2016. Name of Fund | | Return for 12 Months Ended March 31, 20142016 | | Wells Fargo Stable Return N15Cash Invmt Mny Mkt Instl | | 0.32% | PIMCO Total Return (Inst) | 0.15 | 1.30%% | Vanguard Inflation-Protected SecSecs (Adm) | | 2.07% | 1.51 | % | Vanguard Interm Term Bond Index (Signal)(Adm) | | 2.51% | 2.85 | % | Wells Fargo Advantage Core Bond R6 | | | 1.75 | % | T. Rowe Price Retirement IncomeBalanced | | 1.43% | T. Rowe Price Retirement 2005 | 0.01 | 1.70%% | T. Rowe Price Retirement 2010 | | 1.68% | -0.16 | % | T. Rowe Price Retirement 2015 | | 1.61% | -0.67 | % | T. Rowe Price Retirement 2020 | | 1.62% | -1.32 | % | T. Rowe Price Retirement 2025 | | 1.56% | -1.85 | % | T. Rowe Price Retirement 2030 | | 1.50% | -2.26 | % | T. Rowe Price Retirement 2035 | | 1.41% | -2.69 | % | T. Rowe Price Retirement 2040 | | 1.41% | -3.06 | % | T. Rowe Price Retirement 2045 | | 1.35% | -3.09 | % | T. Rowe Price Retirement 2050 | | 1.38% | -3.06 | % | T. Rowe Price Retirement 2055 | | 1.39% | -3.09 | % | Dodge & Cox Stock | | 2.42% | -4.29 | % | Goldman Sachs Midcap Value (I)Instl | | 3.78% | -11.32 | % | JP Morgan Large Cap Growth R5 | | -1.31% | -3.32 | % | Victory Munder Mid-Cap Core Growth (Y) | | 1.77% | -8.84 | % | Vanguard Institutional Index I | | 1.79% | 1.77 | % | Vanguard Mid-Cap Index (Signal)(Admiral) | | 3.26% | -4.29 | % | Vanguard Small-Cap Index (Signal)(Admiral) | | 2.60% | -7.14 | % | Brown Advisory Small-Cap Fdmtl Val Instl | | -1.53% | -7.73 | % | DFABaron Emerging Markets Value IInstitutional | | -0.69% | -9.91 | % | WCM Focused International Growth InstlInst | | 1.02% | 0.95 | % | Fidelity Diversified International | | -0.81% | -5.89 | % | MFS International New Discovery R4 | | 0.71% | 0.37 | % | Vanguard Developed Markets Index Admiral | | -- | -7.35 | % |
POTENTIAL POST-EMPLOYMENT PAYMENTS
The Company has certain obligations to its NEOs upon a termination of employment as a result of agreements with such officers or other plans, arrangements or policies that benefit the officers.
Mr. Burke and Mr. Schwab are the only NEOs who have an employment agreement with the Company. Pursuant to the employment agreement that was entered into in 2007 and amended in 2008, Mr. Burke agreed to serve as an executive officer of the Company and devote his full time to the performance of his duties. Mr. Burke’s employment agreement automatically and continuously extends daily, unless either party gives written notice of termination to the other party, in which case the term would be 36 months beginning on the date such notice was received. The Company is permitted to terminate the executive’s employment agreement for “Good Cause” and the executive is permitted to terminate the employment agreement for “Good Reason,” as those terms are defined in the agreement and described below. The Company will continue to perform its obligations under such agreement. In the event of termination for Good Cause, the Company is not contractually obligated to pay benefits under the agreement to the executive. In the event of the disability of Mr. Burke during the term of his employment agreement, he would receive base salary and bonus continuation at a level of 100 percent for the first 12 months and 60 percent for up to an additional 24 months, but in no event beyond the remainder of the term. He may also receive disability benefits under the Company’s group long-term disability plan; provided, however, that such benefits would offset the amounts described above.
| · | Pursuant to the employment agreement that was entered into in 2007 and amended in 2008, Mr. Burke agreed to serve as an executive officer of the Company and devote his full-time to the performance of his duties. Mr. Burke’s employment agreement automatically and continuously extends daily, unless either party gives written notice of termination to the other party, in which case the term would be 36 months beginning on the date such notice was received. The Company is permitted to terminate the executive’s employment agreement for “Good Cause” and the executive is permitted to terminate the employment agreement for “Good Reason,” as those terms are defined in the agreement and described below. The Company will continue to perform its obligations under such agreement. In the event of termination for Good Cause, the Company is not contractually obligated to pay benefits under the agreement to the executive. In the event of the disability of Mr. Burke during the term of his employment agreement, he would receive base salary and bonus continuation at a level of 100 percent for the first 12 months and 60 percent for up to 24 months but in no event beyond the remainder of the term. He may also receive disability benefits under the Company’s group long-term disability plan; provided, however, that such benefits would offset the amounts described above. |
| · | Pursuant to the employment agreement that was entered into in 2012,2014, Mr. Schwab agreed to serve as managing director of the Company’s Europe region,segment, with an annual salary and participation in the MIP and LTIP to be provided to Mr. Schwab. Mr. Schwab’s employment agreement has a fixed term of three years, except that the Company may release Mr. Schwab from his work duties at any time based on a justified interest of the Company. As discussed in Employment and Post-Employment Benefits, under his employment agreement, Mr. Schwab receives a company car, accident insurance, and a retirement supplement. |
The following sets forth the amount of payments to each NEO in the event of a termination of employment as a result of voluntary termination, retirement (including early retirement), death, disability, termination for Good Cause, and involuntary termination (including termination without Good Cause or for Good Reason).
Voluntary Termination. An NEO may terminate his/her employment with the Company at any time. In general, upon the individual’s voluntary termination:
| · | we would not pay severance; |
| · | the executive would forfeit all unvested stock options, retention restricted stock awards and performance stock awards; |
| · | all benefits and perquisites would cease; and |
| · | the NEO, if a participant in the Salaried Pension Plan, would be entitled to a distribution of his/her vested benefits under that plan, the SERP (see the Pension Benefits Table for Fiscal 20142016 on page 32)35) and the Nonqualified Deferred Compensation Plan (see the Nonqualified Deferred Compensation Table for Fiscal 20142016 on page 33)36). |
Retirement and Early Retirement. No NEOs were eligible for retirement on March 31, 2014.2016. In general, upon the executive’s full or early retirement:
| · | we would not pay severance; |
| · | for full retirement and for early retirement with the approval of the ONC Committee, all unvested stock options and retention restricted stock awards would vest; |
| · | all benefits and perquisites would cease; and |
| · | the NEO, if a participant in the Salaried Pension Plan, the SERP or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Death. In general, upon the death of an NEO:
| · | the executive’s estate would receive his/her base salary through the month in which the executive dies, andplus any unused vacation pay; |
| · | all unvested stock options and retention restricted stock awards granted beginning in fiscal 2012 would vest; |
| · | all benefits and perquisites would cease; |
| · | a prorated portion (based on the period worked during the performance period) of performance shares shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; and |
| · | the NEO’s estate, if he or she was a participant in the Salaried Pension Plan, the SERP or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Disability. If a total and permanent disability causes the termination of Mr. Burke’s employment, then:
| · | he would receive base salary and bonus continuation at a level of 100 percent of the rate paid at the time of disability for the first twelve months and 60 percent for up to the nextan additional 24 months, but in no event beyond the remainder of the term of his employment agreement (Mr. Burke may also receive disability benefits under the Company’s group long-term disability plan, except that such benefits would offset the previously described amounts); |
| · | all unvested stock options and retention restricted stock awards granted beginning in fiscal 2012 would vest; |
| · | a prorated portion (based on the period worked during the performance period) of performance shares shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; and |
| · | all benefits and perquisites would cease. |
If a total and permanent disability causes the termination of Mr. Schwab’s employment, then:
| · | he would receive base salary and bonus continuation at a level of 100 percent of the rate paid at the time of disability for up to nine months (Mr. Schwab may also receive disability benefits under an accident insurance plan, except that such benefits would offset the previously described amounts); |
| · | all unvested stock options and restricted stock awards granted in fiscal 2013 and later would vest; and |
| · | all unvested stock options and restricted stock awards granted beginning in fiscal 2014 would vest; a prorated portion (based on the period worked during the performance period) of performance shares shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; and all benefits and perquisites would cease. |
If a total and permanent disability causes the termination of employment of an NEO, other than Mr. Burke or Mr. Schwab, then for such NEO:
| · | we would not pay severance; |
| · | all unvested stock options and retention restricted stock awards granted beginning in fiscal 2012 would vest; |
| · | a prorated portion (based on the period worked during the performance period) of performance shares shall vest based on the Company’s actual achievement of the performance goals at the end of the performance period; |
| · | all benefits and perquisites would cease; and |
| · | the NEO, if a participant in the Salaried Pension Plan, the SERP or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans. |
Termination for Good Cause. The Company may terminate Mr. Burke’s employment for Good Cause under the terms of his employment agreement and, thereby, terminate any obligation to Mr. Burke under his employment agreement. A termination for “Good Cause” generally means a termination for theft, dishonesty, fraud, violation of certain provisions of the employment agreement, or a serious violation of law. The Company may terminate Mr. Schwab’s employment at any time based on a justified interest of the Company. The other NEOs without an employment agreement may be terminated by the Company for cause at any time, and are not entitled to receive any severance payments or benefits upon termination for cause.such termination. On the NEO’s termination date, generally, all unvested stock options, retention restricted stock awards and long-term incentive awards would be forfeited and all benefits and perquisites would cease. The NEO, if a participant in the Salaried Pension Plan, the SERP or the Nonqualified Deferred Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans.
Termination without Good Cause or for Good Reason. If the Company terminates Mr. Burke’s employment and the termination is not for Good Cause or if Mr. Burke terminates employment with the Company for Good Reason (“Good Reason” means at least one of the following events has occurred without the consent of the affected executive: a material diminution in the executive’s base salary; a material decrease in the executive’s authority, duties or responsibilities or those of the supervisor to whom the executive reports; a material diminution in the budget over which the executive has authority; a material change in the geographic location at which the executive must perform services; or any other action or inaction that constitutes a material breach of the terms of the executive’s employment agreement), the Company is obligated to:
| · | pay to Mr. Burke an amount equal to three times his “Average Annual Earnings” (“Average Annual Earnings” means the average base salary and actual cash incentive or bonus he earned in the five taxable years preceding the year of termination) over the remainder of the employment agreement term; and |
| · | continue, for a period of 36 months from the date of termination, to allow the executive to participate in certain employee health, welfare and retirement benefits, including plans designed to provide the executive with benefits that he would have received under qualified plans but for the statutory limitations on qualified benefits. In the event that such plans preclude such participation, the Company would pay an equivalent amount in cash. |
In no event would Mr. Burke receive the benefits described above if (i) he discloses confidential information of the Company in violation of thehis employment agreement and such disclosure results in a demonstrably material injury to the Company, or (ii) he engages in Competition with the Company, as that term is defined in his employment agreement.
If Mr. Schwab’s employment is terminated by the Company without a compelling reason, then the Company is obligated to:then:
| · | the Company is obligated to continue to pay Mr. Schwab’s base salary over the remainder of the employment agreement term; |
| · | Mr. Schwab remains eligible for bonus and equity grants over the remainder of the employment agreement term; and |
| · | hisMr. Schwab’s benefits and perquisites would continue over the remainder of the employment agreement term. |
If the Company involuntarily terminates the employment of Mr. Lucareli, Mr. Marry, or Mr. Bowser, or Ms. Kelsey without cause, these NEOs would receive benefits under the severance policy for members of the Executive Council. Under the severance policy, each of the NEOs would receive his or her annual base salary at the time of termination in installment payments over the course of theone year following termination and would be eligible to elect Company paidCompany-paid COBRA continuation coverage for one year following termination. The NEOs are required to release the Company from any and all liability in order to be eligible for benefits under the severance policy.
POTENTIAL CHANGE IN CONTROL PAYMENT AND BENEFITS
Generally, awards granted under the Incentive Plan accelerate vesting in the event of an involuntary termination of employment within one year following a Change in Control unless specified otherwise in the applicable award agreement. A Change in Control, as generally defined in the Incentive Plan, will be deemed to take place on the occurrence of any of the following events: (i) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding capital stock of the Company entitled to vote in elections of directors (“Voting Power”) of the Company immediately prior to such merger or consolidation hold less than 50 percent of the Voting Power of the surviving or resulting corporation; (ii) a transfer of 30 percent of the Voting Power, or a substantial portion of the property, of the Company other than to an entity of which the Company owns at least 50 percent of the Voting Power; or (iii) during any period of 24 months, the persons who at the beginning of such 24-month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company. Pursuant to the award agreements for performance stock awards granted in fiscal 2012, 2013, 2014, and 2014,2015, upon an involuntary termination of employment within one year following a Change in Control, the NEO is entitled to accelerated vesting on a pro rata basis, where performance is assumed to be at the Target level and the proration is based on the period worked during the performance period.
Mr. Burke’s employment agreement contains separate Change in Control provisions. The definition of Change in Control generally has the same meaning as in the Incentive Plan described above. If at any time during the 24 months after a Change in Control occurs Mr. Burke’s employment were terminated without “Good Cause”, or if Mr. Burke were to terminate the agreement for any reason during the same time period, the Company is obligated to:
| · | pay to Mr. Burke an amount equal to three times the greater of (i) the sum of his base salary and targetTarget bonus for the current fiscal year, or (ii) his five year average base salary and actual bonus for the five year period ending on the last day of the fiscal year immediately preceding the fiscal year of termination, payable in a lump sum; |
| · | pay to Mr. Burke an amount equal to the pro rata portion of the targetTarget bonus for the calendar year in which his employment terminated; |
| · | accelerate the vesting of Mr. Burke’s unvested stock options and retention restricted stock awards so that all such awards would immediately vest or the restrictions would lapse, as the case may be, on the date of termination; |
| · | if payments madepay to Mr. Burke were subject to the excise tax provisions of Section 4999 of the Code, pay Mr. Burke an additional lump sum payment sufficient to cover the full cost of such excise taxes due to the application of Section 4999 of the Code, if applicable, and his federal, state and local income and employment taxes on the payment;payments; and |
| · | continue to provide coverage for a period of three years to Mr. Burke, his spouse and other dependents under all welfare plans maintained by the Company in which such persons were participating immediately prior to the termination unless precluded by thesuch plan, in which case the Company would pay an equivalent amount in cash. |
Mr. Schwab’s employment agreement does not contain a Change in Control provision.
The Company has also entered into a Change in Control Agreement and Termination Agreement with the other NEOs except(except for Mr. Schwab (andSchwab) and certain other key employees).employees. The definition of Change in Control generally has the same meaning as in the Incentive Plan described above and the definitions of Good Cause and Good Reason generally have the same meanings as in Mr. Burke’s employment agreement described above. For all NEOs other than Mr. Burke or Mr. Schwab, in the event of a Change in Control, if employment of the employee is terminated by the Company for any reason other than Good Cause, or terminated by the employee for Good Reason within 24 months after the Change in Control occurs, or for any reason during the 13th month after the Change in Control, the Company is obligated to provide the same benefits as described above for Mr. Burke with the exception that the Company would pay to the employee an amount equal to two times the greater of (i) the sum of his/her then current base salary and targetTarget bonus, or (ii) his/her five year average base salary and actual bonus, and continue to provide coverage under applicable welfare plans (or the equivalent) for a period of two years.
As described in the Compensation Discussion and Analysis section of the Company’s fiscal 2011 proxy statement, the ONC Committee determined that no substantive changes would be made to any of the existing Employment or Change in Control and Termination Agreements that have been in place with the Company’s employees prior to 2009. At the same time, the ONC Committee determined that any future agreements with employees which provide for benefits upon a change in control will not provide for excise tax gross ups and any benefits following a change in control under such future agreements would only be payable upon the employee’s involuntary termination other than for Good Cause or the employee’s voluntary termination for Good Reason.
The following table sets forth the potential payments upon termination of employment or change in control for each of the NEOs. For purposes of the calculations, it is assumed that Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan would be 2.5 percent of base salary, Company discretionary contributions to the 401(k) Retirement Plan and Deferred Compensation Plan would be 5.0 percent of base salary, and all payments, other than Company matching and discretionary contributions to the 401(k) Retirement Plan and Deferred Compensation Plan, as a result of termination following a Change in Control are “parachute payments” as defined in Section 280G of the Code for purposes of determining whether there is an excise tax and, if applicable, the gross up amount of the excise tax.
Potential Payments Upon Termination of Employment or Change in Control Table Name | Cash Payment ($) | Accelerated Vesting of Equity ($)(1) | Retirement Plan Benefits: Pension Plan (Qualified & SERP) ($) | Perquisites and Continued Benefits ($) | Total ($) | | Cash Payment ($) | | | Accelerated Vesting of Equity ($)(1) | | | Retirement Plan Benefits: Pension Plan (Qualified & SERP) ($) | | | Perquisites and Continued Benefits ($) | | | Total ($) | | | | | | Thomas A. Burke | Thomas A. Burke | Thomas A. Burke | | | | | | Death | 0 | 2,827,587 | NA | NA | 2,827,587 | | | 0 | | | $ | 2,783,866 | | | NA | | | | NA | | | $ | 2,783,866 | | Disability | 1,536,000 | 2,827,587 | NA | (2) | 4,363,587 | | $ | 2,534,195 | | | $ | 2,783,866 | | | NA | | | | (2 | ) | | $ | 5,318,061 | | Involuntary Termination | 3,620,906 | 0 | NA | 208,887(3) | 3,829,793 | | $ | 4,510,811 | | | | 0 | | | NA | | | $ | 151,795 | (3) | | $ | 4,662,605 | | Termination if Change in Control | 5,420,000(4) | 5,130,083 | NA | 4,832,575(5) | 15,382,658 | | $ | 6,025.000 | (4) | | $ | 3,363,586 | | | NA | | | $ | 4,077,002 | (5) | | $ | 13,465,588 | | Change in Control (no termination) | NA | NA | NA | NA | NA | | | NA | | | | NA | | | NA | | | | NA | | | | NA | | | | | | Michael B. Lucareli | Michael B. Lucareli | Michael B. Lucareli | | | | | | Death | 0 | 687,500 | 54,698 | NA | 742,198 | | | 0 | | | $ | 758,242 | | | $ | 67,983 | | | | NA | | | $ | 826,225 | | Disability | (2) | 687,500 | 114,484 | (2) | 801,984 | | | (2 | ) | | $ | 758,242 | | | $ | 142,290 | | | | (2 | ) | | $ | 900,532 | | Involuntary Termination | 366,000 | 0 | 114,484 | 19,437(6) | 499,921 | | $ | 403,000 | | | | 0 | | | $ | 142,290 | | | $ | 22,371 | (6) | | $ | 567,661 | | Termination if Change in Control | 1,381,800(7) | 1,161,154 | 114,484 | 1,281,969(8) | 3,939,406 | | $ | 1,641,800 | (7) | | $ | 920,881 | | | $ | 142,290 | | | $ | 1,200,566 | (8) | | $ | 3,905,537 | | Change in Control (no termination) | NA | NA | NA | NA | NA | | | NA | | | | NA | | | | NA | | | | NA | | | | NA | | | | | | Thomas F. Marry | Thomas F. Marry | Thomas F. Marry | | | | | | Death | 0 | 1,795,803 | 122,976 | NA | 1,918,779 | | | 0 | | | $ | 1,366,355 | | | $ | 145,358 | | | | NA | | | $ | 1,511,713 | | Disability | (2) | 1,795,803 | 257,394 | (2) | 2,053,197 | | | (2 | ) | | $ | 1,366,355 | | | $ | 304,239 | | | | (2 | ) | | $ | 1,670,594 | | Involuntary Termination | 455,000 | 0 | 257,394 | 19,437(6) | 731,831 | | $ | 500,000 | | | | 0 | | | $ | 304,239 | | | $ | 22,371 | (6) | | $ | 826,610 | | Termination if Change in Control | 1,855,000(7) | 2,589,193 | 257,394 | 2,028,227(9) | 6,729,814 | | $ | 2,185,000 | (7) | | $ | 1,570,822 | | | $ | 304,239 | | | $ | 1,773,328 | (9) | | $ | 5,833,389 | | Change in Control (no termination) | NA | NA | NA | NA | NA | | | NA | | | | NA | | | | NA | | | | NA | | | | NA | | | | | | Scott L. Bowser | Scott L. Bowser | Scott L. Bowser | | | | | | Death | 0 | 731,595 | 76,158 | NA | 458,153 | | | 0 | | | $ | 456,011 | | | $ | 91,935 | | | | NA | | | $ | 547,946 | | Disability | (2) | 731,595 | 159,402 | (2) | 544,707 | | | (2 | ) | | $ | 456,011 | | | $ | 192,424 | | | | (2 | ) | | $ | 648,435 | | Involuntary Termination | 314,000 | 0 | 159,402 | 19,720(6) | 493,122 | | $ | 340,000 | | | | 0 | | | $ | 192,424 | | | $ | 22,371 | (6) | | $ | 554,795 | | Termination if Change in Control | 1,081,000(7) | 1,156,464 | 159,402 | 946,893(10) | 3,343,759 | | $ | 1,185,500 | (7) | | $ | 550,643 | | | $ | 192,424 | | | $ | 63,612 | (10) | | $ | 1,992,179 | | Change in Control (no termination) | NA | NA | NA | NA | NA | | | NA | | | | NA | | | | NA | | | | NA | | | | NA | | | | | | Holger Schwab | Holger Schwab | Holger Schwab | | | | | | Death | 0 | 0 | 0 | NA | 0 | | | 0 | | | $ | 459,150 | | | NA | | | | NA | | | $ | 459,150 | | Disability | 510,603 | 0 | 0 | 0 | 510,603 | | $ | 446,381 | | | $ | 459,150 | | | NA | | | | NA | | | $ | 905,530 | | Involuntary Termination | 1,014,597(11) | 343,623(12) | 0 | 65,864(13) | 1,424,083 | | $ | 1,286,561 | (11) | | $ | 762,532 | (12) | | NA | | | $ | 56,602 | (13) | | $ | 2,105,695 | | Termination if Change in Control | 1,014,597(11) | 343,623(12) | 0 | 65,864(13) | 1,424,083 | | $ | 1,286,561 | (11) | | $ | 762,532 | (12) | | NA | | | $ | 56,602 | (13) | | $ | 2,105,695 | | Change in Control (no termination) | NA | NA | NA | NA | NA | | | NA | | | | NA | | | NA | | | | NA | | | | NA | |
Name | | Cash Payment ($) | | | Accelerated Vesting of Equity ($)(1) | | | Retirement Plan Benefits: Pension Plan (Qualified & SERP) ($) | | | Perquisites and Continued Benefits ($) | | | Total ($) | | | | Margaret C. Kelsey | | | | Death | | | 0 | | | $ | 471,325 | | | $ | 70,049 | | | | NA | | | $ | 541,374 | | Disability | | | (2 | ) | | $ | 471,325 | | | $ | 146,614 | | | | (2 | ) | | $ | 617,939 | | Involuntary Termination | | $ | 359,000 | | | | 0 | | | $ | 146,614 | | | $ | 22,371 | (6) | | $ | 527,985 | | Termination if Change in Control | | $ | 1,250,000 | (7) | | $ | 568,157 | | | $ | 146,614 | | | $ | 869,686 | (14) | | $ | 2,834,957 | | Change in Control (no termination) | | | NA | | | | NA | | | | NA | | | | NA | | | | NA | |
(1) | Amounts represent the vesting of retention restricted stock awards and certain performance stock awards and the spread value of the stock options at the closing stock price of $14.65$11.01 on March 31, 2014.2016. In addition, a prorated portion of the performance stock awards is illustrated in such amounts (based on the period worked during each performance period as of March 31, 2016). In the case of death or permanent disability, the vesting of performance stock awards is illustrated at actual performance of 26% of Target for fiscal 2014 awards, and performance is assumed to equal target performance for fiscal 2015 and fiscal 2016 awards. |
(2) | Paid in accordance with plans available to all salaried employees. |
(3) | Amount consists of $33,387$35,020 for three years of welfare plan benefits (or the equivalent); $58,500$64,875 for three years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; and $117,000$51,900 for three years of Company contributions to the 401(k) Retirement Plan and Deferred Compensation Plan. |
(4) | Amount is (i) three times Base Salary and Target Bonus for fiscal 20142016 and (ii) pro rata Target Bonus for fiscal 2014.2016. |
(5) | Amount consists of, in addition to those described in Footnote 3, $4,623,688$3,925,207 for excise tax and gross up. |
(6) | Amount consists of COBRA continuation coverage for one year. |
(7) | Amount is (i) two times Base Salary and Target Bonus for fiscal 20142016 and (ii) pro rata Target Bonus for fiscal 2014.2016. |
(8) | Amount consists of $31,664$33,012 for two years of welfare plan benefits (or the equivalent); $18,300$20,150for two years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; $16,120 for two years of Company contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; and $1,131,284 for excise tax and gross up. |
(9) | Amount consists of $33,012 for two years of welfare plan benefits (or the equivalent); $25,000 for two years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; $36,600$20,000 for two years of Company contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; and $1,195,405$1,695,316 for excise tax and gross up. |
(9)(10) | Amount consists of $31,664$33,012 for two years of welfare plan benefits (or the equivalent); $22,750$17,000 for two years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; $45,500and $13,600 for two years of Company contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; and $1,928,313 for excise tax and gross up.Plan. |
(10) | Amount consists of $31,664 for two years of welfare plan benefits (or the equivalent); $15,700 for two years of Company matching contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; $31,400 for two years of Company contributions to the 401(k) Retirement Plan and Deferred Compensation Plan; and $868,129 for excise tax and gross up. |
(11) | Mr. Schwab would continue to receive his salary and would be eligible for MIP awards over the remaining termterms of his employment agreement.agreements. The estimated amounts illustrated in the above table assume continued payment of his salary and MIP awards at 50% of that salary over the remaining term of the employment contract (through June 30, 2015)2018). The estimated payment has been converted from euros to dollars at the exchange rate in effect at March 31, 2014:2016: $1 = €0 .7262.€0.8787. |
(12) | Mr. Schwab may continue to receive equity grants over the remaining termterms of his employment agreement.agreements. The estimated amounts illustrated in the above table take into account the fiscal 20142016 awards made to Mr. Schwab and assume equity awards being made to him at 100%70% of his base salary (at the Target level) over the remaining term of thehis employment contractcontracts (through June 30, 2015)2018) and reflect continued vesting of such equity awards through that date (presuming the same vesting schedules currently used for such awards). |
(13) | Mr. Schwab may continue to receive continued perquisites under the remaining term of his employment agreement (through June 30, 2015)2018). The estimated amounts illustrated in the above table assume a retirement supplement equal to 10 percent of his base salary ($45,387)29,678) and continued lease and maintenance of a car ($20,477)16,924). |
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ITEM 2 – AMENDMENT AND RESTATEMENT OF 2008 INCENTIVE COMPENSATION PLAN
The Modine Manufacturing Company 2008 Incentive Compensation Plan was initially adopted by the Board of Directors and approved by the shareholders on July 17, 2008, and was amended and restated in 2011 to incorporate certain amendments adopted by the Board of Directors and approved by the shareholders (the “Plan”). On May 7, 2014, the Board of Directors, following the recommendation of the ONC Committee, approved certain amendments to the plan in the form of the Amended and Restated 2008 Incentive Compensation Plan attached hereto as Appendix A (the “Amended and Restated Plan”). The amendments were approved subject to the approval of the Company’s shareholders. The Company is now seeking shareholder approval of the Amended and Restated Plan. Among other things, the proposed amendments:
| · | increase the number of shares available for issuance by 2,600,000; |
| · | amend the “full share award” counting provisions in the plan such that share awards other than options and SARs are counted as 1.6 shares (previously 1.5 shares) against the above share limit for each share granted in an award other than options and SARs; |
| · | expand the list of shareholder approved performance goals that may be used in conjunction with awards intended to qualify as “performance-based compensation” for purposes of Internal Revenue Code Section 162(m); |
| · | prohibit liberal share counting; |
| · | change the default vesting schedule for options and SAR from 3 years to 4 years; |
| · | provide for the granting of restricted stock units; |
| · | prohibit the granting of dividends and dividend equivalent units with respect to options and SARs. With respect to performance stock, dividends and dividend equivalent units shall not be paid until they are earned, unless otherwise provided by the ONC Committee at the time of grant. The proposed amendments also provide that holders of restricted stock units are not deemed to have any rights as a shareholder until such shares are issued, however, the ONC Committee has the right to grant restricted stock unit awards that pay dividend equivalent units; and |
| · | make other minor administrative changes. |
In reaching the determination regarding the increase in the number of shares available for issuance under the Amended and Restated Plan, the Committee considered reasonable projections of future equity grants under the Amended and Restated Plan, the potential dilutive impacts of any equity grants to shareholders, and the anticipated duration of the shares available under the Amended and Restated Plan.
The following chart shows, prior to approval of the amendment to increase the shares available for issuance, but after giving effect to the grant on June 2, 2014, all of the active plans of the Company, the number of shares to be issued upon the exercise of outstanding options for each plan, the number of shares of restricted stock awards outstanding for each plan, the number of shares of stock that are reserved for issuance under all existing performance stock awards if such awards were to pay out at the target level and the number of shares remaining available for future issuance under each plan.
Plan | | Shares to be Issued upon Exercise of Outstanding Options (1) | | | Stock Awards | | | Performance Stock that may be issued if Performance Conditions are Met | | | Shares Remaining Available for Future Grant | | Amended and Restated 2008 Incentive Compensation Plan | | | 1,193,108 | | | | 849,717 | | | | 771,357 | (2) | | | 606,486 | (3) | 2007 Incentive Compensation Plan (4) | | | 441,652 | | | | 0 | | | | 0 | | | | 0 | | Amended and Restated 2000 Stock Incentive Plan for Non-Employee Directors (4) | | | 18,438 | | | | 0 | | | | 0 | | | | 0 | | Total | | | 1,653,198 | | | | 849,717 | | | | 771,357 | (2) | | | 606,486 | (3) |
(1) | The weighted average exercise price of the outstanding options is $13.23 and the weighted average term to expiration is 5.7 years. |
(2)(14) | RepresentsAmount consists of $33,012 for two years of welfare plan benefits (or the numberequivalent); $17,950 for two years of shares that would be issued atCompany matching contributions to the target level401(k) Retirement Plan and Deferred Compensation Plan; $14,360 for two years of payout, regardless of any potential actual payout. |
(3) | RepresentsCompany contributions to the number of shares remaining available401(k) Retirement Plan and Deferred Compensation Plan; and $804,364 for future grant where outstanding performance stock is accounted for at Target performance levels regardless of any potential actual payout. |
(4) | As previously disclosed, no further grants were or shall be made under these plans since the adoption of the 2008 Incentive Compensation Plan in 2008.excise tax and gross up. |
Purpose
The Amended and Restated Plan is intended to provide incentives that will attract and retain the best available non-employee directors and employees for the Company and its subsidiaries, provide additional incentives to such persons and promote the success and growth of the Company. These purposes may be achieved through the grant of options to purchase common stock of the Company, stock appreciation rights (“SARs”), restricted stock awards, unrestricted stock, restricted stock unit awards, performance stock awards, phantom stock awards and cash bonus awards, as described below.
The Company is focused on rewarding performance. The compensation paid to the NEOs and others participating in the Company’s Amended and Restated Plan is weighted so that compensation increases with the improvement in performance of the Company. Please see the Compensation Discussion and Analysis section for additional information about the Company’s objectives for compensation.
Shareholder approval of the Amended and Restated Plan will enable the Company to continue to grant awards under the Amended and Restated Plan that will qualify as “performance-based compensation” under Section 162(m) of the Code and be fully tax deductible by the Company, and, if so desired, to grant options that will qualify as “incentive stock options” under Section 422 of the Code. Shareholder approval of the Amended and Restated Plan is also a condition to the listing on the NYSE of the additional shares of common stock issuable under the Amended and Restated Plan.
Key Features of Amended and Restated Plan
Key features of the Amended and Restated Plan include:
| · | the Amended and Restated Plan is administered by the ONC Committee, which is comprised solely of independent directors; |
| · | Awards available under the Amended and Restated Plan include stock options, restricted stock, unrestricted stock, restricted stock units, SARs, performance stock, phantom stock, and cash bonus awards. |
| · | the aggregate number of shares authorized under the Amended and Restated Plan shall be 8,350,000; |
| · | for each award denominated in shares of stock (other than stock options and SARs), the shares granted shall be counted as 1.6 shares against the above share limit; |
| · | no individual may receive awards under the Amended and Restated Plan for more than 325,000 shares or receive cash-based awards for more than $3,000,000 in any calendar year; |
| · | the Committee may not (i) reduce the exercise price of any outstanding option or SAR, (ii) cash out an underwater option or SAR or (iii) regrant or exchange an underwater option or SAR with another Award under the Amended and Restated Plan (including an option or SAR), without shareholder approval or except in the event of certain corporate transactions; and |
| · | the prohibition of liberal share counting. Specifically, upon the exercise of an option or SAR granted under the Amended and Restated Plan, the full number of options or SARs exercised are considered to have been issued under the Amended and Restated Plan, regardless of the number of shares withheld to satisfy taxes or used to exercise an option or SAR. |
Performance-Based Compensation under Code Section 162(m)
Section 162(m) of the Code provides that the Company may not deduct compensation paid to certain of its executive officers in excess of $1 million in any one year unless the compensation is awarded under a plan that meets certain requirements. One requirement is shareholder approval of the plan.
Performance stock awards, phantom stock awards, restricted stock awards, unrestricted stock awards and cash bonuses that may be granted under the Amended and Restated Plan may be excluded from this deduction limitation if they are conditioned on the achievement of one or more performance goals as set forth in the Amended and Restated Plan. Stock options and SARs granted under the Amended and Restated Plan will be excluded from this deduction limitation because they are required to have an exercise price of not less than the fair market value of the underlying stock on the date of grant. To satisfy the requirements that apply to performance-based compensation, the material terms of the performance goals, the eligibility terms for awards, and the share and dollar maximums on individual participant awards must be approved by shareholders.
The performance goals under the Amended and Restated Plan include the following business criteria:
| · | net sales or revenue growth; |
| · | operating expense ratios; |
| · | operating expense targets; |
| · | gross or operating margins; |
| · | debt to equity ratio / debt levels; |
| · | total shareholder return; |
| · | business diversification: |
| · | employee retention / attrition; |
| · | inventory control / efficiency; and |
| · | such other subjective or objective performance goals, including strategic measures or individual goals, that the ONC Committee deems appropriate. |
Awards subject to performance goals can relate to one or more of the above criteria and can be measured on an absolute basis or in terms of growth or reduction. In addition, the ONC Committee may determine the achievement of any of the above performance goals with or without regard to any of the following events that may occur during the performance period applicable to a performance-based award: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in FASB Accounting Standards Codification 225-20 – Extraordinary and Unusual Items, and/or in Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses, each as set forth by the ONC Committee generally at the time of the grant.
If the Amended and Restated Plan is approved by the shareholders, the ONC Committee would not be limited in its right to award or pay other forms of award under the Amended and Restated Plan that are not performance-based for purposes of Code Section 162(m).
The following is a summary description of the material terms of the Amended and Restated Plan. Please read the Amended and Restated Plan (attached as Appendix A) to understand all of the terms of the plan.
Administration
The Amended and Restated Plan will be administered by the ONC Committee, except that grants of awards to non-employee directors will be made by the entire Board. The ONC Committee has the authority to interpret the Amended and Restated Plan, and the decision of the ONC Committee on any questions concerning the interpretation of the Amended and Restated Plan will be final and conclusive. Subject to the provisions of the Amended and Restated Plan, the ONC Committee has full and final authority to designate the persons to whom awards will be granted; grant awards in such form and amount as the ONC Committee determines; impose limitations, restrictions and conditions upon any award as the ONC Committee deems appropriate; waive, in whole or in part, any limitations, restrictions or conditions imposed upon an award as the ONC Committee deems appropriate; and modify, extend or renew any award previously granted. However, the ONC Committee does not have the authority to reprice awards without shareholder approval.
No Repricing
Without shareholder approval, the Company may not (i) change the terms of an option or SAR to lower its purchase or grant price, (ii) take any other action that is treated as a "repricing" under generally accepted accounting principles, or (iii) repurchase for cash or cancel an option or SAR at a time when its purchase or grant price is greater than the fair market value of the underlying stock in exchange for another Award (including an Option or SAR) unless the cancellation and exchange occurs in connection with certain recapitalization events, as described in the Amended and Restated Plan.
Eligibility
Any non-employee director or employee of the Company or any subsidiary of the Company is eligible to participate in the Amended and Restated Plan. As of June 3, 2014, the Company had seven non-employee directors and the Company and its subsidiaries had approximately 6,900 employees.
Stock Option Awards
Stock options will consist of incentive and nonqualified stock options to purchase shares of the Company’s common stock. The ONC Committee will, among other things, establish the number of shares subject to the option, the time or times at which options may be exercised and whether all of the options may be exercisable at one time or in increments over time. The option exercise price will not be less than 100% of the fair market value of the stock on the date of the grant. A stock option may be exercised in whole at any time or in part from time to time; provided, however, that no option will be exercisable in whole or in part more than ten years from the date of grant.
Stock Appreciation Rights
The ONC Committee may also grant SARs which represent the right to receive an amount of cash or shares of Company common stock based on appreciation in the fair market value of shares of the common stock over a base price. The grant price of the SARs may not be less than 100% of the fair market value of the stock on the date of grant.
Performance Stock Awards
The ONC Committee may grant stock awards based upon the achievement of performance goals (see the description of performance goals above). The ONC Committee establishes the performance goals at the beginning of the award period. The ONC Committee also establishes the award period, the threshold, target and maximum performance levels, and the number of shares or amount of cash payable at various performance levels from the threshold to the maximum. Performance goals are established by the ONC Committee prior to the grant of an award. In order to receive payment, a grantee must generally remain employed by the Company to the end of the award period. The ONC Committee may impose additional conditions on a grantee’s entitlement to receive a performance stock award.
Restricted Stock Awards
The ONC Committee or the Board, as applicable, has broad discretionary authority to set the terms of awards of restricted stock under the Amended and Restated Plan and may grant unrestricted awards as well. Participants will receive all dividends on, and will have all voting rights with respect to, such shares. The ONC Committee may condition the grant of restricted stock upon the attainment of performance goals. See the description of performance goals in Performance Stock Awards above.
Restricted Stock Unit Awards
The ONC Committee may grant restricted stock units that entitle a grantee to receive one share of common stock for each restricted stock unit if the vesting conditions are satisfied. If determined by the ONC Committee at the time of grant, restricted stock units may be settled in cash in an amount equal to the fair market value of the shares the participant is entitled to receive.
Phantom Stock Awards
The ONC Committee may grant phantom stock awards that entitle a grantee to receive cash payments based upon the closing market price of the Company’s common stock if predetermined conditions are satisfied. The ONC Committee may condition the grant of a phantom stock award upon the attainment of the performance goals. See the description of performance goals in Performance Stock Awards above.
Cash Bonus Awards
The ONC Committee may establish cash bonus awards either alone or in addition to other awards granted under the Amended and Restated Plan. The ONC Committee determines the employees to whom cash bonus awards will be granted, the timing of such awards and the conditions upon which the bonus will be paid (including performance goals). The maximum cash bonus payable to an employee in any calendar year may not exceed $3,000,000. See the description of performance goals in Performance Stock Awards above.
Shares Available
As illustrated in the table above on page 40, as of June 3, 2014, there were 606,486 shares of Company common stock available for future issuance under the Plan. If the Amended and Restated Plan is approved, there will be 2,600,000 additional shares authorized and available for issuance under the Amended and Restated Plan (for a total of 8,350,000 shares issuable under the plan since its creation in 2008), all of which may be granted as incentive stock options. Shares subject to Awards that are canceled, terminated or lapse for any reason become available again for award under the Amended and Restated Plan. Any Award or portion thereof that is settled in cash is not counted against the shares available. Finally, the number of shares for any Award other than an Option or SAR that are used to satisfy tax withholding shall not be counted against the shares available. The Amended and Restated Plan provides that stock options and SARs will count as one share against the number of shares available under the Amended and Restated Plan, while awards of stock other than stock options and SARs will count as 1.6 shares under the Amended and Restated Plan.
Adjustments and Change in Control
If any stock dividend is declared upon the common stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the common stock, resulting in a split or combination or exchange of shares, the ONC Committee will make or provide for an adjustment in the number of and class of shares that may be delivered under the Amended and Restated Plan, and in the number and class of and/or price of shares subject to outstanding awards.
Assuming the assumption of awards by a successor, unless a particular award agreement provides otherwise, upon the involuntary termination of a participant’s employment without “cause” (as defined in the Amended and Restated Plan) within the one-year following a “change in control” of the Company (as defined in the Amended and Restated Plan), all unvested awards that are not subject to a performance goal shall become fully vested and exercisable. Similarly, unless a particular award agreement provides otherwise, for awards subject to a performance goal, upon a “change in control,” the performance criteria applicable to such award, other than time-based service vesting criteria, shall be deemed to be satisfied at the target level. In the event of an involuntary termination of such participant’s employment without “cause” within the one-year period following a “change in control,” the time-based service vesting criteria shall also be waived and the award shall become vested. This treatment is applicable to awards under the Amended and Restated Plan other than cash bonuses.
Term
The Amended and Restated Plan will expire on July 17, 2018.
Amendment
The Board may, from time to time, amend, modify, suspend or terminate the Amended and Restated Plan; provided, however, that no such action may impair, without the grantee’s consent, any award previously granted under the Amended and Restated Plan, or be made without shareholder approval where such approval would be required as a condition of compliance with the Code or other applicable laws or regulatory requirements. Absent shareholder approval, neither the ONC Committee nor the Board will have any authority, with or without the consent of a grantee, to reduce the exercise price of outstanding options or SARs or cancel outstanding options or SARs in exchange for another award including an option or SAR with an exercise price that is less than the exercise price of the original options or SARs, except in the event of a corporate event involving the Company, as authorized under the Amended and Restated Plan. As stated in the “No Repricing” discussion above, the Company also may not repurchase for cash an underwater option or SAR.
Federal Income Tax Consequences Relating to the Amended and Restated Plan
The following is a brief summary of the Company’s understanding of the principal federal income tax consequences of grants made under the Amended and Restated Plan based upon the applicable provisions of the Code in effect on the date hereof.
Nonqualified Stock Options and Stock Appreciation Rights. A participant will not recognize taxable income upon the grant of a nonqualified stock option or SAR. Upon exercise, the participant will recognize ordinary income equal to the amount by which the fair market value of the shares on the exercise date exceeds the exercise or grant price. In the case of stock options or stock-settled SARs, upon the subsequent sale of the acquired shares, any additional gain or loss will be a capital gain or loss, and a long-term gain or loss if the shares have been held for more than one year.
Incentive Stock Options. A participant will not recognize taxable income when an incentive stock option is granted or exercised. However, the excess of the fair market value of the covered shares over the exercise price on the date of exercise is an item of tax preference for alternative minimum tax purposes. If the participant exercises the option and holds the acquired shares for more than two years following the date of option grant and more than one year after the date of exercise, the difference between the sale price and exercise price will be taxed as long-term capital gain or loss. If the participant sells the acquired shares before the end of the two-year and one-year holding periods, he or she generally will recognize ordinary income at the time of sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option. Any additional gain will be a capital gain, and a long-term gain if the shares have been held for more than one year.
Restricted Stock, Restricted Stock Units, Performance Stock and Phantom Stock. A participant will not recognize taxable income upon the grant of restricted stock, restricted stock units, performance stock or phantom stock. Instead, the participant will recognize ordinary income at the time of vesting equal to the fair market value of the shares (or cash) received minus any amounts the participant paid. Any subsequent gain or loss will be a capital gain or loss, and a long-term gain or loss if the shares have been held for more than one year. For restricted stock only, the participant may instead elect to be taxed at the time of grant. If the participant makes such an election, the one year long-term capital gains holding period begins on the date of grant.
Tax Effect for the Company. The Company generally will receive a deduction for any ordinary income recognized with respect to an award, subject to the requirements of Section 162(m) of the Code. While the ONC Committee may take steps to ensure the deductibility of compensation awarded under the Amended and Restated Plan as “performance-based compensation,” the ONC Committee may also award non-deductible compensation under the Amended and Restated Plan in appropriate circumstances.
The foregoing is not to be considered as tax advice to any person who may be a participant, and any such persons are advised to consult his or her own tax counsel. The foregoing is intended to be a general discussion and does not cover all aspects of an individual’s unique tax situation.
New Plan Benefits
We cannot determine how many eligible employees and non‑employee directors will participate in the plan in the future. Therefore, it is not possible to determine with certainty the dollar value or number of shares of our common stock that will be issued under the Amended and Restated Plan. The following table sets forth the awards granted under the Plan during Fiscal 2014 to (i) each of our named executive officers, (ii) all executive officers as a group, (iii) all non-employee directors as a group, and (iv) all employees other than executive officers as a group.
Name and Position | | Shares of Restricted and Unrestricted Stock Awarded in Fiscal 2014 | | | Options Awarded in Fiscal 2014 | | | Performance Stock Awarded in Fiscal 2014(1) | | Thomas A. Burke | | | 71,154 | | | | 47,690 | | | | 71,154 | | Michael B. Lucareli | | | 19,962 | | | | 13,379 | | | | 19,962 | | Thomas F. Marry | | | 25,096 | | | | 16,820 | | | | 25,096 | | Holger Schwab | | | 11,297 | | | | 7,572 | | | | 11,297 | | Scott L. Bowser | | | 11,615 | | | | 7,785 | | | | 11,615 | | All current executive officers as a group (eight persons) | | | 166,843 | | | | 111,824 | | | | 166,843 | | All current directors who are not executive officers (seven persons) | | | 36,137 | | | | 0 | | | | 0 | | All employees, including all current officers who are not executive officers | | | 104,565 | | | | 49,726 | | | | 74,190 | |
(1) | These amounts represent the number of performance shares if Target performance is achieved. |
Market Value
On March 31, 2014, the closing sales price of the common stock on the NYSE was $14.65 per share.
Equity Compensation Plan Information
The following table sets forth information as of March 31, 2014 about shares of our common stock outstanding and available for issuance under our existing equity compensation plans:
Plan Category | | Number of shares to be issued upon exercise of outstanding options, warrants or rights (1) | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of shares remaining available for future issuance (excluding securities reflected in 1st column) | | Equity Compensation Plans approved by security holders | | | 2,324,190 | | | | 13.15 | | | | 1,082,780 | (2) | Equity Compensation Plans not approved by security holders | | | 0 | | | | 0 | | | | 0 | | Total | | | 2,324,190 | | | | 13.15 | | | | 1,082,780 | (2) |
(1) | Includes shares issuable under the following type of awards: options — 1,569,232 shares; performance stock assuming Target performance — 754,958, regardless of any potential actual payout. The number of shares subject to options were granted under the following plans: 2007 Incentive Compensation Plan — 475,694 shares; 2008 Incentive Compensation Plan — 1,075,100; Amended and Restated 2000 Stock Incentive Plan for Non-Employee Directors — 18,438. Shares issuable under performance stock awards are from grants under the 2008 Incentive Compensation Plan. |
(2) | Includes the number of shares remaining available for future issuance under the 2008 Incentive Compensation Plan where outstanding performance stock is accounted for at Target performance levels regardless of any potential actual payout. |
The Board of Directors recommends a vote “FOR” the amendment and restatement of the Modine Manufacturing Company 2008 Incentive Compensation Plan.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of a majority of the votes cast thereon, provided a quorum is present. Because abstentions broker non−votes are not considered votes cast, they will have no effect on the vote.
ITEM 32 – ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
TheAs required pursuant to Section 14A of the Exchange Act, the Company annually seeks the advisory vote of its shareholders on its executive compensation program and asks that you support the compensation of the Company’s Named Executive Officers (“NEOs”)NEOs as disclosed in the Compensation Discussion and Analysis section and accompanying tables contained in this proxy statement.
The ONC Committee and the Company are committed to paying for performance and ensuring that the executive compensation plans of the Company drive value. This commitment is reflected in the Company’s executive compensation program, which is designed to balance short- and long-term considerations while rewarding management in a way that reflects the Company’s performance over time.
This proposal, commonly known as a “Say on Pay” proposal, gives you the opportunity to indicate your support or lack of support for the Company’s fiscal 20142016 pay practices and programs for the NEOs through the following resolution:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
This vote is not for or against a particular item of compensation but rather is with regard to the executive compensation program, as a whole, for the NEOs. This shareholder vote is advisory and is, therefore, not binding on the Board of Directors. The Board of Directors will, however, take the outcome of this vote into account when determining the NEOs’ compensation in fiscal 2015.2017.
The Board of Directors recommends a vote “FOR” approval of the compensation of the Company’s NEOs.
Vote Required for Approval
Approval of the advisory vote supporting the Company’s executive compensation policies and procedures for its NEOs requires the affirmative vote of a majority of the votes cast thereon, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will have no effect on the vote.
ITEM 43 - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 20152017 to audit the consolidated financial statements of the Company. Before the Audit Committee selected PwC, it carefully considered the qualifications of the firm, including their performance in prior years and their reputation for integrity and for competence in the fields of accounting and auditing. Services provided to the Company and its subsidiaries by PwC in fiscal 20142016 and fiscal 20132015 are described under Independent Auditor’s Fees for Fiscal 20142016 and 20132015 below.
If the shareholders do not ratify the appointment of PwC, the selection of our independent registered public accounting firm will be reconsidered by the Audit Committee. If, prior to the annual meeting, PwC declines to act or its engagement is otherwise discontinued by the Audit Committee, the Audit Committee will appoint another independent registered public accounting firm whose engagement for any period subsequent to the meeting will be subject to ratification by the shareholders at the 20142016 Annual Meeting of Shareholders.
Representatives of PwC are expected to be present at the 20142016 Annual Meeting of Shareholders. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
INDEPENDENT AUDITORS’AUDITOR’S FEES FOR FISCAL 20142016 AND 20132015
The following table represents fees for professional audit services rendered by PwC for the audit of the Company’s consolidated financial statements for the fiscal years ended March 31, 20142016 and March 31, 2013,2015, and fees billed for other services rendered by PwC during those periods. (In thousands) | | Fiscal 2014 | | | Fiscal 2013 | | | Fiscal 2016 | | | Fiscal 2015 | | Audit Fees: (a) | | $ | 2,158.7 | | | $ | 2,550.8 | | | $ | 1,993.6 | | | $ | 2,179.9 | | Audit-Related Fees: (b) | | $ | 0.0 | | | $ | 0.0 | | | $ | 0.0 | | | $ | 0.0 | | Tax Fees: (c)(b) | | $ | 583.5 | | | $ | 796.0 | | | $ | 209.2 | | | $ | 433.6 | | All Other Fees: (d) | | $ | 4.5 | | | $ | 9.0 | | | $ | 0.0 | | | $ | 0.0 | | Total | | $ | 2,746.7 | | | $ | 3,355.8 | | | $ | 2,202.7 | | | $ | 2,613.5 | |
(a) | Audit Fees: Fees for professional services performed by PwC for (1) the audit of the Company’s annual consolidated financial statements included in the Company’s annual report on Form 10-K and review of financial statements included in the Company’s quarterly reports on Form 10-Q; (2) the audit of the Company’s internal control over financial reporting; and (3) services that are normally provided in connection with statutory and regulatory filings or engagements. |
(b) | Audit-Related Fees: Fees for assurance and related services performed by PwC that are reasonably related to the performance of the audit or review of the Company’s financial statements. This amount may include attestations by PwC that are not required by statute or regulation, consulting on financial accounting/reporting standards, and due diligence related to mergers and acquisitions. |
(c) | Tax Fees: Fees for professional services performed by PwC with respect to tax compliance, tax advice, and tax planning. This may include preparation of returns for the Company and its consolidated subsidiaries, refund claims, payment planning and tax audit assistance. |
(d) | All Other Fees: Fees for permissible work provided by PwC that do not meet any of the above-category descriptions. The fees for fiscal 2014 and fiscal 2013 were for user licenses of PwC’s Comperio research library. |
The Audit Committee has determined that the provision of services rendered above that were not related to itsthe audit of the Company’s financial statements were at all times compatible with maintaining PwC’s independence.
Pre-Approval Policy
The Audit Committee pre-approves all audit services and permitted non-audit services, including all fees and terms, to be performed for the Company by its independent registered public accounting firm, subject to the “de minimis” exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Audit Committee prior to the completion of the audit.firm. Alternatively, the Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. Non-audit services are reviewed and pre-approved by project at the beginning of each fiscal year. Descriptions of each project are provided to the Audit Committee. Any additional non-audit services contemplated by the Company after the beginning of the fiscal year are submitted to the Audit Committee for pre-approval prior to engaging the independent registered public accounting firm to perform any services. The Audit Committee is routinely informed as to the non-audit services actually provided by the independent registered public accounting firm pursuant to the pre-approved projects. All of the fees paid to the independent registered public accounting firm in the fiscal year ended March 31, 20142016 and fiscal year ended March 31, 20132015 were approved in advance by the Audit Committee.
The Board of Directors recommends a vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of fourfive members, each of whom has been determined by the Board to be sufficiently experienced, financially literate and independent in accordance with the applicable NYSE listing standards. Mr. Cooley, the Chair of the Audit Committee, qualifiesand Mr. Anderson qualify as an audit committee financial expertexperts within the meaning of the SEC rules.
The Audit Committee operates under a written charter adopted by the Board of Directors. Under its charter, the Audit Committee’s purpose is to assist the Board of Directors in overseeing:
| · | The integrity of the Company’s financial statements; |
| · | The internal control and disclosure control systems of the Company; |
| · | The independent registered public accounting firm’s qualifications and independence; |
| · | The performance of the Company’s internal audit function and independent registered public accounting firm; and |
| · | The Company’s compliance with legal and regulatory requirements. |
The Audit Committee is responsible for appointing and overseeing the work of the Company’s independent registered public accounting firm for the purpose of preparing and issuing an audit report and performing related work, and for discussing with the independent registered public accounting firm appropriate staffing and compensation. It is also the responsibility of the Audit Committee to ensure the rotation of the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law, or more frequently if the Audit Committee may deem necessary.
In determining whether to reappoint PwC as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company for the fiscal year ending March 31, 2015,2017, the Audit Committee considered the qualifications of the firm, including their performance in prior years and their reputation for integrity and for competence in the fields of accounting and auditing. Members of the Audit Committee prepared written evaluations of PwC, and the evaluations were considered as part of the reappointment process, along with additional input from members of executive management and the head of the Company’s Internal Audit department regarding their views of and experiences with PwC in its capacity as the Company’s independent registered public accounting firm.
The Audit Committee discussed and approved PwC’s compensation for its work as the Company’s independent registered public accounting firm based on a number of factors. These factors included the review of a fee proposal presented by PwC describing the background of the relationship, the proposed scope of audit, and circumstances distinguishing PwC’s work in fiscal 20142016 from its proposed fiscal 20152017 role. The Audit Committee also received input from management regarding its work experience with the PwC audit team and the reasonableness and market competitiveness of PwC’s fee proposal.
In addition, the Audit Committee is charged under its charter with a wide range of responsibilities and authority, including, among others:
| · | Retaining, to the extent it deems necessary or appropriate, and with appropriate funding provided by the Company, independent legal, accounting or other advisors, or other services or tools as it deems necessary or appropriate in carrying out its duties; |
| · | Oversight of management’s implementation of systems of internal controls, including review of policies relating to legal and regulatory compliance, ethics and conflicts of interest; |
| · | Review of the activities and recommendations of the Company’s internal auditing program; |
| · | Monitoring the preparation of quarterly and annual financial reports by the Company’s management, including discussions with management and the Company’s independent registered public accounting firm about draft annual financial statements and key accounting and reporting matters; |
| · | Monitoring and reviewing the Company’s earnings releases with management and the Company’s independent registered public accounting firm; |
| · | Determining whether the independent registered public accounting firm is independent (based in part on the annual letter provided to the Company pursuant to PCAOB Ethics and Independence Rule 3526 (Independence Discussion with Audit Committees)); |
| · | Annually reviewing management’s programs to monitor compliance with the Company’s Code of Ethics; |
| · | Annually reviewing with management the assumptions and disclosures related to the defined benefit and post-employment benefit plans; and |
| · | Reviewing with management at least semi-annually the status, policies and procedures relating to Company common stock held in any such plan. |
The Audit Committee met eight times during the fiscal year ended March 31, 2014.2016. The Audit Committee has an appropriate number of meetings to ensure that it devotes appropriate attention to all of its responsibilities. The Audit Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent registered public accounting firm and with the Company’s internal auditors and compliance personnel, in each case without any other member of the Company’s management being present.
In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and the Company’s independent registered public accounting firm to review and discuss all financial statements, including the Company’s audited financial statements, prior to their issuance, and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles. PwC presented the matters required to be discussed with the Audit Committee by PCAOB AU 380 “Communication with Audit Committees” and SEC Regulation S-X, Rule 2-07 “Communication with Audit Committees.”
With respect to the Company’s independent registered public accounting firm, the Audit Committee, among other things, discussed with PwC matters relating to its independence, after receiving the written disclosures and the letter from PwC required by the PCAOB Ethics and Independence Rule 3526.
On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014,2016, for filing with the SEC.
In performing all of the functions described above, the Audit Committee acts only in an oversight capacity. The Audit Committee completes its review of the matters described above prior to the public announcements of financial results. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for the Company’s financial statements and its report on the effectiveness of the Company’s internal control over financial reporting, and of the Company’s independent registered public accounting firm, who, in their report, express an opinion on the Company’s annual financial statements and on the effectiveness of the Company’s internal control over financial reporting.
THE AUDIT COMMITTEE
Charles P. Cooley, Chair David J. Anderson David G. Bills Christopher W. Patterson Christine Y. Yan (effective EQUITY COMPENSATION PLAN INFORMATION Modine’s equity compensation plans, listed below, all have been approved by shareholders: | · | Amended and Restated 2008 Incentive Compensation Plan; and |
| · | 2007 Incentive Compensation Plan. |
The following table sets forth required information about equity compensation plans as of May 5, 2014)March 31, 2016: Plan Category | | Number of shares to be issued upon exercise of outstanding options, warrants or rights | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of shares remaining available for future issuance (excluding securities reflected in 1st column) | | Equity Compensation Plans approved by security holders | | | 1,456,413 | | | | 10.82 | | | | 3,256,046 | | Equity Compensation Plans not approved by security holders | | | - | | | | - | | | | - | | Total | | | 1,456,413 | | | | 10.82 | | | | 3,256,046 | |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and certain persons who beneficially own more than 10 percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership of equity securities of Modine and derivative securities of Modine with the SEC. Those “reporting persons” are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of those filings and other information furnished by the reporting persons, we believe that all of the Company’s reporting persons complied during the fiscal year ended March 31, 20142016 with the reporting requirements of Section 16(a) of the Exchange Act.
The Board of Directors is not aware of any other matters that will be presented for action at the 20142016 Annual Meeting of Shareholders. Should any additional matters properly come before the meeting, the persons named in the proxy will vote on those matters in accordance with their best judgment. GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Rules of Conduct for the annual meeting are attached as Appendix B.A. Please review the Rules of Conduct before attending the annual meeting. The Rules of Conduct will also be distributed at the annual meeting.
Who may vote?
You may vote your shares of common stock if our records show that you owned the shares at the close of business on May 30, 2014,27, 2016, the record date. A total of 47,662,55847,427,929 shares of common stock were outstanding as of the record date and entitled to vote at the annual meeting. You are entitled to one vote for each share of common stock you own. The holders of common stock do not have cumulative voting rights. The enclosed proxy card shows the number of shares you may vote.
How do I vote?
You may vote in person or by a properly appointed proxy.
Registered Holders
Registered holders may vote (i) by completing and mailing the enclosed proxy card, or (ii) electronically either via the Internet, or (iii) by calling Broadridge Financial Solutions, Inc. Specific instructions for each voting option are set forth on the enclosed proxy card. You may also vote in person at the annual meeting.
The Internet and telephone voting procedures on the enclosed proxy card are for your convenience and reduce costs for Modine. The procedures are designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.
Street Name Holders
If your shares are registered in the name of a bank or brokerage firm, you may be eligible to vote your shares electronically via the Internet or by telephone. If your bank or brokerage firm is participating in the Broadridge Investor
Communication Services’ program, your voting form will provide you with instructions.
401(k) Retirement Plan Participants
If you are a participant in one of Modine’s 401(k) Retirement Plans, you will receive a proxy on which you may indicate your voting instructions for the shares held in your plan account. The trustee for the plan, Wells Fargo Bank, N.A., will vote your shares as you direct. If a proxy is not returned for shares held in a plan, the trustee generally will vote those shares in the same proportion that all shares in the plan for which voting instructions have been received are voted, although it may do otherwise in its discretion.
May I vote in person at the annual meeting?
Although we encourage you to complete and return the proxy card or vote via the Internet or by telephone to ensure that your vote is counted, you may attend the annual meeting and vote your shares in person. You will need to obtain a “legal proxy” from your broker if you hold your shares in street name and want to vote those shares at the annual meeting in person.
Please tell us when you appoint your proxy if you plan on attending the annual meeting so that we may have an accurate count of the number of shareholders attending the meeting.
What does the Board of Directors recommend?
The Board of Directors’ recommendation is included with the description of each item in this proxy statement. In summary, the Board recommends a vote:
“FOR” election of each of the Company-nominated directors for terms expiring in 20172019 (see Item 1); and
“FOR” the Amendment and Restatement of 2008 Incentive Compensation Plan (see Item 2); and
“FOR” approval of the Company’s NEO compensation (see Item 3)2); and
“FOR” ratification of the Company’s independent registered public accounting firm (see Item 4)3).
Unless you give other instructions, the persons named as proxies will vote “FOR” Items 1, 2 3 and 4.3.
What if other matters come up at the annual meeting?
To our knowledge, the matters described in this proxy statement are the only matters that will be subject to a vote at the annual meeting. If other matters are properly presented, the persons appointed as proxies will vote your shares on those other matters in accordance with their best judgment.
May I change my vote after I appoint a proxy?
Yes, you may change your vote by revoking your proxy. You may revoke your proxy by:
· | giving written notice before the annual meeting to the Company’s Secretary stating that you are revoking your previous proxy; |
· | revoking your proxy in the same manner you initially submitted it – by mail, Internet, or the telephone or mail;telephone; or |
· | attending the annual meeting and voting your shares in person. |
If you decide to vote your shares in person, we prefer that you first revoke your prior proxy in the same way you initially submitted it – that is, by mail, Internet or the telephone or mail.telephone. The presence at the annual meeting of a shareholder who has made an effective proxy appointment does not, by itself, constitute a revocation of a proxy appointment.
How are votes counted?
A majority of the shares entitled to vote, represented in person or by proxy, will constitute a quorum at the annual meeting. Abstentions and broker non-votes are counted as present for purposes of determining a quorum.
Voting on the Election of Directors (Item 1)
Directors in an uncontested election are elected by a majority of the votes cast by holders of shares of the Company’s common stock entitled to vote in the election at a shareholder meeting at which a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Amendment and Restatement of 2008 Incentive Compensation Plan (Item 2)
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Advisory Vote on NEO Compensation (Item 3)2)
Approval of the advisory resolution on the Company’s NEO compensation policies and procedures for its NEOs requires the affirmative vote of a majority of the votes cast, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Voting on the Ratification of Independent Registered Public Accounting Firm (Item 4)3)
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the vote.
Who will count the votes?
Broadridge Financial Solutions, Inc., an independent tabulator, will count the votes under the supervision of the Inspectors of Election appointed by the Board of Directors.
Shareholder Proposals for 20152017 Annual Meeting
Shareholder proposals for the 20152017 Annual Meeting of Shareholders of the Company must be received no later than February 17, 201521, 2017 at the Company’s principal executive office, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin 53403-2552, directed to the attention of the Company’s Secretary, in order to be considered for inclusion in next year’s annual meeting proxy material under the proxy rules of the SEC. Written notice of shareholder proposals and director nominations for the 20152017 Annual Meeting of Shareholders of the Company that are not intended to be considered for inclusion in next year’s annual meeting proxy material (shareholder proposals submitted outside the processes of Rule 14a-8) must be received no earlier than April 8, 201512, 2017 and no later than May 3, 20157, 2017 at such offices, directed to the attention of the Company’s Secretary, and must be submitted in accordance with the requirements of the Bylaws of the Company.
Who pays for this proxy solicitation?
Modine pays for the proxy solicitation. Directors, officers and employees of Modine, who will receive no additional compensation for their services, may solicit proxies in person or by mail, telephone, facsimile transmission or other means. We have retained Morrow & Company to act as a proxy solicitor in conjunction with the Annual Meeting. We have agreed to pay that firm $7,500, plus reasonable out-of-pocket expenses, for proxy solicitation services. Brokers, banks, nominees, fiduciaries and other custodians will be requested to solicit beneficial owners of shares and will be reimbursed for their expenses.
How may I help reduce mailing costs?
Eligible shareholders who have more than one account in their name or the same address as other shareholders may authorize us to discontinue mailings of multiple annual reports and proxy statements. Most shareholders can also view future annual reports and proxy statements on the Internet rather than receiving paper copies in the mail. See the next two questions and answers and your proxy card for more information.
Are proxy materials and the annual report available electronically?
Yes, they are available at www.proxyvote.com and on our website, www.modine.com. In addition, shareholders may elect to view future proxy statements and annual reports on the Internet instead of receiving paper copies in the mail. If you are a shareholder of record, you may choose this option and save us the cost of producing and mailing these documents by following the instructions provided on the proxy card to vote on the Internet. On the referenced website, you will be given instructions to choose to receive future proxy statements and annual reports electronically. If you hold your stock in street name, please refer to the information provided by the party in whose name the shares are held for instructions on how to elect to view future proxy statements and annual reports on the Internet.
What happens if multiple shareholders share the same address?
We have adopted a procedure called “householding,” so we are sending only one proxy statement to shareholders with the same last name at a single address, unless we have received instructions to do otherwise. Householding reduces our printing and postage costs. If a shareholder of record wishes to receive a separate copy of a proxy statement or annual report in the future, he or she may providetell us so by providing written notice to the Company’s Secretary, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, WI 53403-2552, or oral notice by calling 262-636-1517, and tell us so.262-636-1517. Upon written or oral request, the Company will promptly send a copy of either document.
Shareholders of record sharing the same address and receiving multiple copies of the annual report and proxy statement may request householding by contacting us in the same manner. If you own your shares in street name, you may request householding by contacting the entity in whose name the shares are held. The foregoing notice and Proxy Statement are sent by order of the Board of Directors. | | Margaret C. Kelsey, | | | Vice President, Legal and Corporate Communications | | | General Counsel and Secretary | | | | June 17, 201421, 2016 | | |
The Company will provide to any shareholder, without charge, upon written request of such shareholder, a copy of the Company’s Form 10-K (without exhibits). Such requests should be addressed to: Vice President, Treasurer and Investor Relations, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin, 53403-2552. A copy of the Company’s Form 10-K is available on our website, www.modine.com.
MODINE MANUFACTURING COMPANY
2008 INCENTIVE COMPENSATION PLAN
Amended and Restated Effective May 7, 2014
1.01Purpose. The Modine Manufacturing Company 2008 Incentive Compensation Plan (the "Plan") is intended to provide incentives that will attract and retain the best available (a) non-employee directors of Modine Manufacturing Company (the “Company”) and (b) employees of the Company or any Subsidiary that now exists or hereafter is organized or acquired by the Company, provide additional incentive to such persons and promote the success and growth of the Company. These purposes may be achieved through the grant of options to purchase Common Stock, the grant of Stock Appreciation Rights, the grant of Restricted Stock Awards, the grant of Restricted Stock Units, the grant of Performance Stock Awards, the grant of Phantom Stock Awards and the grant of Cash Bonus Awards, as described below.
1.02Effective Date. The effective date of the Plan is July 17, 2008 (the “Effective Date”). The Board amended the Plan on May 18, 2011 and on May 7, 2014, subject to the approval of the shareholders of the Company at the 2014 Annual Meeting of Shareholders.
2.01"Affiliate" or "Associate" shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934, as it may be amended from time to time.
2.02“Award” means an Incentive Stock Option, Non-Qualified Stock Option, Stock Appreciation Right, Restricted Stock Award, unrestricted Common Stock Award, Restricted Stock Unit Award, Performance Stock Award, Phantom Stock Award or Cash Bonus Award, as appropriate.
2.03“Award Agreement” means the agreement between the Company and the Grantee specifying the terms and conditions as described thereunder.
2.04“Board” means the Board of Directors of the Company.
2.05“Cash Bonus Award” means a cash award under Article XI of the Plan.
2.06“Cause” shall be deemed to exist if, and only if: (a) Grantee engages in an act of dishonesty constituting a felony that results or is intended to result directly or indirectly in gain or personal enrichment at the expense of the Company; (b) Grantee discloses confidential information of the Company that results in a demonstrable material injury to the Company; or (c) Grantee has engaged in a willful and continued failure to perform substantially the Grantee’s duties on behalf of the Company.
2.07“Change in Control” shall be deemed to take place on the occurrence of any of the following events: (a) the effective time of (i) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding capital stock of the Company entitled to vote in elections of directors (the “Voting Power”) of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 50% of the Voting Power of the surviving or resulting corporation, or (ii) a transfer of 30% of the Voting Power, or a majority of the Company's consolidated assets, other than to an entity of which the Company owns at least 50% of the Voting Power; or (b) the date upon which individuals, who as of May 7, 2014, constitute the Board (as of such date, the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided however, that any person becoming a director subsequent to May 7, 2014 whose appointment or nomination for election by the shareholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest which was (or, if threatened, would have been) subject to Exchange Act Rule 14a-12(c).
2.08“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.
2.09“Committee” means the committee described in Article IV or the person or persons to whom the committee has delegated its power and responsibilities under Article IV.
2.10“Common Stock” or “Stock” means the common stock of the Company having a par value of $0.625 per share.
2.11“Company” means Modine Manufacturing Company, a Wisconsin corporation.
2.12“Fair Market Value” means, as of any date of determination, (a) the closing sale price of a share of Stock on the New York Stock Exchange (or on such other recognized market or quotation system on which the trading prices of Stock are traded or quoted at the relevant time), or (b) if no such sale shall have been made on that day, on the last preceding day on which there was such a sale. If such Stock is not then listed or quoted as referenced above, Fair Market Value shall be an amount determined in good faith by the Committee.
2.13“Grant Date” means the date on which an Award is deemed granted, which shall be the date on which the Committee authorizes the Award or such later date as the Committee shall determine in its sole discretion.
2.14“Grantee” means an individual who has been granted an Award.
2.15“Incentive Stock Option” or “ISO” means an option that is intended to meet the requirements of Section 422 of the Code and regulations thereunder.
2.16“Non-Qualified Stock Option” or “NSO” means an option other than an Incentive Stock Option.
2.17“Option” means an Incentive Stock Option or Non-Qualified Stock Option, as appropriate.
2.18“Performance Goal” means a performance goal established by the Committee at the time of the grant of an Award (or, where applicable, on or before the latest date permissible to enable an Award to qualify as “performance-based compensation” under Section 162(m) of the Code) that is based on the attainment of goals relating to one or more of the following business criteria measured on an absolute basis or in terms of growth or reduction or relative to a designated comparison group:
| (b) | net earnings or income (pre-tax or after-tax and with adjustments as stipulated); |
| (c) | return measures (including but not limited to return on assets employed, equity, average capital employed, capital employed, assets, tangible book value, sales); |
| (e) | earnings before interest, taxes, depreciation and amortization (“EBITDA”); |
| (h) | stock price (including, but not limited to, growth measures and total shareholder return) ; |
| (i) | economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital); |
| (k) | net sales or revenue growth; |
| (m) | operating expense ratios; |
| (n) | operating expense targets; |
| (p) | gross or operating margins; |
| (q) | cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); |
| (t) | debt to equity ratio / debt levels; |
| (u) | total shareholder return; |
| (v) | business diversification; |
| (w) | employee retention / attrition; |
| (y) | inventory control / efficiency; and |
| (z) | such other subjective or objective performance goals, including strategic measures or individual goals, that the ONC Committee deems appropriate. |
The Committee may determine the achievement of any of the above Performance Goals with or without regard to any of the following events that occurs during the performance period applicable to an Award subject to a Performance Goal: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in FASB Accounting Standards Codification 225-20 – Extraordinary and Unusual Items, and/or in Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses, each as set forth by the Committee at the time of the grant (or, where applicable, on or before the latest date permissible to enable the Performance Share Units to qualify as “performance-based compensation” under Section 162(m) of the Code and as specified in the Award Agreement. Awards that are subject to a Performance Goal and that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code may not be adjusted upward. The Committee shall retain the discretion to adjust Awards that are subject to a Performance Goal downward, either on a formula or discretionary basis or any combination, as the Committee determines.
2.19“Performance Stock Award” means an Award under Article IX of the Plan, that is conditioned upon the satisfaction of one or more pre-established Performance Goals.
2.20“Phantom Stock Award” means the right to receive in cash the Fair Market Value of a share of Common Stock under Article X of the Plan.
2.21“Plan” means the Modine Manufacturing Company 2008 Incentive Compensation Plan as set forth herein, as it may be amended from time to time.
2.22“Restricted Stock Award” means a restricted stock award under Article VII of the Plan.
2.23“Restricted Stock Unit Award” means a restricted stock unit award under Article VIII of the Plan.
2.24“Stock Appreciation Right” or “SAR” means the right to receive cash or shares of Common Stock based upon the excess of the Fair Market Value of one share of Common Stock on the date the SAR is exercised over the grant price (which shall be not less than the Fair Market Value of a share of Common Stock on the Grant Date), as further described in Article VI of the Plan.
2.25“Subsidiary” means any corporation in which the Company or another entity qualifying as a Subsidiary within this definition owns 50% or more of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company or another entity qualifying as a Subsidiary within this definition owns 50% or more of the combined equity thereof.
2.26“Unrestricted Common Stock Award” means an award of Common Stock made without vesting restrictions in accordance with Section 7.05, below.
| III. | SHARES SUBJECT TO AWARD. |
3.01Share Limit. Subject to adjustment as provided in Section 3.02 below, the number of shares of Common Stock of the Company that may be issued under the Plan shall not exceed eight million three hundred fifty thousand (8,350,000) shares (the "Share Limit"); provided that no individual may be granted Awards covering, in the aggregate, more than three hundred twenty-five thousand (325,000) shares of Common Stock in any calendar year. Shares issued under the Plan may come from authorized but unissued shares, from treasury shares held by the Company, from shares purchased by the Company or an independent agent in the open market for such purpose, or from any combination of the foregoing. The Share Limit shall be subject to the following rules and adjustments:
| (a) | Any shares of Common Stock subject to Options and SARs shall be counted against the Share Limit as one (1) share for every one share subject thereto. |
| (b) | With respect to SARs, when a stock settled SAR is exercised, the shares subject to an SAR grant agreement shall be counted against the shares available for issuance as one (1) share for every share subject thereto, regardless of the number of shares used to settle the SAR upon exercise. |
| (c) | Any shares of Common Stock subject to Awards other than Options and SARs shall be counted against the Share Limit as 1.6 shares for every one share issued. |
| (d) | If any Award granted under this Plan or any other equity incentive plan of the Company in existence on May 18, 2011 is canceled, terminates, expires, or lapses for any reason, any shares subject to such Award again shall be available for the grant of an Award under this Plan. Any Awards or portions thereof that is settled in cash and not in shares of Common Stock shall not be counted against the foregoing Share Limit. Except as otherwise provided in 3.01(f) below with respect to an Option or SAR, the number of Shares from an Award that are used to satisfy tax withholding shall not be counted against the foregoing Share Limit. |
| (e) | For purposes of applying the annual individual limitation on shares subject to Awards granted during a calendar year, in connection with any Performance Stock Award granted, the number of shares of Common Stock granted shall be based upon the maximum number of shares payable under such Performance Stock Award and shall be counted against the Share Limit as 1.6 shares for every one share issued. |
| (f) | For purposes of applying the number of Shares available under this Plan, Shares withheld to satisfy taxes or used to fund the exercise price in connection with the exercise of an Option or SAR, either directly or by attestation, shall be treated as issued hereunder and if an Option is exercised using the net exercise method, the gross number of Shares for which the Option is exercised shall be treated as issued for purposes of counting the Shares available for issuance under this Plan, not just the net Shares issued to the Participant after reduction for the exercise price and required withholding tax. For the avoidance of doubt, any Shares repurchased on the open market by the Company using proceeds from Option exercises shall not be treated as issued hereunder for purposes of determining the number of Shares available under this Plan. |
3.02Changes in Common Stock. If any stock dividend is declared upon the Common Stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the Common Stock, resulting in a split or combination or exchange of shares, the Committee shall make or provide for such adjustment in the number of and class of shares that may be delivered under the Plan, and in the number and class of and/or price of shares subject to outstanding Awards as it may, in its discretion, deem to be equitable.
4.01Administration by the Committee. For purposes of the power to grant Awards to non-employee directors, the Committee shall consist of the entire Board, provided, however, that discretionary Awards to non-employee directors will be administered by the entire Board but without the participation of any members who at the time are not independent under the rules of the New York Stock Exchange. For other Plan purposes, the Plan shall be administered by a committee designated by the Board to administer the Plan and shall be the Officer Nomination and Compensation Committee of the Board. The Committee shall be constituted to permit the Plan to comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended or any successor rule, and Section 162(m) of the Code. A majority of the members of the Committee shall constitute a quorum. The approval of such a quorum, expressed by a vote at a meeting held either in person or by conference telephone call, or the unanimous consent of all members in writing without a meeting, shall constitute the action of the Committee and shall be valid and effective for all purposes of the Plan.
4.02Committee Powers. The Committee is empowered to adopt such rules, regulations and procedures and take such other action as it shall deem necessary or proper for the administration of the Plan. The Committee shall also have authority to interpret the Plan, and the decision of the Committee on any questions concerning the interpretation of the Plan shall be final and conclusive. The Committee may consult with counsel, who may be counsel for the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. Subject to the provisions of the Plan, the Committee shall have full and final authority to:
| (a) | designate the persons to whom Awards shall be granted; |
| (b) | grant Awards in such form and amount as the Committee shall determine; |
| (c) | impose such limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate; |
| (d) | waive in whole or in part any limitations, restrictions or conditions imposed upon any such Award as the Committee shall deem appropriate; and |
| (e) | modify, extend or renew any Award previously granted, provided that this provision shall not provide authority to reprice Awards to a lower exercise price. |
4.03No Repricing. Repricing of Options or SARs shall not be permitted without shareholder approval. For this purpose, a "repricing" means any of the following (or any other action that has the same effect as any of the following): (A) changing the terms of an Option or SAR to lower its purchase or grant price; (B) any other action that is treated as a "repricing" under generally accepted accounting principles; and (C) repurchasing for cash or canceling an Option or SAR at a time when its purchase or grant price is greater than the Fair Market Value of the underlying stock in exchange for another Award (including an Option or SAR), unless the cancellation and exchange occurs in connection with an event set forth in Section 3.02. Such cancellation and exchange would be considered a "repricing" regardless of whether it is treated as a "repricing" under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Grantee.
4.04Delegation by Committee. The Committee may delegate all or any part of its responsibilities and powers to any executive officer or officers of the Company selected by it. Any such delegation may be revoked by the Board or by the Committee at any time.
5.01Granting of Stock Options. Options may be granted to non-employee directors of the Company and to officers and key employees of the Company and any of its Subsidiaries. In selecting the individuals to whom Options shall be granted, as well as in determining the number of Options granted, the Committee shall take into consideration such factors as it deems relevant pursuant to accomplishing the purposes of the Plan. A Grantee may, if he or she is otherwise eligible, be granted an additional Option or Options if the Committee shall so determine. Option grants under the Plan shall be evidenced by an Award Agreement in such form and containing such provisions as are consistent with the Plan as the Committee shall from time to time approve.
5.02Type of Option. At the time each Option is granted, the Committee shall designate the Option as an Incentive Stock Option or a Non-Qualified Stock Option. Any Option designated as an Incentive Stock Option shall comply with the requirements of Section 422 of the Code, including the requirement that incentive stock options may only be granted to individuals who are employed by the Company, a parent or a Subsidiary corporation of the Company. If required by applicable tax rules regarding a particular grant, to the extent that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares with respect to which an Incentive Stock Option grant under this Plan (when aggregated, if appropriate, with shares subject to other Incentive Stock Option grants made before said grant under this Plan or another plan maintained by the Company or any ISO Group member (as defined in Section 422 of the Code)) is exercisable for the first time by an optionee during any calendar year exceeds $100,000 (or such other limit as is prescribed by the Code), such option grant shall be treated as a grant of Non-Qualified Stock Options pursuant to Code Section 422(d).
5.03Option Terms. Each option grant Award Agreement shall specify the number of Incentive Stock Options and/or Non-Qualified Stock Options being granted; one option shall be deemed granted for each share of stock. In addition, each option grant Award Agreement shall specify the exercisability and/or vesting schedule of such options, if any. For Options granted on or after May 18, 2011, except as otherwise provided by the Committee, the Option shall vest over a four year period, with 25% of the Option vesting on each annual anniversary after the Grant Date. No Option shall be exercisable in whole or in part more than ten years from the Grant Date.
5.04Purchase Price. The purchase price for a share subject to Option shall not be less than 100% of the Fair Market Value of the share on the date the Option is granted, provided, however, the purchase price of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of such share on the date the Option is granted if the Grantee then owns (after the application of the family and other attribution rules of Section 424(d) or any successor rule of the Code) more than 10% of the total combined voting power of all classes of stock of the Company. The purchase price of the Common Stock covered by each Option shall be subject to adjustment as provided in Articles III and XII hereof.
5.05Method of Exercise. An Option that has become exercisable may be exercised from time to time by written notice to the Company stating the number of shares being purchased and accompanied by the payment in full of the purchase price for such shares. The purchase price may be paid by any of the following methods, (a) by cash, (b) to the extent permitted under the particular grant Award Agreement, by transferring to the Company shares of stock of the Company at their Fair Market Value as of the date of exercise of the Option ("Delivered Stock"), (c) a combination of cash and Delivered Stock, or (d) such other forms or means which the Committee shall determine in its discretion and in such manner as is consistent with the Plan's purpose and applicable law. Notwithstanding the foregoing, the Company may arrange for or cooperate in permitting broker-assisted cashless exercise procedures.
5.06Shareholder Rights. A Grantee shall not, by reason of any Options granted hereunder, have any rights of a shareholder of the Company with respect to the shares covered by Options until shares of Stock have been issued. No dividends or dividend equivalents shall be paid with respect to Options.
| VI. | STOCK APPRECIATION RIGHTS. |
6.01Granting of SARs. The Committee may, in its discretion, grant SARs to non-employee directors of the Company and to officers and key employees of the Company and any of its Subsidiaries. SARs may be granted with respect to Options granted concurrently (tandem SARs) or on a standalone basis (standalone SARs).
6.02SAR Terms. Each SAR grant shall be evidenced by an Award Agreement that shall specify the number of SARs granted, the grant price (which shall be not less than the Fair Market Value of a share of Common Stock on the Grant Date), the term of the SAR, and such other provisions as the Committee shall determine. For SARs granted on or after May 18, 2011, except as otherwise provided by the Committee, the SAR shall vest over a four year period, with 25% of the SAR vesting on each annual anniversary after the Grant Date. No SAR shall be exercisable in whole or in part more than ten years from the Grant Date.
6.03Method of Exercise. An SAR that has become exercisable may be exercised by written notice to the Company stating the number of SARs being exercised.
6.04Payment upon Exercise. Upon the exercise of SARs, the Grantee shall be entitled to receive an amount determined by multiplying (a) the difference obtained by subtracting the grant price from the Fair Market Value of a share of Common Stock on the date of exercise, by (b) the number of SARs exercised. At the discretion of the Committee, the payment upon the exercise of the SARs may be in cash, in shares of Common Stock of equivalent value (valued at the Fair Market Value of the Common Stock on the date of exercise), or in some combination thereof. The aggregate number of available shares under Section 3.01 shall not be affected by any cash payments, but for the avoidance of doubt, SARs shall be counted against the individual annual limitation on Awards granted in Section 3.01.
6.05Shareholder Rights. A Grantee shall not, by reason of any SARs granted hereunder, have any rights of a shareholder of the Company with respect to the shares covered by SARs until shares of Stock have been issued. No dividends or dividend equivalents shall be paid with respect to SARs.
| VII. | RESTRICTED STOCK AWARDS AND UNRESTRICTED COMMON STOCK AWARDS. |
7.01Administration. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the eligible persons to whom and the time or times at which grants of Restricted Stock will be made, the number of shares of restricted Common Stock to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the grant of Restricted Stock upon the attainment of Performance Goals so that the grant qualifies as “performance-based compensation” within the meaning of Section 162(m) of the Code. The Committee may also condition the grant of Restricted Stock upon such other conditions, restrictions and contingencies as the Committee may determine. The provisions of Restricted Stock Awards need not be the same with respect to each recipient.
7.02Registration. Any Restricted Stock Award granted hereunder may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock, such certificate shall be registered in the name of the Grantee and shall bear an appropriate legend (as determined by the Committee) referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the event such Restricted Stock is issued in book-entry form, the depository and the Company’s transfer agent shall be provided with notice referring to the terms, conditions and restrictions applicable to such Restricted Stock, together with such stop-transfer instructions as the Committee deems appropriate.
7.03Terms and Conditions. Restricted Stock Awards shall be subject to the following terms and conditions:
| (a) | Until the applicable restrictions lapse or the conditions are satisfied, the Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber the Restricted Stock Award. |
| (b) | Except to the extent otherwise provided in the applicable Award Agreement and in (c) below, the portion of the Award still subject to restriction shall be forfeited by the Grantee upon termination of a Grantee’s service for any reason. For Restricted Stock Awards granted on or after May 18, 2011, except as otherwise provided by the Committee, the Restricted Stock shall vest over a four year period, with 25% of the Restricted Stock Award vesting on each annual anniversary after the Grant Date of the Award. |
| (c) | In the event of hardship, early retirement or other special circumstances of a Grantee whose employment is terminated (other than for cause), the Committee may waive in whole or in part any or all remaining restrictions with respect to such Grantee’s shares of Restricted Stock. |
| (d) | If and when the applicable restrictions lapse, with respect to any Shares registered in book-entry form, the Company’s transfer agent shall be provided with notice regarding the lapse of the restriction, and if a stock certificate was issued with respect to the shares of Restricted Stock, unlegended certificates for such shares shall be delivered to the Grantee. |
| (e) | Each Award shall be confirmed by, and be subject to the terms of, an Award Agreement identifying the restrictions applicable to the Award. |
7.04Rights as Shareholder. A Grantee receiving a Restricted Stock Award shall have all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Unless otherwise determined by the Committee, cash dividends shall be automatically paid in cash and dividends payable in stock shall be paid in the form of additional Restricted Stock.
7.05Unrestricted Common Stock Awards. The Committee or the Board may grant Unrestricted Common Stock Awards to non-employee directors of the Company. Except as otherwise provided at the time of grant, shares of Common Stock subject to an Unrestricted Common Stock Award shall not be subject to the terms and conditions set forth in Section 7.03 above.
| VIII. | RESTRICTED STOCK UNIT AWARDS. |
8.01Administration. Restricted Stock Unit Awards entitle a Grantee to receive one share of Common Stock for each Restricted Stock Unit if the vesting conditions are satisfied. The Committee shall determine the eligible employees to whom and the time or times at which Restricted Stock Unit Awards will be made, the number of Restricted Stock Units to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The provisions of Restricted Stock Unit Awards need not be the same with respect to each recipient.
8.02Terms and Conditions. Restricted Stock Unit Awards shall be subject to the following terms and conditions:
| (a) | A Grantee shall be entitled to receive from the Company one share of Common Stock for each Restricted Stock Unit. At the discretion of the Committee, if so determined at the time of grant, the Company shall be entitled to settle its obligation to deliver shares of Common Stock in cash (valued at the Fair Market Value of the Common Stock on the required date of issuance). |
| (b) | Except as otherwise provided by the Committee at the time of grant, shares of Common Stock payable with respect to Restricted Stock Units shall be issued to a Grantee on the date the vesting conditions applicable to a Restricted Stock Unit Award are satisfied; provided however, that if any Award of Restricted Stock Units to a Grantee who is subject to U.S. federal income tax is nonqualified deferred compensation for purposes of Section 409A of the Code, shares of Common Stock shall only be distributed to the grantee at such times as would not cause the grantee to become subject to penalties under Section 409A of the Code. |
| (c) | A Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber a Restricted Stock Unit Award. |
| (d) | Following vesting, the issuance of shares of Common Stock in settlement of a Restricted Stock Unit may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. |
| (e) | Except to the extent otherwise provided in the applicable Award Agreement and in (f) below, the portion of the Award still subject to vesting shall be forfeited by the Grantee upon termination of a Grantee’s service for any reason. Except as otherwise provided by the Committee, a Restricted Stock Unit Award shall vest over a four year period, with 25% of the Restricted Stock Unit Award vesting on each annual anniversary after the Grant Date of the Award. |
| (f) | In the event of hardship, early retirement or other special circumstances of a Grantee whose employment is terminated (other than for Cause), the Committee may accelerate in whole or in part any unvested Restricted Stock Units held by the Grantee. |
| (g) | Each Award shall be confirmed by, and be subject to the terms of, an Award Agreement identifying the restrictions applicable to the Award, if any. |
8.03Rights as Shareholder. A Grantee receiving a Restricted Stock Unit Award shall not be deemed the holder of any shares covered by the Award, or have any rights as a shareholder with respect thereto, until such shares are issued to him/her at the time set forth in the Applicable Award Agreement. Notwithstanding the foregoing, the Committee shall have the right, but not the obligation, to grant Restricted Stock Unit Awards which pay dividend equivalents to the Grantee in the form of cash payments or additional Restricted Stock Units, as specified in the applicable Award Agreement.
| IX. | PERFORMANCE STOCK AWARDS. |
9.01Administration. Performance Stock Awards entitle a Grantee to receive shares of Common Stock if predetermined conditions are satisfied. The Committee shall determine the eligible employees to whom and the time or times at which Performance Stock Awards will be made, the number of shares to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the Performance Stock Award upon the attainment of Performance Goals so that the Award qualifies as “performance-based compensation” within the meaning of Section 162(m) of the Code. The Committee may also condition the Performance Stock Award upon such other conditions, restrictions and contingencies as the Committee may determine. The provisions of Performance Stock Awards need not be the same with respect to each recipient.
9.02Terms and Conditions. Performance Stock Awards shall be subject to the following terms and conditions:
| (a) | Until the applicable restrictions lapse or the conditions are satisfied, the Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber the Performance Stock Award. |
| (b) | Except to the extent otherwise provided in the applicable Award Agreement, the portion of the Award still subject to restriction may be forfeited by the Grantee upon termination of a Grantee’s service for any reason, at the discretion of the Committee. |
| (c) | If and when the applicable restrictions lapse, the issuance of shares of Common Stock in settlement of a Performance Stock Award may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. |
| (d) | For Performance Stock Awards granted on or after May 18, 2011, the minimum performance period applicable to a Performance Goal will be one year. |
| (e) | Each Award shall be confirmed by, and be subject to the terms of, an Award Agreement identifying the restrictions applicable to the Award, if any. |
9.03Rights as Shareholder. A Grantee receiving a Performance Stock Award shall not be deemed the holder of any shares covered by the Award, or have any rights as a shareholder with respect thereto, until such shares are issued to him/her following the lapse of the applicable restrictions, if any. Except to the extent otherwise provided by the Committee at the time of grant, no dividends or dividend equivalents shall be paid with respect to Performance Stock Awards prior to the time such shares are issued.
10.01Administration. Phantom Stock Awards entitle a Grantee to receive cash payments based upon the Fair Market Value of shares of Common Stock if predetermined conditions are satisfied. The Committee shall determine the eligible employees to whom and the time or times at which Phantom Stock Awards will be made, the number of shares to be covered by the Award, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the grant of a Phantom Stock Award upon the attainment of Performance Goals so that the grant qualifies as “performance-based compensation” within the meaning of Section 162(m) of the Code. The Committee may also condition the grant of a Phantom Stock Award upon such other conditions, restrictions and contingencies as the Committee may determine. The provisions of Phantom Stock Awards need not be the same with respect to each recipient.
10.02Terms and Conditions. Phantom Stock Awards shall be subject to the following terms and conditions:
| (a) | Until the applicable restrictions lapse or the conditions are satisfied, the Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber the Phantom Stock Award. |
| (b) | Except to the extent otherwise provided in the applicable Award Agreement, the portion of the Award still subject to restriction shall be forfeited by the Grantee upon termination of a Grantee’s service for any reason. |
| (c) | If and when the applicable restrictions lapse, the Company shall pay to Grantee an amount equal to the Fair Market Value of a share of Common Stock multiplied by the number of shares covered by the Award for which the restrictions have then lapsed. |
| (d) | Each Award shall be confirmed by, and be subject to the terms of, an Award Agreement identifying the restrictions applicable to the Award. |
| (e) | The aggregate number of available shares in Section 3.01 shall not be affected by any cash payments in respect of Phantom Stock Awards, but for the avoidance of doubt, Phantom Stock Awards shall be counted against the individual annual limitation on Awards granted in Section 3.01. |
10.03Rights as Shareholder. A Grantee receiving a Phantom Stock Award shall not be deemed the holder of any shares covered by the Award, or have any rights as a shareholder with respect thereto.
11.01Administration. The Committee may establish Cash Bonus Awards either alone or in addition to other Awards granted under the Plan. The Committee shall determine the employees to whom and the time or times at which Cash Bonus Awards shall be granted, and the conditions upon which such Awards will be paid. The maximum Cash Bonus Award payable to an employee in any calendar year shall not exceed three million dollars ($3,000,000).
11.02Terms and Conditions. Cash Bonus Awards shall be subject to the following terms and conditions:
| (a) | A Cash Bonus Award under the Plan shall be paid solely on account of the attainment of one or more pre-established, objective Performance Goals. Performance Goals shall be based on one or more business criteria that apply to the individual, a business unit, or the Company as a whole. It is intended that any Performance Goal will be in a form that relates the bonus to an increase in the value of the Company to its shareholders. |
| (b) | Performance Goals shall be established in writing by the Committee not later than 90 days after the commencement of the period of service to which the Performance Goal relates. The pre-established Performance Goal must state, in terms of an objective formula or standard, the method for computing the amount of compensation payable to any employee if the goal is attained. |
| (c) | Following the close of the performance period, the Committee shall determine whether the Performance Goal was achieved, in whole or in part, and determine the amount payable to each employee. |
11.03Non-Exclusivity. This Plan does not limit the authority of the Company, the Board or the Committee, or any Subsidiary to award bonuses or authorize any other compensation to any person.
| XII. | EFFECT OF CORPORATE TRANSACTIONS. |
12.01Merger, Consolidation or Reorganization. In the event of a merger, consolidation or reorganization with another corporation in which the Company is not the surviving corporation, or a merger, consolidation or reorganization involving the Company in which the Common Stock ceases to be publicly traded, the Committee shall, subject to the approval of the Board, or the board of directors of any corporation assuming the obligations of the Company hereunder, take action regarding each outstanding and unexercised Award pursuant to either clause (a) or (b) below:
| (a) | Appropriate provision may be made for the protection of such Award by the substitution on an equitable basis of appropriate shares of the surviving or related corporation, provided that the excess of the aggregate Fair Market Value of the shares subject to such Award immediately before such substitution over the exercise price thereof, if any, is not more than the excess of the aggregate fair market value of the substituted shares made subject to Award immediately after such substitution over the exercise price thereof, if any; or |
| (b) | The Committee may cancel such Award. In the event any Option or SAR is canceled, the Company, or the corporation assuming the obligations of the Company hereunder, shall pay the Grantee an amount of cash (less normal withholding taxes) equal to the excess of (i) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Company Stock as a result of such event over (ii) the exercise price of such option or the grant price of the SAR, multiplied by the number of shares subject to such Award (including any unvested portion). In the event any other Award is canceled, the Company, or the corporation assuming the obligations of the Company hereunder, shall pay the Grantee an amount of cash or stock, as determined by the Committee, based upon the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Company Stock as a result of such event (including payment for any unvested portion). No payment shall be made to a Grantee for any Option or SAR if the purchase or grant price for such Option or SAR exceeds the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Company Stock as a result of such event. Unless the particular Award Agreement provides otherwise, determination of any payment under this Section 12.01(b) for an Award that is subject to a Performance Goal shall be based upon achievement at the target level of performance. |
This Section 12.01 shall not apply to any Cash Bonus Awards established under Article XI of this Plan.
12.02Change in Control. Notwithstanding any provision in this Plan to the contrary, unless the particular Award Agreement provides otherwise or except where a Grantee’s entitlement to an Award is subject to a Performance Goal, upon a Grantee’s involuntary termination of employment or service without Cause within one year following a Change in Control, all Awards (including those that are assumed or were substituted or converted in accordance with Section 12.01(a)) will become fully vested, and, for Options and SARs, immediately exercisable. In the case of an Award under which a Grantee’s entitlement to the Award is subject to the achievement of a Performance Goal, unless the particular Award Agreement provides otherwise, upon the occurrence of a Change in Control, the Grantee shall be deemed to have satisfied the Performance Goal at the target level of performance and such Award shall continue to vest based on the time-based service vesting criteria, if any, to which the Award is subject. For Awards described in the preceding sentence that are assumed or maintained by the acquiring or surviving company following a Change in Control, unless the particular Award Agreement provides otherwise, upon a Grantee’s involuntary termination of employment or service without Cause within one year following a Change in Control, the time-based service vesting criteria shall be deemed satisfied at the time of such termination.
This Section 12.02 shall not apply to any Cash Bonus Awards established under Article XI of this Plan.
13.01Withholding. The Company shall have the power and the right to deduct or withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Grantee’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock or the payment of Restricted Stock Units or Performance Stock, Grantees may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction.
13.02No Employment or Retention Agreement Intended. Neither the establishment of, nor the awarding of Awards under this Plan shall be construed to create a contract of employment or service between any Grantee and the Company or its Subsidiaries; it does not give any Grantee the right to continued service in any capacity with the Company or its Subsidiaries or limit in any way the right of the Company or its Subsidiaries to discharge any Grantee at any time and without notice, with or without Cause, or to any benefits not specifically provided by this Plan, or in any manner modify the Company’s right to establish, modify, amend or terminate any profit sharing or retirement plans.
13.03Non-transferability of Awards. Any Award granted hereunder shall, by its terms, be non-transferable by a Grantee other than by will or the laws of descent and shall be exercisable during the Grantee’s lifetime solely by the Grantee or the Grantee’s duly appointed guardian or personal representative. Notwithstanding the foregoing, the Committee may permit a Grantee to transfer a Non-Qualified Stock Option or SAR to a family member or a trust or partnership for the benefit of a family member, in accordance with rules established by the Committee.
13.04Forfeiture of Awards or Amounts Paid Under the Plan. The Company shall have the power and the right to require any Grantee to forfeit and return to the Company any Award made to the Grantee or proceeds realized thereon pursuant to this Plan consistent with any recoupment policy maintained by the Company under applicable law, as such policy is amended from time to time.
13.05Securities Laws. No shares of Common Stock will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the shares of Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Grantee to take any reasonable action to meet such requirements. The Committee may impose such conditions on any shares of Common Stock issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable to such shares. The Committee may also require the Grantee to represent and warrant at the time of issuance or transfer that the shares of Common Stock are being acquired only for investment purposes and without any current intention to sell or distribute such shares.
13.06Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, any outstanding Awards previously granted under this Plan shall be deemed canceled.
13.07Controlling Law. The law of the State of Wisconsin, except its law with respect to choice of law, shall be controlling in all matters relating to the Plan.
13.08Termination and Amendment of the Plan. The Plan will expire ten (10) years after the Effective Date, solely with respect to the granting of Incentive Stock Options or such later date as may be permitted by the Code for Incentive Stock Options. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall (a) impair without the Grantee’s consent any Award previously granted under the Plan or (b) be made without shareholder approval where such approval would be required as a condition of compliance with the Code or other applicable laws or regulatory requirements. Absent shareholder approval, neither the Committee nor the Board shall have any authority, with or without the consent of a Grantee, to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARs in exchange for another Award including an Option or SAR with an exercise price that is less than the exercise price of the original Options or SARs, except in the event of a corporate event involving the Company, as authorized under Section 3.02 or 12.01 of the Plan.
Modine Manufacturing Company
ANNUAL MEETING OF SHAREHOLDERS
Rules of Conduct
In order to conduct an orderly and constructive meeting of shareholders in a manner that is fair to the interests of all shareholders, and give all shareholders present a reasonable opportunity to be heard, the 20142016 Annual Meeting of Shareholders will be conducted in accordance with the following rules and procedures:
| 1. | You need not vote at this meeting if you have already voted by proxy and have not revoked your proxy. If you have previously voted but wish to change your vote, or if you have not yet voted, you may request a ballot from the inspector of election and vote before the polls close. |
| 2. | Subject to the discretion of the Lead Director, the business of the meeting will be taken up in the order on the agenda. When an item on the agenda is before the meeting, questions or comments should be confined to that item. |
| 3. | Only shareholders eligible to vote at the meeting (or holders of their proxies) may speak at the meeting. Shareholders should not address the meeting until recognized by the Lead Director of the meeting. Shareholders eligible to vote who wish to address the meeting should rise and wait to be recognized. Once recognized, shareholders (or proxy holders) should state their name and, if applicable, the name of any shareholder they represent. |
| 4. | Each speaker shall be limited to 3 minutes on a particular subject. Once a shareholder has spoken on a subject, that shareholder should give other shareholders the opportunity to speak. |
| 5. | Shareholders will be recognized on a rotation basis, and their questions or remarks must be relevant to the meeting, pertinent to matters properly before the meeting and under discussion at that time, and briefly stated. The meeting is not to be used as a forum to present views that are not directly related to the business before the meeting. |
| 6. | Questions and comments unrelated to agenda items should be held for discussion after the conclusion of the formal meeting. |
| 7. | Individual matters that are not of concern to all shareholders generally, such as personal grievances, are not appropriate matters for general discussion.discussion during the meeting. |
| 8. | The use of cameras or sound recording equipment is prohibited, except those employed by the Company, if any, to provide a record of the proceedings. |
Notice of Meeting and Proxy Statement
| 2016 | | Annual Meeting of Shareholders | | | | | 2014 | | | Annual Meeting | | | | | of Shareholders | | | | | |
MODINE MANUFACTURING COMPANY C/O CORPORATE SECRETARY 1500 DEKOVEN AVENUE RACINE, WI 53403 | | VOTE BY INTERNET - www.proxyvote.comwww.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on July 16, 2014.20, 2016. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. | | | | MODINE MANUFACTURING COMPANY
C/O CORPORATE SECRETARY
1500 DEKOVEN AVENUE
RACINE, WI 53403
| | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Modine Manufacturing Company in mailing proxy materials, you may consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
| | | | | | VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on July 16, 2014.20, 2016. Have your proxy card in hand when you call and then follow the instructions. | | | | | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote by phone or Internet, please do not mail your proxy card. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M76454-P54048 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | E12202-P80486 | KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY |
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. MODINE MANUFACTURING COMPANY | The Board of Directors recommends you vote FOR the following proposals: | | | | 1. | Election of Directors | | | | | | | | | | | | | MODINE MANUFACTURING COMPANY | | Nominees: | For | Against | Abstain | | | | | | | | | | | | | The Board of Directors recommends you vote FOR
the following proposals:
| | | | | | | | | | | | | | | | | 1. | Election of Directors1a. | David G. Bills | ☐ | ☐ | ☐ | | | | | | | | | | | | 1b. | Thomas A. Burke | ☐ | ☐ | ☐ | | | | | | | | | | | | Nominees: | | For | Against | Abstain | | | | | | | | | | | | | | | | 1a. David J. Anderson | | o | o | o | | | | | | | | | | | | | | | | 1b. Larry O. Moore | | o | o | o | | | | | | | | | | | | | | | | 1c. Marsha C. Williams | Charles P. Cooley | o☐ | o☐ | o | | ☐ | |
| | | For | Against | Abstain | | | | | | | | 2. | Amendment and Restatement of 2008 Incentive Compensation Plan. | o | o | o | | | | | | |
| 3. | Advisory vote to approve the Company’s named executive officer compensation. | o☐ | o☐ | o☐ | | | | | | | | 4.3. | Ratification of the appointment of the Company's independent registered public accounting firm. | o☐ | o☐ | o☐ |
| | | | | | | NOTE: This Proxy, when properly executed, will be voted as directed or, if no direction is given, will be voted FOR the election of ALL nominees listed above and FOR Items 2 3 and 4.3. | | | |
| For address change/comments, mark here. | ☐ | | | (see reverse for instructions) | | | | | | | | | | For address change/comments, mark here.Please indicate if you plan to attend the 2016 Annual Meeting of Shareholders.
(see reverse for instructions)
| ☐ | ☐ | | | o | | | | Yes | No | | | | Please indicate if you plan to attend the 2014 Annual Meeting of Shareholders. | o | o | | | | | | | | | | Please sign exactly as your nams(s)name(s) appear(s) on the proxy card. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. | |
| | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | | | | | | | | | | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on July 17, 201421, 2016 – the Notice and Proxy Statement and Annual Report are available at www.proxyvote.com and www.modine.com. M76455-P54048E12203-P80486
Annual Meeting of Shareholders Thursday, July 21, 2016 8:00 AM CDT This proxy is solicited by the Board of Directors If you consented to access your proxy information electronically, you may view it by going to the Modine Manufacturing Company website, www.modine.com. The undersigned hereby appoints Michael B. Lucareli and Margaret ("Peggy") C. Kelsey, or either of them, with full power of substitution to each, as attorneys and proxies to represent the undersigned at the 2016 Annual Meeting of Shareholders of Modine Manufacturing Company to be held at The Intercontinental Hotel, 139 East Kilbourn Avenue, Milwaukee, WI 53202 on July 21, 2016 at 8:00 a.m. CDT, and at any adjournment(s) thereof, and to vote all shares of common stock that the undersigned may be entitled to vote at said meeting as directed with respect to the matters as set forth in the Proxy Statement. If any other business should properly come before the meeting and/or at any adjournment(s) thereof, the shares represented by the proxy and voting instructions solicited thereby may be discretionarily voted on such business in accordance with the best judgment of the proxy holders. Modine 401(k) Retirement Savings Plans-Voting Instructions to Trustee, Wells Fargo Bank, N.A., for the Annual Meeting of Shareholders. If you are a participant in the Modine 401(k) Salaried Retirement Savings Plan or the Modine 401(k) Hourly Retirement Savings Plan, you have the right to give instructions to the Trustee as to the voting of shares of Modine Manufacturing Company common stock held in the plan account. The voting of those shares will occur at the 2016 Annual Meeting of Shareholders or at any adjournment(s) thereof. In this regard, please indicate your voting choices on the card, sign and date it, and return this card promptly in the enclosed postage-paid envelope or follow the instructions to record your vote by telephone or Internet. If your instructions are not received at least five days prior to the meeting, or if you do not respond, shares held in an account for which a proxy is not received will generally be voted by the Trustee, Wells Fargo Bank, N.A., in the same proportion that all shares in the plan for which voting instructions have been received are voted although it may do otherwise in its discretion. | | Annual Meeting of ShareholdersAddress Change/Comments:
Thursday, July 17, 2014
9:00 AM CDT
This proxy is solicited by the Board of Directors
If you consented to access your proxy information electronically, you may view it by going to the Modine Manufacturing Company website,www.modine.com.
The undersigned hereby appoints Michael B. Lucareli and Margaret ("Peggy") C. Kelsey, or either of them, with full power of substitution to each, as attorneys and proxies to represent the undersigned at the 2014 Annual Meeting of Shareholders of Modine Manufacturing Company to be held at The Pfister Hotel, 424 East Wisconsin Avenue, Milwaukee, WI 53202 on July 17, 2014 at 9:00 a.m. CDT, and at any adjournment(s) thereof, and to vote all shares of common stock that the undersigned may be entitled to vote at said meeting as directed with respect to the matters as set forth in the Proxy Statement. If any other business should properly come before the meeting and/or at any adjournment(s) thereof, the shares represented by the proxy and voting instructions solicited thereby may be discretionarily voted on such business in accordance with the best judgment of the proxy holders.
| Modine 401(k) Retirement Savings Plans-Voting Instructions to Trustee, Wells Fargo Bank, N.A., for the Annual Meeting of Shareholders. If you are a participant in the Modine 401(k) Salaried Retirement Savings Plan or the Modine 401(k) Hourly Retirement Savings Plan, you have the right to give instructions to the Trustee as to the voting of shares of Modine Manufacturing Company common stock held in the plan account. The voting of those shares will occur at the 2014 Annual Meeting of Shareholders or at any adjournment(s) thereof. In this regard, please indicate your voting choices on the card, sign and date it, and return this card promptly in the enclosed postage-paid envelope or follow the instructions to record your vote by telephone or Internet. If your instructions are not received at least five days prior to the meeting, or if you do not respond, shares held in an account for which a proxy is not received will generally be voted by the Trustee, Wells Fargo Bank, N.A., in the same proportion that all shares in the plan for which voting instructions have been received are voted although it may do otherwise in its discretion.
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(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) | | |