % | |||||||||
The Vanguard Group, Inc.(1) | 17,389,476 | 9.23% | ||||||||||
100 Vanguard Blvd. Malvern, PA 19355 | ||||||||||||
BlackRock, Inc.(2) | 16,762,617 | 8.90% | ||||||||||
55 East 52nd Street New York, NY 10055 | ||||||||||||
T. Rowe Price Associates, Inc.(3) | 15,960,069 | 8.47% | ||||||||||
100 E. Pratt Street Baltimore, Maryland 21202 | ||||||||||||
AMCAP Fund(4) | 13,981,000 | 7.42% | ||||||||||
333 South Hope Street Los Angeles, CA 90071 | ||||||||||||
Capital Research Global Investors(5) | 10,674,122 | 5.66% | ||||||||||
333 South Hope Street Los Angeles, CA 90071 | ||||||||||||
Capital International Investors(6) | 9,689,403 | 5.14% | ||||||||||
11100 Santa Monica Blvd. 16th Floor Los Angeles, CA 90025 | ||||||||||||
| * | Based on |
| (1) | Based upon information contained in a Schedule |
| (2) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 6, 2019. BlackRock, Inc., as parent holding company of investment advisory subsidiaries BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors and BlackRock Fund Managers Ltd, beneficially owned 16,762,617 shares of Valvoline Common Stock as of December 31, 2018, with sole voting power over 15,967,254 shares and sole dispositive power over 16,762,617 shares. |
| (3) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 14, 2019. T. Rowe Price Associates, Inc. (“Price Associates”), an investment adviser, and T. Rowe PriceMid-Cap Growth Fund, Inc.(“Mid-Cap Fund”), an investment company, |
| (4) | Based upon information contained in a Schedule 13G filed with the SEC on February 14, 2019. AMCAP Fund, an investment company, beneficially owned 13,981,000 shares of Valvoline Common Stock as of December 31, 2018. AMCAP Fund has no sole or shared voting or dispositive power |
| |
| through three divisions: Capital Research Global Investors, Capital World Investors and Capital International Investors. These shares may also be reflected in the filings made by Capital Research Global Investors, Capital International Investors and/or Capital World Investors. |
| (5) | Based upon information contained in a Schedule 13G filed with the SEC on February 14, 2019. Capital Research Global Investors, an investment adviser and division of CRMC, beneficially owned 10,674,122 shares of Valvoline Common Stock as of December 31, 2018, with sole voting and sole dispositive power over such shares. |
| (6) | Based upon information contained in a Schedule 13G filed with the SEC on February 14, 2019. Capital International Investors, an investment adviser and division of CRMC, beneficially owned 9,689,403 shares of Valvoline Common Stock as of December 31, 2018, with sole voting and sole dispositive power over such shares. |
Equity Compensation Plan Information
The following table provides information about the Company’s equity compensation plans under which Valvoline Common Stock may be issued as of September 30, 2017.2019.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
Number of
| Weighted-
|
Number of
| |||||||||||||||||||||
Equity compensation plans approved by stockholders | 2,501,741 | (1) | $ | 17.42 | (2) | 5,499,828 | (3) |
| 2,669,633
| (1)
|
| $18.89
| (2)
|
| 13,652,733
| (3)
| |||||||||||
Equity compensation plans not approved by stockholders | 429,786 | (4) | $ | — | 1,568,615 | (5) |
| 507,363
| (4)
|
| $ —
|
|
| 1,480,391
| (5)
| ||||||||||||
| (1) | This figure includes the following shares issuable under the 2016 |
| (2) | The weighted-average exercise price excludes shares in Valvoline |
| (3) | This figure represents |
| (4) | This figure includes |
| (5) | This figure includes |
Valvoline is soliciting the proxies to which this Proxy Statement relates. All costs of soliciting proxies, including the cost of preparing and mailing the Proxy Statement and any accompanying material, will be borne by Valvoline. Expenses associated with this solicitation may also include charges and expenses of banks, brokerage houses and other custodians, nominees or fiduciaries for forwarding proxies and proxy materials to beneficial owners of shares. Solicitations may be made by mail, telephone, facsimile, electronic means and personal interview, and by officers and employees of Valvoline, who will not be additionally compensated for such activity. Valvoline has arranged for the services of Georgeson to assist in the solicitation of proxies. Georgeson’s fees will be paid by Valvoline and are estimated to be $10,500, excludingout-of-pocket expenses.
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Shareholder Proposals for the 20192021 Annual Meeting
Under ourBy-laws, shareholders must follow certain procedures to propose an item of business at an annual meeting. Pursuant to these procedures, the Company must be given advance written notice of such proposals, which must contain the information required by ourBy-laws with respect to the shareholder and the proposal and must be timely. To be timely, written notice must be received by our Corporate Secretary at our principal office not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting; provided, however, that in the event that the date of the Annual Meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting and (ii) the 10th day following the day on which public announcement of such meeting is first made (such applicable notice deadline, the“By-law Notice Deadline”). Based on the January 31, 2018 date for our Annual Meeting, written notice of any shareholder proposal must be received no earlier than October 3, 2018, and no later than November 2, 2018, to be considered timely for our 2019 Annual Meeting of Shareholders, assuming our 2018 Annual Meeting will be held no more than 30 days before and no more than 60 days after January 31, 2019. The chairman of an annual meeting of shareholders may refuse to acknowledge the proposal of any person not made in compliance with ourBy-laws. A copy of ourBy-laws has been filed with the SEC and is available on the SEC’s website,http://www.sec.gov, or may be obtained by written request to: Valvoline’s Corporate Secretary, 100 Valvoline Way, P.O. Box 55270, Lexington, KY 40555-1000.
Under SEC rules, if a shareholder wants us to include a shareholder proposal in our Proxy Statement for the 20192021 Annual Meeting, our Corporate Secretary must have receivedreceive the proposal at our principal executive officers no later thanoffices on or before August 17, 2018,18, 2020, which is 120 calendar days before theone-year anniversary of the mailing date of our Proxy Statement for the Annual Meeting. All proposals must comply with Rule14a-8 under the Exchange Act.
OurBy-laws establish an advance notice procedure for any shareholder who wishes to propose an item of business for consideration at our 2021 Annual Meeting but does not intend for the proposal to be included in our Proxy Statement. Pursuant to these procedures, the shareholder must provide advance written notice of such proposal to our Corporate Secretary, which must contain the information required by ourBy-laws with respect to the shareholder and the business to be brought before the 2021 Annual Meeting. To be timely for our 2021 Annual Meeting, our Corporate Secretary must receive the written notice at our principal executive offices no earlier than the close of business on October 2, 2020 and no later than the close of business on November 1, 2020. If we change the date ofhold our 20192021 Annual Meeting by more than 30 days frombefore or more than 60 days after theone-year anniversary date of our 2020 Annual Meeting, our Corporate Secretary must receive the written notice no earlier than the close of business on the 120th day prior to the date of the 20182021 Annual Meeting thenand no later than the deadline is a reasonable time before we print and send our proxy materials forclose of business on the 2019 Annual Meeting. Any such proposal must comply with alllater of (i) the 90th day prior to the date of the requirements2021 Annual Meeting and (ii) the 10th day following the day on which public announcement of Exchange Act Rulethe 2021 Annual Meeting is first made. The chairman of an annual meeting of shareholders may refuse to acknowledge any person’s proposal not made in compliance with our14a-8.By-laws. A copy of ourBy-laws is available on our website athttp://investors.valvoline.com or on the SEC’s website athttp://www.sec.gov. Shareholders may also obtain a copy of ourBy-Laws by sending a written request to Valvoline’s Corporate Secretary, 100 Valvoline Way, Lexington, KY 40509.
Shareholders should send all proposals for the 20192021 Annual Meeting via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, P.O. Box 55270, Lexington, KY 40555-1000.40509.
As of the date of this Proxy Statement, Valvoline does not know of any business to be presented for consideration at the Annual Meeting, other than the items referred to in this Proxy Statement. In the event that any additional matter is properly brought before the meeting for shareholder action, properly voted proxies will be voted in accordance with the judgment of the proxies named therein.
If you wish to vote by proxy, please do so by visiting the website listed on your proxy card, by calling the telephone number specified on your proxy card or by mailing a completed, signed and dated proxy card. You may also vote by attending the Annual Meeting and voting your shares in person. We appreciate your prompt attention to these matters, and your continued confidence in Valvoline.
Julie M. O’Daniel
Senior Vice President, General CounselChief Legal Officer
and Corporate Secretary
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The following tables reconcile net income and diluted earnings per share (EPS) to adjusted net income and adjusted EPS; net income to adjusted EBITDA; and cash flow from operations to free cash flow, for the periods presented. We believe the use of adjusted EPS, adjusted EBITDA and free cash flow,non-GAAP measures, assists investors in understanding our ongoing operating performance by presenting comparable financing results between periods. Thenon-GAAP information provided is used by management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating adjusted EPS, adjusted EBITDA, and free cash flow.
Valvoline Inc. Employee Stock Purchase Plan was approved by the Board of Directors on November 14, 2017.and Consolidated Subsidiaries
1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Companies with an opportunity to purchase Common Stock through accumulated Contributions. The Company’s intends for the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code. Accordingly, the Plan will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code.RECONCILIATION OFNON-GAAP DATA - NET INCOME AND DILUTED EARNINGS PER SHARE
2. Definitions.(In millions, except per share data - Unaudited)
(a) “Administrator” means the Board or any Committee designated by the Board to administer the Plan pursuant to Section 14.
Year ended | ||||||||
2019
| 2018
| |||||||
Reported net income | $ | 208 |
| $ | 166 |
| ||
Adjustments: | ||||||||
Net pension and other postretirement plan expense |
| 60 |
|
| — |
| ||
Net legacy and separation-related expenses |
| 3 |
|
| 14 |
| ||
Restructuring and related expenses |
| 14 |
|
| — |
| ||
Business interruption expenses |
| 6 |
|
| — |
| ||
Acquisition and divestiture-related (gains) losses |
| (4 | ) |
| 3 |
| ||
Total adjustments,pre-tax |
| 79 |
|
| 17 |
| ||
Income tax expense of adjustments |
| (22 | ) |
| (7 | ) | ||
Income tax adjustments(a) |
| (2 | ) |
| 78 |
| ||
Total adjustments, after tax |
| 55 |
|
| 88 |
| ||
Adjusted net income | $ | 263 |
| $ | 254 |
| ||
Reported diluted earnings per share | $ | 1.10 |
| $ | 0.84 |
| ||
Adjusted diluted earnings per share | $ | 1.39 |
| $ | 1.29 |
| ||
Weighted average diluted common shares outstanding |
| 189 |
|
| 197 |
| ||
(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards and the related issuance of shares of Common Stock under U.S. state corporate laws, U.S. federal and state securities laws, the Code, and any stock exchange or quotation system on which the Common Stock is listed or quoted.
(c) “Board” means the Board of Directors of the Company.
(d) “Code” means the U.S. Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or U.S. Treasury Regulation thereunder will include such section or regulation, any valid regulation or other official applicable guidance promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(e) “Committee” means the Compensation Committee of the Board.
(f) “Common Stock” means the common stock of the Company.
(g) “Company” means Valvoline Inc., a Kentucky corporation, or any successor thereto.
(h) “Compensation” shall be defined from time to time by the Committee in its sole discretion with respect to any Offering Period. Except as otherwise defined by the Committee from time to time in its sole discretion, “Compensation” means thepre-tax regular base wages paid to such Eligible Employee by the Company or a Designated Company prior to reductions forpre-tax contributions made to plan or salary reduction contributions to a plan excludable from income under Sections 125 or 402(g) of the Code. Except as otherwise determined by the Committee, “Compensation” does not include: (1) any bonuses or commissions, (2) overtime pay, (3) any amounts contributed by the Company or a Designated Company to any pension plan, (4) any automobile or relocation allowances (or reimbursement for any such expenses), (5) any amounts realized from the exercise of any stock options or other equity incentive awards, (6) any amounts paid by the Company or a Designated Company for other fringe benefits, such as health and welfare, hospitalization and group life insurance benefits, or perquisites, or paid in lieu of such benefits, or (7) other similar forms of extraordinary compensation.
(i) “Contributions” means the payroll deductions used to fund the exercise of options granted pursuant to the Plan.
(j) “Designated Company” means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan. As of the Effective Date, the Company and the Subsidiaries listed onExhibit A hereto are Designated Companies.
(k) “Designated Percent” means the percentage of Fair Market Value determined by the Administrator for purposes of determining the Purchase Price.
(l) “Effective Date” means the date that the Company’s stockholders approve the Plan.
| (a) | Income tax adjustments in fiscal 2019 relate to Kentucky tax reform, and income tax adjustments in fiscal 2018 primarily relate to U.S. and Kentucky tax reform. |
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(m) “Eligible Employee” means any individual who is an employee providing services to the Company or a Designated Company, unless any such employee is specifically excluded by the Administrator from participation. The Administrator, in its discretion, from time to time may, prior to an Offering Date for all options to be granted on such Offering Date in an Offering, determine (on a uniform and nondiscriminatory basis or as otherwise permitted by TreasuryRegulation Section 1.423-2) that the definition of Eligible Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), or (iv) is a highly compensated employee within the meaning of Section 414(q) of the Code, provided the exclusion is applied with respect to each Offering in an identical manner to all highly compensated individuals of the Employer whose employees are participating in that Offering. Each exclusion shall be applied with respect to an Offering in a manner complying with U.S. TreasuryRegulation Section 1.423-2(e)(2)(ii).
(n) “Employer” means the employer of the applicable Eligible Employee(s).
(o) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.
(p) “Fair Market Value” means, as of any date and unless the Administrator determines otherwise, the closing sales price for the Common Stock as quoted on the New York Stock Exchange on the date of determination (or the closing bid, if no sales were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable Notwithstanding the foregoing, if the determination date for the Fair Market Value occurs on a weekend or holiday, the Fair Market Value will be the price as determined in accordance with the above on the immediately preceding business day, unless otherwise determined by the Administrator.
(q) “Holding Period” has the meaning set forth in Section 9(b) hereof.
(r) “Maximum Share Amount” means the maximum number of Shares that a Participant may purchase on any given Purchase Date, as determined by the Committee in its sole discretion. Until specified otherwise by the Committee, the Maximum Share Amount shall be 1,500.
(s) “New Purchase Date” means a new Purchase Date if the Administrator shortens any Offering Period then in progress.
(t) “Offering” means an offer under the Plan of an option that may be exercised during an Offering Period.
(u) “Offering Date” means the first Trading Day of each Offering Period.
(v) “Offering Periods” means the period of time during which offers to purchase Common Stock are outstanding under the Plan. The Committee shall determine the length of each Offering Period, which need not be uniform; provided that no Offering Period shall exceed twenty-seven (27) months in length. No voluntary payroll deductions shall be solicited until after the effective date of a registration statement on FormS-8 filed under the Securities Act of 1933, as amended, covering the shares to be issued under the Plan.
(w) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(x) “Participant” means an Eligible Employee that participates in the Plan.
(y) “Plan” means this Valvoline Inc. Employee Stock Purchase Plan.and Consolidated Subsidiaries
RECONCILIATION OFNON-GAAP DATA - ADJUSTED EBITDA
(In millions - Unaudited)
Year ended | ||||||||
Adjusted EBITDA - Valvoline
| 2019
| 2018
| ||||||
Net income | $ | 208 |
| $ | 166 |
| ||
Add: | ||||||||
Income tax expense |
| 57 |
|
| 166 |
| ||
Net interest and other financing expenses |
| 73 |
|
| 63 |
| ||
Depreciation and amortization |
| 61 |
|
| 54 |
| ||
EBITDA |
| 399 |
|
| 449 |
| ||
Key items: | ||||||||
Net pension and other postretirement plan expense |
| 60 |
|
| — |
| ||
Net legacy and separation-related expenses |
| 3 |
|
| 14 |
| ||
Restructuring and related expenses |
| 14 |
|
| — |
| ||
Business interruption expenses |
| 6 |
|
| — |
| ||
Acquisition and divestiture-related (gains) losses |
| (4 | ) |
| 3 |
| ||
Adjusted EBITDA | $ | 478 |
| $ | 466 |
| ||
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OFNON-GAAP DATA - FREE CASH FLOW
(In millions - Unaudited)
Free cash flow(a) | Year ended 2019 | ||||
Total cash flows provided by operating activities | $325 | ||||
Adjustments: | |||||
Additions to property, plant and equipment | (108) | ||||
Free cash flow | $217 | ||||
| (a) | Free cash flow is defined as cash flows from operating activities less capital expenditures and certain other adjustments as applicable. |
| A-2 | |
PROXY TABULATOR P.O. BOX 9112 FARMINGDALE, NY 11735 |
Telephone and Internet access is available 24 hours a day, 7 days a week. VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on January 29, 2020 (Vote by 6:00 a.m. Eastern Time on January 28, 2020 for participants in the Valvoline 401(k) Plan). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on January 29, 2020 (Vote by 6:00 a.m. Eastern Time on January 28, 2020 for participants in the Valvoline 401(k) Plan). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
(z) “Purchase Date” means the last Trading Day of the Offering Period.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
(aa) “Purchase Price” means the Designated Percent of the Fair Market Value of a share of Common Stock on the Offering Date or on the Purchase Date, whichever is lower. Unless otherwise determined by the Administrator, the Designated Percent for purposes of the foregoing sentence is eighty-five percent (85%). The Administrator may change the Designated Percent for any Offering Period but in no event shall the Designated Percent be less than eighty-five percent (85%).E86700-P30748 KEEP THIS PORTION FOR YOUR RECORDS
(bb) “Securities Act” means the Securities Act of 1933, as amended from time to time.— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
(cc) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.DETACH AND RETURN THIS PORTION ONLY
(dd) “Trading Day” means a day on which the New York Stock Exchange is open for trading.THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
(ee) “U.S. Treasury Regulations” means the Treasury regulations of the Code. Reference to a specific Treasury Regulation or Section of the Code shall include such Treasury Regulation or Section, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
3. Eligibility.
(a) Offering Periods. Any Eligible Employee on a given Offering Date will be eligible to participate in the Plan, subject to the requirements of Section 5.
(b) Limitations. Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time, as determined in accordance with Section 423 of the Code and the regulations thereunder.
4. Offering Periods. The Administrator will have the power to change the duration of Offering Periods (including the commencement dates thereof) without stockholder approval. Any such change shall be announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation. An Eligible Employee may participate in the Plan by (i) submitting to the Company’s stock administration office (or its designee), on or before a date determined by the Administrator prior to an applicable Offering Date, a properly completed subscription agreement authorizing Contributions in the form provided by the Administrator for such purpose, or (ii) following an electronic or other enrollment procedure determined by the Administrator.
6. Contributions.
(a) At the time a Participant enrolls in the Plan pursuant to Section 5, he or she will elect to have Contributions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period. A Participant’s subscription agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
| VALVOLINE INC. | ||||||||||||||||||||||||||||||||
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1. Election of 9 Directors to serve until the following annual meeting of Valvoline’s shareholders and until their successors have been duly elected and qualified, as set forth in the Proxy Statement.
(b) Payroll deductions for a Participant will commence on the first pay day following the Offering Date and will end on the last pay day prior to the Purchase Date of such Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 10 hereof.
(c) All Contributions made for a Participant will be credited to his or her account under the Plan and Contributions will be made in whole percentages only.
(d) A Participant may discontinue his or her participation in the Plan as provided in Section 10. A Participant may decrease (but not increase) the rate of his or her Contributions during an Offering Period by delivery of a subscription agreement to the Administrator or its designee; provided, however, that a Participant may make such a change only once per Offering Period. The change will become effective as soon as administratively practicable after receipt.
(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b), a Participant’s Contributions may be decreased to zero percent (0%) at any time during an Offering Period. Subject to Section 423(b)(8) of the Code, Contributions will recommence at the rate originally elected by the Participant effective as of the beginning of the first Offering Period scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.
(f) At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of (or any other time that a taxable event related to the Plan occurs), the Participant must make adequate provision for the Company’s or Employer’s federal, state, local or any other tax liability, if any, which arise upon the exercise of the option or the disposition of the Common Stock (or any other time that a taxable event related to the Plan occurs). At any time, the Company or the Employer may, but will not be obligated to, withhold from the Participant’s compensation the amount necessary for the Company or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Employer any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee. In addition, the Company or the Employer may, but will not be obligated to, withhold from the proceeds of the sale of Common Stock or any other method of withholding the Company or the Employer deems appropriate to the extent permitted by U.S. TreasuryRegulation Section 1.423-2(f).
7. Grant of Option. On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period will be granted an option to purchase on each Purchase Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such Eligible Employee’s Contributions accumulated during such Offering Period prior to such Purchase Date and retained in the Eligible Employee’s account as of the Purchase Date by the applicable Purchase Price; provided that in no event will an Eligible Employee be permitted to purchase during each Offering Period more than the Maximum Share Amount and provided further that such purchase will be subject to the limitations set forth in Sections 3(b) and 13. The Eligible Employee may accept the grant of such option by electing to participate in the Plan in accordance with the requirements of Section 5. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that an Eligible Employee may purchase during each Offering Period. Exercise of the option will occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10. The option will expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a Participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Purchase Date, and the maximum number of full shares subject to the option will be purchased for such Participant at the applicable Purchase Price with the accumulated Contributions from his or her account; provided that in no event will an Eligible Employee be permitted to purchase during each Offering Period more than the Maximum Share Amount and provided further that such purchase will be subject to the limitations set forth in Sections 3(b) and 13. No fractional shares of Common Stock will be purchased. Any Contributions accumulated in a Participant’s account which are not sufficient to
Nominees:
For
Against
Abstain
For
Against
Abstain
1a. Gerald W. Evans, Jr.
1b. Richard J. Freeland
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☐
☐
☐
☐
1c. Stephen F. Kirk
1d. Carol H. Kruse
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☐
☐
☐
☐
☐
1e. Stephen E. Macadam
1f. Vada O. Manager
☐
☐
☐
☐
☐
☐
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
1g. Samuel J. Mitchell, Jr.
1h. Charles M. Sonsteby
☐
☐
☐
☐
☐
☐
1i. Mary J. Twinem
☐
☐
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| | INSTRUCTIONS: Please sign exactly as your name appears on this proxy. If shares are held jointly, each shareholder should sign. When signing as an attorney, executor, administrator, or other fiduciary or on behalf of a corporation, bank, trust company, or other similar entity, your title or capacity should be shown. | |||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||||||||
purchase a full share will be refunded to
Important Notice Regarding the Participant, without interest. During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her.
(b) In the event that the numberAvailability of shares of Common Stock to be purchased by all Participants in any Offering Period exceeds the number of shares of Common Stock then available for issuance under the Plan, (i) the Company shall make a pro rata allocation of the remaining shares of Common Stock in as uniform a manner as shall be practicable and as the Committee shall, in its sole discretion, determine to be equitable and (ii) all funds not used to purchase shares of Common Stock on the Purchase Date shall be returned, without interest to the Participants.
9. Delivery; Holding Period.
(a) As soon as reasonably practicable after each Purchase Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each Participant of the shares purchased upon exercise of his or her option in a form determined by the Administrator (in its sole discretion) and pursuant to rules established by the Administrator. The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated methods of share transfer. The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares. No Participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the Participant as provided in this Section 9.
(b) Unless otherwise determined by the Administrator, Participants are required to hold shares of Common Stock acquired under the Plan for theone-year period after the Purchase Date (the “Holding Period”). During the Holding Period, a Participant may not sell or transfer shares of Common Stock acquired under the Plan.
10. Withdrawal.
(a) A Participant may withdraw all but not less than all the Contributions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by (i) submitting to the Company’s stock administration office (or its designee) a written notice of withdrawal in the form determined by the Administrator for such purpose (which may be similar to the form attached hereto as Exhibit B), or (ii) following an electronic or other withdrawal procedure determined by the Administrator. All of the Participant’s Contributions credited to his or her account will be paid to such Participant promptly after receipt of notice of withdrawal and such Participant’s optionProxy Materials for the Offering Period will be automatically terminated,Annual Meeting:
The Notice and no further Contributions for the purchase of shares will be made for such Offering Period. If a Participant withdraws from an Offering Period, Contributions will not resumeProxy Statement and Annual Report on Form 10-K are available at the beginning of the succeeding Offering Period, unless the Participantre-enrolls in the Plan in accordance with the provisions of Section 5.
(b) A Participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.
11. Termination of Employment. Upon a Participant’s ceasing to be an Eligible Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to such Participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such Participant’s option will be automatically terminated. Unless determined otherwise by the Administrator in a manner that is permitted by, and compliant with, Section 423 of the Code, a Participant whose employment transfers between entities through a termination with an immediate rehire (with no break in service) by the Company or a Designated Company shall not be treated as terminated under the Plan.www.proxyvote.com.
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E86701-P30748
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12. Interest. No interest will accrue on the Contributions of a Participant in the Plan.
13. Stock. Subject to adjustment as provided in Section 19 hereof, the maximum number of shares of Common Stock that will be made available for sale under the Plan will be 2,000,000 shares of Common Stock.
14. Administration. Unless otherwise designated by the Board, the Committee shall serve as the Administrator. The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to designate separate Offerings under the Plan, to designate Subsidiaries as participating in the Plan, to determine eligibility, to adjudicate all disputed claims filed under the Plan and to establish such procedures that it deems necessary for the administration of the Plan. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of Contributions, making of Contributions to the Plan, establishment of bank or trust accounts to hold Contributions, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates that vary with applicable local requirements. Every finding, decision and determination made by the Administrator will, to the full extent permitted by law, be final and binding upon all parties. With respect to employees of the Company or any entity that, directly or indirectly, is controlled by the Company, and any entity in which the Company has a significant equity interest, in either case as determined by the Committee, who reside or work outside the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan with respect to such employees in order to conform such terms with the provisions of local law, and the Committee may, where appropriate, establish one or more plans orsub-plans to reflect such amended or varied provisions.
15. Designation of Beneficiary.
(a) If permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any shares of Common Stock and cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to an Purchase Date on which the option is exercised but prior to delivery to such Participant of such shares and cash. In addition, if permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the option. If a Participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the Participant at any time by notice in a form determined by the Administrator. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
(c) All beneficiary designations will be in such form and manner as the Administrator may designate from time to time.
16. Transferability. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such Contributions. Until shares of Common Stock are issued, Participants will only have the rights of an unsecured creditor with respect to the Plan.
PROXY VALVOLINE INC. | ||||||||||||||||
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JANUARY 30, 2020 | ||||||||||||||||
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18. Reports. Individual accounts will be maintained for each Participant in the Plan. Statements of account will be given to participating Eligible Employees at least annually, which statements will set forth the amounts of Contributions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.
19. Adjustments; Dissolution or Liquidation; Corporate Transactions.
(a) Adjustments. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company’s capitalization, or other distribution with respect to holders of the Company’s Common Stock other than normal cash dividends, an automatic adjustment shall be made in the number and kind of shares as to which outstanding options then unexercised shall be exercisable, in the available shares set forth in Section 13, and in the Purchase Period limit under Section 7, so that the proportionate interest of the Participants shall be maintained as before the occurrence of such event; provided, however, that in no event shall any adjustment be made that would cause any option to fail to qualify as an option pursuant to an employee stock purchase plan within the meaning of Section 423 of the Code.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a New Purchase Date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Purchase Date will be before the date of the Company’s proposed dissolution or liquidation. The Administrator will notify each Participant in writing or electronically, prior to the New Purchase Date, that the Purchase Date for the Participant’s option has been changed to the New Purchase Date and that the Participant’s option will be exercised automatically on the New Purchase Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.
(c) Certain Corporate Transactions. In the event of a reorganization, merger, or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation (or survives as a direct or indirect subsidiary of such other constituent corporation or its parent), or upon a sale of substantially all of the property or stock of the Company to another corporation, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period with respect to which such option relates will be shortened by setting a New Purchase Date on which such Offering Period shall end. The New Purchase Date will occur before the date of the Company’s proposed merger or Change in Control. The Administrator will notify each Participant in writing or electronically prior to the New Purchase Date, that the Purchase Date for the Participant’s option has been changed to the New Purchase Date and that the Participant’s option will be exercised automatically on the New Purchase Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Administrator, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Administrator, in its discretion, may elect to terminate the outstanding Offering Period either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Administrator in its discretion), or may elect to permit the Offering Period to expire in accordance with its terms (and subject to any adjustment pursuant to Section 19). If the Offering Period is terminated prior to expiration, all amounts then credited to Participants’ accounts that have not been used to purchase shares of Common Stock will be returned to the Participants (without interest thereon) as soon as administratively practicable.
(b) Without Participant consent and without limiting Section 20(a), the Administrator will be entitled to change the Offering Periods, designate separate Offerings, limit the frequency and/or number of changes in the amount withheld during an Offering Period, permit Contributions in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed Contribution
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elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with Contribution amounts, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable that are consistent with the Plan.
(c) Without limiting the foregoing, in the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to:
The undersigned hereby appoints Samuel J. Mitchell, Jr. and Julie M. O’Daniel, and each of them as proxies for the undersigned, with full power of substitution and power to act alone, to act and to vote all shares of Valvoline Inc. Common Stock that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on January 30, 2020, and at any adjournment or postponement thereof.
If you do not provide voting instructions, your proxy will be voted FOR each of the |
proposal 1 and FOR proposals 2 and 3.
Such modifications or amendments will not require stockholder approval or the consent of any Plan Participants.
21. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan will be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares of Common Stock will not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
23. Code Section 409A. The Plan is exempt from the application of Code Section 409A and any ambiguities herein will be interpreted to so be exempt from Code Section 409A. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Administrator determines that an option granted under the Plan may be subject to Code Section 409A or that any provision in the Plan would cause an option under the Plan to be subject to Code Section 409A, the Administrator may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Administrator determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Code Section 409A, but only to the extent any such amendments or action by the Administrator would not violate Code Section 409A. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option to purchase Common Stock under the Plan that is intended to be exempt from or compliant with Code Section 409A is not so exempt or compliant or for any action taken by the Administrator with respect thereto. The Company makes no representation that the option to purchase Common Stock under the Plan is compliant with Code Section 409A.
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24. Term of Plan. The Plan will be effective as of the Effective Date and will continue in effect through the tenth (10th) anniversary thereof, unless sooner terminated under Section 20.
25. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
26. Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of Kentucky (except itschoice-of-law provisions).
27. No Right to Employment. Participation in the Plan by a Participant shall not be construed as giving a Participant the right to be retained as an employee of the Company or a Subsidiary. Furthermore, the Company or a Subsidiary may dismiss a Participant from employment at any time, free from any liability or any claim under the Plan.
28. Severability. If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been included.
29. Compliance with Applicable Laws. The terms of this Plan are intended to comply with all Applicable Laws and will be construed accordingly.
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The foregoing is hereby acknowledged as being the Valvoline Inc. Employee Stock Purchase Plan as adopted and approved by the Board on November 14, 2017 and by the Company’s stockholders on January __, 2018.
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EXHIBIT A
VALVOLINE INC.
EMPLOYEE STOCK PURCHASE PLAN
DESIGNATED COMPANIES
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EXHIBIT B
VALVOLINE INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
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Capitalized terms used but not otherwise defined herein shall have the meaning given to
such terms in the Valvoline Inc. Employee Stock Purchase Plan.
1. I, , hereby elect to participate in the Valvoline Inc. Employee Stock Purchase Plan (the “Plan”) and subscribe to purchase shares of Common Stock in accordance with this Employee Stock Purchase Plan Subscription Agreement (the “Subscription Agreement”) and the Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of % of my Compensation on each payday (from 0 to 15%) during the Offering Period in accordance with the Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions will be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option and purchase Common Stock under the Plan.
4. I have received a copy of the complete Plan and its accompanying prospectus. I understand that my participation in the Plan is in all respects subject to the terms of the Plan. The Company reserves the right to modify the Plan and to impose other requirements on my participation in the Plan, on the option and on any shares of Common Stock purchased under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. I agree to be bound by such modifications regardless of whether notice is given to me of such event, subject, in any case, to my right to withdrawal from participation in the Plan. I further agree to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
5. I hereby agree to be bound by the terms of the Plan and this Subscription Agreement. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan.
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I ACKNOWLEDGE AND UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT INCLUDING ITS APPENDICES AND MY PARTICIPATION IN THE PLAN WILL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS AFFIRMATIVELY TERMINATED BY ME.
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In order to be counted in the final tabulation, your telephone or Internet vote must be received by 6:00 a.m. Eastern Time on January 28, 2020 if you are voting shares attributable to your investment in the Valvoline Common Stock Fund as a participant in the Valvoline 401(k) Plan or by 11:59 p.m. Eastern Time on January 29, 2020 if you are a registered shareholder. Please sign, date and return your proxy promptly in the enclosed envelope. (Continued and to be signed on reverse side) | ||
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C/O CORPORATE ELECTION SERVICES P.O. BOX 1150 PITTSBURGH PA 15230 VOTE BY TELEPHONE Have your proxy card available when you call Toll-Free 1-888-693-8683 using a touch-tone phone and follow the simple instructions to record your vote. VOTE BY INTERNET Have your proxy card available when you access the website www.cesvote.com and follow the simple instructions to record your vote. VOTE BY MAIL Please mark, sign and date your proxy card and return it in the postage-paid envelope provided or return it to: Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230. Vote by Telephone Call Toll-Free using a touch-tone telephone: 1-888-693-8683 Vote by Internet Access the Website and cast your vote: www.cesvote.com Vote by Mail Return your proxy in the postage-paid envelope provided Telephone and Internet access is available 24 hours a day, 7 days a week. In order to be counted in the final tabulation, your telephone or Internet vote must be received by 6:00 a.m. Eastern Time on January 29, 2018 if you are voting shares attributable to your investment in the Valvoline Common Stock Funds as a participant in an employee savings plan sponsored by Valvoline Inc. or Ashland Global Holdings Inc. or by 6:00 a.m. Eastern Time on January 31, 2018 if you are a registered shareholder. Proxy card must be signed and dated below. Please fold and detach card at perforation before mailing. VALVOLINE INC. PROXY This proxy is solicited on behalf of the Board of Directors for the Annual Meeting of Shareholders on January 31, 2018. The undersigned hereby appoints Samuel J. Mitchell, Jr. and Julie M. O’Daniel, and each of them as proxies for the undersigned, with full power of substitution and power to act alone, to act and to vote all the shares of Valvoline Inc. Common Stock that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on January 31, 2018, and at any adjournment or postponement thereof. Date: Shareholder Sign Here Shareholder (Joint Owner) Sign Here INSTRUCTIONS: Please sign exactly as your name appears on this proxy. If shares are held jointly, each shareholder should sign. When signing as an attorney, executor, administrator, or other fiduciary or on behalf of a corporation, bank, trust company, or other similar entity, your title or capacity should be shown. Please sign, date, and return your proxy promptly in the enclosed envelope.
Proxy card must be signed and dated on the reverse side. Please fold and detach card at perforation before mailing. VALVOLINE INC. PROXY If you do not provide voting instructions, your proxy will be voted FOR each of the Director nominees in proposal 1 and FOR proposals 2, 3 and 4. The Board of Directors recommends a vote FOR each of the Director nominees in proposal 1 and FOR proposals 2, 3 and 4. 1. Election of 7 Directors to serve until the following annual meeting of Valvoline’s shareholders and until their successors have been duly elected and qualified, as set forth in the Proxy Statement. Nominees: FOR AGAINST ABSTAIN 1. Richard J. Freeland 2. Stephen F. Kirk 3. Stephen E. Macadam 4. Vada O. Manager 5. Samuel J. Mitchell, Jr. 6. Charles M. Sonsteby 7. Mary J. Twinem 2. Ratification of the appointment of Ernst & Young LLP as Valvoline’s independent registered public accounting firm for fiscal 2018. 3. A non-binding advisory resolution approving Valvoline’s executive compensation, as set forth in the Proxy Statement. 4. Approval of the Valvoline Inc. Employee Stock Purchase Plan. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting. (Continued and to be signed on the reverse side)
