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Letter to |
December 14, 2017Table of Contents
Chris Villavarayan Chief Executive Officer and President December 17, 2021 |
Dear Shareholder:Fellow Meritor Shareholders,
You are cordially invitedFiscal year 2021 was pivotal for Meritor as we delivered strong financial performance and expanded our position in commercial vehicle electrification as customers aggressively evaluate electric technology solutions to attendprepare for the 2018 annual meeting of shareholders of Meritor, Inc.future. We were able to achieve good financial results this year despite the ongoing pandemic and resulting global supply chain crisis that led to greatly increased steel and freight costs and a challenging labor environment in the United States.
The meeting will be held at the Westin Detroit Metropolitan Airport, 2501 World Gateway Place, in Detroit, Michigan, on Wednesday, January 24, 2018, at 1:30 p.m. (Eastern Standard Time). At the meeting theresame time, strong demand and increased truck production occurred in all our markets throughout the year. Class 8 truck production in North America increased almost 20 percent, production in India more than doubled and South America was up 50 percent. Schedule volatility and labor challenges impacted many of our plants, but we maintained a high level of safety, quality and delivery. In fact, 50 percent of our facilities had zero recordable incidents for the year, I commend these teams for the work they did to maintain a safe working culture in a challenging environment.
Meritor’s heritage dates back over a century to 1909. At that time, no one could have envisioned that the drive axle of a commercial vehicle would become “prime real estate" as the need and desire for electric commercial vehicles became a reality. Not only is Meritor integrating an electric motor, multi-speed transmission, and powertrain controls into the drive axle, we are doing it in a way that provides more value to our customers compared to alternative electric drive systems in the market today. We believe that each of these systems will be a current reportresult in three to four times more content for us than our traditional drive axle. Based on forecasted adoption rates, we expect to achieve fifty percent of our growth – approximately $250 million – in our M2025 timeframe from electrification alone, which would put us on the activitiespath to $1.5 billion in electrification revenue in 2030.
Every quarter of fiscal year 2021, we announced new electrification agreements that expand our potential customer base. And we announced three more wins at our Strategy Day event on December 7. Each of these collaboration opportunities is a validation of our technology solution as commercial vehicle manufacturers finalize their market strategies and architecture choices.
Meritor’s Blue Horizon brand represents our revolution in commercial vehicle transportation. The product pipeline we are bringing to market is transforming the Company followed by discussionvalue we deliver to customers. Thanks to the forward-thinking of global customers, government officials and actionenvironmental agencies, we will make a difference that will impact every generation to come. There is no greater legacy we can leave our children and theirs. I take great pride in my new role as Meritor’s CEO and President. This is an exciting and revolutionary time for the industry, and I believe the Meritor team possesses the talent, expertise and knowledge that comes with a company that has a heritage as strong and solid as ours.
In fiscal year 2022, we will remain focused on delivering superior financial performance, growing the matters describedbusiness in the Proxy Statement. Shareholders will have an opportunity to comment on or to inquire about the affairs of the Companyour traditional and emerging markets, and maintaining a workplace that may be of interest to shareholders generally.fosters creativity and innovation for our valued employees.
If you plan to attend the meeting, please indicate your intention to attend when voting by Internet or telephone or mark the box on your proxy card.
We hope that as many shareholders as can conveniently attend will do so.
Sincerely, yours,
Jeffrey A. Craig
Chris VillavarayanChief Executive Officer and President
MERITOR, INC.
2135 West Maple Road
Troy, Michigan 48084-7186
____________________
Notice of 20182022 Annual Meeting of Shareholders____________________
To the Shareholders of MERITOR, INC.:
Notice is Hereby Giventhat the 20182022 Annual Meeting of Shareholders of Meritor, Inc. (the “Company”) will be held at the Westin Detroit Metropolitan Airport, 2501 World Gateway Place, in Detroit, Michigan 48242, on Wednesday,Thursday, January 24, 2018,27, 2022, at 1:9:30 p.m.a.m. (Eastern Standard Time) for the following purposes:
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Only shareholders of record at the close of business on November 16, 201719, 2021 will be entitled to notice of, and to vote at, the meeting.
By order of the Board of Directors, | |
Interim Corporate Secretary | |
December |
____________________Table of Contents
PROXY STATEMENT____________________Table of Contents
PROXY STATEMENT
The 20182022 Annual Meeting of Shareholders of Meritor, Inc., referred to as the Company (the “Company” or Meritor,“Meritor”) will be held on January 24, 2018,27, 2022, for the purposes set forth in the accompanying Notice of 20182022 Annual Meeting of Shareholders. The Board of Directors of Meritor is soliciting proxies to be used at the Annual Meeting, including any adjournment thereof, and is furnishing this proxy statement in connection with its solicitation.
As permitted by the rules of the Securities and Exchange Commission referred to as the SEC,(the “SEC”), Meritor is making this proxy statement, the proxy card and the annual report to shareholders, collectively referred to herein as the proxy materials, available to you electronically via the Internet.internet. On December 14, 2017,17, 2021, we mailed to our shareholders a notice referred to as the Notice,(the “Notice”) containing instructions on how to access and review the proxy materials and how to vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request one. If you would like a printed copy of the proxy materials, follow the instructions for requesting them that are included in the Notice.
Shareholders of record may vote in any of three ways: (1) via the Internet;internet; (2) by calling a toll-free telephone number; or (3) if you received your proxy materials by mail, by executing and returning a proxy card. Instructions for Internetinternet voting are included in the Notice, and instructions for telephone and Internetinternet voting are included on the proxy card. If you vote by telephone or Internet,internet, it is not necessary to return a proxy card. If you properly give a proxy (including a written proxy or a proxy via telephone or Internet)internet), your shares will be voted as you specify in the proxy. If no specification is made, the shares will be voted in accordance with the recommendations of the Board of Directors. You may revoke your proxy prior to its exercise by delivering written notice of revocation to the Corporate Secretary of the Company, by giving a valid, later-dated proxy, by voting via telephone or Internetinternet at a later date than the date of the proxy or by attending the meeting and voting in person.
If your shares are held in “street name” by a bank, broker or other nominee holder on your behalf, you must follow the directions that you receive from your bank, broker or other nominee holder in order to direct the vote or change the vote of your shares. If you wish to vote in person at the meeting, you must obtain a legal proxy from the nominee holding your Meritor shares.
Our policy is to keep proxy cards, ballots and voting tabulations that identify individual shareholders confidential. However, exceptions to this policy may be necessary in some instances to comply with legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting. Inspectors of election and any employees associated with processing proxy cards or ballots and tabulating the vote must acknowledge their responsibility to comply with this policy of confidentiality.
The Company’s fiscal year ends on the Sunday nearest September 30. For example, fiscal year 20172021 ended on October 1, 2017,3, 2021, fiscal year 2016 ended on October 2, 2016 and fiscal year 20152020 ended on September 27, 2015.2020 and fiscal year 2019 ended on September 29, 2019. For ease of presentation, September 30 is utilized consistently throughout this proxy statement to represent the fiscal year end.
Only shareholders of record at the close of business on November 16, 201719, 2021 are entitled to receive notice of, and to vote at, the meeting. On November 16, 2017,19, 2021, we had outstanding 88,583,47370,076,049 shares of our Common Stock, par value $1 per share referred to as (“Common Stock.Stock”). Each holder of Common Stock is entitled to one vote for each share held.
As of November 16, 2017,19, 2021, T. Rowe Price Trust Company, as directed trustee under the Meritor savings plans for its participating employees, owned the following shares of Common Stock:
Number of | Percent of Outstanding | ||||||||||||
Name and Address | Shares | Common Stock | Number of Shares | Percent of Outstanding Common Stock | |||||||||
T. Rowe Price Trust Company | 2,705,884 | 3.05 | % | 1,001,047 | �� | 1.4% | |||||||
4515 Painters Mill Road | |||||||||||||
Owings Mills, MD 21117 |
If you are a participant and hold shares of Common Stock in Meritor’s savings plans, your Internetinternet or telephone vote or your proxy card will also serve as a voting instruction for the trustee with respect to shares held in your account. Shares held on account of participants in these plans will be voted by the trustee in accordance with instructions from the participants (either in writing or by means of telephone or Internetinternet voting procedures). Where no instructions are received, shares will be voted by the trustee in the same manner and proportion as shares for which instructions are received.
In addition, the following entities reported beneficial ownership of more than 5% of the outstanding shares of Common Stock, calculated as of November 16, 2017.19, 2021. Each entity has sole voting and investment power with respect to the shares of Common Stock listed unless otherwise indicated. This information is based on Schedules 13G that were filed with the SEC, throughout fiscal 2021, unless otherwise known to us.
Number | Percent of Outstanding | ||||||||
Name and Address | of Shares | Common Stock | |||||||
The Vanguard Group(1) | 10,405,822 | 11.75 | % | ||||||
100 Vanguard Blvd. | |||||||||
Malvern, PA 19355 | |||||||||
Glenview Capital Management, LLC(2) | 8,126,817 | 9.17 | % | ||||||
767 Fifth Avenue, 44th Floor | |||||||||
New York, NY 10153 | |||||||||
BlackRock, Inc.(3) | 5,687,074 | 6.42 | % | ||||||
55 East 52nd Street | |||||||||
New York, NY 10055 | |||||||||
LSV Asset Management(4) | 4,767,731 | 5.38 | % | ||||||
155 N. Wacker Drive, Suite 4600 | |||||||||
Chicago, IL 60606 |
BlackRock, Inc. filed PROPOSAL 1 - ELECTION OF DIRECTORS Meritor’s Restated Articles of Incorporation The Our The directors in Class Proxies will be voted at the meeting (unless authority to do so is withheld) for the election as directors of the nominees specified in No director of Meritor was selected pursuant to any arrangement or understanding between him or her and any person other than Meritor. There are no family relationships, as defined in Item 401 of Regulation S-K INFORMATION AS TO NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS Following are the biographies for our director nominees and our directors who will continue to serve after the Former Executive Mr. Evans, a director since May 2005, previously served Meritor as Executive Chairman of the Board from April 2015 to April 2016; Chairman of the Board and Chief Executive Officer from August 2013 to March 2015 (also serving as President from August 2013 to June 2014); and Executive Chairman of the Board and Interim Chief Executive Officer and President from May 2013 until July 2013. Prior to joining Board Qualifications:Mr. Evans’ qualifications include extensive operational and manufacturing experience from his years as a chief operating officer and senior executive of large public companies, including some in the automotive and transportation markets in which we operate. His leadership roles Name and Address Number
of Shares Percent of
Outstanding
Common StockBlackRock, Inc.(1)
55 East 52nd Street
New York, NY 1005510,951,327 15.6% The Vanguard Group(2)
100 Vanguard Blvd.
Malvern, PA 193558,257,807 11.7% Wellington Entities(3)
c/o Wellington Management Company LLP
280 Congress Street
Boston, MA 022106,193,882 8.8% T. Rowe Price Associates, Inc.(4)
100 E. Pratt Street
Baltimore, MD 212025,582,704 7.9% (1) The Vanguard Group filed a Schedule 13G, as amended, reporting that it may be deemed beneficial owner of shares as a result of two of its subsidiaries acting as investment manager of collective trust accounts and investment offerings that own shares of Common Stock. The Vanguard Group has the sole voting power with respect to 100,638 shares, shared voting power with respect 13,789 shares, sole investment power with respect to 10,296,450 shares and shared investment power with respect to 109,372 shares.(2)Glenview Capital Management, LLC and Lawrence M. Robbins filed a Schedule 13G, as amended, reporting that they may be deemed beneficial owners of shares of Common Stock held by various investment funds for which Glenview Capital Management, LLC serves as investment manager. Mr. Robbins is the Chief Executive Officer of Glenview Capital Management, LLC. Glenview Capital Management, LLC and Mr. Robbins have shared voting and investment power with respect to 8,126,817 shares.(3)aan amendment to its Schedule 13G as amended,on February 5, 2021 as a parent holding company of thirteen subsidiaries, each of which acquired beneficial ownership of Common Stock that, in the aggregate, exceeds 5% of the total outstanding Common Stock. NoneOne of the persons deemed a beneficial ownersowner of these shares individually, exceedexceeds the 5% threshold. BlackRock, Inc. has sole voting power with respect to 5,484,55110,861,399 shares.(2) The Vanguard Group filed an amendment to its Schedule 13G on February 10, 2021 as a parent holding company of eight subsidiaries, each of which acquired beneficial ownership of Common Stock that, in the aggregate, exceeds 5% of the total outstanding Common Stock. The Vanguard Group has sole voting power with respect to 0 shares, shared voting power with respect to 141,265 shares, sole investment power with respect to 8,058,446 shares and shared investment power with respect to 199,361 shares. (3) Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP filed a joint Schedule 13G on February 4, 2021 with respect to Common Stock owned of record by clients of one or more investment advisers directly or indirectly owned by Wellington Management Group LLP. Each of Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP has sole voting power with respect to 0 shares, shared voting power with respect to 5,190,601 shares, sole investment power with respect to 0 shares, and shared investment power with respect to 6,193,882 shares. Wellington Management Company LLP has sole voting power with respect to 0 shares, shared voting power with respect to 4,876,527 shares, sole investment power with respect to 0 shares, and shared investment power with respect to 5,656,793 shares. (4) LSV Asset ManagementT. Rowe Price Associates, Inc. filed a Schedule 13G on February 16, 2021 reporting ownership of shares of Common Stock by investment funds and/or managed accounts for which it serves as investment advisor. LSV Asset Managementadviser. T. Rowe Price Associates, Inc. has sole voting power with respect to 2,045,3451,300,415 shares.providepreviously provided that the Board of Directors consistsof the Company (the “Board”) would consist of three classes, of directors with overlapping three-year terms, and that the three classes should beeach class to consist as nearly equalas possible of one-third of the directors and to serve for a term to expire at the third succeeding annual meeting of shareholders after their election. On January 23, 2020, our shareholders approved, and we filed, Restated Articles of Incorporation to eliminate the classified structure of our Board over a three-year period. Specifically, our Restated Articles of Incorporation provide that (1) the directors standing for election at our 2021 annual meeting would stand for election for one-year terms; (2) the directors standing for election at our 2022 annual meeting, which includes any director elected to our Board in number as possible. One class of2021 who was nominated for re-election, are standing for election for one-year terms; and (3) beginning in 2023, all directors is elected each year with terms extending to the Annual Meeting of Shareholders held three years later.will stand for election for one-year terms. Culminating in 2023, our Board will be fully declassified.Company’s Board of Directors currently consists of nineeleven members – four directors in Class I and three directors in Class III, with terms expiring at the 2018 Annual Meeting; three directors in Class I, with terms expiring at the Annual Meeting of Shareholders in 2019;2022, and threefour directors in Class II, with terms expiring at the Annual Meeting of Shareholders in 2020.2023. Jeffrey A. Craig, a Class II director and Executive Chairman of the Board, has notified the Company that he intends to retire effective December 31, 2021, at which time the number of directors will be automatically reduced to ten members – four directors in Class I; three directors in Class III; and three directors in Class II. Also effective upon Mr. Craig's retirement, William R. Newlin will become the independent Chairman of the Board.ThreeFour and three current directors are standing for re-election at the 20182022 Annual Meeting as Class I and Class III directors, respectively, for terms expiring at the Annual Meeting of Shareholders in 2021.2023.corporate governance guidelinesGuidelines on Corporate Governance provide that directors should offer not to stand for re-election if they are age 72 or over at the time of re-election or will reach age 72 during their new term. The members of the Corporate Governance and Nominating Committee then decide whether continued Board service is appropriate. Oneappropriate and in the best interests of the Company. Three of the current nominees standing for re-election at the 20182022 Annual Meeting, Ivor J. Evans, William R. Newlin and Lloyd G. Trotter, will be over age 72 at the time of re-election. In accordance with the Guidelines on Corporate Governance, Messrs. Evans, Newlin and Trotter offered not to stand for re-election at the 2022 Annual Meeting. After considering thetheir contributions and qualifications, of Mr. Trotter, the Corporate Governance and Nominating Committee determined that histheir continued service for the full term is appropriate.I and the directors in Class II (other than Mr. Craig) will continue to serve terms expiring at the Annual Meeting of Shareholders in 2019 and 2020, respectively.2023.Class III – Nominees for Director with Terms Expiring in 20212023, under the headingInformation as to Nominees for Director and Continuing Directorsbelow. If for any reason any of the nominees is not a candidate (which is not expected) when the election occurs, it is likely that either (1) proxies would be voted for the election of the other nominees and a substitute nominee or (2) the Board of Directors would reduce the number of directors.directors serving in Class I or Class III, as applicable.referred to as (“Regulation S-K,S-K”) of the rules and regulations under the Securities Exchange Act of 1934, as amended referred to as the Exchange Act,(the “Exchange Act”), between any director, executive officer or person nominated to become a director or executive officer of Meritor. No person who has served as a director or executive officer of Meritor at any time since October 1, 2016September 30, 2020 has any substantial interest, direct or indirect, in any matter to be acted on at the 20182022 Annual Meeting, other than election of directors to office.20182022 Annual Meeting, including information concerning the particular experience, qualifications, attributes orand skills that led the Corporate Governance and Nominating Committee and the Board to conclude that the nominee or director fulfills the Board’s membership criteria (discussed below underDirector Qualifications and Nominating Procedures). Except as provided below, during the last five years, no director has held any directorships required to be disclosed pursuant to the rules and regulations promulgated by the SEC. For a discussion of membership guidelines that outline the desired composition of the Board as a whole, seeDirector Qualifications and Nominating Proceduresbelow.CLASS III – NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 20212023JAN A. BERTSCHClass I NomineesSenior Vice President and Chief Financial Officer, Owens-Illinois, Inc. (Manufacturer of Glass Containers)Age 60Ms. Bertsch, a director since September 2016, is a member of the Audit Committee and the Corporate Governance and Nominating Committee. She has served as Senior Vice President and Chief Financial Officer of Owens-Illinois, Inc. since November 2015. From 2012 to November 2015, she served asIVOR J. EVANSVice President, Chief Financial Officer of Sigma-Aldrich Corporation. From 2009 to February 2012, she served in various capacities as Vice President and Treasurer and subsequently Vice President, Controller and Principal Accounting Officer of BorgWarner, Inc. From 2001 to 2009, she served in various capacities for Chrysler Group LLC, ultimately serving as Senior Vice President, Chief Information Officer and Treasurer of Chrysler LLC. Ms. Bertsch has been a director of BWX Technologies since 2015 (where she is the chair of the audit committee and a member of the governance committee) and its predecessor Babcock & Wilcox from 2013 to 2015 (where she served as a member of the audit and compensation committees) and also served as chairChairman of the Board, of Visitors for the Wayne State University School of Medicine from 2003 to September 2016.Board Qualifications: Ms. Bertsch has extensive financial acumen and expertise through her experience as Chief Financial Officer of a Fortune 500 company. She possesses the attributes to satisfy the Board’s basic membership criteria. She also possesses additional experience relevant to Board service, including leadership experience and expertise in the areas of manufacturing, accounting and finance, knowledge of generally accepted accounting principles, familiarity with the SEC’s disclosure rules and practices. Additionally, she contributes to the diversity of the Board.RODGER L. BOEHMRetired Senior Partner, McKinsey & Company, Inc. (Management Consultant)Age 58Mr. Boehm, a director as of December 2017, is a member of the Audit Committee.Until his retirement in September 2017, Mr. Boehm was a senior partner at McKinsey & Company, Inc. where he spent 31 years in a variety of roles with increasing responsibility. Mr. Boehm holds a Bachelor of Science degree in materials engineering from Purdue University and a Master of Business Administration degree from Harvard University.Board Qualifications: Mr. Boehm has extensive experience leading consulting engagements on long-term growth strategies and performance improvement combined with a strong engineering background, which provide useful insight into the strategic issues that global manufacturing companies like Meritor face. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the industrial products industry.LLOYD G. TROTTERManaging Partner, GenNx360 Capital Partners (Private Equity Firm)Age 72Mr. Trotter, a director since January 2015, is Chair of the Compensation and Management Development Committee and a member of the Corporate Governance and Nominating Committee. He is a founder of GenNx360 Capital Partners, where he has been Managing Partner since February 2008. He served General Electric as Vice Chairman, and as President and Chief Executive Officer of GE Industrial, from 2006 until his retirement in February 2008. He previously held various leadership positions with General Electric, including Executive Vice and
President Operations, from 2005 to 2006; President and Chief Executive Officer, GE Consumer and Industrial Systems, from 1998 to 2005; and President and Chief Executive Officer, Electrical Distribution and Control, from 1992 to 1998. Prior to that he held various positions in General Electric businesses from 1970, when he began his career with the company. Mr. Trotter is a director of Textron Inc. and chairs its compensation committee. He is a former director of Daimler AG and PepsiCo, Inc.Board Qualifications: Mr. Trotter has extensive knowledge and experience, through his leadership roles at General Electric, in a variety of fields that are important to the Company’s business, including business operations, finance, manufacturing, information technology, supply chain management and international business opportunities. He has experience with acquisitions and divestitures including from his current leadership in a private equity firm. He also has extensive corporate governance and executive compensation experience from serving on boards and committees of public companies, which further enhances his contributions and value to the Board of Directors and the Company. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise, international experience and knowledge of the industrial products industry. Additionally, he contributes to the diversity of the Board.Age 79The Board of Directors recommends that you vote “FOR” the election of these nominees, which is presented as item (1).CLASS I – CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2019IVOR J. EVANSFormer Executive Chairman of the Board, Chief Executive Officer and President of MeritorAge 75 Meritor’sthe Board, he served as Vice Chairman of Union Pacific Corporation (rail transportation) from January 2004 until his retirement in March 2005 and served as a member of the Union Pacific board of directors from 1999 to 2005. He had served as President and Chief Operating Officer of Union Pacific Railroad from 1998 until January 2004.From2004. From 1989 to 1998, he served in various executive positions at Emerson Electric Company (technology and engineering applications), including Senior Vice President, Industrial Components and Equipment. Prior to that, he was President of Blackstone Corp. (automotive components and systems) from 1985 to 1989 and, prior to that, spent 21 years serving in key operations roles for General Motors Corporation (automotive). He is also a former director of Textron Inc. He is a former director of, Cooper Industries, Roadrunner Transportation Systems, Inc. and Spirit AeroSystems and a former operating partner of HCI Equity Partners (formerly named Thayer Capital Partners).inat these companies have provided him with extensive capital allocation experience, which is instrumental in planning how best to use resources to develop Meritor’s business and maximize profitability. He also has considerable transactional and corporate finance experience from his time as an operating partner inof a private equity firm. Mr. Evans’ service as a director of other public companies also widens hisprovides broad perspective with respect to capital allocation, risk management, corporate governance, audit issues, strategy and other matters that confront public companies. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise and knowledge of the transportation and other manufacturing industries and Meritor’s business in particular.WILLIAM R. NEWLIN
Table of ContentsChairman, Newlin Investment Company, LLC (Equity Investment Firm)
WILLIAM R. NEWLIN Chairman Newlin | Mr. Newlin, a director since July 2003, has been the Board Qualifications:Mr. Newlin’s |
THOMAS L. PAJONAS Retired Executive | Mr. Pajonas, a director since September 2013, is Chair of the Corporate Governance and Nominating Committee and a member of the Audit Committee. He served as Executive Vice President and Chief Operating Officer of Flowserve Corp. from February 2014 until Board Qualifications:Mr. Pajonas has extensive global leadership and operational experience combined with a strong manufacturing and engineering background, which provide useful insight into the operational issues that engineering and manufacturing companies like Meritor face. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the industrial products industry, risk management and international background and experience. |
CLASS II – CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2020
RHONDA L. BROOKSPresident, R. Brooks Advisor (Business Consultant)
CHRIS VILLAVARAYAN Chief Executive Officer and |
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JEFFREY A. CRAIGChief Executive Officer and President of Meritor
Board |
WILLIAM J. LYONS
CLASS III NOMINEESRetired Chief Financial Officer, CONSOL Energy Inc. (Producer of Coal and Natural Gas) and CNX Gas Corporation (Producer of Natural Gas)
JAN A. BERTSCH Retired Chief Financial |
Board Qualifications: Ms. Bertsch has extensive financial acumen and expertise through her experience as Chief Financial Officer of Fortune 500 companies. She possesses the attributes to satisfy the Board’s basic membership criteria. She also possesses additional experience relevant to Board service, including leadership experience and expertise in the areas of manufacturing, accounting and finance, risk management, knowledge of generally accepted accounting principles and familiarity with the SEC’s disclosure rules and practices. Additionally, she contributes to the diversity of the Board. |
RODGER L. BOEHM Retired Senior Partner | Mr. Boehm, a director since December 2017, is a member of the Audit Committee and the Compensation and Management Development Committee. Until his retirement in September 2017, Mr. Board Qualifications: Mr. Boehm has |
LLOYD G. TROTTER Managing Partner | Mr. Trotter, a director since January 2015, is Chair of the Compensation and Management Development Committee and a member of the Corporate Governance and Nominating Committee. He is a founder of GenNx360 Capital Partners, where he has been Managing Partner since February 2008. He served General Electric (conglomerate) as Vice Chairman, and as President and Chief Executive Officer of GE Industrial, from 2006 until his retirement in February 2008. He previously held various leadership positions with General Electric, including Executive Vice President, Operations, from 2005 to 2006; President and Chief Executive Officer, GE Consumer and Industrial Systems, from 1998 to 2005; and President and Chief Executive Officer, Electrical Distribution and Control, from 1992 to 1998. Prior to that he held various positions in General Electric businesses from 1970, when he began his career with the company. Mr. Trotter is a former director of Daimler AG, PepsiCo, Inc. and Textron, Inc. Board Qualifications: Mr. Trotter has extensive knowledge and experience, through his leadership roles at General Electric, in a variety of fields that are important to Meritor’s business, including business operations, finance, manufacturing, information technology, supply chain management and international business opportunities. He has experience with acquisitions and divestitures, including from his current leadership of a private equity firm. He also has extensive corporate governance and executive compensation experience from serving on boards and committees of public companies, which further enhances his contributions and value to the Board and Meritor. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise, international experience and knowledge of the industrial products industry. Additionally, he contributes to the diversity of the Board. |
The Board recommends that you vote “FOR” the election of these nominees.
CLASS II – CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2023
STEVEN BERINGHAUSE Retired Executive | Mr. Beringhause, a director since December 2019, is a member of the Compensation and Management Development Committee. He served as Chief Technology Officer of Sensata Technologies Holding plc from September 2015 until January 2021 transitioning to retirement in May 2021. He previously served Sensata as Executive Vice President, Performance Sensing Auto from April 2015 to December 2017; Senior Vice President, Sensors from January 2013 to March 2015; Vice President, Sensors, Asia from May 2010 to December 2012; and Vice President, Sensors, Americas from April 2006 to April 2010. From 1988 to 2006, he served in various technical roles of increasing responsibility for Texas Instruments (semiconductor design and manufacturing). He is also a former director of Lithium Balance A/S (private manufacturer of battery management systems) and Uhnder (private digital radar manufacturer). Mr. Beringhause holds a Master of Science and a Bachelor of Science, both in mechanical engineering, from Massachusetts Institute of Technology. Board Qualifications: Mr. Beringhause has extensive experience in managing advanced technology for commercial applications, including megatrend applications primarily in the areas of electrification and autonomous vehicles, and leading business operations, which provides useful insight into the future technological and product development challenges facing Meritor and its industry. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the transportation industry. |
ELIZABETH A. Former Principal | Ms. Fessenden, a director since June 2021, is a member of the Compensation and Management Development Committee. She served as principal at American Capital, Ltd. (a Nasdaq listed private equity firm) from 2005 to 2007. Prior to that, she spent 28 years at Alcoa Corporation (aluminum manufacturer), where she held various leadership positions, including President, Flexible Packaging from May 2002 to April 2005 and President, Primary Metals Allied from July 2000 to April 2002. Ms. Fessenden has been a director of Board Qualifications: Ms. Fessenden has extensive global leadership and operational experience combined with a strong manufacturing and engineering background, which provide useful insight into the operational issues that engineering and manufacturing companies like Meritor face. She possesses the attributes to satisfy the Board’s basic membership criteria. She also possesses additional experience relevant to Board service, including knowledge of the industrial products industry and international background and experience. Additionally, she contributes to the diversity of the Board. |
FAZAL MERCHANT Retired Co-Chief Executive | Mr. Merchant, a director since October 2020, is a member of the Audit Committee. He served as Co-Chief Executive Officer of Tanium Inc. from June 2019 until his retirement in September 2020. He previously served Tanium as Chief Operating Officer and Chief Financial Officer from May 2017 to June 2019. From 2014 to 2016, he served as Chief Financial Officer Board |
BOARD DIVERSITY MATRIX
The following matrix provides information regarding the gender, race and ethnicity demographics of our Board.
Gender | ||||||||||||||||||||||
Female | ● | ● | ||||||||||||||||||||
Male | ● | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||
Race/Ethnicity | ||||||||||||||||||||||
Asian (excluding Indian/South Asian) | ||||||||||||||||||||||
Black/African American | ● | |||||||||||||||||||||
Caucasian/White | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||
Hispanic/Latin American | ||||||||||||||||||||||
Indian/South Asian | ● | ● | ||||||||||||||||||||
Middle-Eastern/North African | ||||||||||||||||||||||
Native American/Alaskan Native | ||||||||||||||||||||||
Native Hawaiian/Other Pacific Islander |
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors managesdirects or directsoversees the strategy and management of the business of Meritor. In fiscal year 2017,2021, the Board of Directors held five regularly scheduled meetings and threeone special telephonic meetings.meeting. Each current director attended at least 75% of the aggregate number of meetings of the Board (held during the period for which he or she was a director) and the standing and special committees on which he or she served in fiscal year 20172021 (during the periods that he or she served). Meritor encourages each director to attend the Annual Meeting of Shareholders. SevenAll of the then-serving directors attended the 20172021 Annual Meeting.
The Board of Directors has established independence standards for directors, which are set forth in the Company’s Guidelines on Corporate Governance and are identical to the standards prescribed in the corporate governance rules of the New York Stock Exchange.Exchange (the “NYSE”). The Board determined that Mses. Bertsch and Brooks,Fessenden, and Messrs. Beringhause, Boehm, Lyons,Evans, Merchant, Newlin, Pajonas and Trotter have no material relationship with Meritor, either directly or as a partner, shareholder or officer of an organization that has a relationship with Meritor, and are therefore independent within the meaning of the Guidelines on Corporate Governance and the New York Stock ExchangeNYSE listing standards.*There were no transactions, relationships or arrangements involving the Company and any director or nominee for director in fiscal year 20172021 that were considered by the Board in determining the independence of these directors under the Guidelines on Corporate Governance or the New York Stock ExchangeNYSE listing standards.
Board’s Role in Risk Oversight
While risk management is primarily the responsibility of the Company’s management, the Board provides overall risk oversight with a focus on the most significant risks facing the Company. Throughout the year, in conjunction with its regular business presentations to the Board and its committees, management highlights any significant related risks and provides updates on other relevant matters, including issues in the industries in which the Company operates, issues that may impact the Company, operations reviews, the Company’s shortshort- and long-term strategies and treasury-related updates. The Board has delegated responsibility for the oversight of certain risks to the Audit Committee, which oversees the Company’s policies with respect to risk assessment and risk management, including financial, accounting and accountingcybersecurity risk exposures and management’s initiatives to monitor and control such exposures. In that role, the Company’s managementAudit Committee discusses with the Audit CommitteeCompany’s management the Company’s major risk exposures and how these risks are managed, monitored and monitored.mitigated. The Audit Committee receives regular reports on the work of the Company’s Business Standards Compliance Committee from the Company’s General Auditor. In addition to receiving regular internal audit reports and updates on Sarbanes-Oxley Act compliance, the Audit Committee regularly meets in private session with our General Auditor and, separately, with our external auditors, which provides the opportunity for confidential discussion. The Audit Committee also receives reports on any fraud investigations that may arise. In addition, on an annual basis, management conducts an Enterprise Risk Assessmententerprise risk assessment and provides a summary report thereon to the Audit Committee. This assessment is monitoredreviewed by management and utilized with the Audit Committee throughout the year as circumstances change. Within the Company, risk responsibilities are aligned tomanaged by those with the relevant functional expertise and shared among the Company’s senior management.
Risk Assessment in Compensation Programs
Our compensation consultant, Pay Governance LLC (“Pay Governance”), has been engaged to assess Meritor’s compensation programs and has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on Meritor. Representatives from Internal Audit, Human Resources and Legal, with the concurrence of the Compensation and Management Development Committee, developed and carried out a process for evaluation of compensation risks. The process assessed the Company’s executive and broad-based compensation and benefits programs to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature. The focus was on the programs with variability of payout, in which the participant can directly affect payout, and on the controls that exist on such participant action and payout. To the extent that risks were identified, controls or mitigationsmitigation of such risks and their effectiveness were discussed. The representatives also took into account Meritor’s balance between short- and long-term incentives, the alignment of performance metrics with shareholder interests, the existence of share ownership guidelines and other considerations relevant to assessing risks. Based upon the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
____________________
*The Board made the same determination of independence with respect to Victoria B. Jackson Bridges and Joseph B. Anderson, Jr., who resigned from the Board effective January 24, 2017, and David C. Parry, who resigned from the Board effective August 24, 2017.
Board Leadership Structure
OurThe Board of Directors currently consists of nineeleven members, sevenall of whom, other than Mr. Craig, our Executive Chairman, and Mr. Villavarayan, our Chief Executive Officer and President, are independent.* Since April 2016, our Amended and Restated By-Laws (the “By-Laws”) and Guidelines on Corporate Governance have required the separation of the offices of Chairman and Chief Executive Officer. The Board believes this governance structure and the preponderance of outside directors represents a commitment to the independence of the Board and a focus on matters of importance to Meritor’s shareholders. The Board believes the structure also allows the Board to work effectively and properly oversee risk.
Committees
The Board currently has three standing committees (Audit; Compensation and Management Development; and Corporate Governance and Nominating), with the chairs, membership and principal functions of which are briefly describeddetailed below. The charters of these committees are posted on our website,www.meritor.com, in the section headed “Investors – Corporate Governance.” The Board also establishes special committees from time to time for specific limited purposes or durations.
Compensation and Management | Corporate Governance and | |||
Audit Committee | Development Committee | Nominating Committee | ||
Jan A. Bertsch (Chair) | Lloyd G. Trotter (Chair) | Thomas L. Pajonas (Chair) | ||
Rodger L. Boehm | Steven Beringhause | Jan A. Bertsch | ||
Fazal Merchant | Rodger L. Boehm | William R. Newlin | ||
Thomas L. Pajonas | Elizabeth A. Fessenden | Lloyd G. Trotter | ||
William R. Newlin |
Audit Committee
Meritor has a separately designated standing audit committee established in compliance with applicable provisions of the Exchange Act and New York Stock ExchangeNYSE listing standards. The Audit Committee is currently composed of fivefour non-employee directors, William J. Lyons (chair),directors: Jan A. Bertsch (chair), Rodger L. Boehm, Rhonda L. BrooksFazal Merchant and Thomas L. Pajonas. Each of these directors meets the criteria for independence specified in the listing standards of the New York Stock Exchange.NYSE. The Board of Directors has determined that Ms. Bertsch and Mr. LyonsMerchant qualify as “audit committee financial experts” (as defined by the SEC). The Board of Directors has adopted a written charter for the Audit Committee, which is reviewed and reassessed annually for compliance with the New York Stock ExchangeNYSE listing standards. The Audit Committee held five regularly scheduled meetings and twoone special meetingsmeeting in fiscal year 2017.2021.
The Audit Committee is charged with monitoring the integrity of the Company’s financial statements, accounting and financial reporting processes and financial statement audits; compliance with legal and regulatory requirements; the independence and qualifications of the Company’s independent public accountants; the performance of the Company’s internal audit function and independent public accountants; and the Company’s systems of disclosure controls and procedures, internal controls over financial reporting and compliance with the Company’s ethical standards.
To carry out its responsibility,responsibilities, the Audit Committee has authority under its charter and engages in the following activities:
Document and Information Review
● | review its charter annually and submit changes to the Corporate Governance and Nominating Committee and the Board for approval; |
● | review the Company’s annual and quarterly financial statements, before their release, with the independent public accountants and senior management; |
* | In November 2021, the Company announced that Mr. Craig will retire as Executive Chairman of the Board and Mr. Newlin will become the independent Chairman of the Board effective December 31, 2021. |
● | review the Company’s annual and quarterly earnings releases, including the use of pro forma or adjusted information that does not conform with generally accepted accounting principles; |
● | review financial information and earnings guidance before they are provided by the Company to analysts and rating agencies; |
Independent Public Accountants
● | select and employ (subject to approval of the shareholders), and terminate and replace where appropriate, the independent public accountants for the Company, and approve and cause the Company to pay all audit engagement fees; |
● | review the performance and independence of the independent public accountants and remove them if circumstances warrant; |
● | review and approve in advance the scope and extent of any non-audit services performed by the independent public accountants and the fees charged for these services, and receive and evaluate at least annually a report by the independent public accountants as to their independence, including consideration of whether provision of non-audit services is compatible with their independence; |
● | review annually the experience and qualifications of the independent |
● | discuss with the independent public accountants the matters to be discussed under the standards of the Public Company Accounting Oversight Board; |
● | review any significant issues related to the audit activities of the independent public accountants, and oversee the resolution of any disagreements between them and management; |
● | review with the independent public accountants critical accounting policies and practices;new accounting pronouncements; significant financial reporting issues and judgments, including alternative treatments of financial information, significant changes in application of accounting principles and treatment of complex or unusual transactions; significant internal control matters, including recommendations as to the adequacy of the Company’s system of internal controls; management, and critical audit matters and related disclosures; |
● | review at least annually a report from the independent public accountants describing the firm’s internal quality control procedures, including material issues raised on review of such procedures and any investigations by governmental or professional authorities; |
● | assess the objectivity and skepticism demonstrated by the independent public accountants in the performance of their work; |
● | establish the Company’s policies with respect to hiring former employees of the independent public accountants; |
● | review critical audit matters and related disclosures; |
Financial Reporting, Accounting Policies and Internal Control Structure
● | review the integrity of the Company’s financial reporting processes in consultation with the independent public accountants and the internal audit function; |
● | understand the scope of the audit plan, including the independent public accountants’ review of internal control over financial reporting and procedures used in audits and reviews of the Company’s financial statements; |
● | review any disclosure made in connection with annual and quarterly certifications by the |
● | review issues regarding accounting principles and financial statement presentation; |
● | review analyses prepared by management and the independent public accountants regarding significant financial reporting issues and judgments in connection with preparation of financial statements; |
● | review the effect of regulatory and accounting initiatives and off-balance sheet structures on the financial statements; |
● | review and approve all related-party transactions, defined as those transactions required to be disclosed under Item 404 of Regulation S-K; |
● | establish procedures for the receipt, retention and handling of complaints regarding accounting, internal controls or auditing matters, including procedures for the confidential and anonymous submission by employees; |
● | recommend to the Board whether the Company’s annual financial statements be included in |
● | prepare the report to be included in the Company’s annual proxy statement; |
Internal Audit
● | review and approve the internal audit charter, the scope of the annual internal audit plan and the results of internal audits, including management’s response to audit reports; |
● | review |
● | review with the internal auditor significant internal control matters, including incidents of fraud; |
● | review the composition and qualifications of the internal audit staff; |
● | review and concur with management as to the appointment, reassignment, replacement, dismissal, and compensation of the internal auditor charged with auditing and evaluating the Company’s system of internal controls; |
● | review the results of any quality assurance reviews; |
Legal and Ethical Compliance and Risk Management
● | oversee and update the Company’s standards of business conduct policies, and monitor compliance by employees with these policies; |
● | review with the Company’s |
● | monitor policies with respect to risk assessment and risk management, including financial and accounting risk and cybersecurity risk, and initiatives to control risk exposures; |
● | oversee and annually review the activities of the Company’s Employee Benefit Plan Committee (which is made up of management personnel); |
● | review any findings by regulatory agencies with respect to the Company’s activities and management’s response; |
General
● | review and consult with management concerning the composition and capability of the finance staff; |
● | investigate matters brought to its attention within the scope of its duties; |
● | engage outside consultants, independent counsel or other advisors; |
● | review its performance annually; and |
● | perform any other activities consistent with |
As part of each regularly scheduled meeting, the Audit Committee meets in separate executive sessions with the independent public accountants, the internal auditors and senior management and as a committee without members of management.management present.
Compensation and Management Development Committee
The fourfive current members of the Compensation and Management Development Committee referred to as the Compensation Committee,(the “Compensation Committee”) are Lloyd G. Trotter (chair), RhondaSteven Beringhause, Rodger L. Brooks, William J. LyonsBoehm, Elizabeth A. Fessenden and William R. Newlin. Each of these directors is a non-employee director who meets the criteria for independence specified in the listing standards of the New York Stock ExchangeNYSE (including those criteria specifically applicable to members of compensation committees), the criteria for qualifying as an outside director under the Internal Revenue Code of 1986, as amended, referred to as the IRC, and the criteria for qualifying as a non-employee director specified under the Exchange Act. These directors are not eligible to participate in any of the plans or programs that are administered by the Compensation Committee. The Compensation Committee held fourfive regularly scheduled meetings and no special meetings in fiscal year 2017. Under the terms of2021. To carry out its charter,responsibilities, the Compensation Committee has authority under its charter and engages in the following activities:
● | review and approve the goals and objectives relevant to the Chief Executive Officer’s compensation, evaluate his performance against these goals and objectives, and set his compensation accordingly; |
● | establish salaries and annual incentive opportunities of all of the Company’s other officers and review the salary plan and annual incentive opportunities for other Company executives; |
● | evaluate the performance of the Company’s senior executives and plans for management succession and development; |
● | review the design and competitiveness of the Company’s compensation plans and Board; |
● | administer the Company’s incentive, deferred compensation, stock options and long-term and any employment, severance, change in control or similar agreements applicable to the Company’s senior executives; |
● | review material amendments to the design and competitiveness of the Company’s medical benefit plans; |
● | review all material amendments to the Company’s pension and other retirement plans and make recommendations to the Board concerning these amendments; |
● | hire outside consultants, independent counsel and other advisors and approve the terms of their engagement, after considering the advisors’ independence from management; |
● | prepare the report to be included in the Company’s annual proxy statement; |
● | oversee the Company’s compliance with rules and regulations of the SEC and NYSE relating to shareholder approval of certain executive compensation matters; and |
● | review its performance annually. |
SeeExecutive Compensation - Compensation Discussion and Analysisbelow for further information on the scope of authority of the Compensation Committee and the role of management and compensation consultants in determining or recommending the amount or form of executive compensation.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee is currently composed of four non-employee directors, Thomas L. Pajonas (chair), Jan A. Bertsch, William R. Newlin and Lloyd G. Trotter, all of whom meet the criteria for independence specified in the listing standards of the New York Stock Exchange.NYSE. The Corporate Governance and Nominating Committee held fourfive regularly scheduled meetings and twono special meetings in fiscal year 2017. Under the terms of2021. To carry out its charter,responsibilities, the Corporate Governance and Nominating Committee has authority under its charter and engages in the following activities:*
● | screen and recommend to the Board qualified candidates for election as directors of the Company and for service as the Chairman; |
* | In connection with Mr. Craig’s retirement, the Board approved amendments to the Corporate Governance and Nominating Committee’s charter eliminating the role of Executive Chairman effective December 31, 2021. The above summarizes the charter as revised. |
● | periodically prepare and submit its selection criteria for director nominees to the Board for adoption; |
● | oversee, with the assistance of management, a process for new Board member orientation; |
● | annually assess the performance of the |
● | consider matters of corporate governance and Board practices, including oversight of the Company’s strategies and |
● | review periodically the Company’s |
● | review periodically the charter, responsibilities, membership and |
● | review periodically non-employee directors’ compensation and make recommendations to the Board; |
● | review director independence, conflicts of interest, qualifications and conduct, and recommend to the Board removal of a director when appropriate; |
● | oversee engagement with shareholders and proxy advisory firms regarding corporate governance matters and establish protocols with respect to the Company’s overall shareholder engagement initiatives; and |
● | engage search firms and other consultants and independent |
SeeDirector Qualifications and Nominating Proceduresbelow for further information on the nominating process.
In discharging its duties with respect to review of director compensation, the Corporate Governance and Nominating Committee from time to time retains a compensation consultant to provide information on current trends, develop market data and provide objective recommendations as to the amount and form of director compensation. In fiscal year 2017,2021, the compensation consultant was Pay Governance LLC.Governance. Management has no role in determining or recommending the amount or form of director compensation.
DIRECTOR QUALIFICATIONS AND NOMINATING PROCEDURES
As described above, Meritor has a standing nominating committee, the Corporate Governance and Nominating Committee, currently composed of four non-employee directors who meet the criteria for independence specified in the listing standards of the New York Stock Exchange.NYSE. The Corporate Governance and Nominating Committee’s charter is posted on our website,www.meritor.com, in the section headed “Investors – Corporate Governance.”
The Board has adopted membership guidelines that outline the desired composition of the Board as a whole and the criteria to be used in selecting directors.director nominees. These guidelines provide that the Board should be composed of directors with a variety of experience and backgrounds, who have high-levelsignificant senior managerial experience in complex organizations and who represent the balanced interests of shareholders as a whole rather than those of special interest groups.
The basic selection criteria include: highest character and integrity; experience with and understanding of strategy and policy-setting; reputation for working constructively with others; sufficient time to devote to Board matters; no conflict of interest that would interfere with performance as a director; and financial acumen. Other important factors include: knowledge of the transportation and industrial products industry or another manufacturing industry; specialized expertise in a field with which the Board may be expected to interface; international background or experience;experience doing business abroad; and enhancement of the diversity of the Board (which the Board considers in terms of all aspects of diversity, such as diversity of perspective, experience, background and strengths,expertise, when compared with the skillsets and backgrounds of other directors, as well as diversity of gender and race). The Board understands the value of cognitive diversity in decision making and has sought qualified individuals, including women and underrepresented minorities, as Board candidates. The guidelines also set forth examples, for illustrative purposes only, of candidates whose backgrounds would generally be considered to make them positive additions to the Board.
In considering candidates for the Board, the Corporate Governance and Nominating Committee is guided by the membership guidelinescriteria set forth above. The entirety of each candidate’s credentials is considered, and there are no specific minimum qualifications that must be met by a director nominee. In addition, our Guidelines on Corporate Governance require that qualified women and underrepresented minority candidates be included in each search pool from which the Corporate Governance and Nominating Committee selects director candidates. The individual biographies of each of our current directors and nominees set forth previouslyabove outline each individual’s specific experiences, attributes and skills that qualify that person to serve on our Board.
The Corporate Governance and Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. In fiscal year 2017,2021, the Corporate Governance and Nominating Committee paid Heidrick & Struggles $120,000 in fees and $26,509$126,647 in reimbursed expenses in connection with identifying Board candidates for consideration, including Mr. Boehm.Ms. Fessenden.
Our By-Laws allow a shareholder, or group of up to 20 shareholders, to nominate up to two director candidates or, if greater, up to 20% of the number of directors then serving on the Board, if the shareholder or group meets the ownership requirement of 3% or more of our outstanding Common Stock held continuously for at least the previous three years. In order for such nominees to be included in our proxy materials, the shareholder(s) and nominee(s) must also satisfy the other requirements specified in our By-Laws and submit a notice of proxy access nomination together with certain related information required by our By-Laws. Shareholders may also recommend candidates for consideration by the Corporate Governance and Nominating Committee by writing to the Corporate Secretary of the Company at its headquarters in Troy, Michigan, giving the candidate’s name, biographical data and qualifications. A written statement from the candidate, consenting to be named as a candidate and, if nominated and elected, to serve as a director, should accompany any such recommendation. The Corporate Governance and Nominating Committee evaluates the qualifications of candidates properly submitted by shareholders underusing the same criteria and in the same manner as potential nominees identified by the Company. No candidates for Board membership have been put forward for election at the 20182022 Annual Meeting by shareholders or groupspursuant to these proxy access provisions of shareholders holding 5% or more of the outstanding shares of Common Stock who have held such shares for over a year.our By-Laws.
DIRECTOR COMPENSATION IN FISCAL YEAR 20172021
The following table reflects compensation for the fiscal year ended September 30, 20172021 awarded to, earned by or paid to each non-employee director who served during the fiscal year.
Fees Earned | ||||||||||||||||
or Paid in | Stock | |||||||||||||||
Name | Cash ($)(1) | Awards ($)(2)(3) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Total ($) | ||||||||||
Joseph B. Anderson, Jr.(4) | 49,500 | — | 49,500 | |||||||||||||
Steven Beringhause | 105,000 | 119,974 | 224,974 | |||||||||||||
Jan A. Bertsch | 22,500 | 189,730 | 212,230 | — | 249,938 | 249,938 | ||||||||||
Victoria B. Jackson Bridges(4) | 57,000 | — | 57,000 | |||||||||||||
Rhonda L. Brooks | 112,750 | 109,997 | 222,747 | |||||||||||||
Rodger L. Boehm | — | 234,932 | 234,932 | |||||||||||||
Rhonda L. Brooks(4) | 57,500 | 119,974 | 177,474 | |||||||||||||
Ivor J. Evans | 93,750 | 109,997 | 203,747 | 105,000 | 119,974 | 224,974 | ||||||||||
William J. Lyons | 126,250 | 109,997 | 236,247 | |||||||||||||
Elizabeth A. Fessenden | 35,000 | 69,980 | 104,980 | |||||||||||||
Fazal Merchant | 115,000 | 149,957 | 264,957 | |||||||||||||
William R. Newlin | 219,750 | 109,997 | 329,747 | 196,667 | 119,974 | 316,641 | ||||||||||
Thomas L. Pajonas | 122,000 | 109,997 | 231,997 | 125,000 | 119,974 | 244,974 | ||||||||||
David C. Parry(4) | 26,250 | 80,122 | 106,372 | |||||||||||||
Lloyd G. Trotter | 28,500 | 196,226 | 224,726 | — | 239,916 | 239,916 |
(1) | This column includes retainer fees, committee |
(2) | This column includes the grant date fair value, computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of the following separate grants of restricted shares of Common Stock (“restricted shares”). Information on the assumptions used in valuation of the grants is included in Note |
1/1/2017 | 1/26/2017 | 4/1/2017 | 4/20/2017 | 7/1/2017 | ||||||||||||||||||||||||
Name | Grants | Grants | Grants | Grants | Grants | 10/1/2020 Grants | 1/1/2021 Grants | 2/5/2021 Grants | 4/1/2021 Grants | 6/1/2021 Grants | 7/1/2021 Grants | |||||||||||||||||
Steven Beringhause | $ | — | $ | — | $ | 119,974 | $ | — | $ | — | $ | — | ||||||||||||||||
Jan A. Bertsch | $24,740 | $99,998 | $23,999 | — | $40,993 | 32,489 | 32,487 | 119,974 | 32,491 | — | 32,497 | |||||||||||||||||
Rodger L. Boehm | 28,741 | 28,747 | 119,974 | 28,732 | — | 28,738 | ||||||||||||||||||||||
Rhonda L. Brooks | — | 99,998 | — | — | 9,999 | — | — | 119,974 | — | — | — | |||||||||||||||||
Ivor J. Evans | — | 99,998 | — | — | 9,999 | — | — | 119,974 | — | — | — | |||||||||||||||||
William J. Lyons | — | 99,998 | — | — | 9,999 | |||||||||||||||||||||||
Elizabeth A. Fessenden | — | — | — | — | 69,980 | — | ||||||||||||||||||||||
Fazal Merchant | 29,983 | — | 119,974 | — | — | — | ||||||||||||||||||||||
William R. Newlin | — | 99,998 | — | — | 9,999 | — | — | 119,974 | — | — | — | |||||||||||||||||
Thomas L. Pajonas | — | 99,998 | — | — | 9,999 | — | — | 119,974 | — | — | — | |||||||||||||||||
David C. Parry | — | — | — | $70,123 | 9,999 | |||||||||||||||||||||||
Lloyd G. Trotter | 25,498 | 99,998 | 26,996 | — | 43,734 | 29,983 | 29,975 | 119,974 | 29,985 | — | 29,999 |
(3) | In connection with their service on the Board, the current non-employee directors held the following restricted shares |
Restricted | Restricted Share | |||
Name | Shares | Units | ||
Jan A. Bertsch | 14,897 | — | ||
Rhonda L. Brooks | 29,151 | — | ||
Ivor J. Evans | 16,096 | — | ||
William J. Lyons | 29,151 | — | ||
William R. Newlin | 34,362 | — | ||
Thomas L. Pajonas | 29,151 | — | ||
Lloyd G. Trotter | 28,246 | 6,565 |
Name | Restricted Shares | |||
Steven Beringhause | 9,668 | |||
Jan A. Bertsch | 29,579 | |||
Rodger L. Boehm | 28,586 | |||
Ivor J. Evans | 15,074 | |||
Elizabeth A. Fessenden | 2,620 | |||
Fazal Merchant | 5,329 | |||
William R. Newlin | 20,285 | |||
Thomas L. Pajonas | 15,074 | |||
Lloyd G. Trotter | 29,172 |
(4) | Ms. |
Narrative Description of Director Compensation
Only non-employee directors receive compensation for Board service. Directors who are also employees of Meritor or a subsidiaryany of its subsidiaries do not receive compensation for serving as a director. The Company also reimburses its directors for their travel and related expenses in connection with attending Board, committee and shareholders’ meetings.
The following types of compensation were earned by or paid to non-employee directors in fiscal year 2017:2021:
Retainer Fees.Prior to July 1, 2017, non-employeeNon-employee directors of Meritor received aan annual cash retainer at the rate of $90,000 per year$105,000 for Board service. Members of the Audit Committee also received an additional annual cash retainer of $10,000. The chairs of the standing Board committees received additional annual cash retainers in the following amounts per year:amounts: Audit Committee and Compensation Committee - $15,000; and Corporate Governance and Nominating Committee - $10,000. In addition and as applicable for the time periods served, the independent Chairman of the Board received an additional annual cash retainer in the amount of $100,000. Effective July 1, 2017,$150,000 and the cash retainer paid to non-employee directors was increased to $105,000 per year, the additional cash retainers paid to the chairsLead Independent Director of the standing Board committees remained the same, members of the Audit Committee began receivingreceived an additional annual cash retainer in the amount of $10,000 and the additional annual cash retainer paid to the Chairman was increased to $150,000.$50,000.
Committee Meeting Fees.Prior to July 1, 2017, non-employee directors received feesTable of $1,500 for attendance at each standing and special committee meeting ($750 for each telephone meeting). As of July 1, 2017, non-employee directors no longer received meeting fees.Contents
Equity-Based Awards.As part of our director compensation, each non-employee director is entitled to receive, on or about the date of the Annual Meeting of Shareholders, an equity grant equal towith a set value of approximately $120,000, in the form of restricted shares or restricted share units, at the director’s election. Prior to July 1, 2017, the value of the annual equity grants to non-employee directors was $100,000. Effective July 1, 2017, the value of such grants was increased to $120,000 (with pro-rated grants for the remainder of 2017 made on July 1).shares. The restricted shares and restricted share units arewere granted under the 20102020 LTIP and generally vest upon the earlier of (1) three years from the date of grant or (2) the date the director resigns or ceases to be a director by reason of the antitrust laws, compliance with the Company’s conflict of interest policies, or other circumstances the Board determines not to be adverse to the best interests of the Company, if the Board deems such restricted shares or restricted share units to be earned. Upon vesting, the holder of restricted share units is entitled to one share of Common Stock for each unit or its cash equivalent, and non-employee directors generally are entitled to receive a cash payment for dividend equivalents, if any dividends are paid, plus interest accrued during the vesting period. The equity grants to directors in 20172021 were made on January 26, 2017February 5, 2021 in the amount of 6,6713,953 restricted shares or restricted share units per person and on July 1, 2017 in the amount of 602 restricted shares or restricted share units per person, in each case at the director’s election.director.
Deferrals. A director may elect to defer payment of all or part of the cash retainer and meetingcommittee fees to a later date, with interest on deferred amounts accruing quarterly at a rate equal to 120% of the Federal long-term rate set each month by the Secretary of the Treasury. Each director also has the option each year (provided sufficient shares are available under a plan covering director equity grants to accommodate this deferral option at the time of itsthe director’s election) to defer all or any portion of the cash retainer and meeting fees by electing to receive restricted shares or restricted share units that could be forfeited if certain conditions are not satisfied. The restricted shares or restricted share units in lieu of the cash retainer and meetingcommittee fees are valued at the closing price of the Common Stock on the New York Stock ExchangeNYSE – Composite Transactions reporting system referred to as the NYSE(the “NYSE Closing Price,Price”) on the date the fee payment would otherwise be made in cash. In fiscal year 2017, one director2021, none of the directors deferred cash payments to a later date and twothree directors elected to receive restricted shares in lieu of cash payments.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of fiscal year 2017,2021, there have been no transactions, orand there are no currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any director, officer or greater-than-5% beneficial owner of Common Stock, of the Company, or any member of their immediate family, had or will have a direct or indirect material interest.
Various means are employed to solicit information about relationships or transactions involving officers and directors that could raise questions of conflict of interest. Annual questionnaires solicit information from directors and officers regarding transactions and relationships that could trigger SEC rules on disclosure of related-person transactions, as well as relationships and transactions that could impair a director’s independence under the listing standards of the New York Stock Exchange.NYSE. Directors and officers have a continuing duty to update this information should any changes occur during the fiscal year. In addition, all salaried employees, including officers, and directors have a duty to report any known conflicts of interest that would violate the Company’s codeCode of ethicsEthics (including policies regarding standards of business conduct and conflicts of interest; seeCode of Ethicsbelow). A toll-free ethics helpline is available for that purpose. Salaried employees, including officers, are also required to complete an annual certification that they are unaware of, or have reported, any such conflict of interest.
Although we have no written policy regarding review, approval or ratification of related-persontransactions,related-person transactions, the Audit Committee under its charter has the authority to review and approve all related-party transactions, defined as those transactions required to be disclosed under Item 404 of Regulation S-K. The Business Standards Compliance Committee (which is made up of management personnel) and the Audit Committee have responsibility for review of compliance by officers and other employees (including their immediate family members) with the codeCode of ethics,Ethics, including conflict of interest provisions, and the Corporate Governance and Nominating Committee has similar responsibility with respect to compliance by directors and director nominees (including their immediate family members). If a transaction or relationship involving an officer or director were to be reported through the toll-free ethics helpline, annual compliance certifications, questionnaires or otherwise, the Audit Committee, with the assistance of the Business Standards Compliance Committee, would investigate and consider all relevant facts and circumstances, including the nature, amount and terms of the transaction; the nature and amount of the related person’s interest in the transaction; the importance of the transaction to the related person and to the Company; whether the transaction would impair the judgment of a director or officer to act in the Company’s best interest; and any other facts involving the transaction that the Audit Committee deems significant, and would then take appropriate action. Transactions will not be approved under the codeCode of ethicsEthics if they are not in the Company’s best interests. Any committee member who is a related person in connection with a transaction would not participate in consideration of that transaction.
CORPORATE GOVERNANCE AT MERITOR
MeritorThe Company believes good corporate governance is critical to its stability and long-term success. The Board is committed to good governance policies and practices that serve the long-term interests of the Company and its shareholders, employees and other stakeholders. Highlighted below are some of our key corporate governance. governance policies and practices.
Corporate Governance Highlights | ||
☑9 of 11 directors are independent under our Guidelines on Corporate Governance and the NYSE’s listing standards ☑Independent Board Chair or Lead Director ☑Board Chair and Chief Executive Officer roles separated ☑Proxy access right granted to shareholders ☑Qualified women and underrepresented minority candidates required in each search pool from which the Corporate Governance and Nominating Committee selects director candidates | ☑Director resignation policy for directors who fail to obtain a majority vote ☑Annual Board and committee evaluations ☑Executive sessions of independent directors held at each regularly scheduled Board meeting ☑Commitment to corporate social responsibility ☑Share ownership guidelines for directors and executives |
The foundation of our corporate governance principles and practices is the independent nature of our Board, of Directors and its primary responsibility to Meritor’s shareholders. The guidelinesOur Guidelines on Corporate Governance are reviewed periodically by the Corporate Governance and Nominating Committee, and changes are recommended to the Board for approval as appropriate. We will continue to monitor developments and review our guidelinesGuidelines on Corporate Governance periodically and will modify or supplement them when and as appropriate. Our current Guidelines on Corporate Governance Guidelines are posted on our website,www.meritor.com, in the section headed “Investors – Corporate Governance.” Our Guidelines on Corporate Governance Guidelines and practices are summarized below.*
Board Independence
Board Independence | |
● | Independent directors must comprise at least a majority of the Board and, as a matter of policy, a substantial majority of the Board should be independent directors. The Board has adopted criteria for independence based on the definition used in the listing standards of the |
● | The Board reviews the independence of each director annually; |
● | Only independent directors serve on the Board’s standing committees; |
Board Composition
Board Composition | |
● | The Board should consist of a sufficient number of directors to represent various viewpoints and areas of expertise, but not be so large as to impair its ability to function efficiently. In general, the Board consists of |
● | Board |
● | Qualified women and underrepresented minority candidates are required in each search pool from which the Corporate Governance and Nominating Committee selects director candidates; |
* | In connection with Mr. Craig’s retirement, the Board approved amendments to the Guidelines on Corporate Governance eliminating the role of Executive Chairman effective December 31, 2021. The above summarizes the Guidelines on Corporate Governance as revised. |
● | Committee membership is reviewed periodically to assure that each committee has the benefit of both experience and fresh perspectives; |
● | Committee chair rotation is considered at least once every four |
● |
|
● | The Chief Executive Officer |
● | The Guidelines on Corporate Governance |
○ | Non-employee directors should offer not to stand for re-election if they are age 72 at the time of re-election or will reach age 72 during their new term. The Corporate Governance and Nominating Committee decides whether continued Board service is appropriate and, if so, the length of the next term; |
○ | Directors whose job responsibilities change significantly during their Board service, or who retire from the position they held when elected to the Board, are required to offer to |
○ | When the Chief Executive Officer retires or resigns from that position, he or she is expected to offer his or her resignation from the Board. The Board and the successor Chief Executive Officer determine whether continued Board service is desirable and appropriate; |
○ | Under the Company’s majority vote policy, any nominee for director who receives a greater number of “withheld” votes than “for” votes in an uncontested election is required to tender his or her resignation after the certification of the election results. The Corporate Governance and Nominating Committee considers the resignation and recommends to the Board what action should be taken. The Board is required to take action and publicly disclose the decision and its underlying rationale within 90 days of certification of the election results; |
Key Responsibilities of the Board
● | The Company’s long-term strategic goals and plans are discussed in depth by the Board at least annually; |
● | The non-employee directors select the Chief Executive Officer |
● | Management development and succession plans are reviewed annually, including Chief Executive Officer succession plans; |
Board and Committee Meetings
● | The Board has appointed a Chairman who chairs executive sessions, serves as liaison with the Chief Executive Officer and participates in development of meeting agendas; |
● | Board and committee meeting agendas are developed through discussions with management and the Chairman and/or committee chair, and are focused on business performance and strategic issues, leadership, and recent developments; |
● | Agendas are distributed in advance so directors are aware of matters to be discussed and can recommend additional items; |
● | Presentation materials are generally made available to Board and committee members for review in advance of each meeting. If the subject matter is too sensitive for advance distribution of materials, directors are advised in advance of the subject matter and issues to be considered and are given ample time to deliberate on proposed actions; |
● | Directors are expected to attend, prepare for and participate in meetings. The Corporate Governance and Nominating Committee monitors each director’s attendance and addresses any issues that arise; |
● | Non-employee directors meet in private executive sessions during each regular Board meeting. The Chairman chairs these meetings and communicates the results of the sessions to the Chief Executive |
● | Minutes of each committee meeting are provided to each Board member, and the chair of each committee reports at Board meetings on significant committee matters; |
● | Information and data important to understanding the Company’s business, including financial and operating information and factors affecting the Company’s strategic plans and outlook, are distributed regularly to the Board; |
Board Performance and Committee Operations
● | The Corporate Governance and Nominating Committee, which is composed solely of independent directors, is responsible for corporate governance and Board practices, and formally evaluates these areas periodically; |
● | Each Board committee has a detailed charter outlining its responsibilities, as described above under the headingBoard |
● | The Board and its committees have the authority to hire such outside counsel, advisors and consultants as they choose with respect to any issue related to Board activities. Directors also have full access to Company officers and employees and the Company’s outside counsel and auditors; |
● | To enhance Board effectiveness, the Corporate Governance and Nominating Committee |
Director Education
● | Each new director |
● | The continuing education process for Board members includes review of extensive informational materials and meetings with key management personnel; |
● | Meeting agendas regularly include discussions of business environment, outlook, performance and action plans for the various business segments; |
● | Board members may request presentations on particular topics and specific facility visits to educate |
● | Each director is encouraged to attend educational seminars and conferences to enhance his or her knowledge of the role and responsibilities of directors; |
● | In each fiscal year, at least one director is required to attend a director education seminar. In fiscal year |
Alignment with Shareholder Interests
● | A portion of director compensation is equity-based and therefore tied to the Company’s stock performance. Directors can also elect to receive their cash retainer fees in the form of restricted shares or restricted share units; |
● | The Compensation Committee and the Board oversee executive compensation programs to help ensure that they are linked to performance and increasing shareholder value. The Compensation Committee also monitors compliance by Company executives with stock ownership guidelines (seeExecutive Compensation |
● | Senior management meets regularly with major institutional investors and shareholders and reports to the Board on analysts’ and shareholders’ views of the Company; and |
● | The Board has adopted stock ownership guidelines for non-employee directors to further the direct |
All Meritor employees, including our Executive Chairman, Chief Executive Officer, Chief Financial Officer and other executive officers and our Controller,Chief Accounting Officer, are required to comply with our corporate policies, regarding standards of business conduct and conflicts of interest. The purpose of these corporate policies is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. The Audit Committee has oversight responsibility with respect to compliance by employees. The Board of Directors is also required to comply with these policies, and the Corporate Governance and Nominating Committee is responsible for monitoring compliance by directors.
Employees are obligated to report any conduct that they believe in good faith to violate these policies. Employees may submit concerns or complaints regarding ethical issues on a confidential basis to our ethics helpline, by means of a toll-free telephone call or e-mail. The Office of the General CounselChief Legal Officer investigates all concerns and complaints. Employees may also contact the Board of Directors or the Audit Committee directly on these issues (seeCommunications with the Board of Directorsbelow).
Meritor’s ethics manual, including the text of the policies on standards of business conduct and conflicts of interest, is posted in the section headed “Investors – Corporate Governance” on our website,www.meritor.com. We will post on our website any amendment to, or waiver from, a provision of our policies that applies to our Executive Chairman, Chief Executive Officer, Chief Financial Officer or Controller,Chief Accounting Officer, and that relates to any of the following elements of these policies: honest and ethical conduct; disclosure in reports or documents filed by the Company with the SEC and in other public communications; compliance with applicable laws, rules and regulations; prompt internal reporting of code violations; and accountability for adherence to the policies.
CORPORATE SOCIAL RESPONSIBILITY
Meritor’s and the Board’s commitment to sustainability, including beneficial ESG related business practices, is integral to how the Company conducts its business. Sustainability and good corporate stewardship have been a part of Meritor’s culture throughout its long history of innovative product design and manufacture. We last published our annual sustainability report in March 2021 to share the work we have done in the areas of advanced technologies; environment, health and safety; manufacturing initiatives; human capital, social responsibility and corporate governance.
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES
The following table shows the beneficial ownership, reported to us as of October 31, 2017,2021, of Common Stock of (1) each director; (2) each executive officer listed in the table underExecutive Compensation – Fiscal Year 20172021 Summary Compensation Tablebelow; and (3) such persons and other executive officers as a group. SeeVoting Securitiesabove for information on beneficial holders of more than 5% of outstanding Common Stock.
Beneficial Ownership as of October 31, 2017
Beneficial Ownership as of October 31, 2021 | ||||||||||
Percent of | ||||||||||
Outstanding | ||||||||||
Name | Number of Shares(1) | Common Stock(2) | ||||||||
Steven Beringhause | 9,668 | (3) | * | |||||||
Jan A. Bertsch | 56,786 | (3)(4) | * | |||||||
Rodger L. Boehm | 36,523 | (3) | * | |||||||
Ivor J. Evans | 329,015 | (3) | * | |||||||
Elizabeth A. Fessenden | 2,620 | (3) | * | |||||||
Fazal Merchant | 5,329 | (3) | * | |||||||
William R. Newlin | 204,336 | (3)(5) | * | |||||||
Thomas L. Pajonas | 62,936 | (3) | * | |||||||
Lloyd G. Trotter | 76,470 | (3) | * | |||||||
Chris Villavarayan | 123,421 | (6)(7) | * | |||||||
Jeffrey A. Craig | 299,803 | (6) | * | |||||||
Carl D. Anderson II | 31,976 | (6)(7) | * | |||||||
Timothy Bowes | 318 | * | ||||||||
John Nelligan | 19,699 | (6)(7) | * | |||||||
Hannah S. Lim-Johnson(8) | — | * | ||||||||
All of the above and other executive officers as a group (16) persons | 1,284,952 | (3)(4)(5)(6)(7) | 1.8 | % |
* | Less than one percent. | |
(1) | ||
Each person has sole voting and investment power with respect to the shares of Common Stock listed unless otherwise indicated. | ||
(2) | ||
For purposes of computing the percentage of outstanding shares beneficially owned by each person, the number of shares of Common Stock owned by that person and the number of shares of Common Stock outstanding include shares as to which such person has a right to acquire beneficial ownership within 60 days (for example, through the exercise of stock options, conversions of securities or through trust arrangements), in accordance with Rule 13d-3(d)(1) under the Exchange Act. | ||
(3) | ||
Includes restricted shares awarded under the Company’s long-term incentive plans. Restricted shares are held by the Company until certain conditions are satisfied. | ||
(4) | ||
Includes | ||
(5) | ||
Includes 6,860 shares of Common Stock held by a trust of which Mr. Newlin’s spouse is beneficiary. | ||
(6) | ||
In accordance with Rule 13d-3(d)(1) under the Exchange Act, the number of shares of Common Stock owned includes the following | ||
(7) | ||
Includes shares beneficially owned under the Company’s Savings Plans. | ||
(8) | Ms. Lim-Johnson, Senior Vice President, Chief Legal Officer and Corporate Secretary, separated from the Company effective October 25, 2021. |
COMPENSATION COMMITTEE REPORT
The Compensation and Management Development Committee referred to as the Compensation Committee,(the “Compensation Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and based on such review and discussions, recommended to the Board of Directors that such Compensation Discussion and Analysis be included in this proxy statement and the Form 10-K. The threefour independent directors listed below were the members of the Compensation Committee who participated in the review, discussions and recommendation with respect to the Compensation Discussion and Analysis for fiscal year 2017.2021.
Compensation and Management Development Committee
Lloyd G. Trotter,Chair
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a current or formerhas served as an officer or employee of the Company or any of its subsidiaries.subsidiaries within the last three fiscal years. During fiscal year 2017,2021, no member of the Compensation Committee had a relationship that must be described under SEC rules relating to disclosure of related-person transactions. In fiscal year 2017,2021, none of the Company’s executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on the Board or the Compensation Committee of the Company.Committee.
COMPENSATION DISCUSSION AND ANALYSIS
The purpose of this section of the proxy statement is to provide information about our executive compensation programs that relate to the compensation of the Named Executive Officers, as defined below. The Named Executive Officers are the senior members of management listed or discussed in the compensation tables included in this proxy statement. The qualitative information and rationales regarding our executive compensation policies and practices described below are intended to provide a better understanding of the quantitative information regarding each Named Executive Officer described in the tables and narratives that follow this section.
COVID-19 Pandemic Response
The COVID-19 pandemic adversely affected the Company’s financial performance throughout most of fiscal year 2020 and the beginning of fiscal year 2021, however the direct adverse impacts of the pandemic on its operations and financial performance started to dissipate over the course of the third fiscal quarter of fiscal year 2021. Due to the adverse effects of the COVID-19 pandemic on the Company’s financial performance and the uncertainty around its duration and breadth, the Company implemented a series of cost reduction measures in March 2020 to preserve its financial flexibility, including the suspension of certain employer-paid retirement savings plan and pension contributions from May 1, 2020 through the end of the first quarter of fiscal year 2021. These actions affected certain elements of the compensation paid to our Named Executive Officers for portions of fiscal year 2021 as further detailed below.
In December 2020, the Compensation Committee adjusted the fiscal 2019-2021 performance cycle under the 2010 LTIP to address retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the Company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment. The adjustment lowered the threshold targets required to achieve a payout for the fiscal 2019-2021 performance cycle but did not adjust the targets for these performance metrics for payments at or above 100% of target. Further detail on the impacts of this adjustment on the compensation paid to our Named Executive Officers in fiscal year 2021 is provided below.
Executive Summary
We believe our executive compensation program represents best practices that serve the interests of shareholders. Highlighted below are some of our key practices.
What We Do | What We Don't Do | |
☑Focus the majority of pay on performance-based elements ☑Retain an independent compensation consultant ☑Perform an annual peer review and risk assessment ☑Target the median of our peer group when determining executive compensation ☑Maintain a clawback policy in cases of financial restatement ☑Require double-trigger upon change in control in order to receive cash severance and for accelerated vesting to occur ☑Set rigorous stock ownership guidelines for officers and directors ☑Incentive payouts are capped at 200% of target ☑Request an annual say-on-pay shareholder vote | ☒Provide excessive perquisites ☒Pay excise tax gross-ups ☒Promise multi-year salary increases ☒Guarantee minimum bonuses ☒Allow officers or employees to hedge or pledge company stock |
The main components of Meritor’s executive compensation program are annual salary, annual incentives and long-term incentives. The Compensation Committee believes in a “pay for performance” philosophy under which executives are rewarded for performance against objective standards and, as part of that philosophy, continues to examine the Company’s executive compensation program and makemakes changes accordingly. The actions taken by the Compensation Committee in fiscal year 20172021 reflect that philosophy.
Recent actions taken by the Compensation Committee to update and improve the Company’s compensation practices include:
● | Changes to Compensation Levels due to Transition of Leadership. As discussed below under the heading “Elements of the Meritor Compensation Program – Components,” in March 2021, Mr. Craig, formerly the Chief Executive Officer and President, assumed the title of Executive Chairman of the Board, and Mr. Villavarayan, formerly Executive Vice President and Chief Operating Officer, assumed the title of Chief Executive Officer and President (see Board of Directors and Committees – Board Leadership Structure above for further information). This arrangement was the first step in the transition of leadership from Mr. Craig to Mr. Villavarayan and was accompanied by adjustments to their compensation to reflect their revised roles (see “Summary Compensation Table” below for information on total compensation for Mr. Craig and Mr. Villavarayan in 2021, reflecting this mid-year adjustment). In November 2021, Mr. Craig notified the Board of his intention to retire as Executive Chairman effective December 31, 2021. With Mr. Craig’s retirement, the Committee will continue to assess the compensation of Mr. Villavarayan and the leaders of the Company’s business and functional units based on each individual’s scope and responsibilities and the corresponding market analysis and benchmarking studies provided by Pay Governance. There are no current plans to fill the positions of Executive Chairman or Chief Operating Officer, and in November 2021, the Board, upon the recommendation of the Corporate Governance and Nominating Committee, adopted Amended and Restated By-laws effective December 31, 2021, which eliminate the Executive Chairman position and provide for an independent non-executive Chairman of the Board. |
● | Continued 100% Equity-Based Long-Term Incentives Going Forward. For the fiscal |
● | Peer Group Analysis Review. The Compensation Committee annually assesses the competitiveness of the Company’s executive compensation compared to that of similar companies, as described below under the heading “Market Analysis and Benchmarking.” In July |
Administration of Executive Compensation Program
The Compensation Committee has overall responsibility for executive compensation, including administration of equity compensation plans (seeBoard of Directors and Committeesabove for information on the Compensation Committee’s members, charter and meetings in fiscal year 2017)2021). As part of this responsibility, the Compensation Committee evaluates the performance of the Executive Chairman and Chief Executive Officer and determines histheir compensation in light of the goals and objectives of the Company and the executive compensation program.
The Compensation Committee continued its retention of Pay Governance as a compensation consultant in fiscal year 2017.2021. Prior to engaging Pay Governance, the Compensation Committee assessed itsPay Governance’s independence under the standards set forth in the rules under the Exchange Act and the listing standards of the New York Stock Exchange.Exchange (the “NYSE”). The Compensation Committee concluded that such standards were satisfied and no conflict of interest existed with respect to Pay Governance’s work.
Pay Governance provides information on current compensation trends, develops competitive market data and provides objective recommendations as to the design of the compensation program, including the form and mix of award vehicles,awards, the type of performance criteria and the level of award targets. The Compensation Committee directly engages Pay Governance, which also assists the Corporate Governance and Nominating Committee with respect to directors’ compensation. Pay Governance performs no other services for the Company or management.
The Compensation Committee seeks and considers input from senior management in many of its decisions, and Pay Governance confers and collaborates with senior management in developing its compensation recommendations. Senior management regularly participates in the Compensation Committee’s activities in the following ways:
● | The Executive Chairman and Chief Executive Officer |
● | The |
● | The Chief Financial Officer is responsible for evaluating the tax, financial and accounting aspects of certain compensation decisions, as appropriate. He participates in developing financial objectives and targets for performance-based incentive compensation and oversees calculation of payout and vesting levels, in accordance with plan design and the direction of the Compensation Committee. |
Executive Compensation Philosophy and Objectives
The Compensation Committee’s compensation philosophy is to “pay for performance.” The fundamental objectives of the Company’s executive compensation program are to: (1) attract, retain and motivate high caliber executives necessary for Meritor’s leadership and growth; (2) recognize and reward company and individual performance through evaluation of each executive’s effectiveness in meeting strategic and operating plan goals; and (3) foster the creation of shareholder value through close alignment of the financial interests of executives with the investment interests of Meritor’s shareholders.
The Compensation Committee uses several basic practices and policies to carry out its philosophy and to meet the objectives of Meritor’s executive compensation program:
● | Competitive Compensation Packages. In order to attract and retain talented executives, the Compensation Committee designs total compensation packages to be competitive with those of other companies with which Meritor competes for talent, using benchmarking studies to determine market levels of compensation, as described below. |
● | Performance-Based Compensation. A significant portion of each Named Executive Officer’s total potential compensation is performance-based (in other words, the compensation is at risk because it is contingent on achieving strategic and operating plan goals that are intended to improve shareholder return). These goals are established to recognize Company performance against specified targets. The remainder of the compensation of the Named Executive Officers is comprised of base salary and service-based restricted share units. Annual incentives are 100% performance-based, as discussed in detail below under the heading “Elements of the Meritor Compensation Program – Components.” With respect to long-term incentives, for the three-year cycle beginning in fiscal |
● | Equity Awards and Stock Ownership Requirements. A portion of incentive compensation for executives is often comprised of equity and equity-based awards, which are intended to align the interests of the Company’s executives with those of shareholders. As noted above, all of the awards for the long-term incentive cycles in fiscal |
Market Analysis and Benchmarking
The Compensation Committee assesses the competitiveness of Meritor’s compensation program using data and studies compiled and provided by Pay Governance. Pay Governance provides a detailed annual competitive pay study. As part of the assessment process, the Compensation Committee compares the amount of each component and the total amount of direct compensation (defined below) for each executive officer with that for comparable officers at other peer companies in the durable goods manufacturing sector, including companies in the automotive sector that have executive officer positions comparable to the Company’s and with which the Company may compete for talented executives. The Compensation Committee reviewed the Company’s peer group with Pay Governance in July 20172020 and determined that it was still appropriate in light of the Company’s then current situation, and the same peer group was used in the Compensation Committee’s review of executive compensation for fiscal year 2017 and for fiscal year 2018.2021.
The peer group for the competitive analysis for fiscal year 2017 includes2021 included the following 20 companies:
AGCO Corporation | The Manitowoc Company, Inc. | |
American Axle & Manufacturing Holdings, Inc. | Modine Manufacturing Company | |
BorgWarner Inc. | Navistar International Corporation | |
Cooper-Standard Holdings, Inc. | Oshkosh Corporation | |
Dana Incorporated | Terex Corporation | |
Flowserve Corporation | The Timken Company | |
The Greenbrier Companies, Inc. | Trinity Industries, Inc. | |
Hyster-Yale Materials Handling, Inc. | ||
Visteon Corporation | ||
Wabash National Corporation | ||
Wabtech Corporation |
See “Elements of the Meritor Compensation Program – Overview and Analysis” below for information on how the Compensation Committee uses this peer group data in setting compensation.
The Compensation Committee (or the Board, of Directors, as appropriate) may also consider practices at other companies with respect to other elements of compensation, such as perquisites, retirement plans, and health and welfare benefits, in assessing the competitiveness and cost effectiveness of the Company’s compensation programs. Any such studies are done on a case-by-case basis, as needed, and may use a group of comparatorcomparable companies identified at the time by Pay Governance or other advisors.
As noted in “Peer Group Analysis Review” above, in connection with the Compensation Committee’s review of executive compensation for fiscal year 2022, Navistar International Corporation and BorgWarner Inc. were removed from, and Harley-Davidson, Inc. and LCI Industries were added to, the Company’s peer group.
Elements of the Meritor Compensation Program
Overview and Analysis
The primary components of Meritor’s executive compensation program are base salary, annual incentives and long-term incentives, collectively referred to herein as direct compensation. The aggregate of these components (in other words, the total compensation package), and the relative levels of equity and non-equity compensation that comprise direct compensation, are generally targeted in relation to competitive market rates among peer group companies, as described above. Although the Compensation Committee targets the median for the total package of direct compensation for an individual, particular elements of direct compensation may be either below or above the median, provided they are offset by other elements of direct compensation.median.
With this principle in mind, the Compensation Committee approves variations from the peer group revenue-adjusted median (adjusted for each individual based on the revenue responsibility of their respective operating units), or 50th50th percentile, base salary levels for some individuals based on their responsibilities, experience, expertise and performance. In addition, when recruiting new executives, base salary may be set at a premium above the median of the peer group in order to attract the most qualified candidates.
The Compensation Committee also believes that individuals should have an opportunity to earn above-median rewards for superior performance. Therefore, while the Compensation Committee looks at the median of the peer group in terms of the target annual and long-term incentive award for each position, it identifies a maximum potential payout for each position that would be significantly above median if maximum performance objectives are achieved. The range of potential payouts on annual and long-term incentives is described below, under the heading “Components.”
Each year, the Compensation Committee determines the appropriate mix among the components of direct compensation, and the appropriate mix of equity versus non-equity awards, and performance-based versus service-based awards. However, the compensation program contemplates that a significant portion of each executive’s direct compensation is performance-based and therefore is at risk. Performance-based awards, whether in the form of equity or non-equity awards, are tied to achievement of goals that are intended to improve, or reflect improvements in, shareholder
value (see the performance-based awards described under the heading “Components” below). In fiscal year 2021, 86% of our Chief Executive Officer’s target compensation and 68% of the average target compensation of our other Named Executive Officers was at risk.
Chief Executive Officer | Other NEOs | |
In conjunction with setting compensation for fiscal year 2017,2021, the Compensation Committee reviewed past pay-for-performance results over the tenure of each officer. The Compensation Committee was also aware of the potential value of outstanding long-term incentives, including the likelihood of their payout and vesting (based on achievement of performance objectives to date and on the levels of payout and vesting of past awards). This information was also implicit in the overall plan design used by Pay Governance in making recommendations for fiscal year 20172021 compensation.
In addition to direct compensation, special hiring or retention incentives have been put in place for certain executives to motivate them to join the Company or to continue their employment. Named Executive Officers also receive health and welfare benefits and are entitled to participate in the Company’s pension plans and savings plans on substantially the same basis as other employees.
Each component of the executive compensation program is discussed below.
Components
Base Salary.Salary. The Compensation Committee generally reviews and sets base salaries for the executive officers each fiscal year, customarily at its November meeting. Annual salary increases, if any, for executive officers are based on evaluation of each individual’s performance and on his or her level of pay compared to that for similar positions at peer group companies, as indicated by Pay Governance’s reports and survey data. The Compensation Committee from time to time also reviews and adjusts base salaries for executive officers at the time of any promotion or change in responsibilities. There were no base pay, promotion or responsibility changeMr. Craig and Mr. Villavarayan received salary adjustments in fiscal year 2017.March 2021, which were based on a plan for the transition of leadership of the Company from Mr. Craig (who assumed the title of Executive Chairman) to Mr. Villavarayan (who assumed the title of Chief Executive Officer and President). In connection with the transition, Mr. Craig’s compensation was reduced, and Mr. Villavarayan’s compensation was increased, to reflect the beginning of the transfer, with this reallocation resulting in no incremental compensation cost to the Company on an annualized basis. With Mr. Craig’s retirement, the Committee will continue to assess the compensation of Mr. Villavarayan and the leaders of the Company’s business and functional units based on each individual’s scope and responsibilities and the corresponding market analysis and benchmarking studies provided by Pay Governance. Messrs. Anderson, Bowes and Nelligan received salary adjustments in connection with an increase in their responsibilities in March 2021.
Annual Incentives.The Incentive Compensation Plan, as amended referred to as the ICP,(the “ICP”) was last approved by the Company’s shareholders in January 2015. At that time, the ICP was amended and restated to (1) add a clawback provision applicable to awards that are subsequently the subject of a restatement of financial statements within one year due to misconduct or culpable conduct and (2) reflect the change in the name of “ArvinMeritor, Inc.” to “Meritor, Inc.” The performance measures under the ICP were also reapproved by shareholders at that time, for purposes of Section 162(m) of the IRC.
Under the ICP, most employees (including the Named Executive Officers) can earn annual incentive payouts based on Company and/or business segment performance against goals established by the Compensation Committee at the beginning of the Company’s fiscal year. The annual incentive goals for fiscal year 20172021 were based on the following two performance measures, which are defined as set forth below:
Adjusted EBITDA Margin | = | income (loss) from continuing operations before interest, income taxes, depreciation and amortization, non-controlling interest in consolidated joint ventures, loss on sale of receivables, restructuring expenses, asset impairment charges and other special items approved by the Compensation Committee divided by sales | ||
Free Cash Flow | = | cash flows provided by (used for) operating activities from continuing operations, less capital expenditures of continuing operations, excluding all restructuring payments and other special items as approved by the Compensation Committee |
These two components (Adjusted EBITDA margin and Free cash flow) areperformance measures were equally weighted for the purposes of potential annual incentives, and each metric ismeasure was independent of the other. The Compensation Committee chose these measures because Adjustedadjusted EBITDA margin and Freefree cash flow align with the Company’s financial objectives, and also because they are commonly used by the investment community to analyze operating performance and entity valuation and, as such, are factors in the value of shareholders’ investment in the Company.
In November 2016,2020 and January 2021, the Compensation Committee also established target awards, stated as a percentage of base salary, for executive officers, including Messrs. Villavarayan, Craig, Nowlan, Plomin, SpeedAnderson, Bowes, Nelligan and Villavarayan.Ms. Lim-Johnson. Target awards for fiscal year 20172021 were 100%110% for Mr. Craig;Villavarayan; 120% for the period Mr. Craig served as Chief Executive Officer and President and 75% for the period Mr. Craig served as Executive Chairman, on a pro-rated basis; 75% for Mr. Nowlan; andAnderson; 65% for each of Messrs. Plomin, SpeedMs. Lim-Johnson; 60% for Mr. Bowes; and Villavarayan.60% for Mr. Nelligan. See the table under the headingGrants of Plan-Based Awards in Fiscal Year 20172021 below for information on the target, minimum and maximum awards for each Named Executive Officer for fiscal year 2017.2021.
To determine whether annual incentive awards arewere paid, performance for the year iswas measured against specified target levels for each component.performance measure. The target for 100% annual incentive achievement was based on achieving the levels of Adjustedadjusted EBITDA margin and Freefree cash flow defined in the Company’s annual operating plan, referred to as the AOP.plan. Performance of greater than 90% of the AOP level7.5% for Adjustedadjusted EBITDA margin and generating greater than $25$60 million of Freefree cash flow arewere required to achieve a payout for that particular component.performance measure.
The following chart summarizes payout calculations for each portion of the incentive payment:
Adjusted EBITDA | Payout (% of | ||||||||||||
Margin | Target Award) | Free Cash Flow | |||||||||||
Maximum | 10.7% | 200% | $ | 140 million | |||||||||
Target | 10.0% | 100% | $ | 85 million | |||||||||
Threshold | 9.0% | 0% | $ | 25 million |
Adjusted EBITDA Margin | Payout (% of Target Award) | Free Cash Flow | |||||||||||||
Maximum | ≥11.5% | 200% | $ | 155 million | |||||||||||
Target | 9.0% | 100% | $ | 80 million | |||||||||||
Threshold | ≤7.5% | 0% | <$ | 60 million |
The calculated award for an individual cannot exceed 200% of his or her target award. The Compensation Committee has discretion to adjust an award once it is calculated (either upward by up to 50% or downward by up to 100%), or to make an additional award to reflect individual performance or special achievements. However, for Named Executive Officers, only downward adjustments are permitted under the ICP. Under the terms of the ICP, no discretionary increase in an award may be made for a Named Executive Officer.
In fiscal year 2017,2021, the Company exceeded the target levels for both measures, achieving Adjustedadjusted EBITDA margin of 10.37%10.72% and Freefree cash flow of $99$120 million. The calculations of 20172021 performance with respect to the performance measures established by the Compensation Committee did not include any adjustments for unusual, non-recurring or other similar items. Accordingly, the Compensation Committee approved annual incentive payouts to the Named Executive Officers at 158.8%151.3% payout of the target award for the Adjustedadjusted EBITDA margin performance objectivemeasure and at 147.5%
122.0% payout of the target award for the Freefree cash flow performance objectivemeasure for fiscal year 2017,2021, for a combined payout at 153.1%136.6% of target awards. See the column headed “Non-Equity Incentive Plan Compensation” and the related footnote in the table under the headingFiscal Year 20172021 Summary Compensation Tablebelow for total payouts of annual incentives to the Named Executive Officers for fiscal year 2017.2021.
Long-Term Incentives
Overview. The Compensation Committee provides long-term incentives to key employees, including the Named Executive Officers, which incentives are tied to various performance or service objectives over three-year cycles. Each year, the Compensation Committee considers the types of award vehiclesawards to be used and the performance or service objectives and targets on which payout of each type of award depends. The Company has used a number of long-term incentive plans for awards in the past, most recently the 20102020 LTIP.
Types of Awards.The Compensation Committee selects the types and mix of awards for long-term incentives each year after reviewing Pay Governance’s report and survey data on peer group compensation, market practices, shares available for grant under the Company’s long-term incentive plans, and goals to be achieved. TheIn the past three years, the Compensation Committee has used two types of awards in the past three years,awards: awards under performance plans and restricted share units, as further described below. Both are intended to align management’s interests with those of shareholders, either through performance objectives tied to metrics that reward creation of shareholder value, or equity and equity-based awards, or both.
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○ | F |
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○ | F |
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** | The dollar increase of fiscal year 2022 revenue above pro forma fiscal year 2019 revenue, where pro forma fiscal year 2019 revenue is fiscal year 2019 revenue adjusted to take into account (1) changes in end market production (in major, measurable markets), (2) currency translation, (3) contractual price downs (productivity) and (4) contractual changes in product prices (up or down) due to changes in referenced steel indices, in each |
*** | Cash flows provided by (used for) operating activities less capital expenditures including planned restructuring payments and discontinued operations and excluding other special items as approved in advance by the Compensation Committee |
○ | Fiscal 2021-2023 performance cycle: Awards were 100% equity-based, of |
For each performance cycle, the Compensation Committee also establishes target awards, stated as dollar amounts, for each of the Named Executive Officers. Participants can earn awards at the end of the three-year performance period from 0% to 200% of target awards based on actual performance against specified goals. No awards for any performance measure may be earned unless the applicable threshold for payout over the period is met as set forth below. No earnings are accrued or paid on these awards. For the performance share units awarded for the fiscal 2019-2021, fiscal 2020-2022 and fiscal 2021-2023 cycles, payouts are intended to be in the form of Common Stock. However, in all cases, payout will be in the form of cash, not in the form of shares of Common Stock, if there is an insufficient number of authorized shares remaining for awards under the 2010 LTIP or 2020 LTIP to make such payouts, or if applicable grant limitations in the 2010 LTIP or 2020 LTIP restrict payout in shares, in each case as applicable.
○ | Fiscal |
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Adjusted Diluted | ||||||
Adjusted | Earnings per | % of Award | ||||
EBITDA Margin | Share | Earned | ||||
(75% of award) | (25% of award) | and Paid Out | ||||
Maximum Payout | 11.5% | $2.35 | 200% | |||
Target Payout | 10.5% | $2.05 | 100% | |||
Threshold Payout | 10.0% | $1.75 | 50% |
The weighting, targets and potential payouts for the fiscal 2019-2021 cycle were as follows:
In response to retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the Company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment, the Compensation Committee adjusted the threshold targets of the fiscal 2019-2021 performance cycle, lowering them from greater than 10.5% adjusted EBITDA margin and greater than $1.85 of adjusted diluted earnings per share to greater than 8.0% adjusted EBITDA margin and greater than $0.75 of adjusted diluted earnings per share, respectively. The target and maximum targets were not modified. See “Fiscal Year 2021 Long-term Incentive Payouts” below for information on achievement of targets and actual payouts for this cycle, and the effect of the adjustment on the compensation paid to the Named Executive Officers. |
For cycles in progress for which it is still possible to earn an award, but for which no award has yet been earned, the following charts summarize the weighting, targets and potential payouts at different levels of performance of the applicable objective: |
○ | Fiscal |
Adjusted EBITDA Margin (25% of award) | Adjusted Diluted Earnings per Share (25% of award) | New Business Wins (25% of award) | Free Cash Flow Conversion (25% of award) | % of Award Earned and Paid Out | ||||||||||||||||
Maximum Payout | ≥13.3% | ≥$4.80 | ≥$400,000,000 | ≥92.5% | 200% | |||||||||||||||
Target Payout | 12.5% | $4.00 | $300,000,000 | 75.0% | 100% | |||||||||||||||
Threshold Payout | ≤11.5% | ≤$3.25 | ≤$225,000,000 | ≤50.0% | 0% |
Adjusted Diluted | ||||||
Adjusted | Earnings per | % of Award | ||||
EBITDA Margin | Share | Earned | ||||
(50% of award) | (50% of award) | and Paid Out | ||||
Maximum Payout | 12.0% | $3.00 | 200% | |||
Target Payout | 11.0% | $2.25 | 100% | |||
Threshold Payout | 10.0% | $1.50 | 0% | |||
○ | Fiscal |
Adjusted Diluted | Revenue | Net Debt to | ||||||||||||||||||
Earnings per | Growth Above | Adjusted | % of Award | |||||||||||||||||
Share | Market | EBITDA | Earned | |||||||||||||||||
(50% of award) | (25% of award) | (25% of award) | and Paid Out | Adjusted EBITDA Margin (50% of award) | Adjusted Diluted Earnings per Share (50% of award) | % of Award Earned and Paid Out | ||||||||||||||
Maximum Payout | $3.25 | 27.5% | 1.1 | 200% | ≥13.5% | ≥$4.30 | 200% | |||||||||||||
Target Payout | $2.84 | 20.0% | 1.5 | 100% | 12.5% | $3.60 | 100% | |||||||||||||
Threshold Payout | $1.60 | 0.0% | 3.1 | 0% | ≤11.5% | ≤$2.90 | 0% |
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As described above, with respect to each of the fiscal 2019-2021 cycle, fiscal 2020-2022 cycle and fiscal 2021-2023 cycle, the 2016-2018 cycle and the 2017-2019 cycle, 30%, 40% and 40%, respectively, of the total awards were in the form of service-based restricted share units.
The Compensation Committee’s practice in recent years with respect to timing of annual equity-based awards has been to establish December 1 as the standard grant date, whenever possible. If a special meeting is required in December in order to approve the grants for the three-year cycle, the date of grant may be delayed until the first business day in January. The timing of the grant date does not impact the terms of the grant of restricted share units. However, under the FASB’s compensation guidance, the Company measures the fair value of stock-based awards, which is recognized in the Company’s financial statements, based on the NYSE Closing Price on the grant date. The purpose of establishing a standard grant date for the Company’s grant of equity-based long-term incentive awards is to avoid any issue of whether a grant precedes or follows public disclosure of material information. The Company normally announces its fiscal year earnings in mid-November and use of December 1 (or the first business day in January, as the case may be) as a standard grant date provides the market sufficient time to absorb and reflect the information, whether positive or negative, prior to measurement of fair value for accounting purposes.
Fiscal Year 20172021 Long-term Incentive Payouts.In fiscal year 2015,2019, the Compensation Committee provided long-term incentives to the Named Executive Officers under the 2010 LTIP in the form of target awards of performance share units under a performance plan for the three-year period ended September 30, 2017,2021, as described above. The awards, which vested on December 1, 2017,2021, were granted based on an assumed share price of $13.74$16.50 per share, which was the NYSE Closing Price on the date of grant. As described above, in response to the COVID-19 pandemic the Compensation Committee adjusted the threshold targets of the fiscal 2019-2021 performance cycle, lowering them from greater than 10.5% adjusted EBITDA margin and greater than $1.85 of adjusted diluted earnings per share to greater than 8.0% adjusted EBITDA margin and greater than $0.75 of adjusted diluted earnings per share, respectively. The target and maximum targets were not modified. As a result of the adjustment, the applicable grant values of the awards were modified to an assumed share price of $26.98, which was the NYSE Closing Price on December 1, 2020, the effective date of modification. If the Compensation Committee had not adjusted the threshold targets of the fiscal 2019-2021 performance cycle, the Company would have still exceeded the threshold level for both measures (for the effects of the adjustment on the compensation paid to the Named Executive Officers, see the column headed “Stock Awards” and footnote 4 in the table under the heading Fiscal Year 2021 Summary Compensation Table below).
For the three-year performance period ended September 30, 2017,2021, the Company fell short ofexceeded the threshold level for the adjusted EBITDA margin performance measure and exceeded the target levelslevel for both measures,the adjusted diluted earnings per share performance measure, achieving Adjustedadjusted EBITDA margin of 10.37%10.72% and Adjustedadjusted diluted earnings per share of $1.46.$2.94. The calculations of performance over the three-year period with respect to the performance measures established by the Compensation Committee did not include any adjustments for unusual, non-recurring or other similar items. Accordingly, the Compensation Committee approved long-term incentive payouts to the Named Executive Officers at 87.0%74.6% payout of the target award for the Adjustedadjusted EBITDA margin performance objective and at 0.0%122.5% payout of the target award for the Adjustedadjusted diluted earnings per share objective for fiscal year 2017,2021, for a combined payout of 65.3%98.5% of target performance share units. See the table under the headingOutstanding Equity Awards at Fiscal Year-End 20172021 and related footnotes below for information with respect to the performance share units that vested on December 1, 20172021 for these individuals.
Fiscal Year 20172021 Long-term Incentive Awards.In fiscal year 2017,2021, long-term incentives granted to the Named Executive Officers were 100% equity-based in the form of grants of performance share units (60% of the award) and service-based restricted share units (40% of the award). The performance share units will be earned generally based upon achievement of specific measures and goals over the fiscal 2017-20192021-2023 performance period as described above. The Compensation Committee established target awards, stated as dollar amounts, for all of the Named Executive Officers in November 2016.2020 and January 2021. The number of units in each grant was determined by dividing these dollar amounts by an assumed share price of $12.77,$26.98 or $26.84, which waswere the NYSE Closing PricePrices on the datedates of grant.grant, as applicable. See “Types of Awards–Awards under Performance Plans” above for more information on the metrics and other terms applicable to these awards and seeGrants of Plan-Based Awards for Fiscal Year 20172021 below for information on the specific awards made to the Named Executive Officers.
Pension and Retirement Plans.The Company maintains a tax-qualified defined contribution 401(k) savings plan referred to as the Savings Plan,(the “Savings Plan”), as well as a non-qualified supplemental savings plan referred to as the Supplemental(the “Supplemental Savings Plan,Plan”), that provides for contributions without regard to the limitations imposed by the IRC on the Savings Plan.Plan by the Internal Revenue Code of 1986, as amended (the “IRC”). All of the Named Executive Officers may participate in the Company’s Savings Plan and Supplemental Savings Plan on the same basis as other eligible employees.
Under the Savings Plan, a participant can defer up to 50% of eligible pay, on a before-tax basis, subject to annual IRC limits, and the Company matches deferrals at the rate of 100% on the first 3% and 50% on the next 3% of eligible pay. “Eligible pay” includes base salary and annual incentives under the ICP. If an executive elects to participate in the Supplemental Savings Plan, he or she can continue to contribute up to 20% of eligible pay on a before-tax basis, even though his or her Savings Plan contributions or eligible pay have reached the annual IRC limits. Both participant contributions and Company matching contributions to the Savings Plan and Supplemental Savings Plan are always 100% vested. In response to the COVID-19 pandemic, the Company suspended its contributions under the Savings Plan and Supplemental Savings Plan from May 2020 through the first quarter of fiscal year 2021.
Contributions made by Named Executive Officers to the Savings Plan and Supplemental Savings Plan in fiscal year 20172021 are included in the column headed “Salary,” and the Company’s matching contributions are included in the column headed “All Other Compensation,” in each case in the table under the headingFiscal Year 20172021 Summary Compensation Tablebelow.
The Company maintains a tax-qualified, non-contributory defined benefit pension plan referred to as the Pension Plan,(the “Pension Plan”) that covers eligible employees hired before October 1, 2005, and a non-qualified supplemental pension plan referred to as the Supplemental(the “Supplemental Pension Plan,Plan”) that provides benefits to the participants without regard to the limitations imposed by the IRC on qualified pension plans. Messrs. Speed andMr. Villavarayan participateparticipates in the Pension Plan. Mr. Villavarayan also participates in a Canadian defined benefit pension plan (seeFiscal Year 20172021 Pension Benefitsbelow). When information with respect to Mr. Villavarayan’s Pension Plan participation is provided, it includes his participation in the Canadian plan. The present value of accumulated pension benefit for Messrs. Speed andMr. Villavarayan areis reported in the table under the headingFiscal Year 20172021 Pension Benefitsbelow.
Employees hired on or after October 1, 2005 are not eligible to participate in the Pension Plan or the Supplemental Pension Plan, and the Company instead makes additional contributions each year (ranging from 2% to 4% of base salary plus annual incentive, depending on age) to their accounts under the Savings Plan or Supplemental Savings Plan. Benefits under the Pension Plan and Supplemental Pension Plan were frozen beginning January 1, 2008 and replaced with
additional annual Company contributions (ranging from 2% to 4% of base salary plus annual incentive, depending on age) to the Savings Plan and Supplemental Savings Plan for the accounts of eligible employees (seeFiscal Year 20172021 Pension Benefitsbelow for further information). In response to the COVID-19 pandemic, the Company suspended these additional contributions to the Savings Plan and Supplemental Savings Plan from May 2020 through the first quarter of fiscal year 2021. The amounts contributed by the Company under the Savings Plan or Supplemental Savings Plan on behalf of Named Executive Officers as pension contributions are included in the column headed “All Other Compensation” in the table under the headingFiscal Year 20172021 Summary Compensation Tablebelow.
Perquisites. In fiscal year 2006, the Compensation Committee determined to eliminate most perquisite programs (including company cars, club memberships and reimbursement for financial services) and related gross-ups for payment of income taxes and replace some of them with uniform cash payments. As a result, outside of these uniform cash payments, the value of total perquisites provided in fiscal year 20172021 for each Named Executive Officer was less than $10,000 with the exception of certain perquisites related to Mr. Plomin’s foreign work assignment (see the column headed “All Other Compensation” and footnote 7 in the table under the headingFiscal Year 20172021 Summary Compensation TableTable below).
Health and Welfare Benefits.The Company maintains health and welfare benefits, including medical, dental, vision, disability and life insurance programs, and the Named Executive Officers are entitled to participate in these programs on the same basis as other employees. Providing these benefits is necessary for the Company to remain competitive with other employers.
Employment Agreements.Agreements and Retention/Signing Awards. The Company entered into agreements with Messrs. Villavarayan, Craig, Anderson, Bowes and Nowlan,Nelligan in fiscal years 2015 and 2013, respectively, with Messrs. Plomin and Speed in December 2015March 2021 and with Mr. VillavarayanMs. Lim-Johnson in February 2016,July 2020, relating to certain terms of their employment (including the effects of termination without cause). The purpose of these agreements was to provide incentives to retain these individuals in officer positions. The current employment agreements with the Named Executive Officers are described below under the headingAgreements with Named Executive Officers - Employment-Employment Agreements.
In November 2020, the Compensation Committee approved a cash retention bonus of $287,500 for Mr. Anderson that is payable in December 2021. This amount will be reported in the Company’s proxy statement for its 2023 Annual Meeting of Shareholders. Mr. Bowes received a signing bonus of $50,000 in fiscal year 2021. This bonus was approved by senior management because it occurred prior to his becoming an executive officer.
Stock Ownership Guidelines
As noted above, alignment of the financial interests of Meritor’s key executives with those of its shareholders is a fundamental objective of the Compensation Committee’s compensation program and helps to carry out its “pay for performance” philosophy. Accordingly, Meritor has for many years set ownership guidelines that require each Named Executive Officer and other executives to own a minimum number of shares of Common Stock or share equivalents. The current guidelines require ownership of a number of shares of Common Stock equal to the following:
Position Held | Minimum | |
Shares Owned | ||
Executive Chairman and Chief Executive Officer | 6 times Annual Base Salary | |
SVP and Chief Financial Officer, SVP, Chief Legal Officer and Corporate Secretary and Business | 3 times Annual Base Salary | |
1.5 times Annual Base Salary | ||
Other | 0.5 times Annual Base Salary |
Shares owned directly (including unvested restricted shares) or through the Savings Plan and Supplemental Savings Plan and unvested restricted share units are considered in determining whether an executive meets the ownership guidelines. Shares of Common Stock subject to performance share units are not considered. The ownership guidelines provide a transition period during which executives mayprohibit all sales of Common Stock by an executive until they achieve compliance. In general, this period ends as of the date that is five years after the date the ownership guidelines become applicable to the executive.compliance with their requirements. As of the end of fiscal year 2017, all of2021, Messrs. Villavarayan, Bowes and Nelligan were the only Named Executive Officers were in compliancenot yet compliant with thetheir ownership guidelines, taking into account permitted transition periods.requirements due to their recent promotion or hiring, as applicable.
Clawback Policy
The Company’s 2010 LTIP, 2020 LTIP and ICP each hasall have a clawback provision applicable to awards that are calculated based upon the achievement of financial results that are subsequently the subject of a restatement of financial statements within one year following the payment or settlement of the award due to misconduct or culpable conduct.conduct by the participant who received the award. The Compensation Committee will review the Company’s clawback policy in light of the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning executive compensation policies when applicable regulations are issued.
Anti-Hedging and Anti-Pledging Policies
The Board of Directors has adopted, as part of the Company’s insider trading policy, prohibitions against directors, officers and other employees, and certain related persons, from (1) selling Company securities “short”; (2) trading in exchange-traded or other third party options, warrants, puts, or calls or similar instruments on Company securities; (3) holding Company securities in margin accounts; or (4) engaging in any hedging or monetization transactions involving Company securities, including through the use of financial instruments such as forward sales contracts, equity swaps, collars and certain exchange funds designed to hedge or offset any decrease in the market value of Company securities. Transactions involving a broad-based index or a broad-based fund that include Company securities in addition to securities of other companies, including, for example, transactions involving exchange funds pursuant to which an insider divests Company securities, are not considered hedging transactions.
The Board of Directors has also adopted, as part of the Company’s insider trading policy, (1) a prohibition against officers, other employees and certain related persons pledging Company securities as collateral for a loan or other financing arrangement and (2) a provision permitting independent directors to pledge Company securities as collateral for a loan or other financing arrangement with the approval of both the Company’s General CounselChief Legal Officer and Executive Chairman. Approval of pledging of securities by independent directors is based on the circumstances of the request, including: the percentage of securities held by the individual that is currently pledged; compelling need that would justify the pledge; and the magnitude of aggregate pledged shares in relation to total shares outstanding, market value or trading volume. In any event, new pledging transactions are prohibited during “blackout” periods, when all transactions in Company securities are prohibited. There were no new or outstanding pledging transactions by directors and officers duringDuring fiscal year 2017.2021, one independent director pledged approximately 59% of their Company securities as collateral while still remaining in compliance with the director stock ownership policy, which does not count pledged shares as owned under the policy.
Consideration of Shareholder Advisory Vote on Executive Compensation
At the Company’s 20172021 Annual Meeting held on January 26, 2017, approximately 95%28, 2021, more than 98% of the voting shareholders approved, on an advisory basis, the compensation of the executive officers named in the proxy statement for that meeting, with 64,079,73164,439,150 shares voting for approval, 3,096,816907,773 shares voting against approval and 284,45661,518 shares abstaining. The Compensation Committee considers this annual vote in its deliberations with respect to the future direction of executive compensation. The Compensation Committee believes the advisory vote results demonstrate significant, continuing support for the Company’s executive compensation program, and it chose not to make any substantial changes to the existing program for fiscal year 20182022 specifically in response to the 20172021 advisory vote results.
Tax Considerations
Section 162(m) of the IRC generally limits the deductibility of compensation paid to certain executive officers“covered employees” to $1,000,000 per year. There isFor fiscal year 2018, these covered employees included the Company’s Chief Executive Officer and the three most highly compensated executive officers other than the Chief Financial Officer. For fiscal year 2018 and certain prior years, there was an exception to this ruleexemption from the Section 162(m) limit for certain “performance-based” compensation, that is “performance based,” as defined under Section 162(m).
Effective for taxable years beginning on and after January 1, 2018, the IRC. Tax Cuts and Jobs Act of 2017 repealed the performance-based compensation exemption. This repeal was effective beginning in fiscal year 2019. Certain transitional relief applies to performance-based compensation provided pursuant to a binding written agreement that was in effect on November 2, 2017 and not materially modified after that date, provided that certain requirements are met.
Annual incentive awards and certain long-term incentive awards arefor fiscal year 2018 and certain earlier fiscal years were generally intended to be “performance based,“performance-based,” (as then defined under Section 162(m)) but depending upon factors including the design of the plan, may or may not behave been subject to the deductibility limit. However, salaries, service-based restricted shares and restricted share units dodid not qualify as “performance based”performance-based compensation for this purpose.
The Tax Cuts and Jobs Act of 2017 also expanded the definition of covered employee effective for taxable years beginning on and after January 1, 2018. Beginning with fiscal year 2019, “covered employees” included the Company’s Chief Executive Officer, Chief Financial Officer, the three other most highly compensated executive officers of the Company required to be included in the Summary Compensation Table and any individual who was considered a covered employee for fiscal year 2018. The American Rescue Plan Act of 2021, which was enacted in March 2021, further expanded the definition of “covered employee” to include the next five highest compensated employees of the Company effective for taxable years beginning after December 31, 2026.
The Compensation Committee believes that Section 162(m) is only one of several relevant considerations in setting compensation. The Compensation Committee also believes that Section 162(m) should not be permitted to compromise its ability to design and maintain executive compensation arrangements that, among other things, are intended to attract, motivate and help retain a highly qualified and successful management team to lead Meritor. As a result, the Compensation Committee retains the flexibility to provide compensation it determines to be in the best interests of Meritor and its shareholders even if that compensation ultimately is not deductible for tax purposes. Moreover, even if the Compensation Committee intends to grant compensation that qualifies as “performance based” for purposes of Section 162(m), it is not guaranteed that such compensation will so qualify or ultimately will be deductible by the Company.
Cautionary Statement
The information appearing in thisCompensation Discussion and Analysis, and elsewhere in this proxy statement as to performance metrics, objectives and targets relates only to incentives established for the purpose of motivating executives to achieve results that will help to enhance shareholder value. This information is not related to the Company’s expectations of future financial performance and should not be considered as or correlated with any guidance issued by the Company regarding its future earnings, Freefree cash flow or other financial or performance measures.
FISCALYEAR 20172021 SUMMARY COMPENSATION TABLE
TheinformationsetThe information set forth below reflectscompensation,reflects compensation, from allsources, awardedto,all sources, awarded to, earned by or paid to the ChiefExecutiveChief Executive Officer (which includes both Messrs. Villavarayan and Craig for fiscal year 2021), the ChiefFinancialOfficerChief Financial Officer and the three other most highlycompensatedhighly compensated executive officersof theCompanyserving onSeptember30, 2017, who we refer tocollectivelyasofficers of the NamedExecutive Officers,Company serving on September 30, 2021 (collectively, the “Named Executive Officers”), for the fiscal years endedSeptember30, 2015, 2016ended September 30, 2019, 2020 and 2017, asapplicable(except2021, as applicable (except as noted). Thecompensation reportedbelowThe compensation reported below is forservices renderedin allcapacitiestoMeritorand itssubsidiaries.for services rendered in all capacities to Meritor and its subsidiaries.
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qualified | ||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||
Fiscal | Stock | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||
Name and Principal Position(1) | Year | Salary ($)(2) | Bonus ($) | Awards ($)(3) | Compensation ($)(4) | Earnings ($)(5) | Compensation ($)(6) | Total ($) | ||||||||||||||||||
Jeffrey A. Craig | 2017 | 900,000 | 0 | 3,599,991 | 1,377,900 | 0 | 184,359 | 6,062,250 | ||||||||||||||||||
Chief Executive Officer and | 2016 | 891,667 | 0 | 3,499,998 | 954,900 | 0 | 166,568 | 5,513,133 | ||||||||||||||||||
President | 2015 | 733,333 | 0 | 3,500,000 | 1,833,030 | 0 | 142,069 | 6,208,432 | ||||||||||||||||||
Kevin A. Nowlan | 2017 | 500,000 | 0 | 964,991 | 574,125 | 0 | 67,400 | 2,106,516 | ||||||||||||||||||
Senior Vice President and Chief | 2016 | 495,833 | 0 | 849,996 | 397,875 | 0 | 64,992 | 1,808,696 | ||||||||||||||||||
Financial Officer | 2015 | 466,667 | 0 | 699,998 | 453,678 | 0 | 63,095 | 1,683,438 | ||||||||||||||||||
Joseph A. Plomin | 2017 | 435,000 | 0 | 774,999 | 432,890 | 0 | 212,399 | 1,855,288 | ||||||||||||||||||
Senior Vice President and | 2016 | 430,167 | 0 | 534,991 | 299,998 | 0 | 249,988 | 1,515,144 | ||||||||||||||||||
President, International | 2015 | 405,000 | 0 | 481,092 | 360,748 | 0 | 283,111 | 1,529,951 | ||||||||||||||||||
Robert H. Speed | 2017 | 435,000 | 0 | 774,999 | 432,890 | 0 | 83,268 | 1,726,157 | ||||||||||||||||||
Senior Vice President and | 2016 | 430,167 | 0 | 534,991 | 299,998 | 9,973 | 73,628 | 1,348,757 | ||||||||||||||||||
President, Aftermarket & Trailer | ||||||||||||||||||||||||||
and Chief Procurement Officer | ||||||||||||||||||||||||||
Chris Villavarayan | 2017 | 435,000 | 0 | 774,999 | 432,890 | 0 | 83,268 | 1,726,157 | ||||||||||||||||||
Senior Vice President and | 2016 | 424,125 | 0 | 534,984 | 299,998 | 17,768 | 74,160 | 1,351,035 | ||||||||||||||||||
President, Americas | 2015 | 405,000 | 30,000 | 481,092 | 296,728 | 3,664 | 66,727 | 1,283,211 |
Name and Principal Position(1) | Fiscal Year | Salary ($)(2) | Bonus ($)(3) | Stock Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||||||||
Chris Villavarayan | 2021 | 822,500 | 0 | 5,274,186 | 1,404,931 | 0 | 86,344 | 7,587,961 | |||||||||||||||
Chief Executive Officer and President (principal executive officer) | 2020 | 553,073 | 0 | 1,464,990 | 136,325 | 17,044 | 109,355 | 2,280,787 | |||||||||||||||
2019 | 575,000 | 0 | 1,099,989 | 708,944 | 26,557 | 120,835 | 2,531,325 | ||||||||||||||||
Jeffrey A. Craig | 2021 | 833,333 | 0 | 6,657,734 | 1,112,164 | 0 | 85,933 | 8,689,164 | |||||||||||||||
Executive Chairman of the Board (former principal executive officer) | 2020 | 846,667 | 0 | 4,999,980 | 285,600 | 0 | 217,044 | 6,349,291 | |||||||||||||||
2019 | 1,000,000 | 0 | 4,349,994 | 1,802,400 | 0 | 246,723 | 7,399,117 | ||||||||||||||||
Carl D. Anderson II | 2021 | 607,083 | 0 | 1,438,965 | 645,435 | 0 | 66,593 | 2,758,076 | |||||||||||||||
Senior Vice President and Chief Financial Officer | 2020 | 482,135 | 0 | 1,614,987 | 117,875 | 0 | 91,054 | 2,306,051 | |||||||||||||||
2019 | 422,027 | 0 | 749,972 | 546,352 | 0 | 73,704 | 1,792,055 | ||||||||||||||||
Timothy Bowes | 2021 | 455,417 | 50,000 | 609,957 | 405,702 | 0 | 90,766 | 1,611,842 | |||||||||||||||
Senior Vice President and President, Electrification, Industrial and North America Aftermarket | |||||||||||||||||||||||
John Nelligan | 2021 | 459,583 | 0 | 686,196 | 405,702 | 0 | 53,188 | 1,604,669 | |||||||||||||||
Senior Vice President and President, Truck, Americas | |||||||||||||||||||||||
Hannah S. Lim-Johnson | 2021 | 460,000 | 0 | 669,994 | (8) | 408,434 | 0 | 61,262 | 1,599,690 | ||||||||||||||
Former Senior Vice President, Chief Legal Officer and Corporate Secretary | 2020 | 70,917 | 0 | 669,980 | 0 | 0 | 5,184 | 746,081 | |||||||||||||||
(1) | The table reflects the positions held with Meritor at September 30, |
Information for | |
years. | |
(2) | This column includes for fiscal year |
(3) | |
(4) | As noted in Compensation Discussion and Analysis above, the Compensation Committee adjusted the threshold targets of the fiscal 2019-2021 performance cycle of the 2010 LTIP in response to retention and attrition concerns resulting from the impact of the COVID-19 pandemic. The target and maximum opportunities for the fiscal 2019 grants were not increased. Although no incremental awards were granted as a result of these adjustments, the amounts shown in this column include for fiscal year |
Villavarayan, Craig, Anderson and Nelligan; $20.68 on January 31, 2019 for an award to Mr. Anderson; and $20.88 on April 1, 2019 for an award to Mr. Anderson. The NYSE Closing Price on the December 1, 2020 modification date was $26.98. Information on the assumptions used in valuation of the grants is included in Note Assuming achievement of the performance criteria at the maximum levels, the grant date fair value of the restricted share units and performance share units | |
This column includes for fiscal year | |
For fiscal year | |
This column includes the following items for fiscal year |
Jeffrey A. | Kevin A. | Joseph A. | Robert H. | Chris | ||||||||||||||||||||||
Type of Compensation | Craig | Nowlan | Plomin | Speed | Villavarayan | |||||||||||||||||||||
Employer savings plan contributions | $ | 148,392 | $ | 39,086 | $ | 58,709 | $ | 55,125 | $ | 55,125 | ||||||||||||||||
Cash allowances in lieu of perquisites | 33,996 | 27,000 | 27,000 | 27,000 | 27,000 | |||||||||||||||||||||
Group excess liability insurance premium | 1,971 | 1,314 | 1,143 | 1,143 | 1,143 | |||||||||||||||||||||
Miscellaneous expenses related to foreign assignment | — | — | 125,547 | (A) | — | — |
Chris | Jeffrey A. | Carl D. | Timothy | John | Hannah S. | |||||||||||||||||
Type of Compensation | Villavarayan | Craig | Anderson II | Bowes | Nelligan | Lim-Johnson | ||||||||||||||||
Employer savings plan contributions | $53,700 | $50,359 | $38,267 | $30,612 | $29,767 | $27,507 | ||||||||||||||||
Cash allowances in lieu of perquisites | 31,083 | 34,000 | 27,000 | 22,417 | 22,417 | 27,000 | ||||||||||||||||
Group excess liability insurance premium | 1,561 | 1,574 | 1,326 | 995 | 1,004 | 1,005 | ||||||||||||||||
Lump sum repayments for base pay reductions taken during fiscal year 2020 | — | — | — | 36,742 | — | 5,750 |
GRANTSOF PLAN-BASEDPLAN-BASED AWARDSINFISCALYEAR 20172021
TheCompensation Committeemade thefollowinggrantsThe Compensation Committee made the following grants to the NamedExecutive OfficersunderNamed Executive Officers under the ICP and the 20102020 LTIP in fiscal year 2017.Noconsiderationwas2021. No consideration was paid by the NamedExecutive Officersfor theseawards.NoNamed Executive Officers for these awards. No stock options were granted in fiscal year 2017.2021.
Date of Compensation Committee Action | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Plan Name | Grant Date | Type of Award | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chris Villavarayan | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 40,000 | 80,000 | 40,000 | 419,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under | LTIP | share units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Estimated Future Payouts Under | modification | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards(1) | Equity Incentive Plan Awards(2) | 2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 32,579 | 65,158 | 32,579 | 878,981 | |||||||||||||||||||||||||||||||||||||||||||||||||||
All Other | LTIP | share units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock | Grant Date | 2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 21,720 | 586,006 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Date of | Awards: | Fair Value of | LTIP | share units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation | Number of | Stock and | 2020 | 5/6/2021 | 1/27/2021 | Performance | — | — | — | — | 75,782 | 151,564 | 75,782 | 2,033,989 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Plan | Grant | Committee | Type of | Threshold | Target | Maximum | Threshold | Target | Maximum | Shares of Stock | Option | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Name | Date | Action | Award | ($) | ($) | ($) | (#) | (#) | (#) | or Units (#)(3) | Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 5/6/2021 | 1/27/2021 | Restricted | — | — | — | — | — | — | 50,522 | 1,356,010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/4/2020 | 11/4/2020 | Annual | — | 1,028,500 | 2,057,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
and | incentive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/27/2021 | plan target | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey A. Craig | 2010 | 12/1/2016 | 11/2/2016 | Performance | — | — | — | — | 169,146 | 338,292 | — | 2,159,994 | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 158,182 | 316,364 | 158,182 | 1,657,747 | ||||||||||||||||||||||||||||||||||||||||
LTIP | share units | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 12/1/2016 | 11/2/2016 | Restricted | — | — | — | — | — | — | 112,764 | 1,439,996 | modification | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | 2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 111,193 | 222,386 | 111,193 | 2,999,987 | |||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/2/2016 | 11/2/2016 | Annual | — | 900,000 | 1,800,000 | — | — | — | — | — | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | 2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 74,129 | 2,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
plan target | LTIP | share units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kevin A. Nowlan | 2010 | 12/1/2016 | 11/2/2016 | Performance | — | — | — | — | 45,340 | 90,680 | — | 578,992 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/4/2020 | 11/4/2020 | Annual | — | 814,175 | 1,628,351 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
and | incentive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1/27/2021 | plan target | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carl D. Anderson II | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 7,273 | 14,546 | 7,273 | 76,221 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 12/1/2016 | 11/2/2016 | Restricted | — | — | — | — | — | — | 30,227 | 385,999 | modification | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 1,450 | 2,900 | 1,450 | 9,135 | |||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/2/2016 | 11/2/2016 | Annual | — | 375,000 | 750,000 | — | — | — | — | — | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | modification | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
plan target | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 14,367 | 28,734 | 14,367 | 87,639 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph A. Plomin | 2010 | 12/1/2016 | 11/2/2016 | Performance | — | — | — | — | 36,413 | 72,826 | — | 464,994 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 12/1/2016 | 11/2/2016 | Restricted | — | — | — | — | — | — | 24,276 | 310,005 | modification | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | 2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 25,685 | 51,370 | 25,685 | 692,981 | |||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/2/2016 | 11/2/2016 | Annual | — | 282,750 | 565,500 | — | — | — | — | — | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | 2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 17,124 | 462,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
plan target | LTIP | share units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert H. Speed | 2010 | 12/1/2016 | 11/2/2016 | Performance | — | — | — | — | 36,413 | 72,826 | — | 464,994 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | 2020 | 5/6/2021 | 1/27/2021 | Performance | — | — | — | — | 2,481 | 4,962 | 2,481 | 66,590 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 12/1/2016 | 11/2/2016 | Restricted | — | — | — | — | — | — | 24,276 | 310,005 | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | 2020 | 5/6/2021 | 1/27/2021 | Restricted | — | — | — | — | — | — | 1,654 | 44,393 | |||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/2/2016 | 11/2/2016 | Annual | — | 282,750 | 565,500 | — | — | — | — | — | LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | ICP | 11/4/2020 | 11/4/2020 | Annual | — | 472,500 | 945,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
plan target | incentive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chris Villavarayan | 2010 | 12/1/2016 | 11/2/2016 | Performance | — | — | — | — | 36,413 | 72,826 | — | 464,994 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | plan target | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 12/1/2016 | 11/2/2016 | Restricted | — | — | — | — | — | — | 24,276 | 310,005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP | share units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ICP | 11/2/2016 | 11/2/2016 | Annual | — | 282,750 | 565,500 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
plan target |
Date of Compensation Committee Action | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||
Name | Plan Name | Grant Date | Type of Award | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||
Timothy Bowes | 2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 4,447 | 8,894 | 4,447 | 119,980 | ||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 2,965 | 79,996 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 5/6/2021 | 1/27/2021 | Performance | — | — | — | — | 9,165 | 18,330 | 9,165 | 245,989 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 5/6/2021 | 1/27/2021 | Restricted | — | — | — | — | — | — | 6,110 | 163,992 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
ICP | 11/4/2020 | 11/4/2020 | Annual | — | 297,000 | 594,000 | — | — | — | — | — | |||||||||||||
and | incentive | |||||||||||||||||||||||
1/27/2021 | plan target | |||||||||||||||||||||||
John Nelligan | 2010 | 12/1/2020 | 12/1/2020 | Performance | — | — | — | — | 7,273 | 14,546 | 7,273 | 76,221 | ||||||||||||
LTIP | share units | |||||||||||||||||||||||
modification | ||||||||||||||||||||||||
2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 5,559 | 11,118 | 5,559 | 149,982 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 3,707 | 100,015 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 5/6/2021 | 1/27/2021 | Performance | — | — | — | — | 8,047 | 16,094 | 8,047 | 215,981 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
2020 | 5/6/2021 | 1/27/2021 | Restricted | — | — | — | — | — | — | 5,365 | 143,997 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
ICP | 11/4/2020 | 11/4/2020 | Annual | — | 297,000 | 594,000 | — | — | — | — | — | |||||||||||||
and | incentive | |||||||||||||||||||||||
1/27/2021 | plan target | |||||||||||||||||||||||
Hannah S. Lim- | 2020 | 12/1/2020 | 11/4/2020 | Performance | — | — | — | — | 14,899 | 29,798 | 14,899 | 401,975 | ||||||||||||
Johnson(5) | LTIP | share units | ||||||||||||||||||||||
2020 | 12/1/2020 | 11/4/2020 | Restricted | — | — | — | — | — | — | 9,934 | 268,019 | |||||||||||||
LTIP | share units | |||||||||||||||||||||||
ICP | 11/4/2020 | 11/4/2020 | Annual | — | 299,000 | 598,000 | — | — | — | — | — | |||||||||||||
incentive | ||||||||||||||||||||||||
plan target |
(1) |
|
(2) |
|
(3) | This |
(4) |
|
(5) | In connection with Ms. Lim-Johnson’s separation, all of the performance share units and restricted share units granted to her in fiscal year 2021 were forfeited and her participation in the ICP was unaffected due to her having served during all of fiscal year 2021. |
SeeCompensation DiscussionandAnalysis–Elementsof theMeritor Compensation Program–OverviewandAnalysisabove |
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Employment Agreements
Mr. Craig’s Employment Agreement. Mr.Certain executives of the Company, including Messrs. Villavarayan, Craig, Anderson, Bowes and Nelligan, entered into a new employment agreementagreements with the Company in April 2015, in connection with his assumption of the role of Chief Executive Officer, which agreement replaced his previous employment agreement with the Company.March 2021. Under the terms of this agreement,these agreements, if the Company terminates Mr. Craig’sthe executive’s employment without cause, hethey would receive:
● | any accrued and unpaid compensation; |
● | monthly severance base pay for a period of |
● | participation in the current year annual incentive |
● | continuation of health and welfare benefits (other than accidental death and dismemberment |
● | continued life insurance coverage through the end of the severance period; |
● | vesting or forfeiture of special or other long-term incentive awards, restricted shares, restricted share units, performance shares and cash payouts of long-term incentive awards as determined under the terms of the 2010 LTIP or 2020 LTIP, as applicable, or the agreement relating to the grant (the 2010 LTIP |
● | outplacement services for twelve months the value of which may not exceed $10,000. |
Mr. Craig’sThe employment agreementagreements also providesprovide for vesting in accordance with the terms of the applicable plans for all equity grants in the event of a change of control (as defined in those plans). The agreementagreements also providesprovide for severance benefits as described above if a separation of service results from a change of control or within one yeartwo years thereafter (provided the severance period would be 24 months rather than 12 months, and the full target amount of histheir annual incentive willwould be paid in that event rather than the actual amount of the annual incentive payout). The agreementagreements also providesprovide for payments in the event of death andor disability (described further underPotential Payments Upon Terminationbelow) and a non-compete agreement for the duration of the severance period in the event of involuntary termination of employment.
The Company also entered into an agreement with Mr. Craig containing revisions to his base salary, ICP target award for fiscal 2015, and 2010 LTIP target awards for the fiscal 2015-2017 cycle (seeFiscal Year 2017 Summary Compensation TableandGrants of Plan-Based Awards in Fiscal Year 2017above for information on the amount of these elements of his compensation).
Mr. Nowlan’s Employment Agreement. Mr. Nowlan entered into an employment agreement with the Company in 2013. Under the terms of this agreement, if the Company terminates Mr. Nowlan’s employment without cause, he would receive:
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|
Mr. Nowlan’s employment agreement also provides for vesting in accordance with the terms of the applicable plans for all equity grants in the event of a change in control (as defined in those plans) as well as the severance benefits described above if a separation of service results from a change in control or within one year thereafter (provided the full target amount of his annual incentive will be paid in that event rather than apro rataportion). The agreement also provides for payments in the event of death and disability (described further underPotential Payments Upon Terminationbelow) and a non-compete agreement for the duration of the severance period in the event of involuntary termination of employment.
Other Executives’Ms. Lim-Johnson’s Employment AgreementsAgreement. Other executives ofMs. Lim-Johnson, Senior Vice President, Chief Legal Officer and Corporate Secretary, separated from the Company including Messrs. Plomin, Speed and Villavarayan, entered intoeffective October 25, 2021. Pursuant to the terms of her employment agreementsagreement with the Company, in December 2015 or February 2016. These agreements contain provisions with respectMs. Lim-Johnson received accrued and unpaid compensation, severance, certain health and welfare benefits, outplacement services, distributions under the Company’s Savings Plans and reimbursement for unused vacation time. Ms. Lim-Johnson’s awards under the Company’s annual and long-term incentive performance plans were generally prorated for time served, other than awards related to termination without cause and severance in the event of a change of control, similar to those contained in Mr. Craig’s employment agreement (except that (1)fiscal year 2021-2023 performance cycle under the severance period would be 18 months in both cases and (2) the provisions also apply to a termination of employment within two years after a change of control). The agreements also provide for a 12-month non-compete agreement in the event of voluntary termination of employment.2020 LTIP, which were forfeited.
SeePotential Payments Upon Terminationbelow for information on the amounts that would be payable to Messrs. Villavarayan, Craig, Nowlan, Plomin, SpeedAnderson, Bowes and VillavarayanNelligan if their employment had been terminated at the end of fiscal year 2017.2021.
Description of Plan-Based Awards
SeeCompensation Discussion and Analysis - Elements of the Meritor Compensation Program -Components - Annual Incentivesand- Long-Term Incentivesabove for information on the types of plan-based awards that were made in fiscal year 20172021 and are reported in the table above, the applicable performance objectives,measures, and how payouts are calculated. See the column headed “Non-Equity Incentive Plan Compensation” and the related footnote in the table under the headingFiscal Year 20172021 Summary Compensation Tableabove for information on actual annual incentive payments made with respect to fiscal year 2017.2021.
OUTSTANDING EQUITY AWARDSATFISCALYEAR-END 20172021
ThefollowingThe following unvested restrictedsharerestricted share units andperformanceshareand performance share units were held by the NamedExecutive Officersas ofSeptember30, 2017.Named Executive Officers as of September 30, 2021.
Stock Awards | ||||||||||||||||||||||||||||||
Stock Awards | Equity Incentive | Equity Incentive Plan | ||||||||||||||||||||||||||||
Equity Incentive Plan | Equity Incentive Plan | Number of Shares | Market Value of | Plan Awards: Number | Awards: Market or Payout | |||||||||||||||||||||||||
Awards: Number of | Awards: Market or Payout | or Units of Stock | Shares or Units | of Unearned Shares, | Value of Unearned Shares, | |||||||||||||||||||||||||
Number of Shares or | Market Value of | Unearned Shares, Units | Value of Unearned Shares, | That Have | of Stock That | Units or Other Rights | Units or Other Rights That | |||||||||||||||||||||||
Units of Stock That | Shares or Units of Stock | or Other Rights That | Units or Other Rights That | Not Vested | Have Not Vested | That Have Not Vested | Have Not Vested | |||||||||||||||||||||||
Name | Have Not Vested (#)(1) | That Have Not Vested ($)(2) | Have Not Vested (#)(3) | Have Not Vested ($)(2) | (#)(1) | ($)(2) | (#)(3) | ($)(2) | ||||||||||||||||||||||
Chris Villavarayan | 162,206 | 3,659,367 | 288,412 | 6,506,575 | ||||||||||||||||||||||||||
Jeffrey A. Craig | 529,830 | 13,780,878 | 368,956 | 9,596,546 | 414,600 | 9,353,376 | 460,008 | 10,377,780 | ||||||||||||||||||||||
Kevin A. Nowlan | 101,148 | 2,630,859 | 93,865 | 2,441,429 | ||||||||||||||||||||||||||
Joseph A. Plomin | 74,789 | 1,945,262 | 66,955 | 1,741,500 | ||||||||||||||||||||||||||
Robert H. Speed | 74,723 | 1,943,545 | 66,955 | 1,741,500 | ||||||||||||||||||||||||||
Chris Villavarayan | 77,129 | 2,006,125 | 70,464 | 1,832,769 | ||||||||||||||||||||||||||
Carl D. Anderson II | 96,740 | 2,182,454 | 109,322 | 2,466,304 | ||||||||||||||||||||||||||
Timothy Bowes | 12,592 | 284,076 | 37,772 | 852,136 | ||||||||||||||||||||||||||
John Nelligan | 29,324 | 661,549 | 39,934 | 900,911 | ||||||||||||||||||||||||||
Hannah S. Lim-Johnson | 21,480 | 484,589 | 64,438 | 1,453,721 |
(1) | This column includes the following separate grants of restricted share units that vest upon continuation of employment through the end of the restricted period. This column also includes performance share units subject to continued service vesting requirements following satisfaction of the performance criteria as of fiscal year-end |
Number of | ||||||||||
Held as of | ||||||||||
Name | Type of Grant | Grant Date | Vesting Date | 9/30/2021 | ||||||
Chris Villavarayan | Restricted share units | 5/6/2021 | 5/6/2024 | 50,522 | ||||||
Restricted share units | 12/1/2020 | 12/1/2023 | 21,720 | |||||||
Restricted share units | 2/3/2020 | 2/3/2023 | 6,472 | |||||||
Restricted share units | 12/1/2019 | 12/1/2022 | 17,426 | |||||||
Restricted share units | 12/1/2018 | 12/1/2021 | 26,666 | |||||||
Performance share units | 12/1/2018 | 12/1/2021 | 39,400 | (A) | ||||||
Jeffrey A. Craig | Restricted share units | 12/1/2020 | 12/1/2023 | 74,129 | ||||||
Restricted share units | 12/1/2019 | 12/1/2022 | 79,208 | |||||||
Restricted share units | 12/1/2018 | 12/1/2021 | 105,454 | |||||||
Performance share units | 12/1/2018 | 12/1/2021 | 155,809 | (A) | ||||||
Carl D. Anderson II | Restricted share units | 5/6/2021 | 5/6/2024 | 1,654 | ||||||
Restricted share units | 12/1/2020 | 12/1/2023 | 17,124 | |||||||
Restricted share units | 2/3/2020 | 2/3/2023 | 22,163 | |||||||
Restricted share units | 12/1/2019 | 12/1/2022 | 17,663 | |||||||
Restricted share units | 4/1/2019 | 4/1/2022 | 9,579 | |||||||
Restricted share units | 1/31/2019 | 1/31/2022 | 967 | |||||||
Restricted share units | 12/1/2018 | 12/1/2021 | 4,848 | |||||||
Performance share units | 4/1/2019 | 4/1/2022 | 14,151 | (A) | ||||||
Performance share units | 1/31/2019 | 1/31/2022 | 1,428 | (A) | ||||||
Performance share units | 12/1/2018 | 12/1/2021 | 7,163 | (A) |
Name | Type of Grant | Grant Date | Vesting Date | Number of Shares/Units Held as of 9/30/ | ||||||||||||
Restricted share units | 5/6/2021 | 5/6/2024 | ||||||||||||||
Restricted share units | 12/1/2020 | 12/1/ | ||||||||||||||
Restricted share units | 7/31/2020 | 7/31/2023 | 3,517 | |||||||||||||
John Nelligan | Restricted share units | 5/6/2021 | 5/6/2024 | 5,365 | ||||||||||||
Restricted share units | 12/1/2020 | 12/1/ | 3,707 | |||||||||||||
Restricted share units | 5/4/2020 | 5/4/2023 | 1,073 | |||||||||||||
Restricted share units | 12/1/2019 | 12/1/2022 | 3,168 | |||||||||||||
Restricted share units | 12/1/2018 | 12/1/2021 | 8,848 | |||||||||||||
Performance share units | 12/1/2018 | 12/1/ | (A) | |||||||||||||
Restricted share units | 12/1/2020 | 12/1/ | 9,934 | |||||||||||||
Restricted share units | 8/3/2020 | 8/3/2023 | 11,546 |
(A) | |||||||||||||||
Performance share units subject to continued service vesting requirements following satisfaction of the performance criteria as of fiscal year-end | |
(B) | The amount noted was forfeited in connection with Ms. Lim-Johnson’s separation. |
(C) | The amount noted will be prorated for time worked during fiscal year 2021 in connection with Ms. Lim-Johnson’s separation. |
(2) | Based on the number of shares or units multiplied by the NYSE Closing Price on 2021. |
(3) | This column includes the following separate grants of performance share units that are earned at the end of the applicable performance periods, upon the achievement of stated performance goals. |
Name | Type of Grant | Grant Date | Vesting Date | Number of Shares/Units Held as of 9/30/2021 | |||||||||||
Chris Villavarayan | Performance share units | 5/6/2021 | 5/6/2024 | 151,564 | |||||||||||
Performance share units | 12/1/2020 | 12/1/2023 | 65,158 | ||||||||||||
Performance share units | 2/3/2020 | 2/3/2023 | 19,414 | ||||||||||||
Performance share units | 12/1/2019 | 12/1/2022 | 52,276 | ||||||||||||
Jeffrey A. Craig | |||||||||||||||
Performance share units | 12/1/2020 | 12/1/ | |||||||||||||
Performance share units | 12/1/2019 | 12/1/ | 237,622 | ||||||||||||
Performance share units | 5/6/2021 | 5/6/2024 | |||||||||||||
Performance share units | 12/1/2020 | 12/1/ | |||||||||||||
Performance share units | 12/1/2019 | 12/1/ | 52,990 | ||||||||||||
Performance share units | 5/6/2021 | 5/6/2024 | |||||||||||||
Performance share units | 12/1/2020 | 12/1/ | |||||||||||||
Performance share units | 7/31/2020 | 7/31/2023 |
Name | Type of Grant | Grant Date | Vesting Date | Number of Shares/Units Held as of 9/30/2021 | |||||||
John Nelligan | Performance share units | 5/6/2021 | 5/6/2024 | 16,094 | |||||||
Performance share units | 12/1/2020 | 12/1/2023 | 11,118 | ||||||||
Performance share units | 5/4/2020 | 5/4/2023 | 3,218 | ||||||||
Performance share units | 12/1/2019 | 12/1/2022 | 9,504 | ||||||||
Hannah S. Lim-Johnson | Performance share units | 12/1/2020 | 12/1/2023 | 29,798 | (A) | ||||||
Performance share units | 8/3/2020 | 8/3/2023 | 34,640 | (B) |
(A) | The amount noted was forfeited in connection with Ms. Lim-Johnson’s separation. |
(B) | The amount noted will be prorated for time worked during fiscal year 2021 in connection with Ms. Lim-Johnson’s separation. |
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 20172021
The following table includes information with respect to service-based restricted share units and restricted shares held by the Named Executive Officers that vested during the 2017 fiscal year.year 2021. None of the Named Executive Officers holds any stock options and accordingly no stock options were exercised by the Named Executive Officers during the 2017 fiscal year.year 2021.
Stock Awards | ||||||||||||
Number of Shares | Value Realized on | Stock Awards | ||||||||||
Name | Acquired on Vesting (#) | Vesting ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||
Chris Villavarayan | 14,325 | 386,403 | ||||||||||
Jeffrey A. Craig | 228,501 | 2,917,957 | 66,156 | 1,784,889 | ||||||||
Kevin A. Nowlan | 84,949 | 1,079,548 | ||||||||||
Joseph A. Plomin | 52,513 | 677,621 | ||||||||||
Robert H. Speed | 42,641 | 572,652 | ||||||||||
Chris Villavarayan | 47,719 | 651,564 | ||||||||||
Carl D. Anderson II | 5,953 | 160,727 | ||||||||||
Timothy Bowes | — | — | ||||||||||
John Nelligan | 6,227 | 168,004 | ||||||||||
Hannah S. Lim-Johnson | — | — |
FISCAL YEAR 20172021 PENSION BENEFITS
Meritor has a tax-qualified defined benefit retirement plan, the Pension Plan, covering salaried and non-represented U.S. employees hired prior to October 1, 2005. Sections 401(a)(17) and 415 of the IRC limit the annual benefits that may be paid from a tax-qualified defined benefit retirement plan. As permitted by the Employee Retirement Income Security Act of 1974, as amended, the Company has established a non-qualified supplemental plan, the Supplemental Pension Plan, that authorizes the payment out of the Company’s general funds of any benefits calculated under provisions of the Pension Plan that may be above limits under these sections. Participation by new participants in the Pension Plan and Supplemental Pension Plan was terminated on December 31, 2007 and benefits were frozen as of a specified date, as described below.
Messrs. Speed andMr. Villavarayan participateparticipates in the Pension Plan but dodoes not participate in the Supplemental Pension Plan. Mr. Villavarayan is also a member of the Pension Plan for Eligible Non-Union Salaried Commercial Vehicle Aftermarket and Commercial Vehicle Systems Driveline Employees of Meritor Aftermarket Canada Inc., referred to as the Canadian (the “Canadian Pension Plan. Plan”).
The Canadian Pension Plan provides a defined benefit pension entitlement based on earnings and service while he was a Canadian employee. Mr. Villavarayan’s benefit under the Canadian Pension Plan is included in the actuarial present value of the accumulated benefit under the Pension Plan because his benefit under the Canadian Pension Plan is a direct offset to the benefit under the Pension Plan. Messrs. Craig, NowlanAnderson, Bowes, Nelligan and PlominMs. Lim-Johnson were not eligible to participate in the Pension Plan and Supplemental Pension Plan because they were hired after October 1, 2005.
The following table shows the years of credited service and the actuarial present value of the accumulated benefit under the Pension Plan for Messrs. Speed andMr. Villavarayan. This information is provided as of September 30, 20172021 (the measurement date used for financial statement reporting purposes), assuming retirement at age 62. No payments were made to Messrs. Speed orMr. Villavarayan under the Pension Plan during the fiscal year ended September 30, 2017.2021.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | |||||||||||||
Chris Villavarayan | Meritor Retirement Plan | 7.58 | 113,312 | |||||||||||||
Number of | Present Value of | Meritor Supplemental | — | — | ||||||||||||
Years Credited | Accumulated | Retirement Plan | ||||||||||||||
Name | Plan Name | Service (#) | Benefit(1)($) | |||||||||||||
Jeffrey A. Craig | Meritor Retirement Plan | — | — | Meritor Retirement Plan | — | — | ||||||||||
Meritor Supplemental Retirement Plan | — | — | Meritor Supplemental | — | — | |||||||||||
Retirement Plan | ||||||||||||||||
Kevin A. Nowlan | Meritor Retirement Plan | — | — | |||||||||||||
Meritor Supplemental Retirement Plan | — | — | ||||||||||||||
Joseph A. Plomin | Meritor Retirement Plan | — | — | |||||||||||||
Carl D. Anderson II | Meritor Retirement Plan | — | — | |||||||||||||
Meritor Supplemental Retirement Plan | — | — | Meritor Supplemental | — | — | |||||||||||
Retirement Plan | ||||||||||||||||
Robert H. Speed | Meritor Retirement Plan | 2.92 | 42,997 | |||||||||||||
Timothy Bowes | Meritor Retirement Plan | — | — | |||||||||||||
Meritor Supplemental Retirement Plan | — | — | Meritor Supplemental | — | — | |||||||||||
Retirement Plan | ||||||||||||||||
Chris Villavarayan | Meritor Retirement Plan | 7.58 | 80,802 | |||||||||||||
John Nelligan | Meritor Retirement Plan | — | — | |||||||||||||
Meritor Supplemental Retirement Plan | — | — | Meritor Supplemental | — | — | |||||||||||
Retirement Plan | ||||||||||||||||
Hannah S. Lim-Johnson | Meritor Retirement Plan | — | — | |||||||||||||
Meritor Supplemental | — | — | ||||||||||||||
Retirement Plan |
(1) | Information on the valuation method and material assumptions applied in quantifying the present value of the current accrued benefits is included in Note |
The Pension Plan and the Supplemental Pension Plan provide for annual retirement benefits payable on a straight life annuity basis to participating employees, reduced to reflect the cost of Social Security benefits related to service with the Company. The amount of a participant’s annual benefit generally is calculated as 1.5% of the number that is the average of covered compensation for the highest five consecutive years of the ten years preceding retirement, multiplied by years of service, less the Social Security reduction. Covered compensation includes salary and annual incentive award payout under the ICP (see the column headed “Salary” and footnote 45 to the column headed “Non-Equity Incentive Plan Compensation” in the table under the headingFiscal Year 20172021 Summary Compensation Tableabove).
The Pension Plan and the Supplemental Pension Plan credit participants with service earned with Meritor and its predecessor companies, as applicable. The Pension Plan and the Supplemental Pension Plan also include “grandfathering” provisions under which the retirement benefits payable to certain long-term employees will be adjusted in some cases to reflect differences between the benefits earned under the plan and those earned under predecessor plans of Arvin Industries, Inc., Meritor Automotive, Inc. or Rockwell International Inc.Corporation.
Participants may generally elect to retire under the Pension Plan and the Supplemental Pension Plan any time after reaching age 55, with the annual benefit reduced by 6% for each year that the participant receives benefit payments prior to his or her reaching age 62. As of the last day of fiscal year 2017, Messrs. Speed and2021, Mr. Villavarayan arewas not eligible for early retirement under this provision. In the event of the participant’s death, the Pension Plan and the Supplemental Pension Plan also
provide for the payment of benefits to an employee’s surviving spouse or other beneficiary. The amount of the survivor’s benefit is 60% of the participant’s benefit under the Supplemental Pension Plan and can range from 0% to 100% of the participant’s benefit under the Pension Plan, depending on the participant’s election as to benefit payment options.
See Note 2220 of the Notes to Consolidated Financial Statements in the Form 10-K for information on the funded status of the Pension Plan. The Supplemental Pension Plan is currently unfunded.
Non-union employees hired on or after October 1, 2005, including Messrs. Craig, NowlanAnderson, Bowes, Nelligan and Plomin,Ms. Lim-Johnson, are not eligible to participate in the Pension Plan or the Supplemental Pension Plan. In addition, the Pension Plan and the Supplemental Pension Plan were amended, effective December 31, 2007, to provide that benefits wereare frozen for all participating employees, including Messrs. Speed andMr. Villavarayan, as of specified dates. Most participating employees ceased accruing benefits effective January 1, 2008. Some participating employees, who either had at least 20 years of service or were age 50 or older with at least 10 years of service, continued to accrue benefits for an additional transition period that ended June 30, 2011. Messrs. Speed andMr. Villavarayan did not qualify for this transitional accrual period.
For those not eligible to participate in, or whose benefits have been frozen under, the Pension Plan and the Supplemental Pension Plan, the Company makes additional defined contributions to the Savings Plan or Supplemental Savings Plan on behalf of these individuals, with the amount of the contribution depending on the individual’s salary and age. In fiscal year 2017,2021, the Company contributed the following additional amounts to the Savings Plan and Supplemental Savings Plan under this provision on behalf of the Named Executive Officers: Mr. Villavarayan - $22,969; Mr. Craig - $66,187;$23,133; Mr. NowlanAnderson - $26,936;$16,217; Mr. PlominBowes - $25,634;$13,726; Mr. SpeedNelligan - $22,050;$12,498; and Mr. VillavarayanMs. Lim-Johnson - $22,051.Both$10,523. Both participant contributions and Company matching contributions to the Savings Plan and Supplemental Savings Plan are always 100% vested. These amounts are included in the amounts reported in the column headed “All Other Compensation” and the related footnote underFiscal Year 20172021 Summary Compensation Tableabove.
The Company has in the past provided for extra years of credited service under the Pension Plan or Supplemental Pension Plan or additional payments to the Savings Plan or Supplemental Savings Plan in lieu of pension payments in employment agreements for some individuals. None of the Named Executive Officers isare entitled to any additional years of credited service or additional payments.
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL YEAR 20172021
The following table reflects contributions made by the Named Executive Officers and the Company to the Company’s Supplemental Savings Plan in fiscal year 2017,2021, together with earnings on the accounts of the Named Executive Officers during the fiscal year. There were no withdrawals or distributions to the Named Executive Officers under that plan in fiscal year 2017.2021.
Executive | Registrant | Aggregate | Aggregate | |||||||||||||||||||||
Contributions | Contributions | Earnings In | Balance At | |||||||||||||||||||||
In Last Fiscal | In Last Fiscal | Last Fiscal | Last Fiscal | |||||||||||||||||||||
Name | Year ($)(1) | Year ($)(2) | Year ($)(3) | Year-End ($)(4) | Executive Contributions In Last Fiscal Year ($)(1) | Registrant Contributions In Last Fiscal Year ($)(2) | Aggregate Earnings In Last Fiscal Year ($)(3) | Aggregate Balance At Last Fiscal Year-End ($)(4) | ||||||||||||||||
Chris Villavarayan | 89,059 | 32,103 | 222,694 | 1,291,817 | ||||||||||||||||||||
Jeffrey A. Craig | 161,490 | 128,730 | 282,576 | 1,918,944 | 197,787 | 31,321 | 11,652 | 4,790,807 | ||||||||||||||||
Kevin A. Nowlan | — | 18,836 | 15,949 | 122,670 | ||||||||||||||||||||
Joseph A. Plomin | 27,900 | 37,190 | 42,201 | 322,711 | ||||||||||||||||||||
Robert H. Speed | 85,125 | 34,875 | 479,685 | 1,003,124 | ||||||||||||||||||||
Chris Villavarayan | 70,200 | 39,928 | 36,697 | 321,029 | ||||||||||||||||||||
Carl D. Anderson II | 33,696 | 13,867 | 107,747 | 655,345 | ||||||||||||||||||||
Timothy Bowes | 5,108 | 7,662 | -419 | 12,351 | ||||||||||||||||||||
John Nelligan | 18,654 | 5,367 | 44,635 | 258,614 | ||||||||||||||||||||
Hannah S. Lim-Johnson | 46,133 | 11,310 | -150 | 57,293 |
(1) | The amounts reported in this column are included in the amounts reported in the column headed “Salary” for |
(2) | The amounts reported in this column are included in the amounts reported in the column headed “All Other Compensation” for |
(3) | “Earnings” |
(4) | Amounts in this column include executive contributions and registrant contributions that were reported as compensation in the |
Description of Non-Qualified Supplemental Savings Plan
Meritor’s Supplemental Savings Plan allows certain executives of the Company, including the Named Executive Officers, to defer amounts that cannot be contributed to the Savings Plan due to deferral and compensation limits imposed by the IRC. Under the Savings Plan, a participant can defer up to 50% of his or her eligible pay, on a before-tax basis, subject to IRC limits, and the Company matches deferrals at the rate of 100% on the first 3% and 50% on the next 3% of eligible pay. Eligible pay includes base salary, annual incentive payout under the ICP and other eligible bonuses. If an executive elects to participate in the Supplemental Savings Plan, he or she can continue to contribute up to 20% of eligible pay on a before-tax basis, even though his or her Savings Plan contributions or eligible pay have reached the annual IRC limits. Both participant contributions and Company matching contributions to the Supplemental Savings Plan are always 100% vested.
The Company also makes non-elective retirement contributions in lieu of pension payments to the Savings Plan, and these contributions would be made to the Supplemental Savings Plan when eligible pay reaches statutory limits. Company pension contributions to the Supplemental Savings Plan vest 20% after two years of employment and 20% each year thereafter, with full vesting occurring after six years of employment.
The plan administrator keeps track of contributions under the Supplemental Savings Plan as if they were invested in investment options selected by the participant. These options include a variety of mutual funds and Common Stock. Growth of the participant’s account depends on the investment results of the selected mutual funds and/or on the market price of, and the payment of dividends on, Common Stock. Earnings for each investment vehicle for fiscal year 2017 were as follows:
Distributions from the Supplemental Savings Plan are made in cash under one of threefive options, as elected annually by the participant: (1) a lump sum payment six months following termination of employment; (2) a lump sum payment atas of January following the later of age 55 or six months following termination of employment; or (3) ten annual installments payable in January of each year beginning the year after the later of age 55 or six months after termination of employment; (4) a lump sum payable five years and six months following termination of employment; or (5) three annual installments paid beginning six months following termination of employment.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The narrative and tables below describe and quantify potential compensation that could be paid to each of the Named Executive Officers by the Company upon termination of employment as of September 29, 2017,October 3, 2021, voluntarily or with cause, without cause, upon a change of control (or within stated periods thereafter), and upon retirement, death or disability. Except as noted below, the amounts disclosed in the table are based on actual compensation through September 29, 2017October 3, 2021 and estimates of future compensation. The actual amounts that could be paid to the Named Executive Officers upon a termination event are subject to a number of variables and can only be determined after occurrence of a termination event.
Voluntary Termination of Employment or Involuntary Termination of Employment with Cause
A Named Executive Officer would be entitled to the following under the Company’s current policies, plans and any applicable employment agreements upon voluntary termination of employment or involuntary termination of employment with cause. “Cause” is defined generally as a continued and willful failure to perform duties; gross misconduct that is materially and demonstrably injurious to the Company; or conviction of or pleading guilty (or no contest) to a felony or to another crime that materially and adversely affects the Company.
Compensation and Benefits.Benefits. If a Named Executive Officer were to voluntarily resign from his or her position or be terminated for cause, he or she would be entitled only to accrued and unpaid compensation. Participation in benefit plans would cease upon termination.
Incentive Plan Payments and Equity Awards.Awards. Upon voluntary termination or termination with cause, a Named Executive Officer would not be entitled to annual incentive or long-term incentive performance plan participation and all unvested equity grants (including unvested restricted shares, restricted share units and performance share units) would be forfeited.
Savings Plan Distributions.Distributions. Participants in the Savings Plan are generally entitled to a lump sum distribution of the vested interest in their Savings Plan accounts upon any termination of service. Participants in the Supplemental Savings Plan are entitled to receive distributions of the vested portion of their accounts, either in a lump sum or in ten annual installments, at age 55 or six months after any termination of employment, depending on the election made by the participant. All participant contributions and Company matching contributions to the Savings Plan and Supplemental Savings Plan and any related earnings are immediately 100% vested. Retirement contributions made by the Company to the Savings Plan and Supplemental Savings Plan in lieu of participation in the Pension Plan or Supplemental Pension Plan vest 20% for each full year of the participant’s employment beginning with the second year, with full vesting of accounts after completion of six years of service.
The Named Executive Officers would be entitled to receive a distribution of all of their employee and Company-matching contributions and any related earnings from their Savings Plan and Supplemental Savings Plan accounts upon voluntary termination or termination with cause. The Company also makes retirement contributions to the Savings Plan and Supplemental Savings Plan on behalf of the Named Executive Officers in lieu of participation in the Pension Plan and Supplemental Pension Plan. As of September 29, 2017,October 3, 2021, these additional retirement contributions had vested 100% for all of the Named Executive Officers other than Mr. Bowes, and they are eligible to receive a distribution of 100% of their accounts with respect to these contributions upon voluntary termination or termination with cause.
Termination of Employment without Cause
Upon termination without cause, a Named Executive Officer’s compensation and benefits would be governed by the terms of his or her employment letter or agreement, as follows:
Mr. Craig’sNamed Executive Officers’ Employment Agreement.AgreementsMr.. Messrs. Villavarayan, Craig, Anderson, Bowes and Nelligan entered into an employment agreementagreements with the Company in April 2015, which superseded his previous employment agreement.March 2021. Under the terms of this agreement,these agreements, if the Company terminates histheir employment without cause, hethey would receive any accrued and unpaid compensation, together with the following severance payments and benefits:
● | Severance pay: |
● | Annual incentive: |
● | Long-term incentives (seeOutstanding Equity Awards at Fiscal Year-End |
● | Benefits: |
● | Retirement plans: Savings Plan and Supplemental Savings Plan participation would cease at the end of active employment. |
● | Outplacement services: |
No perquisites or allowances arewould be provided to himthem or paid for by the Company during the severance period. Annual incentive and long-term incentive payouts would occur at the time applicable for all participating employees. All other amounts would be payable periodically over the severance period, with timing of some payments delayed to comply with Section 409A of the IRC.
Mr. Nowlan’s Employment Agreement.Mr. Nowlan entered into an employment agreement with the Company in 2013. Under the terms of this employment agreement, if the Company terminates his employment without cause, he would receive any accrued and unpaid compensation, together with the following severance payments and benefits:
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No perquisites or allowances are provided to him or paid for by the Company during the severance period. Annual incentive and long-term incentive payouts would occur at the time applicable for all participating employees. All other amounts would be payable periodically over the severance period, with timing of some payments delayed to comply with Section 409A of the IRC.
Other Named Executive Officers’ Employment Agreements.Messrs. Plomin, Speed and Villavarayan entered into employment agreements with the Company in December 2015 or February 2016.These agreements have substantially the same provisions with respect to termination without cause as Mr. Craig’s employment agreement, described above, except that severance pay would be for a period of 18 monthsand annual incentive payments would be pro rated for the portion of the year during which they were actively employed.
Savings Plan Distributions.Distributions. Upon termination without cause, the Named Executive Officers would also be entitled to a distribution of certain amounts in their Savings Plan and Supplemental Savings Plan accounts, as described above under “Voluntary Termination of Employment or Involuntary Termination of Employment with Cause.”
Termination of Employment upon Change of Control
Under their employment agreements, Messrs. Villavarayan, Craig, Anderson, Bowes and NowlanNelligan would receive substantially the same salary payments and benefits in the case of a termination of employment upon change of control (or within one yeartwo years thereafter) as those outlined above for a termination of employment without cause, except that: (1) the severance period would be 24 months for each of them and (2)that annual incentives for the current year would be paid out at target.
With respect to Messrs. Plomin, Speed and Villavarayan, their employment agreements have substantially the same provisions with respect to termination of employment upon a change of control as Mr. Craig’s employment agreement, described above, except that (1) severance pay would be for a period of 18 months; and (2) the provisions also apply to a termination of employment within two years after a change of control.
Vesting of equity and equity-based awards, payouts with respect to performance plans and treatment of stock options are governed by the provisions of the long-term incentive plan under which they were granted. Pursuant to the terms of awards outstanding under the 2010 LTIP and 2020 LTIP, awards do not vest solely upon a change of control. However,upon a termination of employment other than for cause (including retirement, death, disability, termination without cause or termination for good reason) within two years after a change of control, awards vest in full and are deemed fully earned on the termination date, and performance-based awards are paid out at the target amount as of the date of the change of control.
The amounts in the tables below with respect to termination upon change of control reflect the provisions applicable to each grant, as described above, as if the triggering event had occurred on the last day of fiscal year 2017.2021.
Retirement
Upon retirement, a Named Executive Officer may be eligible for the following payments and benefits:
Defined Benefit Pension Plans.PlansMessrs. Speed and. Mr. Villavarayan participateparticipates in the Pension Plan. The present value of theirhis accumulated benefits is disclosed above in the table under the headingFiscal Year 20172021 Pension Benefits. NeitherHe was not eligible to retire under the Pension Plan as of the last day of fiscal year 2017,2021, and therefore no amounts are included in the table below. The other Named Executive Officers do not participate in the Pension Plan or Supplemental Pension Plan, and no benefits under those plans would be paid to them, even if they were eligible for retirement.
Savings Plan Distributions.Distributions. Upon retirement, the Named Executive Officers would be entitled to a distribution of amounts in their Savings Plan and Supplemental Savings Plan accounts, including any vested Company contributions in lieu of Pension Plan or Supplemental Pension Plan participation, as described above under “Voluntary Termination of Employment or Involuntary Termination of Employment with Cause.”
Incentive Plan Payments and Equity Awards.Messrs. Craig and Plomin areNelligan were eligible to retire and would be entitled topro rataparticipation in the annual incentive plan based on the portion of the year employed. They would also be entitled to participation in each outstanding three-year performance cycle on the same basis and to the same extent as if employed for the entire period. Equity and equity-based awards, including restricted shares, restricted share units and performance share units, would continue to vest in accordance with their terms as if still employed if granted at least one year prior to retirement, but would be forfeited if granted less than a year prior to retirement.
The other Named Executive Officers are not eligible to retire under the Company’s retirement plans at the end of fiscal year 20172021 and, therefore, would not be entitled to the vesting and payouts described above.
See “Termination of Employment upon Change of Control” above for information on additional provisions that would apply with respect to long-term incentive awards upon retirement within two years after a change of control.
Death
In the event of death, a Named Executive Officer’s beneficiary would receive the following benefits:
Insurance.Insurance. The Named Executive Officer’s beneficiary would be entitled to the proceeds of Company-sponsored life insurance policies.
Compensation and Benefits.Benefits. In addition to any accrued and unpaid compensation, the Named Executive Officer’s spouse and other dependents would be eligible for one month of salary and continuation of medical benefits for a period of six months.
Incentive Plan Payments and Equity Awards.Awards. The Named Executive Officer’s beneficiary would be entitled to apro rataportion of any annual incentive based on the portion of the year that the Named Executive Officer was employed. He or she would also be entitled topro ratapayouts under the long-termincentive plan for each three-year performance plan,cycle and vesting of apro rataportion of unvested restricted shares, restricted share units and performance share units, based on actual time worked.
See “Termination of Employment upon Change of Control” above for information on additional provisions that would apply with respect to long-term incentive awards upon death within two years after a change of control.
Savings Plan Distributions.Distributions. Upon the death of a Named Executive Officer, his or her beneficiary would be entitled to distribution of amounts in the Named Executive Officer’s Savings Plan and Supplemental Savings Plan accounts, including any vested Company contributions in lieu of Pension Plan or Supplemental Pension Plan participation, as described above under “Voluntary Termination of Employment or Involuntary Termination of Employment with Cause.”
Disability
In the event of disability of a Named Executive Officer, which is defined generally as the inability to perform the duties of his or her current job as a result of disease or injury, a Named Executive Officerhe or she would be entitled to the following benefits:
Compensation and Benefits.The Named Executive Officer would be entitled to continuation of full or partial salary (depending on years of service) for a period of six months, as short-term disability benefits, after which the Named Executive Officer would receive either 50% of salary (subject to tax and with a monthly maximum of $3,000) or 60% of salary (untaxed and with a monthly maximum of $20,000), depending on the benefit election made under the long-term disability program. After 1½1.5 years on long-term disability benefits, continued eligibility would be based on the inability to perform any job for which the Named Executive Officer is qualified by education, training or experience. Medical, dental, vision and life insurance benefits would continue during the period of receipt of long-term disability benefits as if still employed.
Incentive Plan Payments and Equity Awards.The Named Executive Officer would be entitled to apro rataportion of any annual incentive based on the portion of the year during which he or she was employed. He or she would also be entitled topro ratapayouts under the long-term incentive plan for each three-year performance plan,cycle and vesting of apro rataportion of unvested restricted shares, restricted share units and performance share units, based on actual time worked.
See “Termination of Employment upon Change of Control” above for information on additional provisions that would apply with respect to long-term incentive awards upon disability within two years after a change of control.
Savings Plan Distributions.A Named Executive Officer would be entitled to distributions under the savings plans, as described above under “Voluntary Termination of Employment or Involuntary Termination of Employment with Cause.”
Potential Payments at Fiscal Year-End 20172021
Assuming termination for the stated reasons on the last business day of fiscal year 2017,2021 and giving effect to the agreements and plan provisions described above, Messrs. Villavarayan, Craig, Nowlan, Plomin, SpeedAnderson, Bowes and VillavarayanNelligan would receive the following estimated payments and benefits under the agreements and plans in effect on September 29, 2017October 3, 2021 described above. With respect to Ms. Lim-Johnson, the following payments and benefits were actually received due to her separation as Senior Vice President, Chief Legal Officer and Corporate Secretary effective October 25, 2021. Amounts attributable to savings plan distributions, life and disability insurance, and health and welfare benefits in the event of death andor disability are not included in the tables below because they are available to the Named Executive Officers on the same basis as other salaried employees.
Jeffrey A. Craig | ||||||||||||
Vesting of | ||||||||||||
Restricted | ||||||||||||
Shares, | Health and | |||||||||||
Severance | Annual | RSUs and | Welfare | Outplacement | ||||||||
Termination Event | Pay ($)(1) | Incentive ($)(2) | PSUs ($)(3) | Benefits ($) | Services ($) | Total ($) | ||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | ||||||
Termination without Cause | 900,000 | 1,377,900 | 9,057,523 | 21,221 | 10,000 | 11,366,644 | ||||||
Termination Upon Change of Control | ||||||||||||
-Termination without cause | 1,800,000 | 900,000 | 24,967,909 | 42,442 | 10,000 | 27,720,351 | ||||||
-Death | — | 900,000 | 24,967,909 | 10,610 | — | 25,878,520 | ||||||
-Disability | — | 900,000 | 24,967,909 | — | — | 25,867,909 | ||||||
Retirement | — | 1,377,900 | 16,044,945 | — | — | 17,422,845 | ||||||
Death | — | 1,377,900 | 13,505,216 | 10,610 | — | 14,893,726 | ||||||
Disability | — | 1,377,900 | 13,505,216 | — | — | 14,833,116 | ||||||
Kevin A. Nowlan | ||||||||||||||||||||||||||||||
Vesting of | ||||||||||||||||||||||||||||||
Restricted | ||||||||||||||||||||||||||||||
Shares, | Health and | |||||||||||||||||||||||||||||
Severance | Annual | RSUs and | Welfare | Outplacement | ||||||||||||||||||||||||||
Chris Villavarayan | ||||||||||||||||||||||||||||||
Termination Event | Pay ($)(1) | Incentive ($)(2) | PSUs ($)(3) | Benefits ($) | Services ($) | Total ($) | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | ||||||||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Termination without Cause | 1,000,000 | 574,125 | 1,704,418 | 42,705 | 10,000 | 3,331,248 | 1,402,500 | 1,404,931 | 1,442,900 | 16,051 | 10,000 | 4,276,382 | ||||||||||||||||||
Termination Upon Change of Control | ||||||||||||||||||||||||||||||
-Termination without cause | 1,000,000 | 375,000 | 5,394,162 | 42,705 | 10,000 | 6,821,867 | 1,402,500 | 1,028,500 | 6,912,655 | 16,051 | 10,000 | 9,369,706 | ||||||||||||||||||
-Death | — | 375,000 | 5,394,162 | 10,676 | — | 5,779,838 | — | 1,028,500 | 6,912,655 | 5,350 | — | 7,946,505 | ||||||||||||||||||
-Disability | — | 375,000 | 5,394,162 | — | — | 5,769,162 | — | 1,028,500 | 6,912,655 | — | — | 7,941,155 | ||||||||||||||||||
Retirement | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Death | — | 574,125 | 2,778,976 | 10,676 | — | 3,363,777 | 77,917 | 1,404,931 | 2,947,052 | 5,350 | — | 4,435,250 | ||||||||||||||||||
Disability | — | 574,125 | 2,778,976 | — | — | 3,353,101 | — | 1,404,931 | 2,947,052 | — | — | 4,351,983 | ||||||||||||||||||
Jeffrey A. Craig | ||||||||||||||||||||||||||||||
Termination Event | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | ||||||||||||||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | ||||||||||||||||||||||||
Termination without Cause | 1,050,000 | 1,112,164 | 5,418,498 | 20,666 | 10,000 | 7,611,328 | ||||||||||||||||||||||||
Termination Upon Change of Control | ||||||||||||||||||||||||||||||
-Termination without cause | 1,050,000 | 814,175 | 14,542,266 | 20,666 | 10,000 | 16,437,107 | ||||||||||||||||||||||||
-Death | — | 814,175 | 14,542,266 | 6,889 | — | 15,363,330 | ||||||||||||||||||||||||
-Disability | — | 814,175 | 14,542,266 | — | — | 15,356,441 | ||||||||||||||||||||||||
Retirement | — | 1,112,164 | 10,361,402 | — | — | 11,473,566 | ||||||||||||||||||||||||
Death | 58,333 | 1,112,164 | 9,458,017 | 6,889 | — | 10,635,403 | ||||||||||||||||||||||||
Disability | — | 1,112,164 | 9,458,017 | — | — | 10,570,181 |
Carl D. Anderson II | ||||||||||||||||||
Termination Event | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | ||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | ||||||||||||
Termination without Cause | 945,000 | 645,435 | 1,072,299 | 27,885 | 10,000 | 2,700,619 | ||||||||||||
Termination Upon Change of Control | ||||||||||||||||||
-Termination without cause | 945,000 | 472,500 | 3,415,607 | 27,885 | 10,000 | 4,870,992 | ||||||||||||
-Death | — | 472,500 | 3,415,607 | 9,295 | — | 3,897,402 | ||||||||||||
-Disability | — | 472,500 | 3,415,607 | — | — | 3,888,107 | ||||||||||||
Retirement | — | — | — | — | — | — | ||||||||||||
Death | 52,500 | 645,435 | 1,917,860 | 9,295 | — | 2,625,090 | ||||||||||||
Disability | — | 645,435 | 1,917,860 | — | — | 2,563,295 | ||||||||||||
Timothy Bowes | ||||||||||||||||||
Termination Event | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | ||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | ||||||||||||
Termination without Cause | 742,500 | 405,702 | 66,108 | 27,885 | 10,000 | 1,252,195 | ||||||||||||
Termination Upon Change of Control | ||||||||||||||||||
-Termination without cause | 742,500 | 297,000 | 710,144 | 27,885 | 10,000 | 1,787,529 | ||||||||||||
-Death | — | 297,000 | 710,144 | 9,295 | — | 1,016,439 | ||||||||||||
-Disability | — | 297,000 | 710,144 | — | — | 1,007,144 | ||||||||||||
Retirement | — | — | — | — | — | — | ||||||||||||
Death | 41,250 | 405,702 | 171,437 | 9,295 | — | 627,684 | ||||||||||||
Disability | — | 405,702 | 171,437 | — | — | 577,139 | ||||||||||||
John Nelligan | ||||||||||||||||||
Termination Event | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | ||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | ||||||||||||
Termination without Cause | 742,500 | 405,702 | 320,532 | 27,885 | 10,000 | 1,506,619 | ||||||||||||
Termination Upon Change of Control | ||||||||||||||||||
-Termination without cause | 742,500 | 297,000 | 1,112,005 | 27,885 | 10,000 | 2,189,390 | ||||||||||||
-Death | — | 297,000 | 1,112,005 | 9,295 | — | 1,418,300 | ||||||||||||
-Disability | — | 297,000 | 1,112,005 | — | — | 1,409,005 | ||||||||||||
Retirement | — | 405,702 | 600,389 | — | — | 1,006,091 | ||||||||||||
Death | 41,250 | 405,702 | 578,995 | 9,295 | — | 1,035,242 | ||||||||||||
Disability | — | 405,702 | 578,995 | — | — | 984,697 |
Joseph A. Plomin | |||||||||||||||||||||||||
Vesting of | |||||||||||||||||||||||||
Restricted | |||||||||||||||||||||||||
Shares, | Health and | ||||||||||||||||||||||||
Severance | Annual | RSUs and | Welfare | Outplacement | |||||||||||||||||||||
Termination Event | Pay ($)(1) | Incentive ($)(2) | PSUs ($)(3) | Benefits ($) | Services ($) | Total ($) | |||||||||||||||||||
Voluntary Termination or | |||||||||||||||||||||||||
Termination with Cause | — | — | — | — | — | — | |||||||||||||||||||
Termination without Cause | 652,500 | 432,890 | 1,225,583 | 32,156 | 10,000 | 2,353,129 | |||||||||||||||||||
Termination Upon Change of Control | |||||||||||||||||||||||||
-Termination without cause | 652,500 | 282,750 | 3,813,222 | 32,156 | 10,000 | 4,790,629 | |||||||||||||||||||
-Death | — | 282,750 | 3,813,222 | 10,719 | — | 4,106,691 | |||||||||||||||||||
-Disability | — | 282,750 | 3,813,222 | — | — | 4,095,972 | |||||||||||||||||||
Retirement | — | 432,890 | 2,108,241 | — | — | 2,541,130 | |||||||||||||||||||
Death | — | 432,890 | 1,988,265 | 10,719 | — | 2,431,874 | |||||||||||||||||||
Disability | — | 432,890 | 1,988,265 | — | — | 2,421,155 | |||||||||||||||||||
Robert H. Speed | |||||||||||||||||||||||||
Vesting of | |||||||||||||||||||||||||
Restricted | |||||||||||||||||||||||||
Shares, | Health and | ||||||||||||||||||||||||
Severance | Annual | RSUs and | Welfare | Outplacement | |||||||||||||||||||||
Termination Event | Pay ($)(1) | Incentive ($)(2) | PSUs ($)(3) | Benefits ($) | Services ($) | Total ($) | |||||||||||||||||||
Voluntary Termination or | |||||||||||||||||||||||||
Termination with Cause | — | — | — | — | — | — | |||||||||||||||||||
Termination without Cause | 652,500 | 432,890 | 1,223,866 | 32,276 | 10,000 | 2,351,532 | |||||||||||||||||||
Termination Upon Change of Control | |||||||||||||||||||||||||
-Termination without cause | 652,500 | 282,750 | 3,810,959 | 32,276 | 10,000 | 4,788,485 | |||||||||||||||||||
-Death | — | 282,750 | 3,810,959 | 10,759 | — | 4,104,468 | |||||||||||||||||||
-Disability | — | 282,750 | 3,810,959 | — | — | 4,093,709 | |||||||||||||||||||
Retirement | — | — | — | — | — | — | |||||||||||||||||||
Death | — | 432,890 | 1,971,107 | 10,759 | — | 2,414,756 | |||||||||||||||||||
Disability | — | 432,890 | 1,971,107 | — | — | 2,403,997 | |||||||||||||||||||
Chris Villavarayan | |||||||||||||||||||||||||
Vesting of | |||||||||||||||||||||||||
Restricted | |||||||||||||||||||||||||
Shares, | Health and | ||||||||||||||||||||||||
Severance | Annual | RSUs and | Welfare | Outplacement | |||||||||||||||||||||
Termination Event | Pay ($)(1) | Incentive ($)(2) | PSUs ($)(3) | Benefits ($) | Services ($) | Total ($) | |||||||||||||||||||
Voluntary Termination or | |||||||||||||||||||||||||
Termination with Cause | — | — | — | — | — | — | |||||||||||||||||||
Termination without Cause | 652,500 | 432,890 | 1,276,293 | 15,035 | 10,000 | 2,386,718 | |||||||||||||||||||
Termination Upon Change of Control | |||||||||||||||||||||||||
-Termination without cause | 652,500 | 282,750 | 3,965,355 | 15,035 | 10,000 | 4,925,639 | |||||||||||||||||||
-Death | — | 282,750 | 3,965,355 | 5,012 | — | 4,253,116 | |||||||||||||||||||
-Disability | — | 282,750 | 3,965,355 | — | — | 4,248,105 | |||||||||||||||||||
Retirement | — | — | — | — | — | — | |||||||||||||||||||
Death | — | 432,890 | 1,970,739 | 5,012 | — | 2,408,641 | |||||||||||||||||||
Disability | — | 432,890 | 1,970,739 | — | — | 2,403,630 |
Hannah S. Lim-Johnson
Termination Event | Severance Pay ($)(1) | Annual Incentive ($)(2) | Vesting of Restricted Shares, RSUs and PSUs ($)(3) | Health and Welfare Benefits ($) | Outplacement Services ($) | Total ($) | |||||||||||||
Voluntary Termination or Termination with Cause | — | — | — | — | — | — | |||||||||||||
Termination without Cause | 690,000 | (4) | 408,434 | 217,072 | 20,666 | 10,000 | 1,346,172 | ||||||||||||
Termination Upon Change of Control | |||||||||||||||||||
-Termination without cause | — | — | — | — | — | — | |||||||||||||
-Death | |||||||||||||||||||
-Disability | |||||||||||||||||||
Retirement | — | — | — | — | — | — | |||||||||||||
Death | — | — | — | — | — | — | |||||||||||||
Disability | — | — | — | — | — | — |
(1) | Based on annual salary as of the last day of |
(2) | |
The executive would be entitled to annual incentive participation for | |
(3) | Based, as applicable, on the number of unvested shares of restricted stock, unvested restricted share units and unvested performance share units (reported at the actual performance level achieved for the fiscal |
●in the case of termination upon change of control, the total number granted; | |
● | in the case of termination without cause, |
● | in the case of death and disability, a prorated number of shares of restricted stock, restricted share units and performance share units, based on active time worked prior to the date of the death or disability. |
In each case, the applicable numbers are multiplied by the NYSE Closing Price on October 1, 2021 ($22.56), the last trading day of fiscal year 2021. | |
(4) | Includes all severance pay, distributions under the Company’s Savings Plans and reimbursement for unused vacation time, including amounts that were paid or are payable after October 3, 2021. |
In each case,Table of Contents
Under the applicable numbersDodd-Frank Wall Street Reform and Consumer Protection Act, we are multiplied byrequired to disclose the NYSE Closing Price on September 29, 2017 ($26.01)median of the annual total compensation of our employees (excluding our CEO), the last trading dayannual total compensation of our CEO, and the ratio of these two amounts. In March 2021, Mr. Craig, formerly the Chief Executive Officer and President, assumed the title of Executive Chairman of the Board, and Mr. Villavarayan, formerly Executive Vice President and Chief Operating Officer, assumed the title of Chief Executive Officer and President. As a result, we have calculated Mr. Villavarayan’s compensation for purposes of the CEO pay ratio by annualizing his base pay and cash allowances in lieu of perquisites and adding all other amounts as reflected in the Summary Compensation Table. As noted previously, the column headed “Stock Awards” and footnote 4 in the table under the heading Fiscal Year 2021 Summary Compensation Table includes incremental accounting expense related to adjustments to Mr. Villavarayan’s existing awards under the fiscal year 2017.2019-2021 performance cycle.
For 2021, any changes in employee population or compensation arrangements did not result in material changes to the median employee determination. While the individual identified as our median employee for 2019 and 2020 is no longer an employee of the Company, an individual with substantially similar compensation has been selected as the median employee for 2021. We utilized the consistently applied compensation measure of total direct compensation (“TDC”) for the period from September 28, 2020 to October 3, 2021, which consisted of the sum of annual base pay and the value of annual and target long-term incentives.
For 2021, the median TDC of all employees of the Company (other than the CEO), was $39,786. The total compensation of the CEO was $7,703,378. Based on this information, the ratio of the annual total compensation of the Company’s CEO to the median of the annual total compensation of all employees was approximately 194 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. Because the SEC rules for identifying the median employee and calculating the pay ratio permit companies to use various methodologies and assumptions, to apply certain exclusions and to make reasonable estimates that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio we have reported.
PROPOSAL REGARDING2 - ADVISORY VOTE TO APPROVE EXECUTIVE OFFICER COMPENSATION
As required pursuant to Section 14A of the Exchange Act, we are providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with the SEC’s compensation disclosure rules. We provide this advisory vote on an annual basis, and the next such vote will occur at the Annual Meeting of Shareholders in 2019.2023.
As described in detail under the headingExecutive Compensation - Compensation Discussion and Analysis, we believe our executive compensation program is balanced, seeks to closely align the interests of our Named Executive Officers with the long-term interests of our shareholders, and is focused on pay for performance in support of Meritor’s business objectives. As you review theCompensation Discussion and Analysissection of this proxy statement and the other sections related to executive compensation, you should note the following:
● | The Company’s annual incentive compensation and long-term incentive compensation are both based on the achievement of business objectives that support Meritor’s long-term success. |
● | A substantial portion of our Named Executive Officers’ compensation is tied to Meritor’s stock performance (including the equity-based awards reflected in the tables under the headingsExecutive Compensation – Fiscal Year |
● | We utilize three-year vesting cycles for service-based restricted shares and restricted share units and for performance-based long-term incentive awards to promote a longer-term focus. |
● | Our compensation actions show that we maintain a pay-for-performance culture by basing a significant portion of payments under our incentive plans on achievement of measurable business objectives. |
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our Named Executive Officers, as described in this proxy statement, in accordance with the SEC’s compensation disclosure rules. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee.
Accordingly, we ask our shareholders to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 20182022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Fiscal Year 20172021 Summary Compensation Table and the other related tables and disclosure in the Proxy Statement.”
The Board of Directors recommends that you vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this proxy statement, which is presented as Item (2).statement.
The Audit Committee, in accordance with its written charter, assists the Board in fulfilling its responsibility for monitoring the integrity of the accounting, auditing and financial reporting practices of Meritor. The Audit Committee’s function is more fully described in its charter, which is summarized above under the headingBoard of Directors and Committees – Committees – Audit Committeeand is available in the section headed “Investors – Corporate Governance” on the Meritor website (www.meritor.com).The four directors listed below were the members of the Audit Committee who participated in the review, discussions and recommendation with respect to the Audit Committee Report for fiscal year 2017.2021.
The Board has determined that (1) all of the members of the Audit Committee meet the criteria for independence specified in the listing standards of the New York Stock Exchange; (2) all of the members of the Audit Committee are “financially literate,” and one or more members of the Audit Committee possess accounting or related financial management expertise (as these qualifications are interpreted in the business judgment of the Board), in each case as required by the listing standards of the New York Stock Exchange; and (3) Jan A. Bertsch and William J. LyonsFazal Merchant qualify as “audit committee financial experts,” as required by the SEC and defined in Regulation S-K. Each member of the Audit Committee has either education and high-level experience in financial matters, or an extensive working knowledge of financial matters acquired through operational experience leading significant businesses. This mix of financial and operational expertise provides the Audit Committee with diverse viewpoints on financial matters and enhances its effectiveness. The qualifications of each Audit Committee member are disclosed under the headingElection of Directors –Information– Information as to Nominees for Director and Continuing Directorsabove.
The Audit Committee is responsible for annual selection and overseeing the independence, qualifications and performance of the independent auditors. The criteria considered by the Audit Committee in carrying out this responsibility are discussed below under the headingProposal to Approve the Selection of Auditors.The Audit Committee is also responsible for approval of the independent auditor’s compensation and, as a policy, all services provided and the related budgets are pre-approved. The procedure for approval of independent auditor compensation is discussed in more detail under the headingIndependent Accountants’ Feesbelow.
The Audit Committee is also responsible for reviewing significant internal control matters, the adequacy of the system of internal controls, the internal audit charter, the scope of the annual internal audit plan and the results of internal audits. The Audit Committee also consults with management as to appointment, reassignment, replacement, dismissal and compensation of the internal auditor.
Management is responsible for the financial reporting process, including the system of internal controls and disclosure controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The independent auditors are responsible for auditing these financial statements and expressing an opinion as to their conformity to GAAP. The Audit Committee’s responsibility is to monitor and review these processes, acting in an oversight capacity. The Audit Committee does not certify the financial statements or guarantee the independent auditor’s report. The Audit Committee relies, without independent verification, on the information provided to it, the representations made by management and the independent auditors and the report of the independent auditors.
The Audit Committee has reviewed and discussed the audited financial statements of the Company for the fiscal year ended September 30, 20172021 with the Company’s management and with Deloitte & Touche LLP (“Deloitte”), the Company’s independent auditors. The Audit Committee has also reviewed and discussed communications from both management and Deloitte regarding internal controls over financial reporting, as required by the Public Company Accounting Oversight Board’s Auditing Standard No. 5, “An Audit of Internal Control over Financial Reporting That is Integrated with an Audit of Financial Statements,” and applicable SEC rules.
The discussions with Deloitte also included the overall scope of and plans for the audit and the matters required to be discussed under Public Company Accounting Oversight Board Auditing Standard No. 16, “Communications with Audit Committees.” In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Deloitte their independence.
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017,2021 filed with the Securities and Exchange Commission.
Audit Committee
William J. Lyons,Jan A. Bertsch, ChairmanChairJan A. BertschRhondaRodger L. BrooksBoehm
Fazal Merchant
Thomas L. Pajonas
INDEPENDENT ACCOUNTANTS’ FEES
During the last two fiscal years, Deloitte & Touche LLP billed Meritor and its subsidiaries the following fees for its services:
Fiscal Year Ended September 30, | Fiscal Year Ended September 30, | |||||||||
2016 | 2017 | 2020 | 2021 | |||||||
Audit fees(a) | $4,856,000 | $5,204,000 | $ | 4,648,500 | $ | 4,670,000 | ||||
Audit-related fees(b) | — | 100,000 | 419,000 | 273,000 | ||||||
Tax fees(c) | 700,000 | 851,000 | 259,300 | 55,500 | ||||||
All other fees | — | — | — | — | ||||||
TOTAL | $5,556,000 | $6,155,000 | $ | 5,326,800 | $ | 4,998,500 |
(a) | Includes fees related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002. |
(b) | Audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” Audit-related fees principally the services provided in connection with our securities offerings. |
(c) | Includes fees for tax consulting and compliance. |
Pursuant to its charter, the Audit Committee is responsible for selection,selecting, approving compensation and overseeing the independence, qualifications and performance of the independent accountants. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent accountants. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. In assessing requests for services by the independent accountants, the Audit Committee considers whether such services are consistent with the auditor’s independence; whether the independent accountants are likely to provide the most effective and efficient service based upon their familiarity with the Company; and whether the service could enhance the Company’s ability to manage or control risk or improve audit quality.
All of the audit-related and tax services provided by Deloitte in fiscal years 20162020 and 20172021 (described in the footnotes to the table above) and related fees were approved in advance by the Audit Committee.
PROPOSAL TO3 - APPROVE THE SELECTION OF AUDITORS
The Audit Committee of the Board of Directors of Meritor has selected the firm of Deloitte & Touche LLP as the auditors of the Company, subject to the approval of the shareholders. Deloitte & Touche LLP havehas acted as auditors for Meritor and its predecessor company, Meritor Automotive, Inc., since 1997.1996.
Before the Audit Committee appointed Deloitte & Touche LLP, it carefully considered, among other things, the qualifications of that firm and the quality of its work, including its performance for Meritor, its ability and expertise in handling the breadth and complexity of Meritor’s world-wide operations, the appropriateness of its fees and its reputation for integrity and for competence in the fields of accounting and auditing. The members of the Audit Committee and the Board of Directors currently believe that the continued retention of Deloitte & Touche LLP to serve as the Company’s independent external auditor is in the best interests of the Company and its investors.shareholders. Representatives of Deloitte & Touche LLP are expected to attend the 20182022 Annual Meeting, are expected to be available to respond to appropriate questions and will have the opportunity to make a statement if they desire to do so.
The Board of Directors recommends that you vote “FOR” the proposal to approve the selection of Deloitte & Touche LLP to act as auditors for Meritor, which is presented as item (3).Meritor.
Our BoardTable of Directors has unanimously approved, and recommends that our shareholders approve, amendments to our Amended and Restated Articles of Incorporation, referred to as the Articles, to provide shareholders with the ability to amend our Amended and Restated By-Laws, referred to as the By-Laws. Under Indiana law and our Articles, the affirmative vote of holders representing at least 80% of the voting power of our Common Stock is required to approve the proposed amendments to our Articles. A form of amended and restated Articles isContents attached to this proxy statement asAppendix A. This summary of the proposed amendments to the Articles is qualified in its entirety by reference toAppendix A.
Indiana law provides that, unless otherwise specified by the articles of incorporation, only a corporation’s board of directors may amend or repeal the by-laws. Our Articles currently provide our Board of Directors with the exclusive power to make, alter, amend or repeal the By-Laws.
Our Board of Directors is committed to good corporate governance and has carefully considered the advantages and disadvantages of adopting a change to our Articles to provide our shareholders with the ability to amend our By-Laws. After weighing these considerations, and upon the recommendation of the Corporate Governance and Nominating Committee, the Board of Directors has concluded that amending the Articles to allow shareholders to amend our By-Laws will enhance our corporate governance practices by giving shareholders a say in important governance principles.
If the proposed amendments are approved by our shareholders, management will file amended and restated Articles with the Indiana Secretary of State following the annual meeting to incorporate the approved amendments. The amended and restated Articles will become effective upon acceptance of the filing by the Indiana Secretary of State. Upon the approval of this proposal and the acceptance of the amended and restated Articles by the Indiana Secretary of State, corresponding amendments to our By-Laws will also be made.
If this proposal is not approved, the proposed amendments to our Articles will not be made and all existing provisions, including the default position under Indiana law reserving authority to amend our By-Laws solely to the Board of Directors, will remain in effect.
The Board of Directors recommends that you vote “FOR” the proposal to approve the amendments to our Amended and Restated Articles of Incorporation to allow shareholders to amend our Amended and Restated By-Laws, which is presented as item (4).
The presence, in person or by proxy, of the holders of at least a majority of the shares of Common Stock entitled to be cast on any matter to be acted on at the 20182022 Annual Meeting is necessary to have a quorum. Once a share is represented with respect to any matter, it is deemed present for quorum purposes for the remainder of the meeting. Assuming a quorum is present, the vote required for approval of each proposal is as follows:
● | Proposal 1: Election of Directors— |
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○ | Majority Vote Policy. Under the Company’s majority vote policy (as described above under the headingCorporate Governance at Meritor – Board Composition), any nominee for director who is elected but who receives a greater number of “withhold” votes than “for” votes in an uncontested election is required to tender his or her resignation promptly after the certification of the election results. The Corporate Governance and Nominating Committee will consider the matter and recommend to the Board what action should be taken. The Board is required to take action and publicly disclose its decision, including the underlying rationale, within 90 days of certification of the election results. |
● | Proposal 2: Advisory Vote on Executive Compensation— The proposal relating to the advisory vote on executive compensation will be considered approved if more votes are cast in favor of the proposal than are cast against it. This proposal is advisory in nature, which means that it is not binding on the Board | |
● | Proposal 3: Selection of Auditors — | |
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Abstentions and broker non-votes will have the following effects on the outcome of the proposals:
● | Effect of Abstentions— Under Indiana law, an abstention from voting on a matter by a shareholder present in person or represented by proxy at the meeting will not affect the outcome of the election of directors, the advisory vote on executive compensation or the proposal to approve the selection of auditors. |
● | Effect of Broker Non-Votes— If your shares of Common Stock are held in “street name” and you do not give your broker voting instructions, your broker will have discretion to vote your shares only for the proposal to approve the selection of auditors. With respect to all other matters to be voted on at the |
The Board of Directors does not know of any other matters that may be presented at the meeting. In the event of a vote on any matters other than those referred to in items (1), (2), and (3) and (4) of the accompanying Notice of 20182022 Annual Meeting of Shareholders, it is intended that properly given proxies will be voted on the additional matters in accordance with the judgment of the person or persons voting such proxies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of Meritor equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the New York Stock Exchange. Officers, directors and greater-than-ten percent shareholders are required by SEC regulation to furnish us with copies of all Forms 3, 4 and 5 they file.
Based solely on our review of the copies of such forms we have received and information and representations furnished by our officers and directors, we believe that all our officers, directors and greater-than-ten percent beneficial owners have filed with the SEC on a timely basis all required forms with respect to transactions in Meritor securities in fiscal year 2017, except that Mr. Plomin did not timely file one Form 4 in fiscal year 2017 reflecting one transaction.
ANNUAL REPORTS
Our Annual Report to Shareholders, including the Form 10-K and financial statements, for the fiscal year ended September 30, 2017,2021, was either made available electronically or mailed to shareholders with this proxy statement.
EXPENSES OF SOLICITATION
Meritor will bear the cost of the solicitation of proxies. In addition to the use of the mailsmail and use of a website to make proxy materials available electronically, proxies may be solicited personally, or by telephone, telegraph, telecopy, Internetinternet or other means of communication by our directors, officers and employees without additional compensation. As usual, we will also reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their expenses of resending proxy materials to principals and obtaining their proxies.
SHAREHOLDER PROPOSALS FOR 20192023 ANNUAL MEETING
Under the SEC’s rules and regulations, shareholder proposals for the 20192023 Annual Meeting of Shareholders must be received on or before August 16, 2018,19, 2022, at the Office of the Corporate Secretary at our headquarters, 2135 West Maple Road, Troy, Michigan 48084-7186, in order to be eligible for inclusion in our proxy materials.
The proxy access provision of our By-Laws allows a shareholder, or group of up to 20 shareholders, to nominate up to two director candidates or, if greater, up to 20% of the number of directors then serving on our Board, if the shareholder or group meets the ownership requirement of 3% or more of our outstanding Common Stock held continuously for at least the previous three years. In addition,order for such nominees to be included in our proxy materials, the shareholder(s) and nominee(s) must also satisfy the other requirements specified in our By-Laws and submit a notice of proxy access nomination together with certain related information required by our By-Laws to our Corporate Secretary in writing at the above address on or after September 29, 2022 and on or before October 29, 2022.
Our By-Laws require a shareholder desiring to propose any matter for consideration at the 20192023 Annual Meeting of Shareholders, other than through inclusion in our proxy materials, to notify our Corporate Secretary in writing at the above address on or after September 26, 201829, 2022 and on or before October 26, 2018.29, 2022.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
We have established procedures for shareholders and other interested parties to communicate directly with non-management members of the Board of Directors.Board. You can contact the Board by mail at: Meritor Board of Directors, 33717 Woodward Ave., PMB 335, Birmingham, MI 48009.
If you have concerns involving internal controls, accounting or auditing, you can contact the Audit Committee directly by mail at: Meritor Audit Committee, 33717 Woodward Ave., PMB 407, Birmingham, MI 48009.
FORWARD LOOKING STATEMENTS
This proxy statement contains statements and estimates relating to future results of the company and compensation of the Named Executive Officers that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results and compensation may differ materially from that projected as a result of certain facts and uncertainties, including but not limited to timing of and reason for termination of employment; compensation levels and outstanding equity and incentive awards at the time of termination; and age and length of service at the time of termination; as well as other facts and uncertainties, including but not limited to those detailed herein, in the Form 10-K and from time to time in other filings of the Company with the SEC. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.
December 14, 201717, 2021
● | indicate your desire to attend the meeting when you grant your proxy via our Internet or telephone voting procedures; or |
● | mark the appropriate box on the proxy card and mail the card using the enclosed envelope. |
AMENDED AND RESTATEDARTICLES OF INCORPORATIONOFMERITOR, INC.
ARTICLE 1
IDENTIFICATION
The nameTable of the Corporation is Meritor, Inc. (the “Corporation” or the “Company”).
ARTICLE 2
PURPOSE, POWERS AND DURATION
Section 2.01Purpose. The purpose for which the Corporation is formed is the transaction of any or all lawful business for which corporations may be incorporated under the Indiana Business Corporation Law, as the same may, from time to time, be amended (the “Act”).Contents
Section 2.02Powers. The Corporation, subject to any limitations or restrictions imposed by the Act, other law or these Articles of Incorporation, as the same may, from time to time, be amended (these “Articles”), shall have the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including without limitation all powers enumerated in the Act as examples of corporate powers.
Section 2.03Duration. The Corporation is to have perpetual existence.
ARTICLE 3
REGISTERED OFFICE AND REGISTERED AGENT
The street address of the registered office of the Corporation is:
150 West Market StreetSuite 800Indianapolis, Indiana 46204
and the name and business office of its registered agent in charge of such office are:
CT Corporation System150 West Market StreetSuite 800Indianapolis, Indiana 46204
The undersigned represents that the registered agent named above has consented to the appointment of registered agent.
ARTICLE 4
NUMBER OF AUTHORIZED SHARES
The Corporation shall have authority to issue a total of Five Hundred Thirty Million (530,000,000) shares of the Corporation (“Shares”).
ARTICLE 5
GENERAL PROVISIONS REGARDING SHARES
Section 5.01Common Stock.
(a) Five Hundred Million (500,000,000) of the Shares that the Corporation has authority to issue constitute a separate and single class of Shares designated as “Common Stock”, which shall have a par value of One Dollar ($1.00) per share and shall not be issued in series, with all shares of Common Stock having identical rights, preferences and limitations.
(b) The Common Stock shall have the following voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations or restrictions thereof:
(i)Dividends. Whenever the full dividends upon any outstanding Preferred Stock for all past dividend periods shall have been paid and the full dividends thereon for the then current respective dividend periods shall have been paid, or declared and a sum sufficient for the respective payments thereof set apart, the holders of shares of the Common Stock shall be entitled to receive such dividends and distributions in equal amounts per share, payable in cash or otherwise, as may be declared thereon by the Board of Directors of the Corporation (the “Board”) from time to time out of assets or funds of the Corporation legally available therefor.
(ii)Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled as herein provided or referred to, all of the remaining assets of the Corporation shall belong to and be distributable in equal amounts per share to the holders of the Common Stock. For purposes of this Section 5.01(b)(ii), a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Corporation.
(iii)Voting. Subject to the rights of holders of Preferred Stock of any series, the holders of Common Stock shall have the right to cast one vote for each duly authorized, issued and outstanding share of Common Stock held by them upon each question or matter submitted generally to the Shareholders.
Section 5.02Preferred Stock. Thirty Million (30,000,000) of the Shares that the Corporation has authority to issue constitute a separate and single class of Shares designated as “Preferred Stock”, which shall be without par value, shall rank prior to and be preferred over Common Stock as to assets and dividends, and may be issued in series as follows, with all shares of Preferred Stock of the same series having identical rights, preferences and limitations:
(a) Two Million (2,000,000) shares of Preferred Stock (or such greater or lesser number as may be established pursuant to Section 6.01 of these Articles) constitute a separate and single series designated as “Series A Junior Participating Preferred Stock”, which shall have the relative rights, preferences and limitations set forth in this Article 5 and in Article 6 of these Articles.
(b) The remainder of the Preferred Stock (“Other Preferred Stock”) may be issued in one or more series. Subject to the rights of the holders of any then outstanding Preferred Stock, the Board is vested with authority to determine and state the designations and the relative rights (including voting rights, if any), preferences and limitations of any such series of Other Preferred Stock by the adoption and filing in accordance
with the Act, before the issuance of any Shares of such series, of an amendment or amendments to these Articles determining the terms of such series (a “Preferred Stock Amendment”). The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(i) the designation of the series, which may be by distinguishing number, letter or title;
(ii) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Amendment) increase or decrease (but not below the number of shares thereof then outstanding);
(iii) whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series;
(iv) the dates at which dividends, if any, shall be payable;
(v) the redemption rights and price or prices, if any, for shares of the series;
(vi) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;
(vii) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(viii) whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
(ix) restrictions on the issuance of shares of the same series or of any other class or series; and
(x) the voting rights, if any, of the holders of shares of the series.
Except as may be provided in these Articles or in a Preferred Stock Amendment, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and except as may be required by the Act, holders of Preferred Stock shall not be entitled to receive notice of any meeting of Shareholders at which they are not entitled to vote. Subject to the requirements of the Act, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding Common Stock.
Section 5.03Issuance of Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct the issuance by the Corporation of Shares on such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.
Section 5.04Distributions Upon Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct in respect of the issued and outstanding shares of Common Stock and Preferred Stock (i) the payment of dividends and the making of other distributions by the Corporation at such times, in such amounts and forms, from such sources and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles, and (ii) the making by the Corporation of Share dividends and Share splits, pro rata and without consideration, in Shares of the same class or series or in Shares of any other class or series, and without obtaining the affirmative vote or the written consent of the holders of the Shares of the class or series in respect of which the payment or distribution is to be made.
Section 5.05Preemptive Rights. Unless otherwise determined by the Board, no holder of Shares shall, as such holder, have any right to purchase or subscribe for any Shares of any class which the Corporation may issue or sell, whether or not exchangeable for any Shares of any class or classes and whether out of unissued shares authorized by these Articles as originally filed or by any amendment thereof or out of Shares acquired by it after the issue thereof.
Section 5.06Acquisition of Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct the acquisition by the Corporation of the issued and outstanding shares of Common Stock and Preferred Stock, in such amounts, from such persons, for such considerations, from such sources and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.
Section 5.07Issuance of Rights, Options and Warrants. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to create and to authorize and direct the issuance (on either a pro rata or a non-pro rata basis) by the Corporation of rights, options and warrants for the purchase of Shares, other securities of the Corporation, or shares or other securities of any successor in interest of the Corporation (a “Successor”), at such times, in such amounts, to such persons, for such consideration (if any), with such form and content (including without limitation the consideration for which any Shares, other securities of the Corporation, or shares or other securities of any Successor are to be issued) and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.
Section 5.08Record Ownership of Shares. The Corporation shall be entitled to treat the holder of record (according to the books of the Corporation) of any Share or Shares (including any holder registered in a book-entry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and owner for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such Share or Shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable law.
Section 5.09Recognition Procedure for Beneficial Ownership of Shares. The Board may establish a recognition procedure, which may be included in the By-Laws of the Corporation (as the same may be amended from time to time, the “By-Laws”), by which the beneficial owner of any Share registered on the books of the Corporation in the name of a nominee is recognized by the Corporation, to the extent provided in any such recognition procedure, as the owner thereof.
Section 5.10Disclosure Procedure for Beneficial Ownership of Shares. The Board may establish a disclosure procedure, which may be included in the By-Laws, by which the name of the beneficial owner of any Share registered on the books of the Corporation in the name of a nominee shall, to the extent not prohibited by the Act or other applicable laws, be disclosed to the Corporation. Any disclosure procedure established by the Board may include reasonable sanctions to ensure compliance therewith, including without limitation (i) prohibiting the voting of, (ii) providing for mandatory or optional reacquisition by the Corporation of, and (iii) the withholding or payment into escrow of any dividend or other distribution in respect of, any Share of which the name of the beneficial owner is not disclosed to the Corporation as required by such disclosure procedure.
Section 5.11Liability of Shareholders. The private property of the Shareholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatever.
ARTICLE 6
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
The Series A Junior Participating Preferred Stock shall have the designation and the relative rights, preferences and limitations set forth in this Article 6.
Section 6.01Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be Two Million (2,000,000). Such number of shares may be increased or decreased by resolution of the Board;provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
Section 6.02Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, and of any other junior stock of the Corporation, shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the second Monday of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 6.02(a) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.
Section 6.03Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the Shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Preferred Stock Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of Shareholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 6.04Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 6.02 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series APreferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 6.04(a)(iii), purchase or otherwise acquire such shares at such time and in such manner.
Section 6.05Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in these Articles, or in any Preferred Stock Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6.06Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 6.07Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 6.08No Redemption. The shares of Series A Preferred Stock shall not be redeemable.
Section 6.09Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.
Section 6.10Amendment. These Articles shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.
ARTICLE 7
DIRECTORS, BY-LAWS AND ARTICLES OF INCORPORATION
Section 7.01Number of Directors. The number of Directors of the Corporation shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the whole Board, provided that such number shall not be less than three (3). A director need not be a Shareholder. The election of directors need not be by ballot unless the By-Laws so require.
Section 7.02Classified Board.
(a) The Directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of Shares, as provided in these Articles or in any Preferred Stock Amendment, shall be divided, with respect to the time for which they severally hold office, into three classes, each class being as nearly equal in number as possible. Members of each class shall hold office until their successors are duly elected and qualified. At each annual meeting of Shareholders, Directors elected to succeed those Directors
whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of Shareholders after their election, with each Director to hold office until his or her successor shall have been duly elected and qualified.
(b) Subject to the rights of the holders of any series of Preferred Stock, and unless the Board otherwise determines, newly created directorships resulting from any increase in the authorized number of Directors or any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and Directors so chosen shall hold office for a term expiring at the annual meeting of Shareholders at which the term of office of the class to which they have been elected expires and until such Director’s successor shall have been duly elected and qualified. No decrease in the number of authorized Directors constituting the whole Board shall shorten the term of any incumbent Director.
Section 7.03Removal for Cause. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of Shares, as provided in these Articles or in any Preferred Stock Amendment, to elect additional Directors under specific circumstances, no Director of the Corporation shall be removed from his or her office as a Director by vote or other action of Shareholders or otherwise except for cause and in no event without the affirmative vote of at least 80 percent of the voting power of the Shares of the Corporation then entitled to vote at an election of Directors (the “Voting Shares”), voting together as a single class.
Section 7.04By-Laws. Except as otherwise expressly provided in these Articles or the Act, the By-Laws of the Corporation may from time to time be altered, amended or repealed, or new By-Laws may be adopted, by either (a) the Board of Directors by the affirmative vote of a majority of the total number of Directors at the time, or (b) the affirmative vote, at a meeting of the shareholders of the Corporation, of the holders of at least a majority of the voting power of the Voting Shares, voting together as a single class.
Section 7.05Articles of Incorporation. From time to time any of the provisions of these Articles may be amended, altered or repealed, and other provisions authorized by the statutes of the State of Indiana at the time in force may be added or inserted in the manner at the time prescribed by said statutes, and all rights at any time conferred upon the Shareholders of the Corporation by its Articles of Incorporation are granted subject to the provisions of this Section 7.05. Notwithstanding anything contained in these Articles to the contrary, none of Article 7, Article 9 or the last sentence of Section 8.01 may be amended or repealed, and no provision inconsistent with this Article 7, Article 9 or the last sentence of Section 8.01 may be adopted, except by the affirmative vote of the holders of at least 80 percent of the voting power of the Voting Shares, voting together as a single class.
ARTICLE 8
PROVISIONS FOR REGULATIONS OF BUSINESSAND CONDUCT OF AFFAIRS OF CORPORATION
Section 8.01Meetings of Shareholders. Meetings of the Shareholders shall be held at such place, within or without the State of Indiana, as may be provided in the By-Laws or in the respective notices, or waivers of notice, thereof. In the absence of any such provision, all Shareholders’ meetings shall be held at the principal office of the Corporation. Special meetings of the Shareholders for any purpose or purposes shall be called only by the Board pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation would have if there were no vacancies.
Section 8.02Action by Directors. Meetings of the Board or any committee of the Board (a “Committee”) shall be held at such place, within or without the State of Indiana, as may be specified in the By-Laws or in the respective notices, or waivers of notice, thereof and shall be conducted in such manner as may be specified in the By-Laws or permitted by the Act. Any action required or permitted to be taken at any meeting of the Board or a Committee may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all members of the Board or such Committee, and such written consent is filed with the minutes of the proceedings of the Board or such Committee.
Section 8.03Board Committees. Unless the By-Laws otherwise provide, the Board may, by resolution adopted by a majority of the whole Board of Directors, designate from among its members one or more Committees, each of which shall, to the extent provided in the resolution or By-Laws and not prohibited by the Act and other applicable laws, have and exercise all of the authority of the Board in the management of the Corporation.
Section 8.04Places of Keeping of Corporate Records. The Corporation shall keep at its principal office a copy of (i) these Articles, and all amendments thereto currently in effect; (ii) the By-Laws, and all amendments thereto currently in effect; (iii) minutes of all meetings of the Shareholders (“Shareholders Minutes”) for the prior three years; (iv) all written communications by the Corporation to the Shareholders, including the financial statements furnished by the Corporation to the Shareholders for the prior three years; (v) a list of the names and business addresses of the current Directors and the current officers of the Corporation (“Officers”); and (vi) the most recent Annual Report of the Corporation as filed with the Secretary of State of Indiana. The Corporation shall also keep and maintain at its principal office, or at such other place or places within or without the State of Indiana as may be provided, from time to time, in the By-Laws, (i) minutes of all meetings of the Board and of each Committee, and records of all actions taken by the Board and by each Committee without a meeting; (ii) appropriate accounting records of the Corporation; (iii) a record of the Shareholders in a form that permits preparation of a list of the names and addresses of all the Shareholders, in alphabetical order by class of Shares, stating the number and class of Shares held by each Shareholder; and (iv) Shareholders Minutes for periods preceding the prior three years. All of the records of the Corporation described in this Section 8.04 (collectively, the “Corporate Records”) shall be maintained in written form or in another form capable of conversion into written form within a reasonable time.
Section 8.05Limitation of Liability of Directors, Officers and Others.
(a) No Director, member of any Committee, member of another committee appointed by the Board (an “Appointed Committee”), Officer, employee or agent of the Corporation (collectively, “Corporate Person”) shall be liable for any loss or damage suffered on account of any action taken or omitted to be taken by such Corporate Person if, in taking or omitting to take any action causing such loss or damage, either (i) such Corporate Person acted (A) in good faith, (B) with the care an ordinarily prudent person in a like position would have exercised under similar circumstances, and (C) in a manner such Corporate Person reasonably believed was in the best interests of the Corporation, or (ii) such Corporate Person’s breach of or failure to act in accordance with the standards of conduct set forth in clause (i) above (the “Standards of Conduct”) did not constitute willful misconduct or recklessness.
(b) Any Corporate Person shall be fully protected, and shall be deemed to have complied with the Standards of Conduct, in relying in good faith, with respect to any information contained therein, upon (i) the Corporate Records, or (ii) information, opinions, reports or statements (including financial statements and other financial data) prepared or presented by (A) one or more other Corporate Persons whom such Corporate Person reasonably believes to be competent in the matters presented, (B) legal counsel, public accountants or other persons as to matters that such Corporate Person reasonably believes are within such person’s professional or expert competence, (C) a Committee or an Appointed Committee, of which such Corporate Person is not a member, if such Corporate Person reasonably believes such Committee or Appointed Committee merits confidence, or (D) the Board, if such Corporate Person is not a Director and reasonably believes that the Board merits confidence.
(c) No repeal or modification of this Section 8.05, directly or by adoption of an inconsistent provision of these Articles, by the Shareholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter that, but for this Section 8.05, would accrue or arise prior to such repeal or modification.
Section 8.06Indemnification of Directors, Officers and Others. To the extent permitted by the Act and the By-Laws, the Corporation may:
(a) indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil or criminal, administrative or investigative, formal or informal (an “Action”), by reason of the fact that such person is or was a Corporate Person, or is or was serving at the request of the Corporation as a director, officer, employee, agent, partner, trustee or member or in another authorized capacity (collectively, an “Authorized Capacity”) of or for another corporation, unincorporated
association, business trust, estate, partnership, trust, joint venture, individual or other legal entity, whether or not organized or formed for profit (collectively, “Another Entity”), against expenses (including attorneys’ fees) (“Expenses”) and judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Action;
(b) pay, in advance of the final disposition of an Action, the Expenses reasonably incurred in defending such action by a person who may be entitled to indemnification by the Corporation; and
(c) purchase and maintain insurance on behalf of any person who is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, against any liability asserted against and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability.
The indemnification and advance of Expenses authorized by this Section 8.06 shall (i) not be deemed exclusive of any other rights to which a person may be entitled under any law, any resolution of the Board or the Shareholders, any other authorization, whenever adopted, after notice, by a majority vote of all then outstanding Shares entitled to vote generally in the election of Directors, or the articles of incorporation, by-laws or other governing documents, or any resolution of or other authorization by the directors, shareholders, partners, trustees, members, owners or governing body, of Another Entity; (ii) inure to the benefit of the heirs, executors and administrators of such person; and (iii) continue as to any such person who has ceased to be a Corporate Person or to be serving in an Authorized Capacity of or for Another Entity.
Section 8.07Compensation of Directors. The Board is hereby specifically authorized, in and by the By-Laws, or by resolution duly adopted by the Board, to make provision for reasonable compensation to its members for their services as Directors, and to fix the basis and conditions upon which such compensation shall be paid. Any Director may also serve the Corporation in any other capacity and receive compensation therefor in any form.
Section 8.08Direction of Purposes and Exercise of Powers by Directors. The Board, subject to any specific limitations or restrictions imposed by the Act or these Articles, shall direct the carrying out of the purposes and exercise the powers of the Corporation, without previous authorization or subsequent approval by the Shareholders.
ARTICLE 9
SHAREHOLDER VOTE REQUIRED FORBUSINESS COMBINATIONS
Section 9.01Higher Vote for Business Combinations. In addition to any affirmative vote required by law, these Articles or the By-Laws of the Corporation, and except as otherwise expressly provided in Section 9.02, a Business Combination (as hereinafter defined) shall not be consummated without the affirmative vote of the holders of at least 80 percent of the Voting Shares, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise.
Section 9.02When Higher Vote Is Not Required. The provisions of Section 9.01 shall not be applicable to a Business Combination if the conditions specified in either of the following paragraphs (a) or (b) are met.
(a) Approval by Continuing Directors. The Business Combination shall have been approved by at least two-thirds of the Continuing Directors (as hereinafter defined), whether such approval is made prior to or subsequent to the date on which the Interested Shareholder (as hereinafter defined) became an Interested Shareholder (the “Determination Date”).
(b) Price and Procedure Requirements. Each of the seven conditions specified in the following subparagraphs (i) through (vii) shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination (the “Consummation Date”) of any consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be an amount at least equal to the higher amount determined under clauses (A) and
(B) below (the requirements of this paragraph (b)(i) shall be applicable with respect to all shares of Common Stock outstanding, whether or not the Interested Shareholder has previously acquired any shares of the Common Stock): (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Shareholder for any shares of Common Stock acquired beneficially by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (2) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; and (B) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of outstanding Shares of any class or series, other than the Common Stock, in such Business Combination shall be an amount at least equal to the highest amount determined under clauses (A), (B) and (C) below (the requirements of this paragraph (b)(ii) shall be applicable with respect to all outstanding Shares of every class or series, other than the Common Stock, whether or not the Interested Shareholder has previously acquired any Shares of a particular class or series):
(A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Shareholder for any Shares of such class or series acquired beneficially by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of such class or series of Shares from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Shares; and
(B) the Fair Market Value per share of such class or series of Shares on the Announcement Date or on the Determination Date, whichever is higher; and
(C) the highest preferential amount per share to which the holders of Shares of such class or series would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, regardless of whether the Business Combination to be consummated constitutes such an event.
(iii) The consideration to be received by holders of a particular class or series of outstanding Shares (including Common Stock) shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Shareholder in its direct or indirect acquisition of beneficial ownership of Shares of such class or series. If the consideration so paid for Shares of any class or series varied as to form, the form of consideration for such class or series of Shares shall be either cash or the form used to acquire beneficial ownership of the largest number of Shares of such class or series previously acquired by the Interested Shareholder.
(iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination, such Interested Shareholder shall not have become the beneficial owner of any additional Shares except as part of the transaction that results in such Interested Shareholder becoming an Interested Shareholder and except in a transaction that, after giving effect
thereto, would not result in any increase in the Interested Shareholder’s percentage beneficial ownership of any class or series of Shares; and, except as approved by at least two-thirds of the Continuing Directors: (A) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Shares; (B) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock); and (C) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock.
(v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a Shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all Shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by at least two-thirds of the Continuing Directors, the opinion of an investment banking firm selected for and on behalf of the Corporation by at least two-thirds of the Continuing Directors as to the fairness of the terms of the Business Combination from a financial point of view to the holders of the outstanding Shares other than the Interested Shareholder and its Affiliates or Associates (as hereinafter defined).
(vii) Such Interested Shareholder shall not have made any material change in the Corporation’s business or equity capital structure without the approval of at least two-thirds of the Continuing Directors.
Any Business Combination to which Section 9.01 shall not apply by reason of this Section 9.02 shall require only such affirmative vote as is required by law, any other provision of these Articles, the By-Laws of the Corporation or any agreement with any national securities exchange.
Section 9.03Certain Definitions. For the purposes of this Article 9:
(a) A “Business Combination” shall mean:
(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (A) any Interested Shareholder or (B) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder involving any assets or securities of the Corporation, any Subsidiary or any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder having an aggregate Fair Market Value of $25,000,000 or more; or
(iii) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or
(iv) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) that has
the effect, directly or indirectly, of increasing the proportionate share of any class or series of Shares, or any securities convertible into Shares or into equity securities of any Subsidiary, that is beneficially owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or
(v) any agreement, contract, arrangement or other understanding providing for any one or more of the actions specified in clauses (i) through (iv) above.
(b) A “person” shall mean any individual, firm, corporation or other entity and shall include any group composed of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Shares.
(c) “Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation, any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner of Voting Shares having 10 percent or more of the votes entitled to be cast by the holders of all then outstanding Voting Shares; or
(ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Shares having 10 percent or more of the votes entitled to be cast by the holders of all then outstanding Voting Shares; or
(iii) is an assignee of or has otherwise succeeded to any Voting Shares which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933;
provided,however, that neither Meritor Automotive, Inc. nor Arvin Industries, Inc. shall be deemed an Interested Shareholder as a result of any ownership of Shares or otherwise prior to the mergers of such corporations with and into the Corporation.
(d) A person shall be a “beneficial owner” of any Shares:
(i) which such person or any Affiliate or Associate of such person beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of such person has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares.
(e) For the purposes of determining whether a person is an Interested Shareholder pursuant to Section 9.03(c), the number of Shares deemed to be outstanding shall include shares deemed owned by the Interested Shareholder through application of Section 9.03(d) but shall not include any other Shares that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(f) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on July 7, 2000 (the term “registrant” in such Rule 12b-2 meaning in this case the Corporation).
(g) “Subsidiary” means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in Section 9.03(c), the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Corporation.
(h) “Continuing Director” means any member of the Board who is not an Affiliate or Associate or representative of the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is not an Affiliate or Associate or representative of the Interested Shareholder and is recommended or elected to succeed a Continuing Director by at least two-thirds of the Continuing Directors then members of the Board.
(i) “Fair Market Value” means: (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by at least two-thirds of the Continuing Directors; and (iii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by at least two-thirds of the Continuing Directors.
(j) In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash to be received” as used in Sections 9.02(b)(i) and (ii) shall include the shares of Common Stock and/or the shares of any other class or series of Shares retained by the holders of such shares.
Section 9.04Powers of Continuing Directors. Any determination as to compliance with this Article 9, including without limitation (a) whether a person is an Interested Shareholder, (b) the number of Shares or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether the requirements of Section 9.02(b)(ii) have been met with respect to any Business Combination, and (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more shall be made only upon action by not less than two-thirds of the Continuing Directors of the Corporation; and the good faith determination of at least two-thirds of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article 9.
Section 9.05No Effect on Fiduciary Obligations. Nothing contained in this Article 9 shall be construed to relieve the Board or any Interested Shareholder from any fiduciary obligation imposed by law.
Section 9.06Amendment, Repeal, etc. Notwithstanding any other provisions of these Articles or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, these Articles or the By-Laws of the Corporation), the affirmative vote of the holders of at least 80 percent of the voting power of the Voting Shares, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article 9; provided, however, that the preceding provisions of this Section 9.06 shall not apply to any amendment to this Article 9, and such amendment shall require only such affirmative vote as is required by law and any other provisions of these Articles or the By-Laws of the Corporation, if such amendment shall have been approved by at least two-thirds of the members of the Board who are persons who would be eligible to serve as Continuing Directors.
MERITOR, INC. | VOTE BY INTERNET -www.proxyvote.com ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS VOTE BY PHONE - 1-800-690-6903 VOTE BY MAIL TO REQUEST PAPER COPIES OF PROXY MATERIALS: If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before January |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS | ||
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
MERITOR, INC. | For | Withhold | For All Except | ||||||||
The Board of Directors recommends that you vote FOR the following: | ☐ | ☐ | ☐ | ||||||||
Proposal 1 - | The election of directors - nominees for a term expiring in 2023: | ||||||||||
Nominees: | |||||||||||
01) | Ivor J. Evans | 05) | Jan A. Bertsch | ||||||||
02) | William R. Newlin | 06) | Rodger L. Boehm | ||||||||
03) | Thomas L. Pajonas | 07) | Lloyd G. Trotter | ||||||||
04) | Chris Villavarayan |
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The Board of Directors recommends that you vote FOR the | ||||||||
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Proposal 2 - | To approve, on an advisory basis, the compensation of the named executive officers as disclosed in the proxy statement; | ☐ | ☐ | ☐ | ||||
Proposal 3 - | To consider and vote upon a proposal to approve the selection by the Audit Committee of the Board of Directors of the firm of Deloitte & Touche LLP as auditors of the Company; | ☐ | ☐ | ☐ | ||||
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Proposal 4 |
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To transact such other business as may properly come before the meeting. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE MERITOR, INC. ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 24, 2018.27, 2022.
The Annual Meeting of Shareholders will be held on Wednesday,Thursday, January 24, 2018,27, 2022, at 1:9:30 p.m.a.m., at The Westin Detroit Metropolitan Airport, 2501 World Gateway Place, Detroit, Michigan 48242.
Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request printed copies. The items to be voted on are provided on the reverse side of this notice.
This communication presents only a brief overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
MERITOR, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIRECTION CARD TO T. ROWE PRICE TRUST COMPANY, DIRECTED TRUSTEE
The undersigned hereby appoints Rhonda L. Brooks,Ivor J. Evans, William R. Newlin and Lloyd G. Trotter, jointly and severally, proxies, with full power of substitution, to vote shares of common stock of the Company owned of record by the undersigned and which the undersigned is entitled to vote, at the Annual Meeting of Shareholders to be held at The Westin Detroit Metropolitan Airport, 2501 World Gateway Place, Detroit, MIMichigan 48242, on January 24, 201827, 2022 or any adjournment thereof, as specified on the reverse side of this card, and to vote in accordance with their discretion on such other matters as may properly come before the meeting.
The undersigned also provides directions to T. Rowe Price Trust Company, Directed Trustee, to vote shares of common stock of the Company allocated, respectively, to accounts of the undersigned under the Meritor, Inc. Savings Plan and the Meritor, Inc. Hourly Employees Savings Plan, and which are entitled to be voted, at the aforesaid Annual Meeting or any adjournment thereof, as specified on the reverse side of this card.
Where a vote is not specified:
● | The proxies will vote all such shares owned of record FOR the election of directors and FOR proposals (2) |
● | T. Rowe Price Trust Company, as Directed Trustee, will vote all such shares allocated to the Meritor, Inc. Savings Plan and Hourly Employees Savings Plan accounts of the undersigned on proposals (1), (2) |
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope