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PATRICK INDUSTRIES, INC. |
107 West Franklin Street |
P.O. Box 638 |
Elkhart, Indiana 46515-0638 |
(574) 294-7511 |
NOTICE OF |
To Be Held |
| |
| 1. | To elect eight directors to the Board of Directors to serve until the 2018 Annual Meeting of Shareholders; |
| 2. | To ratify the appointment of Crowe Horwath LLP as our independent registered public accounting firm for fiscal year 2017; |
| 3. | To amend our Articles of Incorporation to increase the number of authorized shares of common stock without par value, from 20,000,000 to 40,000,000; |
| 4. | To approve an amendment to the Patrick Industries, Inc. 2009 Omnibus Incentive |
| |
| 5. | To consider and transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
By OrderPlease note that brokers may not vote your shares on the election of directors, on compensation matters or on other proposals to be considered by shareholders at the Annual Meeting (except on the ratification of the Boardindependent accountants) in the absence of Directors,
Andy L. Nemeth
your specific instructions as to how to vote. Please return your proxy card so your vote can be counted.
By Order of the Board of Directors, |
| /s/ Joshua A. Boone |
Joshua A. Boone Secretary |
October ___, 2009
, 2017
May 17, 2017.
| PATRICK INDUSTRIES, INC. |
107 West Franklin Street |
P.O. Box 638 |
Elkhart, Indiana 46515-0638 |
(574) 294-7511 |
____________ |
PROXY STATEMENT |
|
To Be Held |
______________ |
www.patrickind.com.
Ashareholder’s shares, the broker non-vote occurs whenmay vote the shares in its discretion on matters designated as routine. However, a broker holdingcannot vote shares registeredheld in street name is permitted to vote, inon matters designated as non-routine unless the broker’s discretion, on routine matters without receivingbroker receives voting instructions from the client, but isbeneficial owner. If a shareholder’s shares are held in street name and the shareholder does not permittedprovide voting instructions to the broker, the broker will have discretion to vote withoutthose shares only on Proposal 2 because the ratification of the appointment of the Company’s independent registered public accounting firm is considered a routine matter. Each of the other items to be submitted for a vote of shareholders at the Annual Meeting is considered non-routine. “Broker non-votes” occur when brokerage firms return proxies for which no voting instructions on non-routine matters,have been received from beneficial owners and the broker returns a proxy card with
nodoes not have discretionary authority to vote on the non-routine matter.proposal. Broker non-votes and abstentions will be included in the determination of the number of shares of common sharesstock present at our SpecialAnnual Meeting for quorum purposes, but will not be counted as votes cast on any matter presented at our Special Meeting.
Annual Meeting that is a non-routine matter.
identification at the Annual Meeting to hand in with his or her ballot.
Shareholder
Included in the Proxy Statement
Joseph M. Cerulli, age 57, has been employed by Tontine Associates, LLC, an affiliate of Tontine Capital Partners, LP, and Tontine Capital Management, LLC (collectively, with their affiliates, “Tontine”), since January 2007. Prior to that, Mr. Cerulli was an independent financial consultant from 2002 to 2006. Mr. Cerulli has particular knowledge of our Company and the industries in which we operate based on Tontine’s long-standing investment in the Company and possesses extensive knowledge with respect to financial and investment matters. Mr. Cerulli currently serves as a member of the Company’s Corporate Governance and Nominations Committee. He has served as a director of the Company since 2008.
331,807 net shares currently available. the amendment to the Plan. Broker non-votes and abstentions will not have an effect on the approval of the proposal. Proxy Statement. The Plan shall be administered by the Compensation Committee of the Board of Directors The Compensation Committee shall have authority to interpret the Plan and any award agreement under the Plan, prescribe rules and regulations, and make determinations necessary for the administration of the Plan. The determinations of the Compensation Committee shall be final and binding.The Board of Directors unanimously recommends a vote FOR the nominated directors. 1. Effective July 1, 2016, non-employee directors are compensated through a flat annual retainer fee of $56,000 per year compared to a flat annual retainer of $50,000 in the first six months of 2016; 2. Committee chairpersons and the Chairman continue to receive an additional $4,000 annual retainer; and 3. Non-employee directors receive an annual restricted stock grant with a targeted value of $75,000 in May of each year (beginning with the May 2016 grant), which will vest upon such director’s continued service as a member of Name Total Joseph M. Cerulli $ 53,000 $ 75,003 $ — $ 128,003 John A. Forbes 57,000 75,003 — 132,003 Paul E. Hassler 57,000 75,003 125,996 257,999 Michael A. Kitson 57,000 75,003 — 132,003 M. Scott Welch 53,000 75,003 — 128,003 Walter E. Wells 57,000 75,003 — 132,003 (1) Amounts shown do not represent compensation actually received. Such amounts reflect the aggregate grant date fair value of 1,549 shares of restricted stock granted to each non-employee director, at a closing stock price of $48.42 on May 17, 2016. The aggregate grant date fair value was computed in accordance with ASC 718. (2) Represents payments under the Company’s Executive Retirement Plan and Deferred Compensation Plan based on prior employment with the Company. 1:APPROVAL22009 OMNIBUS INCENTIVE PLANPurposeAPPOINTMENT OF INDEPENDENTBackground:the Audit Committee recommend that shareholders ratify the appointment of Crowe Horwath LLP as our independent registered public accounting firm for our fiscal year 2017. Although we are not required to do so, we believe that it is appropriate to request that shareholders ratify this appointment. If shareholders do not ratify the appointment, the Audit Committee will investigate the reasons for the shareholders’ rejection and reconsider the appointment. Representatives of Crowe Horwath LLP will be at the Annual Meeting, will be given the opportunity to make a statement, and will be available to respond to questions.On August 13, 2009 (the “Effective Date”)“FOR” approval of the ratification of the appointment of Crowe Horwath LLP. The ratification of the appointment will be approved by our shareholders if, at the Annual Meeting, a quorum is present and the vote of a majority of the votes cast are voted in favor of the proposal. 2016 2015 $ 679,500 $ 609,200 14,000 57,700 19,700 14,000 All Other Fees — — Total Fees $ 713,200 $ 680,900 (1) Audit fees consist of fees for professional services rendered for the annual audit of the Company’s financial statements, including in 2016 and 2015, the audit of the Company’s internal control over financial reporting, the reviews of the interim financial statements included in the Company’s quarterly reports, and other services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements, such as the reviews of various SEC filings, and in 2015, consents related to registration statements. (2) Audit-related fees include fees related to due diligence services related to acquisitions and the audit of the Company’s employee benefit plan. (3) Tax fees consist of the review of Federal and State tax returns and assistance with inquiries, primarily from state and local tax authorities. Tax fees in 2016 and 2015 were related to the review by Crowe Horwath LLP of the 2015 and 2014 tax returns, respectively. unanimously approvedthat such financial statements be included in our Annual Report on Form 10-K for filing with the SEC.subjectby the Audit Committee on February 28, 2017.shareholder approval,the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts. You are being asked to approve the Plan.Patrick Industries, Inc. 1987 Stock Option Program, as amended and restated (the “Predecessor Plan”),Plan including incentive stock options, non-qualified stock options, relatedSARs, restricted stock appreciation rightsand restricted stock units (“RSUs”), and stock awards. If the Plan is approved by the shareholders, no future grants will be made under the Predecessor Plan. Approval of the Plan will in no way affect the validity of prior grants made under the Predecessor Plan. Options to purchase 330,125 shares of common stock, without par value, of the Company (“shares”) and 151,000 stock awards, subject to restrictions, were outstanding under the Predecessor Plan as of October 8, 2009. An aggregate of 264,502331,807 net shares were available for future awards under the Predecessor Plan as of October 8, 2009. IfMarch 24, 2017 (the record date), prior to the Plan is approvedapproval by shareholders the shares available for future awards under the Predecessor Plan will be included in the total shares available under the Plan.of this Proposal 4. In the event that the required votes to approve the amendment to the Plan are not obtained, then Patrick’s ability to make future grants under the Plan will not become effective and the Company will not be able to make grants of awards pursuantlimited to the terms of the Plan.You are also being asked to approve certain material terms of the Plan in order to preserve Patrick’s ability to receive a federal income tax deduction for performance-based payments under the Plan. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable regulations, the Company must seek shareholder approval to preserve its ability to receive this federal income tax deduction. Shareholder approval of the Plan will have the effect of reducing the potential tax to be paid by the Company on certain compensation should it reach the limits set forth in Section 162(m) of the Code. If shareholders fail to approve the Plan, the Company will still be able to make awards of, among other things, stock options, stock appreciation rights, and restricted stock under the Predecessor Plan, but may be unable to receive a federal income tax deduction for certain performance-based awards under the Predecessor Plan.Plan, includingamendment to the material termsPlan. The affirmative vote of a majority of the votes cast is required for performance-based awards for purposesapproval of Section 162(m).aon file with the Securities and Exchange Commission. A copy of whichthe Plan is attached toavailable from the Corporation’s Secretary at the address on the cover of this proxy statement as Appendix A.(the “Committee”(“Compensation Committee”).
The Compensation Committee may delegate its authority to one or more executive officers of the corporationCompany to designate employees who are not executive officers as eligible to participate in the Plan and to determine the amount and type of awards that may be granted to employees who are not executive officers.
Service Providers who are employees, consultants, or directors, who are determined by the Compensation Committee to be significantly responsible for the success and future growth and profitability of the Company, are eligible to receive awards under the Plan. However, Incentive Stock Options (as that term is defined in Section 422 of the Code) may be granted only to employees. The number of persons eligible to participate in the Plan is currently estimated to be approximately All of the available shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options. At all times the Company will reserve and keep available a sufficient number of shares to satisfy the requirements of all outstanding awards under the Plan that are to be settled in shares. Shares available for delivery under this Plan may be authorized and unissued shares or treasury shares. Stock Options: 500,000 shares Stock Appreciation Rights: 500,000 shares Restricted Stock and Restricted Stock Units: 500,000 shares. Performance-Based Awards Payable in Cash: $1 million determined as of the payout date Cash-Based Awards: $1 million determined as of the payout date Other Share-Based Awards: 500,000 shares Canceled Awards. Awards granted to a Service Provider that are canceled shall continue to count toward the individual share limit applicable to that Service Provider as set forth in the Adjustments and Substitution of Awards: If there is any change affecting the Company’s common stock by reason of any stock split, stock dividend, cash dividend, recapitalization, reclassification, reorganization or similar event affecting the Company’s capital structure or its business as defined in the Plan, the maximum number of shares issuable to a Service Provider under the Plan, and any other limitation under In the case of a merger, consolidation, acquisition or disposition of property or shares, separation, spin-off, reorganization, stock rights offering, liquidation, disaffiliation or similar event affecting the Company or any of its Stock Options:Options may take the form of Incentive Stock Options (“ISOs”) or Nonqualified Stock Options. The exercise price of a stock option shall not be less than 100% of the fair market value per share, as defined, on the date the stock option is granted. In the case of any ISO granted to a 10% shareholder, as defined, the exercise price shall not be less than 110% of the fair market value per share, as defined, on the date such ISO is granted. The term of a stock option cannot exceed 10 years and in the case of any Stock Appreciation Restricted Stock and Restricted Stock Performance The performance objective(s) with respect to any performance-based award may include any one or more of the following objectives, as established by the Compensation Committee: earnings per share; net income or net operating income (before or after taxes and before or after extraordinary items); sales, revenues or expenses; cash flow return on investments; earnings before or after taxes; earnings before interest, taxes, depreciation and amortization (“EBITDA”); gross revenues; gross margins; share price including, but not limited to, growth measures and total shareholder return; economic value added; debt reduction; market share; revenue growth; cash flow; increase in customer base; return on equity, assets, capital or investment; working capital; net margin; earnings before interest, taxes, depreciation, amortization and rent expense (“EBITDAR”); headcount; sales per dollar of salaried/hourly wage expense; material costs, labor, overhead, delivery, selling, general, and administrative expenses, interest, amortization, and other expenses; sales dollar content per manufactured housing and recreational vehicle units shipped; gross margin per customer; return on total assets; return on fixed assets; accounts receivable turns; days sales in accounts receivable; inventory turns; days inventory on hand; operating and investing cash flows; leverage ratio; fixed charge ratio; and capital expenditures. Performance measures may exclude certain types or categories of extraordinary, unusual or non-recurring items, including the dilutive effects of acquisitions or joint ventures, restructuring and/or other nonrecurring charges, the effects of changes to generally accepted accounting principles (“GAAP”) required by the Financial Accounting Standards Board, International Financial Accounting Standards (“IFRS’), or any other standard setting body, the impact of any “extraordinary items” as determined under GAAP or IFRS or any other standard setting body, the effect of any change in outstanding shares due to any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends, and any other unusual, non-recurring gain or loss or other extraordinary item. Shares covered by an award granted under the Plan are not counted as used, unless actually issued and delivered to a Participant. In addition, shares exchanged by a Participant in payment of the exercise price, retained by the Company pursuant to a tax withholding election, covered by an award settled in cash, or withheld by the Company in connection with an award which is net-settled, are available for future awards under the Plan. If an award expires, is terminated, surrendered, or canceled without having been exercised in full, or is otherwise forfeited, then the unissued shares are available for future awards. Awards may be granted in substitution for stock and stock based awards of another company (an “Acquired Company”) in connection with a merger, consolidation or similar transaction involving such Acquired Company and the Company or an Affiliate, or the acquisition of property or stock of the Acquired Company. Such awards are not counted against the share limitations set forth in the Plan. The Plan does not provide any Participant the right to continue as an employee, consultant or director of the Company and a Participant does not have any rights as a shareholder unless shares are actually issued. Rights under the Plan are not assignable by a Participant, except by will or by the laws of descent and distribution, unless otherwise determined by the Compensation Committee. No award granted under the Plan will be transferred for value. The Participant or beneficiary is responsible for paying any federal, state, and local income or employment tax due on any award, and the Company is not liable for any interest or penalty that a Participant or beneficiary incurs by failing to pay any tax. An award agreement may include restrictions on resale of shares or other disposition, provisions for the acceleration of vesting and/or exercisability of awards or for the cancellation of awards upon a change in control of the Company, and provisions to comply with applicable laws. The costs of administering the Plan are paid by the Company. The repricing of options or SARs without shareholder approval is prohibited. The The Compensation Committee may establish one or more sub-plans under the Plan, including sub-plans to satisfy blue sky, securities, and/or tax laws. The Company reserves the right to amend the Plan. The Board No amendment or termination may be made without shareholder approval that would increase the maximum number of shares that may be issued under the Plan (except for adjustments permitted under the Plan), change the class of eligible Participants, permit the repricing of outstanding options or SARs or otherwise require shareholder approval. No amendment or termination may terminate or adversely affect any right of a Participant under an award without the Participant’s consent, except as necessary to comply with changes in law or accounting rules applicable to the Company. Name and Position Number of Option Todd M. Cleveland, President and CEO 67,500 $ 0.75 Andy L. Nemeth, Executive Vice President and CFO $ 0.75 34,063 $ 1.75 Executive Group 95,937 $ 0.75 Non-Executive Director Group - - Federal Income Tax Consequences shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that is subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the Participant. grant of performance shares or performance units. Upon payment in respect of the earn-out of performance shares or performance units, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted shares received. Upon payment of other awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted shares received. Name and Address of Beneficial Owner Aggregate Number of Shares of Common Stock Beneficially Owned Percent of Class Five Percent Shareholders: Jeffrey L. Gendell c/o Tontine Capital Management, L.L.C. 55 Railroad Avenue, 1st Floor 5,174,963 (1) 56.5% Andrew K. Boszhardt, Jr. and Zoltan H. Zsitvay c/o Great Oaks Capital Management, LLC 660 Madison Avenue, 14th Floor New York, NY 10065 529,261 (2) 5.8% Directors: Paul E. Hassler (3) 93,005 1.0% Keith V. Kankel 36,186 * Larry D. Renbarger 36,000 * Terrence D. Brennan 28,500 * Walter E. Wells 28,500 * Joseph M. Cerulli (4) 3,500 * Named Executive Officers: Todd M. Cleveland (5) 204,791 2.2% Andy L. Nemeth (6) 86,838 * Darin R. Schaeffer (7) 15,110 * Directors and Executive Officers as a group (9 persons) 5.8% Oversight authority for the stock-based compensation programs. www.patrickind.com. We believe that the compensation plan as it relates to our Executive Retirement Plan Non-Qualified Excess Plan3070 people.TheAs amended, the maximum number of shares available for delivery to Service Providers pursuant to awards granted under the Plan shall be 750,000,2,100,000, subject to adjustment as described in the Plan, plus the number of shares previously authorized for issuance under the Predecessor Plan which are not subject to outstanding awards under the Predecessor Plan on the Effective Date or that become available for future awards under the Predecessor Plan as a result of the subsequent forfeiture, lapse or expiration of awards granted pursuant to the Predecessor Plan that were outstanding as of the Effective Date.consistentlyconsistent with Section 162(m) of the Code. Under Section 162(m) of the Code, in order for compensation in excess of $1,000,000 paid in any year to any “covered employee” to be deductible by the Company, such compensation must qualify as “performance-based.” A “covered employee” is defined as a Company’scompany’s chief executive officer and any of the Company’ssuch company’s three other most highly compensated executive officers named in the proxy statement, not including the chief financial officer. The following individual annual grant limitations apply per calendar year to all covered employees participating in the Plan, and are subject to adjustment as described in the Plan.Performance –BasedPerformance-Based Awards Payable in Shares: 500,000 sharesPlanPlan.thisthe Plan on the maximum number of shares issuable to an individual Service Provider or in the aggregate will be equitably adjusted by the Compensation Committee in its discretion to prevent dilution or enlargement of the rights of the holders of outstanding awards granted under the Plan (“Participants”).Incentive Stock OptionISO granted to a 10% shareholder, the term of such Incentive Stock OptionISO shall not exceed 5 years.Rights (“SARs”):Rights:The right to receive the difference between the fair market value of a share on the date of exercise and the exercise price, payable in cash, shares, other securities, other awards, other property or any combination thereof.Units (“RSUs):Units:Restricted Stock means an award that entitles the recipient to receive shares or cash after a period of restriction. They are subject to substantial risk of forfeiture and restrictions on their sale or other transfer by the Participant. RSUs confer the right to receive shares at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Compensation Committee. They are subject to substantial risk of forfeiture and restrictions on their sale or other transfer by the Participant.Awards:Shares and Performance Units:An award, denominated in either shares or U.S. dollars, which is earned during a specified performance period subject to the attainment of performance criteria.•Other Awards:2009 Plan isand any subsequent amendments are governed by the laws of the State of Indiana, without regard to its conflict of laws principles.of Directors (the “Board”) or the Compensation Committee may at any time amend, alter, suspend, or terminate the Plan, without the consent of the Participants or beneficiaries.2009 Awards Under the Plan:Stock options and awards previously granted under the Predecessor Plan will not be affected by the Plan and will remain outstanding until they are exercised, expire or otherwise terminate. Under the terms of the Predecessor Plan, equity awardsany one Participant are limited to a maximum of 50,000 shares per fiscal year.In May 2009, the Company granted a total of 495,000 stock options to certain executive officers and non-executive officer employees. Of this total, 255,000 stock options were granted subject to shareholder approval of the Plan. If the Plan is approved by shareholders, the maximum number of shares available for delivery to Service Providers pursuant to awards granted under the Plan would be 750,000 plus the 264,502 shares that were available for future awards under the Predecessor Plan as of October 8, 2009, less the 255,000 shares issuable under the May 2009 grant that are subject to shareholder approval of the Plan. The table below sets forth information regarding the 255,000 shares granted to our executive officers, non-employee directors and non-executive employees that are subject to shareholder approval of the Plan.
Options
Granted (1)
Exercise
Price
67,500
$ 1.75
28,437
101,563
$ 1.75Non-Executive Officer Employee Group (2)21,75035,750$ 0.75$ 1.75(1)These options have a 10-year term. On the grant date, 10% of the options were immediately vested. The remaining options will vest 25%, 35% and 30% on the first, second and third anniversary dates, respectively, of the option grant date.(2)These options consist of awards granted to four officers of the Company.Effective Date and Termination:The 2009 Plan will be effective as of August 13, 2009,May 17, 2017, if approved by shareholders.Unless earlier terminated, the Plan will expire on August 13, 2019.August 13, 2009.April __, 2017. This summary is not intended to be complete and does not describe state or local tax consequences. It is not intended as tax guidance to Participants in the Plan.incentive stock option (“ISO”).ISO. The exercise of an ISO, however, may result in alternative minimum tax liability. If shares are issued to the optionee pursuant to the exercise of an ISO, and if no disqualifying disposition of such shares is made by such optionee within two years after the date of grant or within one year after the date of exercise, then upon sale of such shares, any amount realized in excess of the exercise price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss. If shares acquired upon the exercise of an ISO are disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the disposition of such shares in a sale or exchange) over the exercise price paid for such shares. Any further gain (or loss) realized by the Participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.restricted stock units.RSUs. The recipient of an award of restricted stock unitsRSUs generally will be subject to tax at ordinary income rates on the amount of cash received or the fair market value of unrestricted shares received, measured as of the date that such shares are transferred to the Participant under the award (reduced by any amount paid by the Participant for such restricted stock units), and the capital gains/gain/loss holding period for such shares will also commence on such date.14 requires the affirmative vote of a majority of the votes cast, provided a quorum (50% of the outstanding shares of common stock) is present.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL NO. 1 APPROVING THE PATRICK INDUSTRIES, INC. 2009 OMNIBUS INCENTIVE PLAN.theMarch 24, 2017 (the record date,date), information concerning the partiesshareholders known to us as having beneficial ownership of more than five percent of our outstanding common stock and information with respect to the stock ownership of all of our directors, named executive officers, and all of our directors and executive officers individually and as a group. The address of each director and named executive officer listed below is 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana, 46515-0638.46515-0638, except as otherwise provided.
Greenwich, CT 06830Name and Address of Beneficial Owner Five Percent Shareholders: 1,633,297 9.7 % 1,606,747 9.6 % Jeffrey L. Gendell
C/o Tontine Capital Management, L.L.C.
One Sound Shore Drive Suite 304
Greenwich, CT 06830 896,439 5.3 % Directors: Walter E. Wells 45,904 * Paul E. Hassler 51,575 * Joseph M. Cerulli (4) 27,124 * John A. Forbes 17,898 * Michael A. Kitson 11,681 * M. Scott Welch 23,572 * Named Executive Officers: Todd M. Cleveland (5) 492,424 2.9 % Andy L. Nemeth 84,193 * Jeffrey M. Rodino 78,826 * Joshua A. Boone 8,195 * Courtney A. Blosser 28,314 * 878,706 5.2 % (1)(1) Information based on the Schedule 13D/A13G filed by Blackrock, Inc. on January 11, 2017.(2) Information based on the Schedule 13G filed by RBC Global Asset Management (U.S.) Inc. on February 10, 2017. (3) Information based on the Form 4 filed jointly by Tontine Capital Management, L.L.C. (“TCM”), Tontine Capital Partners, L.P. (“TCP”), Tontine Capital Overseas Master Fund II, L.P. (“ TCO”TCP 2”), Tontine Capital Overseas GP,Associates, L.L.C. (“TCO GP”TA”), Tontine Asset Associates, L.L.C. (“TAA”) and Jeffrey L. Gendell (together with TCM, TCP, TCO and TCO GP “Tontine”) on December 16, 2008.February 13, 2017. Includes 4,221,155633,698 shares owned directly by TCP, and 953,808140,382 shares owned directly by TCO. Mr. Gendell is the managing member of TCM, the general partner of TCP. Mr. Gendell is also the managing member of TCO GP, the general partner of TCO.(2)Information based on the Schedule 13G filed jointly by Great Oaks Strategic Investment Partners, LP (the “Fund”), GOCP, LLC (the “General Partner”), Great Oaks Capital Management, LLC (the “Investment Manager”), Andrew K. Boszhardt, Jr., and Zoltan H. Zsitvay on September 9, 2009. Includes 529,261122,359 shares owned directly by the Fund. TA.(4) Mr. BoszhardtCerulli is the managing member and controlling personemployed by a Tontine-related entity. He disclaims beneficial ownership of the General Partner and the Investment Manager, and Mr. Zsitvay is the advisor of the Investment Manager with respectshares beneficially owned by Tontine described in footnote (3) above, except to the Fund.extent of his pecuniary interest therein.(3)(5) Includes 49,00099,996 stock options and 35,201 net stock appreciation rights which are exercisable within 60 days of the record date. Mr. Hassler retired from his role as the Company’s Chief Executive Officer effective January 31, 2009 and continues to serve in his role as Chairman of the Board.
CORPORATE GOVERNANCE(4)Mr. Cerulli is employed by an affiliate of Tontine. He disclaims beneficial ownership of the shares beneficially owned by Tontine.
The Board believes that fundamental corporate governance is important to ensure that we are managed for the long-term benefit of our shareholders. The Board expects to review its corporate governance practices and policies as set forth in its Corporate Governance Guidelines, Code of Ethics, and various Committee Charters, all of which were updated in accordance with the listing standards of the NASDAQ Stock Market and the SEC rules, at least every two years or as it deems appropriate.(5)Includes 15,000 options which are exercisable within 60 days of the record date.
Board Membership(6)Includes 37,750 options which are exercisable within 60 days of the record date.
As of the date of this Proxy Statement, the Board has eight members. Except for Mr. Cleveland, our Chief Executive Officer, and Mr. Nemeth, our President, no director is an employee.(7)Mr. Schaeffer is an executive officer of the Company. Includes 2,000 options which are exercisable within 60 days of the record date.COMPENSATION COMMITTEEfrom January 1, 2008 to May 22, 2008for 2016, was comprised of Terrence D. Brennan (Chairman), Keith V. Kankel, Walter E. Wells, and Harold E. Wyland. Mr. Wyland resigned from the Board effective with the 2008 Annual Meeting. Mr. Wells became Chairman effective May 22, 2008. On July 21, 2008, the size of the Compensation Committee was increased to five members: Walter E. Wells (Chairman), Terrence D. Brennan, JosephJohn A. Forbes, Michael A. Kitson and M. Cerulli, Keith V. Kankel and Larry D. Renbarger. Scott Welch. The Compensation Committee met threefive times in 2008.2016. The primary responsibilities of this committeeCommittee include:onin the “Corporate Governance” section of our website at www.Patrickind.com.2008,2016, no executive officer served on the Board or compensation committee of any other corporation with respect to which any member of the Compensation Committee was engaged as an executive officer. No member of the Compensation Committee was an officer or employee of the Company during 2008. Keith V. Kankel2016.formerlycomprised of John A. Forbes (Chairman), Joseph M. Cerulli, Michael A. Kitson, M. Scott Welch and Walter E. Wells. This Committee met four times in 2016. The primary responsibilities of this committee include:officerinitial statement of beneficial ownership and certain statements of changes in beneficial ownership of our common stock. Based solely on our review of such forms and written representation from the directors and officers that no other reports were required, we are unaware of any instances of noncompliance or late compliance with such filings during the fiscal year ended December 31, 2016.Named Executive Officers included in the 2016 CD&A • Todd M. Cleveland - Chief Executive Officer (CEO) • Andy L. Nemeth - President • Jeffrey M. Rodino - Chief Sales Officer (CSO) and Executive Vice-President of Sales • Joshua A. Boone - Chief Financial Officer (CFO), Vice President of Finance, and Secretary-Treasurer • Courtney A. Blosser - Chief Human Resources Officer (CHRO) and Executive Vice President of Human Resources from 1974-2004assumed the position of CFO, effective January 1, 2016. For additional details, see footnotes 8, 9 and became a member of11 to the “Summary Compensation Committee in 2008.COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS2016 Executive Compensation Plan Highlights:• No increase to base compensation for the CEO position • Increase to base compensation for the other NEOs • No change to Short-Term Incentive plan architecture • No change to Long-Term Incentive plan architecture • No change to CEO Short-Term and Long-Term Incentive plan payout targets • Short-Term Incentive plan and Long-Term Incentive plan payout targets increased year-over-year for other NEOs to reflect Company revenue scope change and market competitive position for Total Target Direct compensation. • Performance and Retention Grant initiated for Messrs. Nemeth, Rodino and Blosser • No other changes year-over-year to the Executive Compensation Plan. Summary named executive officersNEOs and other executives should be aligned with the Company’s short-term and long-term objectives, itsorganizational strategic plan,agenda and its operating performance and cash flows, and increasingassure appropriate management ownership in the Company. Messrs. Cleveland, Nemeth, Rodino, Boone and Blosser comprise our “Named Executive Officers” or “NEOs”, as such term is used under SEC rules. Our objective isphilosophy and objectives are to provide a comprehensive market competitive compensation program designed to attract, retain and retain highlymotivate the best qualified executivestalents from inside and outside the industry and to align the interestinterests of our Board with our senior management team in effortswith the interests of our shareholders, both short-term and long-term. We utilize a performance management system which is designed to drive decisions by senior management to facilitate strong leadership in an environment that createsa ‘Customer 1st-Performance-Based’ culture. Our performance management system links compensation to achieving or exceeding certain objectives based on our short-term and promotes productivity and goal-oriented results.long-term goals. In order to meet these objectives, the Compensation Committee has met numerous times over the past several yearsyear and has conducted marketindependent benchmark studies and analysisanalyses to ensure that we are providingdevelop a competitive complete packagecomprehensive performance and rewards compensation strategy as it relates to our senior management team. OurNEOs and other executives. See “Plan Components” discussion below.
COMPENSATION
COMMITTEEINDEPENDENT COMMITTEE CONSULTANT CHIEF EXECUTIVE OFFICER and CHIEF HUMAN RESOURCES OFFICER currently includestargets for the NEOs. The committee further reviews and approves compensation including base compensation, targets, thresholds, and maximums of short-term and long-term incentive compensation. In addition, the Compensation Committee utilizes a third party compensation consulting firm, Willis Towers Watson, to provide relevant compensation benchmarks for the NEOs and other key leadership roles as well as plan design review and input. The most recent shareholder advisory vote taken in connection with our Annual Meeting of Shareholders that was held on May 18, 2016, is taken into consideration by the Company’s Compensation Committee with respect to the acceptability of the plan. In the case of the latest vote in 2016, the plan decisions were approved, thereby providing further validation to the executive compensation decisions and policies. The Compensation Committee takes the shareholder advisory voting results, along with any other shareholder input on executive compensation, into consideration as one of several decision points in its executive compensation decision making process for each plan year.componentscompanies: American Woodmark Corporation, Apogee Enterprises, Inc., Builders First Source, Inc., Cavcogeneral objectivesindependent compensation committee consultant.they relatedescribed in the footnote to each:the chart below) for the NEOs and all performing team members. 
(1) 2012 excludes the benefit of the income tax credit associated with net operating losses of $6.8 million. Annual Compensation and Benefits Components Description and Purpose Base Salary Cash payments reflecting a market competitive position for performance of functional role. Short-Term Incentives Lump sum cash payments reflective of approved pay-for-performance plan and the relative achievements of the business and individual performance objectives. The Board reserves the right at any time to award discretionary bonuses to senior management based on outstanding performance or other factors. Long-Term Incentives Stock vehicle grants reflecting approved pay-for-performance plan and the relative long-term achievement of the business performance plans as well as the Company’s desire to retain high performing talent and align the interests of senior management with shareholder interests. Executive Health and Welfare Benefits We do not have health and welfare benefits outside the scope of our standard plans for all employees. Voluntary Deferred Compensation Plan Voluntary deferred compensation plan whereby highly compensated individuals can elect to voluntarily defer all or a portion of their wages in any given year subject to applicable laws and restrictions. Designed to supplement market competitive position and further drive retention of key executives. Other Compensation Other compensation includes automobile allowance, Company contributions pursuant to the Patrick Industries, Inc. 401(k) Plan, and Company contributions to individual Health Savings Accounts and health club reimbursement pursuant to the Company’s general health and wellness program. Executive Retirement Plan Supplemental executive retirement program based on a formula of base wages, service and other criteria designed to retain key senior talent. Severance Benefits We provide reasonable and customary transition support aligned to market benchmark data. Salaries –Salaryjob responsibility,recommendations by the CEO.performance, experience, skillperformance. In general, the Compensation Committee targets the 25th - 50th percentile of the Company’s peer group in determining base salaries and the 75th - 100th percentile of the Company’s peer group for determining short-term incentive compensation.market practices.2016, and for the other NEOs for 2014 and 2015. In 2016, the base salaries for Messrs. Nemeth, Rodino, Boone and Blosser were increased as shown below. The following table summarizes the 2015 and 2016 base salaries as approved by the Board for the NEOs:Name 2015 Base
Salary - 1/1/152016 Base
Salary - 2/29/16% Increase - 2/29/2016 Todd M. Cleveland $ 550,000 $ 550,000 — % Andy L. Nemeth 265,000 425,000 60.4 % Jeffrey M. Rodino 275,000 350,000 27.3 % Joshua A. Boone 175,000 210,000 20.0 % Courtney A. Blosser 210,000 235,000 11.9 % Performance Bonuses – Non-Equity Incentive Plan Awardsapproved each year and Performance Bonuses are intendedbased on the achievement of a combination of the Company’s financial results and the individual’s performance against defined objectives. Several key components were considered in the development of the 2016 STI plan to reward outstandingalign the STIs with shareholder interest by measuring the Company’s financial performance and effortsthe individual’s performance in support of the Company’s short- and long-term strategies. These components include:they relatea percentage of base salary. The portion of the STI award that is tied to individual performance is based on the Compensation Committee’s assessment of an individual’s performance against defined objectives (30% weighting), with the NEOs each receiving an individual performance rating ranging from 0.0 to 5.0. The Company performance component of the STI award is based upon the Company’s Net Income achieved relative to target Net Income (70% weighting), with the actual results correlated to established performance targets and corresponding payout thresholds. The threshold Company Net Income performance is 75% of target Net Income and the maximum Company Net Income performance is capped at 120% of target Net Income. The threshold, target and maximum performance metrics for the 2016 STI plan are outlined below:2016 STI Award Component Threshold Performance Target
PerformanceMaximum Performance Company Performance (Net Income) (1) ($39.013MM) ($52.017MM) ($62.420MM) Individual Rating 2.5 3.5 5.0 Payout as a Percentage of Target Award 50% 100% 200% (1) All Net Income targets are net of the contributions of 2016 acquisitions. Name 2016 Base Salary ($)
Target Award as a % of Base Salary (1)Target STI Award ($) Actual Award Amount as a % of Target Award Actual 2016 STI Award Payout ($) Todd M. Cleveland $ 550,000 163.6% $ 900,000 109.2% $ 982,800 Andy L. Nemeth 425,000 170.6% 725,000 106.7% 773,575 Jeffrey M. Rodino 350,000 157.1% 550,000 104.2% 573,100 Joshua A. Boone 210,000 89.3% 187,500 106.7% 200,063 Courtney A. Blosser 235,000 106.4% 250,000 104.2% 260,500 (1) The target award as a percentage of base salary for the NEOs was determined by the Compensation Committee and applied to the base salary in effect as of February 29, 2016. An increased target award as a percentage of base salary was established for each NEO (exclusive of the CEO) in 2016 in alignment with the Company’s “pay-for-differentiated-performance” philosophy, market competitive positions for earned payout and further enhancement of the pay-at-risk for each NEO. tiedinitially developed for each NEO by the Compensation Committee to items including earnings before interest, taxes, depreciationguide their planned respective contribution toward the Company’s strategic and amortizationfinancial goals for the plan year, and reviewed and approved by either the CEO or by the Board, in the CEO’s case.EBITDA”LTIP”) as a result of their ability to make a significant contribution to the Company’s financial performance, their level of responsibility, their ability to meet performance objectives, and their leadership potential and execution.Base Salary ($) Target Award as a % of Base Salary Target Award ($) (1,154 Restricted Shares @ $39.00 per share) Restricted Shares Target Award -
Performance-Contingent (80%)
(Shares @ $39.00 per share)
Restricted Shares
Target Award -
Time-Based (20%)
(Shares @ $39.00 per share)$150,000 30% $45,000 923 231 debt reduction.(2) restricted shares with performance-based vesting (“Performance-Contingent Shares”). The Compensation Committee believes that the use of Time-Based Shares and Performance-Contingent Shares aligns the NEOs’ focus with the Company’s long-term financial performance objectives and assures that significant retention value of the granted equity is maintained for each NEO. The 2016 LTIP restricted share component is further defined below:Plan Component Threshold EBITDA Performance (1)
(2.0 Rating)
Payout as % of targetTarget EBITDA Performance (1)
(3.0 Rating)
Payout as % of targetMaximum EBITDA Performance (1)
(5.0 Rating)
Payout as % of targetTime-Based Shares 100% 100% 100% Performance-Contingent Shares 50% 100% 150% (1) The Company EBITDA performance is measured as the cumulative EBITDA achieved in 2016, 2017 and 2018. Name Total Target Award
as a % of Base SalaryTotal Target Award ($)
Target
Time-Based Share Award
(Shares)Target
Performance- Contingent Share Award
(Shares)Todd M. Cleveland 227.3% $ 1,250,000 6,410 25,642 Andy L. Nemeth 164.7% 700,000 3,590 14,359 Jeffrey M. Rodino 128.6% 450,000 2,308 9,231 Joshua A. Boone 35.7% 75,000 385 1,539 Courtney A. Blosser 63.8% 150,000 769 3,078 Name Threshold EBITDA Performance
(2.0 Rating)
Component Award (Shares)Target EBITDA Performance
(3.0 Rating)
Component Award (Shares)Maximum EBITDA Performance
(5.0 Rating)
Component Award (Shares)Time-Based Shares (1) Todd M. Cleveland 6,410 6,410 6,410 Andy L. Nemeth 3,590 3,590 3,590 Jeffrey M. Rodino 2,308 2,308 2,308 Joshua A. Boone 385 385 389 Courtney A. Blosser 769 769 769 Performance-Contingent Shares (1) Todd M. Cleveland 12,821 25,642 38,463 Andy L. Nemeth 7,180 14,359 21,539 Jeffrey M. Rodino 4,616 9,231 13,847 Joshua A. Boone 770 1,539 2,309 Courtney A. Blosser 1,539 3,078 4,617 (1) Represents the number of shares for the threshold, target and maximum payouts for the Time-Based Shares and Performance-Contingent Shares for the 2016 LTIP award. reservesestablished target price for a particular plan year that is to be achieved over a period of three years, in the event the condition is not met. The following table sets forth information about the required share value of the Company’s common stock to be owned by each NEO for the year ended December 31, 2016: Name 2016 Base Salary 2016 Multiple of Base Salary Required Total Share Value ($) (1) Todd M. Cleveland $ 550,000 4X $ 2,200,000 (2) Andy L. Nemeth 425,000 2X 850,000 (2) Jeffrey M. Rodino 350,000 2X 700,000 (2) Joshua A. Boone 210,000 1.5X 315,000 (3) Courtney A. Blosser 235,000 1.5X 352,500 (2) (1) Inclusive of the fair value of stock options, restricted stock and restricted stock units, and PSUs awarded by the Company, and shares purchased by the NEO in the open market. (2) NEO’s total common stock ownership for the year ended December 31, 2016 exceeded the 2016 requirement. (3) NEO’s total common stock ownership for the year ended December 31, 2016 does not meet the 2016 requirement. Mr. Boone was a newly elected officer in 2016 and has three performance cycles to attain the stock ownership requirement. Name Year 1 - 2014
PSU Grant (shares)
Threshold/Target/MaximumYear 2 - 2015
PSU Grant (shares)
Threshold/Target/MaximumYear 3 - 2016
PSU Grant (shares)
Threshold/Target/MaximumAndy L. Nemeth 6,600 / 8,801 / 11,001 6,600 / 8,800 / 11,000 6,600 / 8,800 / 11,000 Jeffrey M. Rodino 6,600 / 8,801 / 11,001 6,600 / 8,800 / 11,000 6,600 / 8,800 / 11,000 Courtney A. Blosser 3,300 / 4,399 / 5,500 3,300 / 4,400 / 5,500 3,300 / 4,400 / 5,500 Name Stock Option Award (shares) Andy L. Nemeth 48,960 Jeffrey M. Rodino 19,216 Courtney A. Blosser 6,208 Tranche 1 Tranche 2 Tranche 3 Tranche 4 Total SARS Strike Price of SARS $ 61.43 $ 71.26 $ 82.66 $ 95.89 SARs (shares) per tranche by NEO: Andy L. Nemeth 12,240 12,240 12,240 12,240 48,960 Jeffrey M. Rodino 4,804 4,804 4,804 4,804 19,216 Courtney A. Blosser 1,552 1,552 1,552 1,552 6,208 award discretionary bonuses to senior management based on outstanding performance or other factors.Long-Term Incentives – In efforts to increase management ownership in the Company, our plan links performance to our strategic plan and our shareholder interests in efforts to provide long-term shareholder value.– In effortsand Non-Qualified Excess Planretain2007, the Company maintains a highly qualified management team, ournon-qualified executive officers, upon approval byretirement plan (the “Executive Retirement Plan”) for Mr. Nemeth. According to the Board,provisions of the Executive Retirement Plan, Mr. Nemeth is entitled to receive annually 40% of his respective highest annual base wages earned in the last three years prior to retirement or termination from the Company paid over ten years in 260 consecutive bi-weekly payments. Mr. Nemeth became fully vested in the Executive Retirement Plan on May 18, 2007 pursuant to a change of control event, which occurred on May 18, 2007, as a result of the Adorn acquisition and the Company’s private placement of shares to Tontine. No new employees have been invited to participate in a supplemental retirement program which is based on base wages, years of service and other criteria. – In efforts to retainhighly qualified management team, our Compensation Committee approved a voluntary non-qualified deferred compensation plan (the “NQDC Plan”) for its key executives whereby our highly compensated individuals couldcan elect at the beginning of any fiscal year to voluntarily defer all or a portion of their base wages in any given yearsfor that particular year, subject to applicable laws and restrictions.Perquisites – PerquisitesWe believe in a performance-based compensation and benefits package and therefore provide very few perquisites to our NEOs. We provide a car allowance to our NEOs, other executives, corporate managers, and general managers, all of which are minimized to promote team-oriented results.
Severance Benefits – We continue to supportdo not maintain separate benefit plans for our executive teamNEOs. They participate in the same health and want to provide reasonablewelfare plans as all of our other general employees with the same deductibles and equitable protection consistent with comparable practices of comparable companies.
As a resultco-pays. The NEOs also participate in the same 401(k) retirement program as all of the acquisitionsother general employees.
In 2008, as market conditions in all three of the major markets the Company serves began to deteriorate, coupled with the global economic crisis that occurred in the latter half of 2008, the senior
management team was forced to turn its primary focus to significantly reducing debt as quickly as possible to account for a 30% decrease in combined revenues and corresponding reduction in EBITDA levels. The senior management team worked closely with the Board in its forecasting efforts and plans related to deleveraging and aligning its cost structure with its revenue base. The Compensation Committee and the Board again spent significant time with the senior management team and determined that, while the strategic growth priorities that were established in conjunction with the acquisition of Adorn in 2007 were no longer short-term goals, the EBITDA and debt reduction priorities were still the most important initiatives to increase shareholder value under the current conditions, and therefore an EBITDA and debt reduction based incentive was still the best-aligned approach for the senior management team.
Benchmarking
We use a variety of resources, including SEC filings as they relate to our customers, suppliers and other companies of our size, to assist in establishing our compensation programs for our senior executives. Our major competitors are not publicly traded and, therefore, we do not have access to their compensation information to make appropriate comparisons at this level. Along with current market rates for companies of our size, structure and reporting responsibilities, we utilize market surveys, Board member experience, external compensation studies, and engage the assistance of our advisors and contacts within the industry to help supplement our decision making process. While the manufactured housing industry, which represents approximately 45% of our 2008 revenue base, has been operating at the lowest levels in more than 40 years, we have worked to provide an appropriate compensation package that recognizes the inherent limitations on organic growth, while fully recognizing the significant efforts put in by our management team to not only execute on strategies in conjunction with our strategic plan, but to continue to promote a culture of performance-based results and team oriented goal setting. Additionally, with the change in management personnel related to Mr. Hassler being appointed President and Chief Executive Officer in 2004, we recognized that our new senior management team, while experienced within the industry and with the Company, owned very little Company stock. Accordingly, we have takentrading on the initiative of increasing management’s ownership of common stock through the issuance of both restricted and unrestricted stock awards in conjunction with our 1987 Omnibus Stock Option Program as amended and will continue to do so under Mr. Cleveland, our new President and Chief Executive Officer.
Equity Trading Restrictions
The Company had a policy effective through March 26, 2008 with regards to a mandatory blackout period related to equity transactions which startedmarket on the fifteenthlast trading day of the month ending in a reporting period (March, June, September, and December) and ended three days after the public release of financial information for that period. The policy was modified on March 27, 2008 whereby the mandatory blackout period begins on the last day of thefiscal month ending in a reporting period (March, June, September and December) and ends forty-eight hours after the expiration of two full stock market trading days following the public release of the financial information for that reporting period. During this period, Section 16 insiders and certain management and other management employees who have access to “inside” information are precluded from trading in the public market any types of company ownedCompany equity securities. Additionally, the Company precludes any Section 16 insider, as defined by the SEC, Director, Officer or Employee from trading in the public market, or any other market, based on information that is not made available to the general public.
Components of Executive Compensation Plan
The components of
Base Salary
Non-Equity Incentive Plan Awards
Stock Awards
Non-Qualified Stock Options
Executive Retirement Plans and Non-Qualified Excess Plan
Base Salary
The Compensation Committee reviews and approves the base salaries of named executive officers each year, as well as at the time of promotion, change in job responsibilities, or any other change deemed to be a material event. Base salaries are set on the first day of January of each year. The Compensation Committee sets the salary for the President and CEO, and approves the base salaries for the other named executives based on recommendations by the President and CEO. The Compensation Committee recommendedInternal Revenue Code and the Board subsequently approved a base salary forregulations adopted thereunder to enable us to claim the namedtax deductibility of performance-based compensation in excess of $1 million per taxable year to our executive officers based on recommendations by Mr. Hassler, President and CEO, as well as a reviewofficers. However, if compliance with Section 162(m) conflicts with our compensation objectives or is contrary to the best interests of individual performance and trends in the marketplace effective January 1, 2008, and represented no change from the base salaries approved in May 2007, upon the consummationour shareholders, we will pursue those objectives, regardless of the Adorn acquisition. In May 2008 in conjunction with Mr. Cleveland being appointed President and Chief Operating Officer, the Compensation Committee and the Board approved, based on a recommendation by Mr. Hassler, that Mr. Cleveland’s base salary be increased to $300,000. Mr. Cleveland, recognizing the deteriorating economic conditions, voluntarily elected not to accept the increase in base salary as recommended by the Compensation Committee and the Board until these conditions improved. Additionally, effective July 1, 2008, based upon unprecedented economic conditions in the RV and MH industries, the named executive officers voluntarily elected to take a 10% reduction in base salary. Effective March 30, 2009, the named executive officers and the named officer voluntarily elected to take further reductions in their base wages. The following table summarizes the 2008 and 2009 base salaries as approved by the Board for the named executive officers and the named officer and subsequent voluntary salary reductions taken by them:
Name | 2008 Base Salary – 1/1/08 (1) | 2008 Base Salary – 7/1/08 (2) |
% Decrease 7/1/08 | 2009 Base Salary – 3/30/09 (3) |
% Decrease 3/30/09 |
Paul E. Hassler (4) | $ 350,000 | $ 315,000 | 10.0% | N/A | N/A |
Todd M. Cleveland (4) | 265,000 | 265,000 | 11.7% (5) | $ 75,000 | 71.7% |
Andy L. Nemeth | 230,000 | 207,000 | 10.0% | 120,000 | 42.0% |
Darin R. Schaeffer (6) | 150,000 | 150,000 | -% | 100,000 | 33.3% |
Gregory G. Lee (7) | 160,000 | N/A | N/A | N/A | N/A |
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Non-Equity Incentive Plan Awards
The Annual Non-Equity Incentive Plan Awards are reviewed and approved each year and are based on the achievement of financial targets. Several key components were considered in the development of the 2008 incentive plan to incentivize the management team to minimize exposure areas as identified. Some of these areas include:
The significant leverage position taken on as a result of the acquisition;
The significantly deteriorating market conditions in the primary industries that the Company serves;
Declining projected EBITDA levels as a result of the deteriorating market conditions;
The tightening of commercial credit related to overall macroeconomic conditions and the global economic crisis that occurred in 2008;
The $110 million credit facility entered into as a result of the acquisition and the related debt covenant thresholds;
Necessary cost reduction initiatives that the management team needed to implement to continue to size the organization to the declining sales levels; and
The significant voluntary salary reductions taken by the senior management team.
As a result of the above factors, the compensation committee identified two key components for the 2008 non-equity incentive plan for the named executive officers and the named officer. The two key components include:
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The following table summarizes the EBITDA incentive compensation participation targets and amounts paid to each of the named executive officers and the named officer for the year ended December 31, 2008:
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The following table summarizes the debt reduction incentive compensation participation targets for each of the named executive officers and the named officer for the year ended December 31, 2008:
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While these targets have been used in 2008, the Compensation Committee reserves the right to modify, cancel, change or reallocate any components of this calculation or criteria at any time.
Stock Awards
Annual Performance Based Stock Awards:
We believe that increasing senior management’s ownership in the Company is critical to our long-term strategic plan and keeping management goals aligned with increasing shareholder value. In May 2007, the Board approved the granting of up to 50,000 shares to the named executive officers, the named officer, and other key members of the senior management team, and any other members of the management team as determined by the named executive officers of the Company, upon the completion of certain key milestone events in conjunction with the consolidation of Adorn into Patrick. The consolidation plan was divided into three phases with Phase I completed on October 5, 2007, Phase II completed on March 26, 2008,and Phase III completed on August 14, 2008. All shares issued to the named executive officers were approved by the Board. There were 21,450 shares granted to the named officer and named executive officers in 2008.
Discretionary Stock Awards:
We believe that managementattendant tax implications. You should be rewarded for outstanding performance, irrespective of financial targetsaware that Section 162(m) is highly technical and metrics and therefore reserve the right to issue unrestricted stock grants to named executive officers and other individuals atcomplex, so that even when we seek favorable tax treatment thereunder, we cannot assure you that our discretion. There were no discretionary unrestricted stock grants issued to the named officer or named executive officers for the year ended December 31, 2008.
Stock-Based Compensation:
Beginningtax position will prevail. We expense equity awards in 2006, the Company granted the named executive officers the right to elect to receive any or all of their base pay or base pay increases in any given year in restricted stock in lieu of cash. The election is made as of the first of the year. The shares are issued as of the first of the year and vest quarterly at 25% per quarter. The officers are responsible for all applicable taxes associatedaccordance with such shares and are entitled to all rights and voting privileges with respect to such shares.
The following table summarizes the individual elections in 2008 made by the named executive officers and the named officer to have shares issued in lieu of cash compensation:
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Non-Qualified Stock Options
Beginning in 2006, the Company began using performance shares in lieu of stock options as the primary incentive for the named executive officers due to the regulatory reporting requirements and the preference towards stock awards as a primary form of long-term incentive compensation. The Compensation Committee has not granted any stock options to the named executive officers since 2005. At December 31, 2008, the Company had two (2) non-qualified stock option grants outstanding with grant dates, percent vested and unvested, and termination dates as follows:
Grant Date | Options Remaining | Vested | Unvested | Termination Date |
06/22/04 | 78,750 | 100% | - % | 06/21/10 |
10/31/05 | 47,000 | 75% | 25% | 10/30/11 |
A description of all stock awards held by the named executives as of the end of fiscal 2008 is contained in the Outstanding Equity Awards at December 31, 2008 table on page 21. We reserve the right at any time to grant options under our stock option plan.
Executive Retirement Plans and Non-Qualified Excess Plan
The Company maintains two non-qualified executive retirement plans (“Plan A” for Mr. Hassler and Mr. Nemeth and “Plan B” for Mr. Lee) for its key executives.
Executive Retirement Plans:
Plan A and B:
Employees are invited to participate in the plan upon approval by the Board. The employee makes no contributions to the plan and the retirement benefits are unfunded. The Company purchases
and is the owner of life insurance policies on certain executives which accumulate cash value as a potential source of funding, if required. The benefits under the plan are unsecured and subject to substantial risk in the event of bankruptcy or other insolvency matters. Under Plan A, these benefits are not taxable to the employee until received and vest upon a change in control as defined in the plans, the employee achieving 25 years of continuous service, the employee reaching age 65, or a combination of the employee’s age and years of service equaling 85. Under Plan B, these benefits are not taxable to the employee until received and vest upon a change in control as defined in the plans, the employee achieving 10 years of continuous service for which the employee is 50% vested and then 5% vested for each year of continuous service up to a maximum of 100% vesting after 20 years of continuous service. In the event the employee shall retire at any time prior to age sixty-five (65) and after reaching the age of sixty (60) years, the retirement benefits payable under both Plan A and Plan B are reduced by 5% per year for each year or portion thereof prior to the employee’s attainment of age 65. The provisions of the agreements provide for benefits payable in the event of death or disability. All named executive officers, except Mr. Cleveland, and the named officer, Mr. Schaeffer, are participants in this plan.
Plan A:
According to the provisions of Plan A, Mr. Hassler and Mr. Nemeth upon vesting are entitled to receive annually 40% of their respective highest annual base wages earned in the last three years prior to retirement or termination from the Company paid over ten years in 260 consecutive bi-weekly payments. Mr. Hassler became fully vested when he turned age 60. Mr. Nemeth became fully vested in the plan on May 18, 2007 pursuant to a change of control event, which occurred on May 18, 2007 as a result of the Adorn acquisition and the Company’s private placement of shares to Tontine.
Plan B:
According to the provisions of Plan B, Mr. Lee upon vesting is entitled to receive annually up to 40% of his highest annual base wages earned in the last three years prior to retirement or termination from the Company paid over ten years in 260 consecutive bi-weekly payments. Mr. Lee became fifty (50%) vested in the plan on June 27, 2008 pursuant to a change of control event, which occurred on June 27, 2008 in conjunction with the Company’s rights offering and private placement of shares to Tontine.
Non-Qualified Excess Plan
The Company maintains a voluntary non-qualified deferred compensation plan for its key executives whereby individuals can elect at the beginning of any fiscal year to defer all or a portion of their base wages for that particular year, subject to applicable laws and restrictions. This plan was implemented in 2008 and Messrs. Hassler, Cleveland, Nemeth, and Schaeffer all elected to participate in this plan. Participants are immediately vested in the plan.
Perquisites
We believe in a performance based compensation and benefits package and therefore provide very few perquisites to our named executives. We do not provide the personal use of a company airplane, nor does the Company provide security at a personal residence, commuting expenses, personal travel using vehicles owned or leased by the Company except for the use of a company automobile by Mr. Cleveland, housing and other living expenses, clerical or secretarial services for personal matters, club memberships not exclusively used for business purposes, personal financial or tax advice or investment management services, or tax planning, financial planning, or tax preparation costs. We provide a car allowance to our named executive officers, corporate managers, and general managers, all of which are included as taxable income.
Benefit Plans
We do not maintain separate benefit plans for our named executive officers and for the named officer. They participate in the same health and welfare plans as all of our other general employees with the same deductibles and co-pays. The named executive officers and the named officer also participate in the same 401(k) retirement program as all of the other general employees.
Name and Principal Position Year Salary Bonus Stock Option Non-Equity Change in All Total ($) Paul E. Hassler, Chairman and Chief Executive Officer (8) 2008 2007 2006 326,045 323,687 280,020 - - - 50,533 292,823 99,080 21,805 40,241 40,241 - 190,700 66,560 89,110 502,524 82,123 14,233 14,465 14,144 501,726 1,364,440 582,168 Todd M. Cleveland, President and Chief Operating Officer (8) 2008 2007 260,730 246,565 - - 38,335 - - - - 158,900 5,844 - 4,975 7,283 309,884 412,748 Andy L. Nemeth, Executive Vice President of Finance, Secretary-Treasurer, and Chief Financial Officer 2008 2007 2006 212,659 204,451 180,024 - - - 38,335 292,823 49,540 12,905 23,816 23,816 - 127,100 41,600 15,948 87,417 6,316 14,017 14,215 14,032 293,864 749,822 315,328 Darin R. Schaeffer, Vice President, Corporate Controller, and Principal Accounting Officer (9) 2008 147,712 - 14,224 - - 3,116 150 165,202 Gregory G. Lee, Executive Vice President of Marketing and New Product Development (10) 2008 2007 153,846 (10) 154,617 - - 8,460 136,400 6,230 6,230 - 95,300 115,766 18,545 6,607 11,092 290,909 422,184Chief Executive Officer, our Chief Financial Officer and any other highly compensated executive officers who were required to file reports under Section 16 of the Securities Exchange Act of 1934 (the “named executive officers”)NEOs for the yearyears ended December 31, 2008:2016, 2015 and 2014. There were no stock options awarded to our NEOs for the years ended December 31, 2015 and 2014.
($)(1)
($)(2)
Awards
($)(3)
Awards ($)(4)
Incentive Plan
Compensation ($)(2)(5)
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings ($)(6)
Other
Compensation ($)(7)______________________
Name and
Principal PositionYear
Salary
($)(1)
Bonus
($)(2)
Stock
Awards
($)(3)
Option
Awards
($)(4)
Non-
Equity
Incentive
Plan
Compen-
sation ($)(5)Change in
Pension Value and Non- Qualified Deferred Compensa-tion Earnings ($)(6)
All
Other
Compen-
sation ($)(7)Total ($) Todd M. Cleveland 2016 $ 541,539 $ — $ 1,863,575 $ — $ 982,800 $ — $ 15,164 $ 3,403,078 Chief Executive Officer 2015 539,424 — 1,889,201 — 1,350,090 — 14,708 3,793,423 (8) 2014 555,770 490,000 1,849,015 — 806,670 — 15,220 3,716,675 Andy L. Nemeth 2016 422,475 — 1,409,072 1,590,208 773,575 14,768 16,335 4,226,433 President (9) 2015 265,000 70,029 707,312 — 489,971 14,132 15,583 1,562,027 2014 271,730 265,000 441,132 — 215,710 13,523 16,252 1,223,347 Jeffrey M. Rodino 2016 330,865 — 1,036,381 624,131 573,100 — 12,795 2,577,272 Chief Sales Officer 2015 271,827 35,040 745,114 — 574,960 — 12,147 1,639,088 and Executive Vice 2014 276,517 150,000 449,543 — 291,410 — 12,818 1,180,288 President of Sales (10) 2016 219,961 — 111,882 — 200,063 — 7,829 539,735 Chief Financial Officer, Vice President of Finance, and Secretary- Treasurer (11) Courtney A. Blosser 2016 223,731 — 406,413 201,634 260,500 — 12,136 1,104,414 Chief Human Resources 2015 202,327 27,170 334,771 — 242,830 — 12,749 819,847 Officer and Executive 2014 203,537 90,000 250,379 — 142,450 — 13,042 699,408 Vice President of Human Resources (12) (1)2008 base salaries, which took effect on January 1, 2008, were as follows: Mr. Hassler, $350,000; Mr. Cleveland, $265,000; Mr.(2) The NEOs received discretionary bonus awards for the year ended December 31, 2014, and Messrs. Nemeth, $230,000;Rodino and Mr. Schaeffer, $150,000. Effective July 1, 2008, base salaries were reduced by 10% toBlosser received discretionary bonus awards for the following: Mr. Hassler’s base salary was set at $315,000; Mr. Cleveland’s salary was set at $265,000; Mr. Nemeth’s base salary was set at $207,000; and Mr. Schaeffer’s salary was set at $150,000. Mr. Lee resigned from the Company effective June 27, 2008. For information on further voluntary reductions in base wages taken in 2009, see “Base Salary” on pages 14 and 15.
| year ended December 31, 2015. The |
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| (3) | Amounts shown do not reflect compensation actually received. Such amounts reflect the |
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| (4) | Amount shown does not reflect compensation actually received. Such amount reflects the aggregate fair value of stock options and stock appreciation rights (“SARs”) granted |
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| (5) | Amounts shown represent the |
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| (6) | Amounts shown do not reflect compensation actually received. Such amounts reflect the aggregate change in the present value of the |
| Name | Year | 401(k) Matching Contribution ($) | Other (a) ($) | Total All Other Compensation ($) | ||||||
| Todd M. Cleveland | 2016 | $ | 724 | $ | 14,440 | $ | 15,164 | |||
| 2015 | 268 | 14,440 | 14,708 | |||||||
| 2014 | 780 | 14,440 | 15,220 | |||||||
| Andy L. Nemeth | 2016 | 795 | 15,540 | 16,335 | ||||||
| 2015 | 243 | 15,340 | 15,583 | |||||||
| 2014 | 712 | 15,540 | 16,252 | |||||||
| Jeffrey M. Rodino | 2016 | 795 | 12,000 | 12,795 | ||||||
| 2015 | 247 | 11,900 | 12,147 | |||||||
| 2014 | 718 | 12,100 | 12,818 | |||||||
| Joshua A. Boone | 2016 | 329 | 7,500 | 7,829 | ||||||
| Courtney A. Blosser | 2016 | 536 | 11,600 | 12,136 | ||||||
| 2015 | 249 | 12,500 | 12,749 | |||||||
| 2014 | 642 | 12,400 | 13,042 | |||||||
| (8) | Effective January 1, 2016, Mr. |
| (9) | Mr. Nemeth |
| (10) | Mr. Rodino was appointed Chief Sales Officer (“CSO”) of the Company in September 2016. In addition to his CSO position, Mr. Rodino serves as the Executive |
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| (11) | Mr. |
| (12) | Mr. Blosser was appointed Chief Human Resources Officer and Executive Vice President of |
Name and Principal Position | Company Contributions |
Automobile Allowance ($) |
Paul E. Hassler | $ 793 | $ 13,440 |
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Todd M. Cleveland President and Chief Operating Officer | - | 4,975 (1) |
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Andy L. Nemeth | 577 | 13,440 |
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Darin R. Schaeffer | 150 | - |
Vice President, Corporate Controller, and Principal Accounting Officer |
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Gregory G. Lee | 132 | 6,475 |
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3) | All Other Stock Awards:# of Shares of Stock or Units (#) (4) | All Other Option Awards: # of Securities Underlying Options (#) (5) | Exercise or Closing Market Price on Grant Date ($ Per Share) (6) | Grant Date Fair Value of Stock and Option Awards/ SARs ($) (7) | ||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||
| Todd M. Cleveland | 2/23/2016 | $450,000 | $900,000 | $1,800,000 | 12,821 | 25,642 | 38,463 | 6,410 | — | $41.53 | $ | 1,863,575 | |
| Andy L. Nemeth | 2/23/2016 | 362,500 | 725,000 | 1,450,000 | 7,180 | 14,359 | 21,539 | 3,590 | — | 41.53 | 1,043,608 | ||
| 2/23/2016 | — | — | — | 6,600 | 8,800 | 11,000 | — | — | 41.53 | 365,464 | |||
| 9/26/2016 | 48,960 | 61.43 | 907,573 | ||||||||||
| 9/26/2016 | 12,240 | 61.43 | 226,893 | ||||||||||
| 9/26/2016 | 12,240 | 71.26 | 187,114 | ||||||||||
| 9/26/2016 | 12,240 | 82.66 | 150,579 | ||||||||||
| 9/26/2016 | 12,240 | 95.89 | 118,049 | ||||||||||
| Jeffrey M. Rodino | 2/23/2016 | 275,000 | 550,000 | 1,100,000 | 4,616 | 9,231 | 13,847 | 2,308 | — | 41.53 | 670,917 | ||
| 2/23/2016 | — | — | — | 6,600 | 8,800 | 11,000 | — | — | 41.53 | 365,464 | |||
| 9/26/2016 | 19,216 | 61.43 | 356,208 | ||||||||||
| 9/26/2016 | 4,804 | 61.43 | 89,052 | ||||||||||
| 9/26/2016 | 4,804 | 71.26 | 73,439 | ||||||||||
| 9/26/2016 | 4,804 | 82.66 | 59,100 | ||||||||||
| 9/26/2016 | 4,804 | 95.89 | 46,332 | ||||||||||
| Joshua A. Boone | 2/23/2016 | 93,750 | 187,500 | 375,000 | 770 | 1,539 | 2,309 | 385 | 41.53 | 111,882 | |||
| Courtney A. Blosser | 2/23/2016 | 125,000 | 250,000 | 500,000 | 1,539 | 3,078 | 4,617 | 769 | — | 41.53 | 223,681 | ||
| 2/23/2016 | — | — | — | 3,300 | 4,400 | 5,500 | — | — | 41.53 | 182,732 | |||
| 9/26/2016 | 6,208 | 61.43 | 115,078 | ||||||||||
| 9/26/2016 | 1,552 | 61.43 | 28,769 | ||||||||||
| 9/26/2016 | 1,552 | 71.26 | 23,726 | ||||||||||
| 9/26/2016 | 1,552 | 82.66 | 19,093 | ||||||||||
| 9/26/2016 | 1,552 | 95.89 | 14,968 | ||||||||||
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| (1) | The related performance targets and results are described in detail under “Non-Equity Incentive Plan Awards” on pages 21 to 23. For the |
| (2) | Restricted shares granted in fiscal 2016 under the 2016 LTIP that are Performance-Contingent based will vest if target EBITDA performance is achieved at the conclusion of the cumulative three-year performance measurement period ending on December 31, 2018. See “Long-Term Incentive Plan” on pages 23 to 25. |
| (3) | Restricted PSUs granted in fiscal 2016 under the Supplemental Long-Term Incentive Grant will vest if target EBITDA performance is achieved at the conclusion of the cumulative three-year performance measurement period ending on December 31, 2018. See “Supplemental Long-Term Incentive Grant for NEOs” on pages 25 and 26. |
| (4) | These shares represent the Time-Based restricted stock awards granted in fiscal 2016 that vest on the third anniversary of the grant date. See “Long-Term Incentive Plan” on pages 23 to 25. |
| (5) | These stock options and SARs were granted on September 26, 2016 and were 100% unvested as of December 31, 2016. Both the stock options and SARs vest pro-rata over four years commencing on September 26, 2017, are exercisable at various exercise prices, and expire after nine years. Unvested options and SARs are subject to forfeiture if the NEO’s employment with the Company is terminated before the options or SARs vest. See “Performance and Retention - 2016 Stock Option and SARs Grants” on page 26. |
| (6) | Represents the closing price of the Company’s stock on the NASDAQ stock market on the grant date for the Time-Based and Performance-Contingent based stock awards and the exercise/strike price of the stock options and SARs awards. |
| (7) | Represents the fair value of stock awards, stock options and SARs as of the grant date computed in accordance with ASC 718. |
2016 Option Awards Stock Awards Name Number of Number of Option Option Number of Market Value Paul E. Hassler 24,500 - 10.01 6/21/10 - - 18,375 6,125 9.95 10/30/11 - - Todd M. Cleveland - - - - - - Andy L. Nemeth 14,500 - 10.01 6/21/10 - - 10,875 3,625 9.95 10/30/11 - - Darin R. Schaeffer - - - - - - Gregory G. Lee - - - - - - 2016 2008named executive officersNEOs as of December 31, 2008:2016.
Securities
Underlying
Unexercised
Options
(#)
Exercisable (1)
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)
Exercise
Price ($)
Expiration
Date
Shares or
Units of
Stock That
Have Not
Vested (#)
of Shares
or Units of
Stock That
Have Not
Vested ($) Options/SARs Awards Name Todd M. Cleveland 12/18/2013 100,000 — $18.45 12/18/2022 12/18/2013 24,999 — 18.45 12/18/2022 12/18/2013 24,999 — 22.13 12/18/2022 12/18/2013 24,999 — 26.56 12/18/2022 12/18/2013 24,999 — 31.87 12/18/2022 Andy L. Nemeth 9/26/2016 — 48,960 61.43 9/26/2025 9/26/2016 — 12,240 61.43 9/26/2025 9/26/2016 — 12,240 71.26 9/26/2025 9/26/2016 — 12,240 82.66 9/26/2025 9/26/2016 — 12,240 95.89 9/26/2025 Jeffrey M. Rodino 9/26/2016 — 19,216 61.43 9/26/2025 9/26/2016 — 4,804 61.43 9/26/2025 9/26/2016 — 4,804 71.26 9/26/2025 9/26/2016 — 4,804 82.66 9/26/2025 9/26/2016 — 4,804 95.89 9/26/2025 Joshua A. Boone — — — — — Courtney A. Blosser 9/26/2016 — 6,208 61.43 9/26/2025 9/26/2016 — 1,552 61.43 9/26/2025 9/26/2016 — 1,552 71.26 9/26/2025 9/26/2016 — 1,552 82.66 9/26/2025 9/26/2016 — 1,552 95.89 9/26/2025 (1)Stock(1) Both the stock options within each annual grant vest incrementally at a rate of 25% per year, with full vesting at the end of fourand SARs that were granted to Mr. Cleveland in 2013 vested pro-rata over three years, commencing on December 18, 2014, and expire after sixnine years. The stock options and SARs that were granted to Messrs. Nemeth, Rodino and Blosser in 2016 vest pro-rata over four years, commencing on September 26, 2017, and expire after nine years. Unvested sharesoptions and SARs are subject to forfeiture if the named executive officer’sNEO’s employment with the Company is terminated under certain circumstances before the options or SARs vest. Stock Awards Name Grant
DateNumber of Shares or Units of Stock That Have Not Vested (#) (1) Market Value of Unearned Shares or Units of Stock That Have Not Vested ($) (2) Equity Incentive Plan Awards:
Number of Unearned Shares or Units That Have Not Vested (#) (3)Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units That Have
Not Vested ($) (2)Todd M. Cleveland 2/23/2016 6,410 $ 489,083 38,463 $ 2,934,727 2/16/2015 8,620 657,706 51,725 3,946,618 2/18/2014 10,645 812,214 63,872 4,873,434 Andy L. Nemeth 2/23/2016 3,590 273,917 21,539 1,643,426 2/16/2015 1,551 118,341 9,311 710,429 2/18/2014 1,282 97,817 7,695 587,129 Jeffrey M. Rodino 2/23/2016 2,308 176,100 13,847 1,056,526 2/16/2015 1,724 131,541 10,345 789,324 2/18/2014 1,330 101,479 7,986 609,332 Joshua A. Boone 2/23/2016 385 29,376 2,309 176,177 2/16/2015 1,500 114,450 — — Courtney A. Blosser 2/23/2016 769 58,675 4,617 352,277 2/16/2015 690 52,647 4,138 315,729 2/18/2014 813 62,032 4,878 372,191 (1) Restricted share grants related to Time-Based share awards, which were approved by the Board on February 23, 2016, February 16, 2015 and February 18, 2014, will fully vest on the third anniversary of the grant date or February 23, 2019, February 16, 2018 and (2) Based on a market price of $76.30 per share which was the NASDAQ Stock Market closing price on December 31, 2016. (3) Restricted share grants related to Performance-Contingent based share awards, which were approved by the Board on February 23, 2016, February 16, 2015 and February 18, 2014, will vest if target EBITDA performance is achieved at the conclusion of the cumulative three-year performance measurement period. Unvested restricted stock awards are subject to forfeiture under certain circumstances if the NEO’s employment with the Company is terminated before the shares vest. (4) Mr. Boone’s restricted share grant dated February 16, 2015 reflects 750 shares that will fully vest on July 7, 2017 and 750 shares that will fully vest on the third anniversary of the grant date or February 16, 2018. These shares were granted to Mr. Boone in his role as the Company’s Director of Corporate Finance prior to his assuming his officer role of Chief Financial Officer, Vice-President of Finance and Secretary-Treasurer in 2016. Option Performance Stock Units Name Grant
DateEquity Incentive Plan Awards:
Number of Unearned Shares or Units That Have Not Vested (#) (1)Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units That Have Not Vested ($) (2) Andy L. Nemeth 2/23/2016 8,800 $ 671,440 3/30/2015 8,800 671,440 2/18/2014 8,801 671,516 Jeffrey M. Rodino 2/23/2016 8,800 671,440 3/30/2015 8,800 671,440 2/18/2014 8,801 671,516 Courtney A. Blosser 2/23/2016 4,400 335,720 3/30/2015 4,400 335,720 2/18/2014 4,399 335,644 (1) Restricted share grants related to PSUs, which were approved by the Board on February 23, 2016, March 30, 2015 and February 18, 2014, will vest if target EBITDA performance is achieved at the conclusion of the cumulative three-year performance measurement period. Unvested PSUs are subject to forfeiture if the NEO’s employment with the Company is voluntarily terminated before the shares vest. (2) Based on a market price of $76.30 per share which was the NASDAQ Stock Market closing price on December 31, 2016. 2008exercised by the named executive officers and the named officer in 2008 and stock awards that vested or were paidappreciation rights in 2008 to the named executives.2016. Stock Options/SARS Stock Awards Name Number of Shares Acquired on Exercise
(#)(1)(2)Value Realized on
Exercise ($)(1)(2)Number of Shares
Acquired on Vesting (#)(3)(4)Value Realized on
Vesting ($)(3)(4)Todd M. Cleveland 149,006 $ 5,609,910 57,933 $ 1,815,769 Andy L. Nemeth — — 14,195 444,914 Jeffrey M. Rodino — — 15,354 481,232 Joshua A. Boone — — — — Courtney A. Blosser — — 7,170 224,724 NameNumber of SharesAcquired on Exercise (#)Value Realized onExercise ($)Number of SharesAcquired on Vesting (#)Value Realized onVesting ($)Paul E. Hassler--7,250 (1)50,533 (1)(2) --10,000 (2)75,450 (2)Todd M.(3)The number of shares acquired on vesting in 2016 related to Time-Based share awards was 8,275 shares for Mr. Cleveland, --5,500 (1)38,335 (1)Andy L. 2,028 shares for Mr. Nemeth,--5,500 (1)38,335 (1)--10,000 (2)75,450 (2)Darin R. Schaeffer--2,000 (1)14,224 (1)Gregory G. Lee--1,200 (1)8,460 (1)--5,000 (2)37,725 (2)
______________________
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| (4) | The number of shares acquired on vesting in 2016 related to Performance-Contingent share awards was 49,658 shares for Mr. Cleveland, 12,167 shares for Mr. Nemeth, 13,161 shares for Mr. Rodino, and |
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(a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted average exercise price of outstanding options, warrants, and rights Number of securities Equity compensation plans approved by security holders 125,750 $ 9.99 599,605 Equity compensation plans not approved by security holders - N/A - Total 125,750 $ 9.99 599,605 Name Executive Registrant Aggregate Aggregate Aggregate Balance as of Paul E. Hassler $ 5,850 $ 30,058 $ 53,202 - $ 862,078 Todd M. Cleveland 7,500 - (1,656) - 5,844 Andy L. Nemeth 11,053 - 4,895 - 119,936 Darin R. Schaeffer 3,900 - (784) - 3,116 Gregory G. Lee - 114,468 1,298 - 134,311
remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))Plan Category Number of securities to be issued upon exercise of outstanding options and rights (1) Weighted average exercise price of outstanding options and rights Number of securities
remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))Equity compensation plans approved by security holders 372,955 $ 41.71 853,187 Equity compensation plans not approved by security holders — N/A — Total 372,955 $ 41.71 853,187 (1) The number of securities represented is the amount of shares to be issued upon exercise of outstanding options and SARs as of December 31, 2016. named executive officers and the named officerNEOs in the Executive Retirement Plans and the Non-Qualified Excess Plan, and is set forth in the Summary“Summary Compensation TableTable” under the caption “Change in Pension Value and Non-Qualified Deferred Compensation Earnings”:
Contribution in
Last FY ($)
Contributions in
Last FY (1)
Earnings in Last
FY (2)
Withdrawals/
Distributions ($)
Last FYE (3)______________________Name Executive
Contribution in
Last FY ($)Registrant
Contributions in
Last FY ($)Aggregate
Earnings in Last
FY ($) (1)Aggregate
Withdrawals/
Distributions ($)Aggregate Balance as of
Last FYE ($) (2)Todd M. Cleveland — — — — — Andy L. Nemeth (3) $ 14,768 $ 194,835 Jeffrey M. Rodino — — — — — Joshua A. Boone — — — — — Courtney A. Blosser — — — — — (1)(1) Represents the charge to operationsinterest for the current fiscal year associated with the compensation cost recognized by the Company pursuant to the terms of the plan.annuity.
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| Represents the present value of an annuity as of December 31, |
| (3) | According to the provisions of the Executive Retirement Plan, payments of the annuity for Mr. Nemeth will commence prior to his eligible retirement age over a 10-year vesting period due to death or disability. |
See
Confidentiality 12 Months Base Salary and Insurance Benefits 12 Months Base Salary and Insurance Benefits 2 Years 12 Months Base Salary and Insurance Benefits Name Fees Stock Option Non-Equity Changes in Pension Value And Non-Qualified Deferred All Other Total ($) Terrence D. Brennan $ 20,600 $ 22,750 - - $ - $ - $ 43,350 Joseph M. Cerulli (5) - - - - - - - Keith V. Kankel 26,600 22,750 - - 72,020 6,450 127,820 Larry D. Renbarger 26,000 22,750 - - - - 48,750 Walter E. Wells 19,600 22,750 - - - - 42,350 Represents the market value of COMPENSATION COMMITTEE REPORT our independent Board members: /s/ and Following aor Change in Control for Fiscal Year 2008named executive officers and named officer,NEOs and other general employees that are fair and commensurate with their job duties, functions, and responsibilities. We believe it is important to protect our key employees in the event of a change in control and it is also in the best interest of the Company to obtain a release from employees whose employment is terminated as well as a non-compete agreement from certain employees in the form of a severancean employment agreement. The following table summarizes the severanceemployment agreements at December 31, 20082016 for our named executive officers and named officerNEOs in the event they are terminated without cause:cause or upon change in control. In addition to reasonable severance benefits, our NEOs, other executives, and general employees who have received long-term incentive awards (in the form of restricted stock grants, PSUs, stock options and SARS) are immediately vested in all restricted incentive awards granted as defined in the terms and conditions of the LTI grant.NameSeverancePayments uponName Severance Benefits Upon Termination
Without Cause or Upon Change in Control (1)Non Compete
AgreementPaul E. Hassler$350,0001 Year1 YearTodd M. Cleveland$300,0001 YearAndy L. Nemeth$230,0001 Year1 YearDarin R. Schaeffer612 Months Base Salary and Insurance Benefits$75,0001 YearCourtney A. Blosser 1 Year— — (1) (1) Employee is required to sign a mutual release of claims in a form satisfactory to the Company. mutual releasehypothetical termination date of claims in a form satisfactory toDecember 31, 2016, including the Company.Employment Contracts The Company has entered into Employment Agreements with Paul E. Hassler, Todd M. Cleveland, Andy L. Nemeth, and Darin R. Schaeffer pursuant to which they agreed to serve as executive officers, and an officer in the case of Mr. Schaeffer, of the Company. The agreements contain a non-compete clause and certain other stipulations and provide for a severance package that includes twelve (12) months base salary for Messrs. Hassler, Cleveland and Nemeth, and six (6) months base salary for Mr. Schaeffer. Under the Agreements, voluntary termination with or without good reason, death, disability or retirement, shall not result in any obligation of the Company to make payments. Mr. Hassler’s Employment Agreement was terminated upon his retirement effective January 31, 2009.2008 Director CompensationNon-employee directors are paid an annual retainer of $5,000 and effective in August 2008, received $600 for each board meeting and $600 for each committee meeting they attend, and $300 for each conference call they attend, with a maximum of $1,200 per combined event. Committee members receive an additional annual retainer of $5,000, regardless of the number of committees on which they serve. Starting in fiscal year 2008, committee chairs no longer receive an additional annual retainer. Employee directors receive no compensation as such. On an annual basis in May, each non-employee director is automatically granted a restricted stock award of 3,500 sharesprice of the Company’s common stock which will veston that date, the benefits upon such director’s continued servicetermination without cause or a change in control for our NEOs would have been as a member of the Board for one year or earlier upon certain events.The following table sets forth a summary of the compensation we paid to our non-employee directorsfollows in the year ended December 31, 2008:
Earned or
Paid in
Cash
($)(1)
Awards
($)(2)
Awards ($)
Incentive Plan
Compensation
($)
Compensation
Earnings ($)(3)
Compensation
($)(4)Name / Benefit Todd M. Cleveland Base salary $ 550,000 Acceleration of long-term incentives (1) 13,713,782 Acceleration of stock options/SARs exercise (2) — Annual non-equity incentive bonus (4) 982,800 Total benefits $ 15,246,582 Andy L. Nemeth Base salary $ 425,000 Acceleration of long-term incentives (1) 3,431,059 Acceleration of long-term performance stock units (3) 2,014,396 Acceleration of stock options/SARs exercise (2) 971,734 Annual non-equity incentive bonus (4) 773,575 Total benefits $ 7,615,764 Jeffrey M. Rodino Base salary $ 350,000 Acceleration of long-term incentives (1) 2,864,302 Acceleration of long-term performance stock units (3) 2,014,396 Acceleration of stock options/SARs exercise (2) 381,390 Annual non-equity incentive bonus (4) 573,100 Total benefits $ 6,183,188 Joshua A. Boone Base salary $ 245,000 Acceleration of long-term incentives (1) 320,003 Acceleration of long-term performance stock units (3) — Acceleration of stock options/SARs exercise (2) — Annual non-equity incentive bonus (4) 200,063 Total benefits $ 765,066 Courtney A. Blosser Base salary $ — Acceleration of long-term incentives (1) 1,213,551 Acceleration of long-term performance stock units (3) 1,007,084 Acceleration of stock options/SARs exercise (2) 123,213 Annual non-equity incentive bonus (4) 260,500 Total benefits $ 2,604,348 (1)The amounts under the column headed “Fees Earned or Paid in Cash” represent meeting and retainer fees.(2)3,500unearned shares or units of restricted stock granted to each non-employee director atthat have not vested based on a closing stockmarket price of $6.50$76.30 per share, which was the NASDAQ Stock Market closing price on April 25, 2008.(3)(4) Represents payments under the Company’s deferred compensation planshort-term incentive award earned in 2016, and approved by the Compensation Committee, based on prior employment with the Company.achievement of both pre-determined Company performance targets and individual performance targets for 2016. See "Summary Compensation Table" on page 28.(4)Represents fees paid for services associated with Mr. Kankel’s duties as Secretary to the Board and certain committees.(5)Upon his appointment to the Board in July 2008, Mr. Cerulli elected not to receive any form of director compensation for his services for the remainder of 2008. Mr. Cerulli began receiving compensation for his services beginning in January 2009.Terrence D. BrennanJoseph CerulliKeith V. KankelLarry D. RenbargerHouseholdingProxy MaterialsSpecialAnnual Meeting and Proxy Statement and the Annual Report for the year ended December 31, 2016 may have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your bank, broker, or other nominee. Upon written or oral request to Andy L. Nemeth-Secretary, at Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana, 46515-0638,Joshua A. Boone-Secretary, we will provide a separate copy of the Annual Report for the year ended December 31, 20082016 or Notice of Annual Meeting and Proxy Statement.Other Matterstheour Annual Report on Form 10-K for the year ended December 31, 2016, excluding certain of the exhibits thereto, may be obtained without charge by writing to Andy L. Nemeth-Secretary,Joshua A. Boone-Secretary, Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana 46515-0638.promptly vote by telephone, by Internet, or execute and return promptly the enclosed form of proxy in the envelope provided.Andy L. NemethANDY L. NEMETHSecretaryOctober ___, 2009APPENDIX APATRICK INDUSTRIES, INC.OMNIBUS INCENTIVE PLANAdopted by the Board effective as of August 13, 2009ARTICLE 1BACKGROUND AND PURPOSE OF THE PLAN1.1Background. This Omnibus Incentive Plan (the “Plan”) permits the grant of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, and other Awards.1.2Purpose. The purposes of the Plan are (i) to attract and retain highly competent persons as Employees, Directors, and Consultants of the Company and its Affiliates; (ii) to provide additional incentives to such Employees, Directors, and Consultants by aligning their interests with those of the Company’s shareholders; and (iii) to promote the success and business of the Company and its Affiliates.1.3Eligibility. Service Providers who are Employees, Consultants, or Directors, who are determined by the Committee to be significantly responsible for the success and future growth and profitability of the Company, are eligible to receive Awards under the Plan. However, Incentive Stock Options may be granted only to Employees.1.4Definitions. Capitalized terms used in the Plan and not otherwise defined herein shall have the meanings assigned to such terms in the attached Appendix.ARTICLE 2SHARE LIMITS2.1Shares Subject to the Plan.(a) Shares Reserved. Subject to adjustment as provided in Section 2.3 hereof, the maximum number of Shares available for delivery to Service Providers pursuant to Awards granted under the Plan shall be:(i)(750,000) Shares, plus(ii) the number of Shares previously authorized for issuance under the Predecessor Plan which (1) are not subject to outstanding awards under the Predecessor Plan on the Effective Date; or (2) become available for future award grants under the Predecessor Plan asa result of the subsequent forfeiture, lapse or expiration of awards granted pursuant to the Predecessor Plan that were outstanding as of the Effective Date.All of the available Shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options. At all times the Company will reserve and keep available a sufficient number of Shares to satisfy the requirements of all outstanding Awards under the Plan that are to be settled in Shares. The Shares available for delivery under this Plan may be authorized and unissued Shares or treasury Shares.(b) Shares Counted Against Limitation. Shares covered by an Award granted under the Plan shall not be counted as used unless and until such Shares are actually issued and delivered to a Participant. In addition, any Shares exchanged by a Participant as full or partial payment to the Company of the exercise price under any Stock Option exercised under the Plan, any Shares retained by the Company pursuant to a Participant’s tax withholding election, any Shares covered by an Award which is settled in cash, and any Shares withheld by the Company in connection with an Award which is net-settled, shall become available for future Awards under the Plan.(c) Lapsed Awards. If an Award: (i) expires; (ii) is terminated, surrendered, or canceled without having been exercised in full; or (iii) is otherwise forfeited in whole or in part (including as a result of Shares constituting or subject to an Award being repurchased by the Company pursuant to a contractual repurchase right), then the unissued Shares that were subject to such Award and/or such surrendered, canceled, forfeited, or repurchased Shares (as the case may be) shall become available for future Awards under the Plan.(d) Substitute Awards. The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors, consultants or advisors of another company (an “Acquired Company”) in connection with a merger, consolidation or similar transaction involving such Acquired Company and the Company or an Affiliate, or the acquisition by the Company or an Affiliate of property or stock of the Acquired Company. The Committee may direct that substitute Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Any such substitute Awards granted under the Plan under this Section 2.1(d) shall not count against the Share limitations set forth in Section 2.1(a) and 2.2.2.2Individual Limits. Awards under the Plan to Covered Employees shall be subject to the following individual limits, which shall be construed and applied consistently with Code §162(m), except that the limits shall apply to all Service Providers:(a) Stock Options. Subject to adjustment as provided in Section 2.3, the maximum aggregate number of Shares subject to Stock Options granted in any one Fiscal Year to any one Service Provider shall be 500,000 Shares.(b) Stock Appreciation Rights. Subject to adjustment as provided in Section 2.3, the maximum aggregate number of Shares subject to Stock Appreciation Rights granted in any one Fiscal Year to any one Service Provider shall be 500,000 Shares.(c) Restricted Stock and Restricted Stock Units. Subject to adjustment as provided in Section 2.3, the maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Fiscal Year to any one Service Provider shall be 500,000 Shares.(d) Performance Awards. Subject to adjustment as provided in Section 2.3, (i) the maximum aggregate number of Shares subject to Performance Awards payable in Shares granted in any one Fiscal Year to any one Service Provider shall be 500,000 Shares, and (ii) the maximum aggregate amount awarded with respect to Performance Awards payable in cash granted in any one Fiscal Year to any one Service Provider shall be $1,000,000.00, determined as of the date of payout.(e) Cash-Based Awards. Subject to adjustment as provided in Section 2.3, the maximum aggregate amount awarded with respect to Cash-Based Awards granted in any one Fiscal Year to any one Service Provider shall be $1,000,000.00, determined as of the date of payout.(f) Other Share-Based Awards. Subject to adjustment as provided in Section 2.3, the maximum aggregate grant with respect to other Share-Based Awards in any one Fiscal Year to any one Service Provider shall be 500,000 Shares.(g) Canceled Awards. Any Awards granted to a Service Provider that are canceled shall continue to count toward the individual share limit applicable to that Service Provider set forth in this Section 2.2.2.3Adjustments.(a) In the event that there is any dividend or distribution payable in Shares, or any adjustment, recapitalization, reclassification, reorganization or other change in the Company’s capital structure or its business, including without limitation, any stock split, reverse stock split, stock dividend, cash dividend or dividend or distribution of cash, stock or other property, share combination or similar event affecting the capital structure of the Company (including a Corporate Transaction) (as defined in Section 2.3(b) below), then the maximum aggregate number of Shares available for Awards under Section 2.1 of the Plan, the maximum number of Shares issuable to a Service Provider under Section 2.2 of the Plan, and any other limitation under this Plan on the maximum number of Shares issuable to an individual Service Provider or in the aggregate shall be proportionately adjusted (and rounded down to a whole number) by the Committee as it deems equitable in its discretion to prevent dilution or enlargement of the rights of the Participants. In addition, in the event of any distribution or transaction of the type described in the preceding sentence, the Committee may make appropriate and equitable substitutions or adjustments to the number and kind of Shares or other securities subject to outstanding Awards, and/or to the exercise price of outstanding Stock Options and Stock Appreciation Rights. The Committee’s determination with respect to any such adjustments under this Section 2.3(a) shall be conclusive and binding on all Participants.(b) In the case of any merger, consolidation, acquisition or disposition of property or shares, separation, spin-off, reorganization, stock rights offering, liquidation,disaffiliation or similar event affecting the Company or any of its Affiliates (a “CorporateTransaction”), the Committee may, in its discretion, (i) cancel all outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Committee in its sole discretion; and (ii) substitute other property (including, without limitation, cash or other securities of the Company and securities of entities other than the Company) for the Shares subject to outstanding Awards. Any action or adjustment authorized under this Section 2.3(b) and taken by the Committee shall be conclusive and binding on all Participants.(c) Notwithstanding anything herein to the contrary, the Committee may not take any such action described in this Section 2.3 that would cause an Award that is otherwise exempt from Code §409A to become subject to Code §409A, or cause an Award that satisfies the requirements of Code §409A to fail to so comply with such requirements.ARTICLE 3ADMINISTRATION OF THE PLAN3.1Administrator. The Plan shall be administered by the Committee.3.2Powers of the Committee. Subject to the provisions of the Plan, Applicable Laws, and the specific duties delegated by the Board to the Committee, the Committee shall have the authority in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Awards may be granted hereunder and the types of Awards to be granted to each; (iii) to determine the number of Shares to be covered by each Award granted hereunder; (iv) to determine whether, to what extent, and under what circumstances an Award may be settled in cash, Shares, other securities, other Awards, or other property; (v) to approve forms of Award Agreements; (vi) to determine, in a manner consistent with the terms of the Plan, the terms and conditions of any Award granted hereunder, based on such factors as the Committee, in its sole discretion, shall determine; (vii) to construe and interpret the terms of the Plan and Award Agreements; (viii) to correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry out the purposes of the Plan; (ix) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established pursuant to Section 12.1 of the Plan; (x) to authorize withholding arrangements pursuant to Section 10.7(b) of the Plan; (xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Committee; (xii) to accelerate the vesting of an Award; and (xiii) to make all other determinations and take all other action described in the Plan or as the Committee otherwise deems necessary or advisable for administering the Plan and effectuating its purposes.3.3Compliance with Applicable Laws. The Committee shall administer, construe, interpret, and exercise discretion under the Plan and each Award Agreement in a manner that is consistent and in compliance with a reasonable, good faith interpretation of all Applicable Laws.3.4Effect of Committee’s Decision and Committee’s Liability. The Committee’s decisions, determinations and interpretations shall be final and binding on all Participants andany other permitted holders of Awards. Neither the Committee nor any of its members shall be liable for any act, omission, interpretation, construction, or determination made in good faith in connection with the Plan or any Award Agreement.3.5Delegation to Executive Officers. To the extent permitted by Applicable Laws, the Committee may delegate to one or more Executive Officers the powers: (i) to designate Employees who are not Executive Officers as eligible to participate in the Plan; and (ii) to determine the amount and type of Awards that may be granted to Employees who are not Executive Officers.3.6Awards may be Granted Separately or Together. In the Committee’s discretion, Awards may be granted alone, in addition to, or in tandem with any other Award or any award granted under another plan of the Company or an Affiliate. Awards granted in addition to or in tandem with other awards may be granted either at the same time or at different times.3.7Non-Employee Director Awards. Notwithstanding anything to the contrary herein, the Board shall be responsible for administering this Plan with respect to Awards to Non-Employee Directors, subject to the provisions of this Plan. With respect to the administration of the Plan as it relates to Awards granted to Non-Employee Directors, references in this Plan to the “Committee” shall refer to the Board.ARTICLE 4VESTING AND PERFORMANCE OBJECTIVES4.1General. The vesting schedule or Period of Restriction for any Award shall be specified in the applicable Award Agreement. The criteria for vesting and for removing restrictions on any Award may include (i) performance of substantial services for the Company or an Affiliate for a specified period; (ii) achievement of one or more Performance Objectives; or (iii) a combination of (i) and (ii), as determined by the Committee.4.2Period of Absence from Providing Substantial Services. To the extent that vesting or removal of restrictions is contingent on performance of substantial services for a specified period, a leave of absence (whether paid or unpaid) shall not count toward the required period of service unless the Award Agreement provides otherwise.4.3Performance Objectives.(a) Possible Performance Objectives. The Performance Objective(s) with respect to any Award may include any one or more of the following objectives, as established by the Committee in its sole discretion: (i) earnings per share; (ii) net income or net operating income (before or after taxes and before or after extraordinary items); (iii) sales, revenues or expenses; (iv) cash flow return on investments which equals net cash flows divided by owners equity; (v) earnings before or after taxes; (vi) earnings before interest, taxes, depreciation and amortization (“EBITDA”); (vii) gross revenues; (viii) gross margins; (ix) share price including, but not limited to, growth measures and total shareholder return; (x) economic value added, which equals net income or net operating income minus a charge for use of capital; (xi) debtreduction; (xii) market share; (xiii) revenue growth; (xiv) cash flow; (xv) increase in customer base; (xvi) return on equity, assets, capital or investment; (xvii) working capital; (xviii) net margin; (xix) earnings before interest, taxes, depreciation, amortization and rent expense (“EBITDAR”); (xx) headcount; (xxi) sales per dollar of salaried wage expense; (xxii) sales per dollar of hourly wage expense; (xxiii) material costs, labor, overhead, delivery, selling, general, and administrative expenses, interest, amortization, and other expenses; (xxiv) sales dollar content per manufactured housing and recreational vehicle units shipped; (xxv) gross margin per customer; (xxvi) return on total assets; (xxvii) return on fixed assets; (xxviii) accounts receivable turns; (xxix) days sales in accounts receivable; (xxx) inventory turns; (xxxi) days inventory on hand; (xxxii) operating and investing cash flows; (xxxiii) leverage ratio; (xxxiv) fixed charge ratio; and (xxxv) capital expenditures. Performance Objectives may be based upon Company-wide, Affiliate, divisional, project team, and/or individual performance. The Performance Objectives established by the Committee for any Performance Period may be expressed in terms of attaining a specified level of the Performance Objective or the attainment of a percentage or absolute increase or decrease in the particular objective, and may involve comparisons with respect to historical results of the Company or an Affiliate and/or operating groups or segments thereof, all as the Committee deems appropriate. The Performance Objectives established by the Committee for any Performance Period may be applied to the performance of the Company relative to a market index, a peer group of other companies or a combination thereof, all as determined by the Committee for such Performance Period. The Committee may further specify in respect of the specified Performance Objectives for any Performance Period, a minimum acceptable level of achievement below which no Award payment will be made or vesting will occur, and may set forth a formula for determining the amount of any payment to be made or level of vesting, if performance is at or above the minimum acceptable level, but falls short of maximum achievement of the specified Performance Objectives.(b) Objective Criteria; Adjustments to Performance Objectives. Any Performance Objective shall relate to the Service Provider’s performance for the Company (or an Affiliate) or the Company’s (or Affiliate’s) business activities or organizational goals, and shall be sufficiently specific that a third party having knowledge of the relevant facts could determine whether the Performance Objective is achieved, and to calculate the amount of the Award payable to a Participant based on the level of achievement. The Committee may provide, in connection with the setting of the Performance Objectives, that any evaluation of performance may include or exclude certain items that may occur during any Performance Period including, but not limited to, the following: (i) to exclude the dilutive effects of acquisitions or joint ventures; (ii) to assume that any business divested by the Company achieved Performance Objectives at targeted levels during the balance of the Performance Period following such divestiture; (iii) to exclude restructuring and/or other nonrecurring charges; (iv) to exclude the effects of changes to generally accepted accounting principles (“GAAP”) or generally accepted accounting standards required by the Financial Accounting Standards Board, International Financial Accounting Standards (“IFRS”), or any other standard setting body; (v) to exclude the impact of any “extraordinary items” as determined under GAAP, IFRS or applicable standards of any other standard setting body; (vi) to exclude the effect of any change in outstanding Shares by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; and (vii) to exclude any other unusual, non-recurring gain or loss or other extraordinary item. To the extent suchinclusions or exclusions affect an Award under this Plan, they shall be prescribed in a form that meets the requirements of Code §162(m) for deductibility.(c) Shareholder Approval of Performance Objectives. No Award granted to a Covered Employee that is intended to qualify as “performance-based compensation” under Code §162(m) shall be made unless the Company’s shareholders shall have previously approved the Plan, or unless the Award is made contingent on shareholder approval of the Plan.(d) Documentation of Performance Objectives. With respect to any Award granted to a Covered Employee, the Performance Objectives shall be set forth in writing no later than 90 days after commencement of the Performance Period to which the Performance Objective(s) relate(s) (or, if sooner, before 25% of such period has elapsed) and at a time when achievement of the Performance Objective(s) is (are) substantially uncertain. Such writing shall also include the Performance Period for measuring achievement of the Performance Objectives, as established by the Committee.(e) Committee Certification. Prior to settlement of any Award granted to a Covered Employee that is contingent on achievement of one or more Performance Objectives, the Committee shall certify in writing that the applicable Performance Objective(s) and any other material terms of the Award were in fact satisfied. For purposes of this Section 4.3(e), approved minutes of the Committee shall be adequate written certification.(f) Negative Discretion. The Committee may reduce, but may not increase, the number of Shares deliverable, or the amount payable, under any Award granted to a Covered Employee that is contingent on achievement of one or more Performance Objectives after the applicable Performance Objectives are satisfied.ARTICLE 5STOCK OPTIONS5.1Terms of Stock Options. Subject to the provisions of the Plan, the type of Stock Option, term, exercise price, vesting schedule, and other conditions and limitations applicable to each Stock Option shall be as determined by the Committee and shall be stated in the Award Agreement.5.2Type of Stock Option. Each Stock Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. Neither the Company nor the Committee shall have liability to a Participant or any other party if a Stock Option (or any part thereof) which is intended to be an Incentive Stock Option does not qualify as an Incentive Stock Option. In addition, the Committee may make an adjustment or substitution described in Section 2.3 of the Plan that causes the Stock Option to cease to qualify as an Incentive Stock Option without the consent of the affected Participant or any other party.5.3Limitations.(a) Maximum Term. No Stock Option shall have a term in excess of 10 years, in each case measured from the date the Stock Option is granted. In the case of anyIncentive Stock Option granted to a 10% Shareholder (as defined in Section 5.3(e), below), the term of such Incentive Stock Option shall not exceed 5 years measured from the date the Stock Option is granted.(b) Minimum Exercise Price. Subject to Section 2.3 of the Plan, the exercise price per share of a Stock Option shall not be less than 100% of the Fair Market Value per Share on the date the Stock Option is granted. In the case of any Incentive Stock Option granted to a 10% Stockholder (as defined in Section 5.3(e), below), subject to Section 2.3 of the Plan, the exercise price per share of such Incentive Stock Option shall not be less than 110% of the Fair Market Value per Share on the date such Incentive Stock Option is granted.(c) Repricing Prohibited. Except as provided in Section 2.3, the Committee shall not amend any outstanding Stock Option to reduce its exercise price, and shall not grant a Stock Option with a lower exercise price to a Participant within six months to the same individual before or after a Stock Option with a higher exercise price held by such Participant is canceled.(d) $100,000 Limit for Incentive Stock Options. Notwithstanding a Stock Option’s designation, to the extent that Incentive Stock Options are exercisable for the first time by a Participant during any calendar year with respect to Shares whose aggregate Fair Market Value exceeds $100,000 (regardless of whether such Incentive Stock Options were granted under this Plan, or any other plan of the Company or any Affiliate), such Stock Options shall be treated as Nonstatutory Stock Options (but only to the extent of any such excess). For purposes of this Section 5.3(d), Fair Market Value shall be measured as of the date the Stock Option was granted and Incentive Stock Options shall be taken into account in the order in which they were granted.(e) 10% Shareholder. For purposes of this Section 5.3, a “10% Shareholder” is an individual who, immediately before the date an Award is granted, owns (or is treated as owning) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or an Affiliate), determined under Code §424(d).5.4Payment of Exercise Price. The Committee shall determine the acceptable form of consideration for exercising a Stock Option, including the method of payment. In the case of an Incentive Stock Option, the Committee shall determine the acceptable form of consideration at the time of grant. To the extent approved by the Committee in its discretion and as set out in the applicable Award Agreement, the exercise price of a Stock Option may be paid (i) in United States dollars in cash or by check; (ii) through delivery of Shares owned by the Participant having a Fair Market Value equal, as of the date of exercise, to the exercise price of the Stock Option; (iii) by having the Company retain from the Shares otherwise issuable upon exercise of the Stock Option, a number of Shares having a Fair Market Value equal, as of the date of exercise, to the exercise price of the Stock Option (a “net-exercise”); (iv) in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Committee; (v) by any combination of (i), (ii), (iii) and (iv) above; or (vi) payment of such other lawful consideration as the Committee may determine. Notwithstanding the foregoing, the Committee shall accept only such payment on exercise of an Incentive Stock Option as is permitted by Code §422.
Joshua A. Boone
Secretary5.5Exercise of Stock Options.(a) Procedure for Exercise. Any Stock Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. A Stock Option shall be deemed exercised when the Committee (or its designee) receives: (i) notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Stock Option and (ii) full payment for the Shares (in a form permitted under Section 5.4) with respect to which the Stock Option is exercised.(b) Termination of Relationship as a Service Provider. Following a Participant’s Termination of Service, the Participant (or the Participant’s Beneficiary, in the case of Termination of Service due to death) may exercise his or her Stock Options within such period of time as is specified in the Award Agreement to the extent that the Participant’s Stock Options are vested as of the Termination of Service. In the absence of a specified time in the Award Agreement, the Participant’s Stock Options shall remain exercisable for three months following the Participant’s Termination of Service for any reason other than Disability or death, and for 12 months after the Participant’s Termination of Service on account of Disability or death. After the Participant’s death, his Beneficiary may exercise the Participant’s Stock Options only to the extent that the deceased Participant was entitled to exercise such Stock Options as of the date of his or her death.(c) Rights as a Shareholder. Shares subject to a Stock Option shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the Stock Option exercise date. Until such Stock Option exercise date, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to a Stock Option.5.6Repurchase Rights. The Committee shall have the discretion to grant Stock Options which are immediately exercisable for unvested Shares (“reverse vesting”). If the Participant ceases to be a Service Provider while holding such unvested Shares, the Company shall have the right to repurchase any or all of those unvested Shares at a price per share equal to the lower of (i) the exercise price paid per Share or (ii) the Fair Market Value per Share at the time of repurchase. The terms upon which such repurchase right shall be exercisable by the Committee (including the period and procedure for exercise and the appropriate vesting schedule for the purchased Shares) shall be established by the Committee and set forth in the document evidencing such repurchase right.ARTICLE 6STOCK APPRECIATION RIGHTS6.1Terms of Stock Appreciation Right. The term, exercise price, number of Shares, vesting schedule, medium of settlement, and other conditions and limitations applicable to each Stock Appreciation Right, shall be as determined by the Committee and shall be stated in the Award Agreement. Upon exercise, all Stock Appreciation Rights shall be settled in cash, Shares, other securities, other Awards, other property or any combination thereof as determined by the Committee, and as stated in the Award Agreement.6.2Exercise of Stock Appreciation Right.(a) Procedure for Exercise. Any Stock Appreciation Right granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. A Stock Appreciation Right shall be deemed exercised when the Committee (or its designee) receives notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Stock Appreciation Right.(b) Termination of Relationship as a Service Provider. Following a Participant’s Termination of Service, the Participant (or the Participant’s Beneficiary, in the case of Termination of Service due to death) may exercise his or her Stock Appreciation Rights within such period of time as is specified in the Award Agreement to the extent that the Participant’s Stock Appreciation Rights are vested as of the Termination of Service. In the absence of a specified time in the Award Agreement, the Participant’s Stock Appreciation Rights shall remain exercisable for three months following the Participant’s Termination of Service for any reason other than Disability or death, and for 12 months after the Participant’s Termination of Service on account of Disability or death. After the Participant’s death, his Beneficiary may exercise the Participant’s Stock Appreciation Rights only to the extent that that the deceased Participant was entitled to exercise such Stock Appreciation Rights as of the date of his or her death.(c) Rights as a Shareholder. Shares subject to a Stock Appreciation Right payable in Shares shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the date the Stock Appreciation Right is exercised and Shares (if any) are delivered in settlement thereof. Unless and until such delivery, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to the Stock Appreciation Right.ARTICLE 7RESTRICTED STOCK AND RESTRICTED STOCK UNITS7.1Terms of Restricted Stock. Subject to the provisions of the Plan, the Period of Restriction, the number of Shares granted, and any other conditions and limitations applicable to each Award of Restricted Stock shall be as determined by the Committee and shall be stated in the Award Agreement. Unless the Committee determines otherwise, Shares of Restricted Stock may be held by the Company as escrow agent until the restrictions on such Shares shall have lapsed.(a) Transferability. Except as provided in this Section 7.1, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.(b) Other Restrictions. The Committee, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.(c) Removal of Restrictions. Except as otherwise provided in this Section 7.1, and subject to Section 10.5 of the Plan, Shares of Restricted Stock subject to an Award of Restricted Stock made under the Plan shall be released from the applicable transfer and other restrictions, and shall become fully transferable, as soon as practicable after the Period of Restriction ends, and in any event no later than 2½ months after the end of the Fiscal Year in which the Period of Restriction ends.(d) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement.(e) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions (and shall therefore be forfeitable to the same extent) as the Shares of Restricted Stock with respect to which they were paid. If any such dividends or distributions are paid in cash, the Award Agreement may (but is not required to) specify that the cash payments shall be subject to the same restrictions as the related Shares of Restricted Stock, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Shares of Restricted Stock vest or are forfeited. Alternatively, the Award Agreement may specify that the dividend equivalents or other payments shall be unrestricted, in which case they shall be paid as soon as practicable after the dividend or distribution date. In no event shall any cash dividend or distribution be paid later than 2½ months after the Fiscal Year in which the dividend or distribution becomes nonforfeitable.(f) Right of Repurchase of Restricted Stock. If, with respect to any Award of Restricted Stock, a Participant’s Termination of Service occurs before the end of the Period of Restriction, then the Company shall have the right to repurchase forfeitable Shares of Restricted Stock from the Participant at their original issuance price or other stated or formula price (or to require forfeiture of such Shares if issued at no cost).7.2Terms of Restricted Stock Units. Subject to the provisions of the Plan, the Period of Restriction, number of underlying Shares, and other conditions and limitations applicable to each Award of Restricted Stock Units shall be as determined by the Committee and shall be stated in the Award Agreement.(a) Settlement of Restricted Stock Units. Subject to Section 10.5 of the Plan, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of the underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Period of Restriction, and in any event no later than 2½ months after the end of the Fiscal Year in which the Period of Restriction ends.(b) Dividend and Other Distribution Equivalents. The Committee is authorized to grant to holders of Restricted Stock Units the right to receive payments equivalent to dividends or other distributions with respect to Shares underlying Awards of Restricted Stock Units. The Award Agreement may specify that the dividend equivalents or other distributionsshall be subject to the same restrictions as the related Restricted Stock Units, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Restricted Stock Units are paid or forfeited. Alternatively, the Award Agreement may (but is not required) to specify that the dividend equivalents or other distributions shall be unrestricted, in which case they shall be paid on the dividend or distribution payment date for the underlying Shares, or as soon as practicable thereafter. In no event shall any unrestricted dividend equivalent or other distribution be paid later than 2½ months after the Fiscal Year in which the record date for the dividend or distribution occurs.(c) Forfeiture. If, with respect to any Award of Restricted Stock Units, a Participant’s Termination of Service occurs before the end of the Period of Restriction, then the Restricted Stock Units granted pursuant to such Award shall be forfeited and the Company (and any Affiliate) shall have no further obligation thereunder.ARTICLE 8PERFORMANCE AWARDS8.1Terms of Performance Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Awards to Participants in such amounts and upon such terms as the Committee shall determine. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Objective(s), the Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award which are not inconsistent with the terms of this Plan. The establishment of Performance Objectives with respect to the grant or vesting of any Performance Award to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall follow procedures substantially equivalent to those set forth in Section 4.8.2Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) Share, subject to adjustment as provided in Section 2.3, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value that is established by the Committee at the time of grant.8.3Settlement of Performance Awards. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of a Performance Award shall be entitled to receive payout of the value and/or distribution of the number of Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Objectives have been achieved. The determination and certification of the attainment of the Performance Objectives with respect to any Performance Award granted to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall comply with the requirements set forth in Section 4. Subject to Section 10.5, unless the terms of the Award Agreement require payment at some later date, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value ofthe underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Performance Period, and in any event no later than 2½ months after the end of the Fiscal Year in which the Performance Period ends.8.4Forfeiture. If, with respect to any Performance Award, (i) a Participant’s Termination of Service occurs before the end of the Performance Period, or (ii) any Performance Objective(s) are not achieved by the end of the Performance Period, then the Performance Shares or Performance Units granted pursuant to such Performance Award shall be forfeited and the Company (and any Affiliate) shall have no further obligation thereunder.ARTICLE 9OTHER AWARDS9.1Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Service Providers in such amounts and upon such terms and conditions, including the achievement of Performance Objectives, as the Committee may determine.(a) Each Cash-Based Award shall be evidenced by an Award Agreement that shall specify the payment amount or formula, the Performance Objective(s), the Performance Period, if applicable, the time and form of payment or distribution, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.(b) Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. The Committee may also require the satisfaction of such service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Objectives as described in Section 4.3, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish Performance Objectives, the final value of a Cash-Based Award that will be paid to the Participant will depend on the extent to which the Performance Objectives are met. The establishment of Performance Objectives with respect to the grant or vesting of any Cash-Based Award granted to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall follow procedures substantially equivalent to those set forth in Section 4.(c) Payment or settlement, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award Agreement, in cash, Shares or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award granted to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall comply with the requirements set forth in Section 4. Subject to Section 10.5, unless the terms of the Award Agreement require payment at some later date, the amount payable in connection with a Cash-Based Award shall be paid to the Participant as soon as practicable after the end of the applicable Performance Period, and in any event no later than 2½ months after the end of the Fiscal Year in which the Performance Period ends.9.2Grant of Other Share-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Service Providers, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.(a) Each Other Share-Based Award shall be expressed in terms of Shares or units based on such Shares, as determined by the Committee. The Committee may also require the satisfaction of such service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Objectives as described in Section 4.3, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish Performance Objectives, the final value of Other Share-Based Awards that will be paid to the Participant will depend on the extent to which the Performance Objectives are met. The establishment of Performance Objectives with respect to the grant or vesting of any Other Share-Based Award granted to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall follow procedures substantially equivalent to those set forth in Section 4.(b) Payment or settlement, if any, with respect to an Other Share-Based Award shall be made in accordance with the terms of the Award, in cash, Shares or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Other Share-Based Award granted to a Covered Employee intended to result in performance-based compensation for purposes of Code §162(m) shall comply with the requirements set forth in Section 4. Subject to Section 10.5, unless the terms of the Award Agreement require payment at some later date, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of the underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Performance Period, and in any event no later than 2½ months after the end of the Fiscal Year in which the Performance Period ends.(c) Participants shall have no voting rights with respect to Shares represented by Other Share-Based Awards until the date of the issuance of such Shares, if any, in settlement of such Award.9.3Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Share-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following the Participant’s Termination of Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Share-Based Awards, and may reflect distinctions based on the reasons for termination.ARTICLE 10ADDITIONAL TERMS OF AWARDS10.1No Rights to Awards. No Service Provider shall have any claim to be granted any Awards under the Plan, and the Company is not obligated to extend uniform treatment to Participants or Beneficiaries under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant.10.2No Effect on Employment or Service Relationship. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company or any Affiliate; nor shall they interfere in any way with the Participant’s right or the Company’s or any Affiliate’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws and any enforceable agreement between the Service Provider and the Company or any Affiliate.10.3No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.10.4Transferability of Awards. Unless otherwise determined by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. Subject to the approval of the Committee in its sole discretion, Nonstatutory Stock Options may be transferable to members of a Participant’s immediate family, and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only shareholders. “Members of the immediate family” means the Participant’s spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. To the extent that any Award is transferable, such Award shall contain such additional terms and conditions as the Committee deems appropriate.10.5Conditions On Delivery of Shares and Lapsing of Restrictions. The Company shall not be obligated to deliver any Shares pursuant to the Plan or to remove restrictions from Shares previously delivered under the Plan unless and until (i) all conditions of the Award have been met or removed to the satisfaction of the Committee, (ii) subject to approval of the Company’s counsel, all other legal matters (including any Applicable Laws) in connection with the issuance and delivery of such Shares have been satisfied, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Committee may consider appropriate to satisfy the requirements of Applicable Laws.10.6Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance or sale of any Shares hereunder, shall relieve theCompany of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.10.7Withholding.(a) Withholding Requirements. Prior to the delivery of any Shares or payment of any cash pursuant to the grant, exercise, vesting, or settlement of an Award, the Company shall have the power and the right to deduct or withhold, or to require a Participant or Beneficiary to remit to the Company, an amount sufficient to satisfy any federal, state, and local taxes (including the Participant’s employment tax obligations) that the Company determines is required to be withheld to comply with Applicable Laws. The Participant or Beneficiary shall remain responsible at all times for paying any federal, state, and local income or employment tax due with respect to any Award, and the Company shall not be liable for any interest or penalty that a Participant or Beneficiary incurs by failing to make timely payments of tax.(b) Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant or Beneficiary to satisfy such tax withholding obligation, in whole or in part, by (i) electing to have the Company withhold otherwise deliverable Shares, or (ii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required by Applicable Law to be withheld. The Fair Market Value of the Shares to be withheld or delivered, or with respect to which restrictions are removed, shall be determined as of the date that the taxes are required to be withheld.10.8Other Provisions in Award Agreements/Change in Control. In addition to the provisions described in the Plan, an Award Agreement may include such other provisions (whether or not applicable to the Award of any other Participant) as the Committee determines appropriate, including restrictions on resale or other disposition, provisions for the acceleration of vesting and/or exercisability of Awards upon a Change in Control of the Company, provisions for the cancellation of Awards in the event of a Change in Control of the Company, and provisions to comply with Applicable Laws.10.9Section 16 of the Exchange Act. It is the intent of the Company that Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the Awards, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. The Company shall have no liability to any Participant or other person for Section 16 consequences of Awards or events in connection with Awards if an Award or related event does not so qualify.10.10Not Benefit Plan Compensation. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s compensation for purposes of determining the Participant’s benefits under any other employee benefit plans or arrangements provided by the Company or an Affiliate, except where the Committee expressly provides otherwise in writing.10.11Section 409A.(a) Certain awards under the Plan may constitute nonqualified deferred compensation under Code §409A, including the regulations and guidance promulgated thereunder, and it is intended that such awards meet the requirements of paragraphs (a)(2), (3), and (4) of Code §409A, and the terms and provisions of the Plan and Award Agreements should be interpreted and applied in a manner consistent with such requirements.(b) Notwithstanding any provision in this Plan or any Award Agreement to the contrary, if any provision of this Plan or any Award Agreement contravenes any regulations or guidance promulgated under Code §409A or could cause any Award to be subject to additional taxes, accelerated taxation, interest or penalties under Code §409A, the Company may, in its sole discretion and without the Participant’s consent, modify this Plan or any Award Agreement: (i) to comply with, or avoid being subject to, Code §409A, or to avoid the imposition of any taxes, accelerated taxation, interest or penalties under Code §409A, and (ii) to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Code §409A. This section does not create an obligation on the part of the Company to modify this Plan or any Award Agreement and does not guarantee that the Awards will not be subject to interest or penalties under Code §409A.(c) If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s “separation from service” (as such term is defined under Code §409A) at such time as the Participant is a Specified Employee and such amounts are subject to the provisions of Code §409A, then no payment shall be made, except as permitted under Code §409A, prior to the first day of the seventh (7th) calendar month beginning after the Participant’s separation from service (or the date of his or her earlier death), or as soon as administratively practicable thereafter. “Specified Employee” means an Employee who at any time during the twelve-month period ending on the identification date was a “key employee” as defined under Code §416(i) (applied in accordance with the regulations thereunder, but without regard to paragraph (5) thereof). The Company may adopt a Specified Employee Identification Policy which specifies the identification date, the effective date of any change in the key employee group, compensation definition and other variables that are relevant in identifying specified employees, and which may include an alternative method of identifying specified employees consistent with the regulations under Code §409A. In the absence of any such policy or policy provision, for purposes of the above, the “identification date” is each December 31st, and an employee who satisfies the above conditions will be considered to be a “specified employee” from April 1st following the identification date to March 31st of the following year, and the compensation and other variables, and special rules for corporate events and special rules relating to nonresident aliens, that is necessary in identifying specified employees will be determined and applied in accordance with the defaults specified in the regulations under Code §409A. Any Specified Employee Identification Policy will apply uniformly to all nonqualified deferred compensation plans subject to Code §409A that are maintained by the Company or an affiliate.ARTICLE 11TERM, TERMINATION AND AMENDMENT OF PLAN11.1Term of Plan. The Plan shall become effective on the Effective Date; provided that the Plan and any Awards granted hereunder shall be null and void if the Plan is not approved by the Company’s shareholders before any compensation under the Plan is paid.11.2Termination of the Plan. The Plan shall terminate upon the earliest to occur of (i) the date on which all Shares available for issuance under the Plan have been issued as fully vested Shares; or (ii) the date determined by the Board pursuant to its authority under Section 11.3 of the Plan; provided, however, that Incentive Stock Options may not be granted after the tenth anniversary of the Effective Date. No Plan termination that impacts any deferred compensation subject to Code §409A shall be made without compliance with the provisions of Code §409A regarding terminations and liquidations.11.3Amendment of the Plan. The Board or the Committee may at any time amend, alter, suspend, or terminate the Plan, without the consent of the Participants or Beneficiaries. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws. Notwithstanding any provision of this Section 11.3 to the contrary, the Company reserves the right to:(a) amend the Plan (or any outstanding Award Agreement) in any respect solely to comply with the provisions of Code §409A so as not to trigger any unintended tax consequences prior to the payment or other taxable event with respect to the Award;(b) pay the lump sum value of any deferred compensation hereunder if the Company determines that such payment will not constitute an impermissible acceleration of payments under the limited cashout provision of Treas. Reg. §1.409A-3(j)(4)(v), or under one of the exceptions provided in Treas. Reg. §1.409A-3(j)(4)(ix) or any successor guidance; in such an event, payment shall be made at the earliest date permitted under such guidance; and(c) make payments hereunder before such payments are otherwise due if it determines that the provisions of the Plan fail to meet the requirements of Code §409A; provided, however, that such payment(s) may not exceed the amount required to be included in income as a result of such failure to comply the requirements of Code §409A.11.4Effect of Amendment or Termination. Except as provided in Sections 11.3 and 11.5 of the Plan, no amendment, alteration, suspension, or termination of the Plan shall impair the rights of any Participant or Beneficiary under an outstanding Award, unless required to comply with an Applicable Law or mutually agreed otherwise between the Participant and the Committee; any such agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.11.5Adjustments of Awards Upon the Occurrence of Unusual or Nonrecurring Events. The Committee may, in its sole discretion (but subject to the limitations and conditionsexpressly stated in the Plan, such as the limitations on adjustment of Performance Objectives), adjust the terms and conditions of Awards during the pendency or in recognition of (i) unusual or nonrecurring events affecting the Company or an Affiliate (such as a capital adjustment, reorganization, or merger) or the financial statements of the Company or an Affiliate, or (ii) any changes in Applicable Laws or accounting principles. By way of example, the power to adjust Awards shall include the power to suspend the exercise of any Stock Option or Stock Appreciation Right.ARTICLE 12MISCELLANEOUS12.1Authorization of Sub-Plans. The Committee may from time to time establish one or more sub-plans under the Plan, including but not limited to for purposes of satisfying applicable blue sky, securities, and/or tax laws. The Committee shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations as the Committee deems necessary or desirable, and/or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Committee shall deem necessary or desirable. All sub-plans adopted by the Committee shall be deemed to be part of the Plan, but each sub-plan shall apply only to Participants included within any such sub-plan(s).12.2Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Indiana, regardless of the laws that might otherwise govern under any state’s applicable principles of conflicts of laws.12.3Committee Manner of Action. Unless otherwise provided in the bylaws of the Company or the charter of the Committee: (i) a majority of the members of a Committee shall constitute a quorum, and (ii) the vote of a majority of the members present who are qualified to act on a question assuming the presence of a quorum or the unanimous written consent of the members of the Committee shall constitute action by the Committee. The Committee may delegate the performance of ministerial functions in connection with the Plan to such person or persons as the Committee may select.12.4Expenses. The costs of administering the Plan shall be paid by the Company.12.5Severability. If any provision of the Plan or any Award Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person or Award, such provision shall be construed or deemed to be amended to resolve the applicable infirmity, unless the Committee determines that it cannot be so construed or deemed amended without materially altering the Plan or the Award, in which case such provision shall be stricken as to such jurisdiction, person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.12.6Delivery of Shares. Subject to any governing rules or regulations (including applicable stock exchange rules), the Company shall issue or cause to be issued the Shares acquired pursuant to an Award and shall deliver such Shares to or for the benefit of theParticipant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry Shares credited to the account of the Participant, (b) by depositing such Shares for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such Shares to the Participant in certificate form.12.7Construction. Unless the contrary is clearly indicated by the context, (i) the use of the masculine gender shall also include within its meaning the feminine and vice versa; (ii) the use of the singular shall also include within its meaning the plural and vice versa; and (iii) the word “include” shall mean to include, but not to be limited to.12.8No Trust or Fund Created. Neither the Plan nor any Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company (or an Affiliate) and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company (or an Affiliate) pursuant to an Award, such right shall be no more secure than the right of any unsecured general creditor of the Company (or the Affiliate, as applicable).12.9Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.12.10Complete Statement of Plan. This document is a complete statement of the Plan.APPENDIXAs used in the Plan, the following terms shall have the following meanings:(a) “Affiliate” means an entity in which the Company has a direct or indirect equity interest, whether now or hereafter existing; provided however, that with respect to an Incentive Stock Option, an Affiliate means a “parent corporation” (as defined in Code §424(e) or a “subsidiary corporation” (as defined in Code §424(f)) with respect to the Company, whether now or hereafter existing.(b) “Applicable Laws” means the requirements relating to, connected with, or otherwise implicated by the administration of long-term incentive plans under applicable state corporation laws, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.(c) “Award” means, individually or collectively, a grant under the Plan of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Cash-Based Awards, Other Share-Based Awards, or other awards under the Plan.(d) “Award Agreement” means a written agreement setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement shall be subject to the terms and conditions of the Plan.(e) “Beneficiary” means the personal representative of the Participant’s estate or the person(s) to whom an Award is transferred pursuant to the Participant���s will or in accordance with the laws of descent or distribution.(f)“Board” means the board of directors of the Company.(g) “Cash-Based Award” means an Award, settled in cash, granted pursuant to Article 9.(h) “Change of Control” means a change in control as defined in the relevant Award Agreement.(i) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein shall be a reference to any regulations or other guidance of general applicability promulgated under such section, and shall further be a reference to any successor or amended section of such section of the Code that is so referred to and any regulations thereunder.(j) “Committee” means the Compensation Committee of the Board, which has been constituted by the Board to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act, Code §162(m), and/or other Applicable Laws.(k) “Company” means Patrick Industries, Inc., an Indiana corporation, or any successor thereto.(l) “Consultant” means any natural person, including an advisor, engaged by the Company or an Affiliate to render services to such entity.(m) “Covered Employee” means any Employee who is or may become a “Covered Employee” as defined in Code §162(m), or any successor provision of the Code, and who is designated, either as an individual Employee or a member of a class of Employees, by the Committee no later than (i) ninety (90) days after the beginning of the relevant Performance Period, or (ii) the date on which twenty-five percent (25%) of the relevant Performance Period has elapsed, as a “Covered Employee” under this Plan for such Performance period.(n)“Director” means a member of the Board.(o) “Disability” means total and permanent disability as defined in Code §22(e)(3).(p)“Effective Date” means August 13, 2009.(q) “Employee” means any person who is an employee, as defined in Code §3401(c), of the Company or any Affiliate or any other entity the employees of which are permitted to receive Incentive Stock Options under the Code. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient, by itself, to constitute “employment” by the Company.(r)“Exchange Act” means the Securities Exchange Act of 1934, as amended.(s) “Executive Officer” means an individual who is an “executive officer” of the Company (as defined by Rule 3b-7 under the Exchange Act) or a Covered Employee.(t) “Fair Market Value” means the closing price of a Share as reported on the Nasdaq National Market (or such other consolidated transaction reporting system on which such Shares are primarily traded) on the date of calculation (or on the next preceding trading date if Shares were not traded on the date of calculation); provided, however, that if Shares of the Company’s common stock are not at any time readily tradeable on a national securities exchange or other market system, “Fair Market Value” shall mean the amount determined in good faith by the Committee as the fair market value of shares of the Company. Fair Market Value shall be determined by the Committee in a manner consistent with Code §409A, to the extent applicable, and any other applicable law or regulation.(u) “Fiscal Year” means the Company’s fiscal year. If an Award is granted by an Affiliate, such Affiliate’s fiscal year shall apply instead of the Company’s fiscal year with respect to such Award.(v) “Incentive Stock Option” means a Stock Option intended to qualify as an incentive stock option within the meaning of Code §422.(w)“Nonemployee Director” means a Director who is not an Employee.(x) “Nonstatutory Stock Option” means a Stock Option not intended to qualify as an Incentive Stock Option.(y) “Other Share-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 9.(z) “Participant” means the holder of an outstanding Award granted under the Plan.(aa) “Performance Objective” means a performance objective or goal that must be achieved before an Award, or a portion of an Award, becomes nonforfeitable, as described in Section 4.3 of the Plan.(bb) “Performance Period” means a fiscal year of the Company, or a series of two or more consecutive fiscal years, as determined by the Committee.(cc) “Performance Share” means an Award under Article 8 and subject to the terms of this Plan, denominated in Shares, the value of which is determined as a function of the extent to which corresponding performance criteria have been achieved.(dd) “Performance Unit” means an Award under Article 8 and subject to the terms of this Plan, denominated in U.S. dollars, the value of which is determined as a function of the extent to which corresponding performance criteria have been achieved.(ee) “Period of Restriction” means the period during which Restricted Stock, the remuneration underlying Restricted Stock Units, or any other feature of an Award is subject to a substantial risk of forfeiture. A Period of Restriction shall be deemed to end when the applicable Award ceases to be subject to a substantial risk of forfeiture.(ff) “Person” means any individual, company, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Exchange Act.(gg) “Predecessor Plan” means the Patrick Industries, Inc. 1987 Stock Option Program, as amended and restated on May 11, 2006.(hh) “Restricted Stock” means Shares that, during a Period of Restriction, are subject to restrictions as described in Article 7 of the Plan.(ii) “Restricted Stock Unit” means an Award that entitles the recipient to receive Shares or cash after a Period of Restriction, as described in Article 7 of the Plan.(jj)“Service Provider” means an Employee, Director or Consultant.(kk)“April , 2017Share” means a share of the Company’s common stock.(ll) “Stock AppreciationRight” means an Award that entitles the recipient to receive, upon exercise, the excess of (i) the Fair Market Value of a Share on the date the Award is exercised, over (ii) a base amount (exercise price) specified by the Committee which shall notbe less than the Fair Market Value of a Share on the date the Award is granted, as described in Article 6 of the Plan.(mm) “Stock Option” means an option to purchase Shares that is granted pursuant to Article 5 of the Plan. A Stock Option may be an Incentive Stock Option or a Nonstatutory Stock Option.(nn) “Subsidiary” means a company or other entity (a) more than 50 percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (b) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, or unincorporated association), but more than 50 percent (50%) of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.(oo) “Termination of Service” means the date an individual ceases to be a Service Provider. Unless the Committee or a Company policy provides otherwise, a leave of absence authorized by the Company or the Committee (including sick leave or military leave) from which return to service is not guaranteed by statute or contract shall be characterized as a Termination of Service if the individual does not return to service within three months; such Termination of Service shall be effective as of the first day that is more than three months after the beginning of the period of leave. If the ability to return to service upon the expiration of such leave is guaranteed by statute or contract, but the individual does not return, the leave shall be characterized as a Termination of Service as of a date established by the Committee or Company policy. For purposes of the Plan and any Award hereunder, if an entity ceases to be an Affiliate, Termination of Service shall be deemed to have occurred with respect to each Participant in respect of such Affiliate who does not continue as a Service Provider in respect of the Company or another Affiliate after such giving effect to such Affiliate’s change in status.
VOTEBYTELEPHONEc/o National City BankShareholder Services OperationsLocator 5352P. O. Box 94509Cleveland, OH 44101-4509Have your proxy card available when you call the Toll-Free Number 1-888-693-8683 using a touch-tone phone and follow the simple instructions to record your vote.VOTEBYINTERNETHave your proxy card available when you access the website www.cesvote.com and follow the simple instructions presented to record your vote.VOTEBYMAILPlease mark, sign and date your proxy card and return it in the postage-paid envelope provided or return to: National City Bank, P.O. Box 535300, Pittsburgh, PA 15253.Vote by TelephoneCall Toll-Free using aTouch-Tone phone:1-888-693-8683Vote by InternetAccess the website andcast your vote:www.cesvote.comVote by MailReturn your proxyin the postage-paidenvelope provided.Vote 24 hours a day, 7 days a week!Your telephone or Internet vote must be received by 8:00 a.m. Eastern Timeon November 19, 2009 to be counted in the final tabulation.If you vote by telephone or Internet, please do not send your proxy by mail.If voting by mail, Proxy must be signed and dated below.Please fold and detach card at perforation before mailing.
The undersigned hereby appoints Todd M. Cleveland and Andy L. Nemeth, and each of them, as the undersigned’s proxies, each with full power of substitution, to represent and to vote, as designated on the reverse, all of the undersigned’s Common Stock in Patrick Industries, Inc. at the Special Meeting of Shareholders of Patrick Industries, Inc. to be held at the Company’s corporate office located at 107 West Franklin Street, Elkhart, Indiana 46515, at 10:00 AM (ET) on Thursday, November 19, 2009, and at any adjournment or postponement thereof, with the same authority as if the undersigned were personally present.This Proxy when properly executed will be voted in the manner directed herein by the undersigned shareholders. If no specific direction is made, this Proxy will be voted in accordance with the recommendations of the Board of Directors.Your signature on this Proxy is your acknowledgment of receipt of the Notice of Special Meeting and Proxy Statement.Dated: ______________________________________, 2009Signature(Signature if held jointly)Please sign exactly as name appears hereon. For joint accounts, all tenants must sign. Executors, Administrators, Trustee, etc. should so indicate when signing.PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.YOUR VOTE IS IMPORTANTRegardless of whether you plan to attend the Special Meeting of Shareholders, you can be sure your shares are represented at the meeting by promptly returning your proxy in the enclosed envelope.Proxy must be signed and dated on the reverse side.Please fold and detach card at perforation before mailing.PATRICK INDUSTRIES, INC.107 West Franklin Street, P.O. Box 638,
This Proxy is Being Solicited on Behalf of the Board of DirectorsElkhart, Indiana 46515The Board of Directors recommends a vote FOR the proposal below:1.To approve the Patrick Industries, Inc. 2009 Omnibus Incentive Plan.oFORoAGAINSToABSTAIN2.To consider and transact such other business as may properly come before the meeting or any adjournment or postponement thereof.(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)