Driving Shareholder Return Long-term incentive grants are intended to balance short-term operating objectives of the Company with long-term objectives and align the financial interests of our executives with those of our shareholders. In determining the number of shares granted in 2022, the target value for each grant was converted to a number of shares based on the opening share price on the day of the grant.
For 2022, the Compensation Committee made long-term incentive grants at the first regularly scheduled meeting when the Compensation Committee determined all elements of the NEOs’ compensation for the year.
Performance-Based Restricted Stock Units
To further align the long-term interests of executive leadership with those of our shareholders, and to provide an incentive to achieve long-term financial and operating objectives, the Compensation Committee granted performance-based restricted stock units to key employees (including the NEOs) that vest based on the achievement of specified performance objectives. Performance-based restricted stock units also serve to both reward and retain executives, as the receipt of a payout is linked to performance and the value of the payout is linked to the share price when the shares vest. Cumulative dividend equivalents are paid in cash based on the actual number of shares delivered at the end of the performance cycle.
2022-2024 Performance-Based Restricted Stock Units Cycle
The performance metrics for performance-based restricted stock units granted in 2022 were cumulative adjusted EPS and adjusted ROIC for a three-year performance period (2022-2024). The Compensation Committee selected these metrics because it believed they are highly correlated to driving long-term shareholder value and key elements to achievement of the Company’s business strategy. Actual performance for adjusted EPS and adjusted ROIC is calculated based on adjusted earnings as used for external reporting in 20225, with the ability to exclude the effect of material changes in
5 See Appendix A for reconciliations of adjusted EPS and adjusted ROIC as used for external reporting to their most directly comparable GAAP financial measures.
accounting principles, methods, significant changes in tax law that are not reflected in the plan, and/or the impact on results from a single acquisition of $600 million or greater during the three-year performance cycle. For the 2022-2024 performance-based restricted stock unit cycle, the cumulative adjusted EPS target was set approximately 10% higher than the actual cumulative adjusted EPS results for the 2019-2021 cycle, which was the most recently completed cycle at the time the 2022-2024
In determining the number of shares granted in 2023, the target value for each grant was converted to a number of shares based on the opening share price on the day of the grant. For 2023, the Compensation Committee made long-term incentive grants at the first regularly scheduled meeting when the Compensation Committee determined all elements of the NEOs’ compensation for the year. Performance-Based Restricted Stock Units To further align the long-term interests of executive leadership with those of our shareholders, and to provide an incentive to achieve long-term financial and operating objectives, the Compensation Committee granted performance-based restricted stock units to key employees (including the NEOs) that vest based on the achievement of specified performance objectives. Performance-based restricted stock units also serve to both reward and retain executives, as the receipt of a payout is linked to performance and the value of the payout is linked to the share price when the shares vest. Cumulative dividend equivalents are paid in cash based on the actual number of shares delivered at the end of the performance cycle. 2023-2025 Performance-Based Restricted Stock Units Cycle The performance metrics for performance-based restricted stock units granted in 2023 were cumulative adjusted EPS, adjusted ROIC and relative TSR for a three-year performance period (2023-2025). The Compensation Committee selected the financial performance metrics because it believed they are highly correlated to driving long-term shareholder value and achieving the Company’s business strategy. The Committee selected the relative TSR metric to reflect the growing prevalence of the use of relative TSR among peer companies. Actual performance for adjusted EPS and adjusted ROIC is calculated based on adjusted earnings as used for external reporting in 20235, with the ability to exclude the effect of material changes in accounting principles, methods, or significant changes in tax law that are not reflected in the plan, and/or the impact on results from a single acquisition of $700 million or greater during the three-year performance cycle. For both the Company and the chosen comparison group, which is the S&P 400 Capital Goods Index, relative TSR performance is measured by comparing the average closing stock price for the last 30 calendar days of the performance period, minus the average closing stock price for the 30 calendar days prior to the start of the performance period, plus cumulative dividends, divided by the average closing stock price for the 30 calendar days prior to the start of the performance period. The S&P 400 Capital Goods Index was chosen as the comparison group for relative TSR given that the Company is a member of the index, operates in similar markets and geographies to other members of the index, and competes for investor capital with other index members. For the 2023-2025 performance-based restricted stock unit cycle, the cumulative adjusted EPS target was set approximately 7% higher than the actual cumulative adjusted EPS results for the 2020-2022 cycle (calculated to exclude intangible amortization from acquisitions and utilizing net debt instead of total debt), which was the most recently completed cycle at the time the 2023-2025 target was established and was also record three-year performance at that time. The three-year target for adjusted ROIC was set approximately 10 basis points higher than the actual average adjusted ROIC for the 2019-2021 cycle. The factors that go into setting the target include consideration of prior-year results for the Company as compared to results for U.S. industrial peers, current market conditions, cyclicality and outlook, acquisitions, divestitures, past targets and performance against those targets and other factors. The Company’s performance targets for the performance-based restricted stock units granted in 2022 are shown in the table below. Straight-line interpolation is used to calculate payouts for these performance-based restricted stock units. 2022-2024 Performance-Based Restricted Stock Units Cycle: Metrics and Weightings
| Threshold | Target | Maximum | Three-Year Cumulative Adjusted EPS (60% weighting) | $10.33 | $14.76 | $19.19 | Adjusted ROIC* (40% weighting) | 8.5% | 11.0% | 14.0% | | é | é | é | Plan Funding | 50% | 100% | 200% |
*Adjusted ROIC less than 7.5% will result in zero payout for the cycle. Between adjusted ROIC of 7.5% to 8.5%, a payout under the Three-Year Cumulative Adjusted EPS metric is possible.
For information about the specific performance-based restricted stock units awarded to the NEOs in 2022, see the “2022 Grants of Plan-Based Awards” table on page 61.
Results for the 2020-2022 Performance-Based Restricted Stock Units Cycle
In 2020, the NEOs received awards of performance-based restricted stock units to cover a three-year performance period (2020-2022).
The performance metrics for performance-based restricted stock units granted in 2020 were cumulative adjusted EPS and adjusted ROIC for the three-year performance period. The Compensation Committee selected these metrics because it believed they are highly correlated to driving long-term shareholder value and key elements to achievement of the Company’s business strategy. Actual performance for adjusted EPS and adjusted ROIC is calculated based on fully adjusted EPS as used for external reporting6, with the ability to exclude the effect of changes in accounting principles or methods that are not reflected in the plan. No such exclusions were applied to the 2020-2022 performance-based restricted stock unit cycle, and fully adjusted EPS and adjusted ROIC as used for external reporting were used to determine actual performance for the applicable compensation adjusted metrics.
The Compensation Committee believed that the targets for the performance-based restricted stock units granted in 2020 were appropriately challenging and that achievement would be supportive of shareholder value creation. The adjusted EPS target for the 2020-2022 performance-based restricted stock unit cycle was 36% higher than the most recently completed cycle. The adjusted ROIC target for the 2020-2022 cycle was set 30 basis points higher than the 2019-2021 adjusted ROIC target and 90 basis points higher than the actual 2019-2021 average adjusted ROIC of 10.9%.
In terms of actual results for the cycle, adjusted EPS decreased approximately 11% year-over-year in 2020, due to the negative impact from the COVID-19 pandemic, increased approximately 15% year-over-year in 2021, and increased approximately 28% year-over-year in 2022. As a result, the performance-based restricted stock units were earned at 91.8% reflecting the difficulty of the targets set for the cycle
65 See Appendix A for reconciliations of adjusted EPS and adjusted ROIC as used for external reporting to their most directly comparable GAAP financial measures. Beginning with our grants made in 2023, the Company calculates adjusted EPS as excluding intangible amortization from acquisitions in addition to the Company’s prior adjustments used for external reporting purposes. In addition, as of our 2023 grants, the Company calculates adjusted ROIC as adjusted net operating profit after taxes and excluding tax-effected acquisition intangible amortization divided by a two-point average of net debt plus total equity over the period. as we achieved record
Table of Contents equal to the adjusted ROIC target for the 2022-2024 cycle (calculated to exclude tax-effected acquisition intangible amortization and utilizing net debt instead of total debt) because the Compensation Committee continued to find this to be a challenging target that would drive profitable growth and disciplined capital allocation. The factors that go into setting the adjusted EPS and adjusted ROIC targets include consideration of prior-year results for the Company as compared to results for U.S. industrial peers, current market conditions, cyclicality and outlook, acquisitions, divestitures, past targets and performance against those targets and other factors. The Company’s performance targets for the performance-based restricted stock units granted in 2023 are shown in the table below. Straight-line interpolation is used to calculate payouts for these performance-based restricted stock units. 2023-2025 Performance-Based Restricted Stock Units Cycle: Metrics and Weightings | Threshold | Target | Maximum | Three-Year Cumulative Adjusted EPS (50% weighting) | $13.06 | $17.41 | $21.76 | Adjusted ROIC* (30% weighting) | 9.8% | 12.7% | 16.2% | Relative TSR** (20% weighting) | 25th percentile | 50th percentile | 75th percentile | | é | é | é | Plan Funding | 50% | 100% | 200% |
*Adjusted ROIC less than 8.5% will result in zero payout for the cycle. Between adjusted ROIC of 8.5% to 9.8%, a payout under the Three-Year Cumulative Adjusted EPS metric is possible. ** See “2023-2025 Performance-Based Restricted Stock Units Cycle” on page 51, for information regarding how performance for relative TSR is calculated. For information about the specific performance-based restricted stock units awarded to the NEOs in 2023, see the “2023 Grants of Plan-Based Awards” table on page 62. Results for the 2021-2023 Performance-Based Restricted Stock Units Cycle In 2021, the NEOs received awards of performance-based restricted stock units to cover a three-year performance period (2021-2023). The performance metrics for performance-based restricted stock units granted in 2021 were cumulative adjusted EPS and adjusted ROIC for the three-year cumulative adjusted EPS over the period, including record adjusted EPS results in 2021 and 2022, and strong average ROIC performance. Moreover, as detailed on page 35 in the “2022 Performance” section, the Company’s three-year TSR outpaced the median of our 2022 compensation peer group and exceeded the S&P 500 Industrials over the timeframe, reflecting strong performance over this period. The Compensation Committee selected these metrics because it believed they are highly correlated to driving long-term shareholder value and achieving the Company’s business strategy. Actual performance for adjusted EPS and adjusted ROIC is calculated based on fully adjusted EPS as used for external reporting6, with the ability to exclude the effect of changes in accounting principles or methods that are not reflected in the plan. No such exclusions were applied to the 2021-2023 performance-based restricted stock unit cycle, and fully adjusted EPS and adjusted ROIC as used for external reporting were used to determine actual performance for the applicable compensation adjusted metrics. The Compensation Committee believed that the targets for the performance-based restricted stock units granted in 2021 were appropriately challenging and that achievement would be supportive of shareholder value creation. The adjusted EPS target for the 2021-2023 performance-based restricted stock unit cycle was 10% higher than the actual cumulative adjusted EPS for the 2018-2020 performance cycle and 54% higher than the target set for that cycle. The adjusted ROIC target for the 2021-2023 cycle was set at the actual average adjusted ROIC for the 2018-2020 performance cycle and 100 basis points higher than the target set for that cycle. The Company’s performance goals and actual calculated results for the 2020-2022 cycle are summarized in the table below. Straight-line interpolation is used to calculate actual payouts for these performance-based restricted stock units. Despite the significant unforeseen impact of COVID-19, no adjustments or modifications were made to the financial performance metrics or targets for our 2020-2022 performance-based RSU cycle. Payouts earned for the 2020-2022 PRSU awards reflect calculated outcomes measured against original metrics and targets established prior to the outbreak of the COVID-19 pandemic.
2020-2022 Performance-Based Restricted Stock Units Cycle: Metrics, Weightings and Actual Results
| Threshold | Target | Maximum | Actual | Three-Year Cumulative Adjusted EPS (60% weighting) | $10.87 | $15.52 | $20.18 | $14.84 | ROIC (40% weighting) | 8.5% | 11.8% | 14.0% | 11.2% | | é | é | é | é | Plan Funding | 50% | 100% | 200% | 91.8% |
Under accounting rules, performance-based restricted stock units are expensed over the vesting period using the fair value on the date of grant and adjusted quarterly to account for actual and anticipated performance.
Time-Based Restricted Stock Units
Time-based restricted stock units that were awarded in 2022 to each NEO vest 25% each year over a four-year period. Cumulative dividend equivalents are paid in cash upon vesting. For information about the specific number of time-based restricted stock units awarded to the NEOs in 2022, see the “2022 Grants of Plan-Based Awards” table on page 61.
Under accounting rules, time-based restricted stock units are expensed over the vesting period using the fair value on the date of grant.
Retirement Programs
The Company is transitioning away from defined benefit plans to the use of market-competitive defined contribution and employee savings plans for all eligible salaried employees, including the NEOs. The NEOs also participate in the Company’s nonqualified retirement programs based on eligibility.
Several years ago, the Company closed its primary defined benefit plan in the United States (the “Pension Plan”) to new entrants and ceased providing Excess Benefit Agreements to newly appointed officers. In 2018, the Company announced that, effective December 31, 2022, it would freeze benefits under the Pension Plan. Mr. Coughlin participates in the Pension Plan and has ceased to accrue benefits as of December 31, 2022. In connection with the Pension Plan freeze, Mr. Coughlin will be eligible to receive Qualified Core DC Contributions starting in 2023. To align with this action, in 2018, the Compensation Committee approved the freezing of benefits under the Excess Benefit Agreements, also effective as of December 31, 2022 (Mr. Coughlin, Mr. Fracassa and Mr. Kyle have Excess Benefit Agreements and have ceased to accrue benefits under these arrangements after December 31, 2022).
Due to the varying tenure of our NEOs and the transition of our retirement plans, our U.S.-based NEOs participate (or participated)
6 See Appendix A for reconciliations of adjusted EPS and adjusted ROIC as used for external reporting to their most directly comparable GAAP financial measures. Beginning with our grants made in 2023, the Company calculates adjusted EPS as excluding intangible amortization from acquisitions in addition to the Company’s prior adjustments used for external reporting purposes. In addition, as of our 2023 grants, the Company calculates adjusted ROIC as adjusted net operating profit after taxes and excluding tax-effected acquisition intangible amortization divided by a two-point average of net debt plus total equity over the period. Grants made prior to 2023 do not include these additional adjustments. Performance-based restricted stock units were earned at 145.9%, reflecting very strong performance throughout the cycle including record three-year cumulative adjusted EPS over the period and strong average adjusted ROIC performance. The Company’s performance goals and actual calculated results for the 2021-2023 cycle are summarized in the table below. Straight-line interpolation is used to calculate actual payouts for these performance-based restricted stock units. 2021-2023 Performance-Based Restricted Stock Units Cycle: Metrics, Weightings and Actual Results | Threshold | Target | Maximum | Actual | Three-Year Cumulative Adjusted EPS (60% weighting) | $9.92 | $14.17 | $18.42 | $17.11 | ROIC (40% weighting) | 8.5% | 11.5% | 14.0% | 11.8% | | é | é | é | é | Plan Funding | 50% | 100% | 200% | 145.9% |
Under accounting rules, performance-based restricted stock units are expensed over the vesting period using the fair value on the date of grant and adjusted quarterly to account for actual and anticipated performance. Time-Based Restricted Stock Units Time-based restricted stock units that were awarded in 2023 to each NEO vest 25% each year over a four-year period. Cumulative dividend equivalents are paid in cash upon vesting. For information about the specific number of time-based restricted stock units awarded to the NEOs in 2023, see the “2023 Grants of Plan-Based Awards” table on page 62. Under accounting rules, time-based restricted stock units are expensed over the vesting period using the fair value on the date of grant. Retirement Programs Several years ago, the Company closed its primary defined benefit plan in the United States (the “Pension Plan”) to new entrants and ceased providing Excess Benefit Agreements to newly appointed officers. Benefits under both the Pension Plan (inclusive of the restoration portion described below) and the Excess Benefit Agreements were frozen on December 31, 2022. In connection with the Pension Plan freeze, Mr. Coughlin, our only NEO who participated in the Pension Plan, became eligible to receive Qualified Core DC Contributions starting in 2023. Due to the varying tenure of our NEOs and the transition of our retirement plans, our U.S.-based NEOs participated in different programs during 2023 based on their eligibility as follows: | 52 | Name | Defined Benefit | Defined Contribution |
Qualified | Nonqualified | Qualified | Nonqualified |
Name | Defined Benefit | Defined | Pension Plan (Frozen) | Supplemental Pension Plan | SIP Plan Matching Contributions | Core DC Contribution | Post-Tax Savings Plan | Restoration Portion (Frozen) | Excess Benefit Agreement (Frozen) | Richard G. Kyle | | | ü | ü | ü | ü | Philip D. Fracassa | | | ü | ü | ü | ü | Christopher A. Coughlin | ü | ü | ü | ü | ü | ü | Hansal N. Patel | | Qualified | Nonqualified | Qualified | Nonqualified | Pension Plan | Supplemental Pension Plan | SIP Plan Matching Contributions | Core DC Contribution | Post-Tax Savings Plan | Restoration Portion | Excess Benefit Agreement | Richard G. Kyle | | | ü | ü | ü | ü | Philip D. Fracassa | | | ü | ü | ü | ü | Christopher A. Coughlin | ü | ü | ü | ü | | ü | Hansal N. Patel | | | | ü | ü | ü | Hans Landin | | | | ü | ü | ü |
Because Mr. Roellgen is based in Colmar, France, he does not participate in the U.S. plans outlined above. A summary of the plans in which he participates is set forth below. The following is a summary of the plans in which the NEOs other than Mr. Roellgen participated during 2023: | · | Qualified Pension Plan: Eligible salaried employees whose age plus years of service equaled or exceeded 50 as of December 31, 2003 participate in the U.S. plans outlined above. A summaryPension Plan, which provides an annual benefit of 0.75% times Final Average Earnings times years of service prior to 2023. “Final Average Earnings” is based on the plans in which he participates is set forth below.The following ishighest five years of eligible compensation over the 10 years preceding the plan freeze, subject to Internal Revenue Code (the “Code”) limits. Eligible compensation includes base salary and annual cash incentive but excludes long-term incentives. Participants meeting plan eligibility requirements, like Mr. Coughlin, can retire on or after age 62 and receive a summary of the plans in which the NEOs other than Mr. Roellgen participate (or participated):
| ● | Qualified Pension Plan: The Pension Plan benefit replaces a targeted percentage of pre-retirement income, subject to limits on benefits and compensation imposed by the Internal Revenue Code (the “Code”). Eligible salaried employees whose age plus years of service equaled or exceeded 50 as of December 31, 2003 participate in the Pension Plan, which provides an annual benefit of 0.75% times Final Average Earnings times years of service. “Final Average Earnings” is based on the highest five non-consecutive years of eligible compensation over the 10 years preceding retirement. Eligible compensation includes base salary and annual cash incentive but excludes long-term incentives. The benefit is payable beginning at age 65 for the lifetime of the employee, with alternativelifetime benefit unreduced for commencing payments before age 65. Alternative forms of payment are available, including a lump sum option, available with actuarial adjustments. Participants may retire early if they meet certain eligibility requirements, with the benefit reduced if started before age 62. As of December 31, 2022, Mr. Coughlin is eligible for retirement under this plan. | | | | | ● |
| · | Nonqualified Supplemental Pension Plan: The Supplemental Pension Plan: The supplemental pension plan benefit replaces a targeted percentage of pre-retirement income. There are two components to this plan: | | | |
| (1) | Restoration Portion: A restoration portion restores benefits to affected Company employees that would otherwise be provided under the Pension Plan were it not for Code limits; and |
| (2) | Individual Excess Benefits Agreements: These arrangements are for legacy NEOs and provide for a benefit based on Final Average Earnings as described above with offsets for other Company-provided benefits. |
| (1) | Restoration Portion: A restoration portion restores benefits to affected Company employees that would otherwise be provided under the Pension Plan were it not for Code limits; and | | | | | (2) | Individual Excess Benefits Agreements: These arrangements are for legacy NEOs and provide for a benefit based on Final Average Earnings as described above with offsets for other Company-provided benefits. | | | |
| | Supplemental retirement benefits for NEOs who have an Excess Benefit Agreement will be calculated using a target benefit of 60% of Final Average Earnings, offset by the sum of: (a) an annuity which could be purchased at market rates with the value of Company matching contributions, any “Core DC” contributions available under the Company’s Savings and Investment Retirement Plan (the “SIP Plan”), and “Post-Tax Savings Plan” contributions, accumulated at an 8% interest rate until benefit commencement, and (b) any Company-provided defined benefit pensions. The net benefit after offsets is automatically paid as a lifetime annuity or an unadjusted 50% joint-and-survivor annuity depending on whether the executive is married when benefits commence. Alternatively, the executive can elect an actuarially equivalent lump sum with payment delayed 5 years. | | | | | | Participating NEOs ratably earn the 60% benefit over 10 years (15 years for Mr. Kyle) of Company service. All participating NEOs have at least 15 years of service and at least five years of officer service so have fully accrued the benefit and are fully vested. Participating NEOs can | | | |
| | | | | retire after age 55, but the benefit is reduced by 4% for each year benefits commence prior to age 62. Mr. Coughlin and Mr. Kyle are currently eligible for retirement under this plan. | | | | | ●Supplemental retirement benefits for NEOs who have an Excess Benefit Agreement will be calculated using a target benefit of 60% of Final Average Earnings preceding the plan freeze, offset by the sum of: (a) an annuity which could be purchased at market rates with the value of Company matching contributions, any “Core DC” contributions available under the Company’s Savings and Investment Retirement Plan (the “SIP Plan”), and “Post-Tax Savings Plan” contributions earned prior to the pension freeze, accumulated at an assumed 8% interest rate until benefit commencement, and (b) any Company-provided defined benefit pensions. The net benefit after offsets is automatically paid as a lifetime annuity or an unadjusted 50% joint-and-survivor annuity depending on whether the executive is married when benefits commence. Alternatively, the executive can elect an actuarially equivalent lump sum with payment delayed 5 years. Participating NEOs ratably earn the 60% benefit over 10 years (15 years for Mr. Kyle) of Company service. All participating NEOs have fully accrued the benefit and are fully vested. Participating NEOs can retire after age 55, but the benefit is reduced by 4% for each year benefits commence prior to age 62. Mr. Coughlin, Mr. Fracassa and Mr. Kyle are currently eligible for retirement under this plan. | · | Qualified SIP Plan Matching Contributions: The SIP Plan is a savings plan which matches 100% on the first 3% of pay contributed by the employee plus 50% on the next 3%, subject to Code limits on compensation and contributions. | | | | | ● |
| · | Qualified Core DC Contributions: Core DC contributions refer to non-matching Company contributions provided within the SIP Plan to eligible U.S.-based salaried employees not earning Pension Plan service. Contributions range from 1% to 4.5% of eligible compensation (up to Code limits) based on an employee’s age plus years of service. Employees impacted by the December 31, 2022 freezing of benefits under the Company’s primary U.S. defined benefit pension plan are now eligible to receive the Core DC contribution under the SIP Plan. | | | | | ● | Nonqualified Post-Tax Savings Plan: The Post-Tax Savings Plan is intended to restore benefits that would be provided under the SIP Plan were it not for Code limits. Affected employees have the option each year of taking these contributions in taxable cash or to defer the amounts with interest credited at a market-based interest rate (prime + 1%). |
Because Mr. Roellgen is based in Colmar, France, he does not participate in the U.S. plans outlined above. Instead, Mr. Roellgen participates in a legally required French Retirement Indemnity Plan (the “FRIP”) as well as the Timken Europe Supplementary Pension Plan with Defined Benefits (the “Europe Executive Plan”). The FRIP covers all French employees and pays a lump sum benefit based on service. The maximum FRIP benefit payable is six months of pay following 40 years of service. Mr. Roellgen’s
|
| · | Nonqualified Post-Tax Savings Plan: The Post-Tax Savings Plan is intended to restore benefits that would be provided under the Europe ExecutiveSIP Plan are equal to 10% of his highest 3 years of pension earnings multiplied by the ratio of his years of service at December 31, 2012 to his years of service at retirement. The benefit is paid in the form of a 60% joint-and-survivor annuity. The Europe Executive Plan benefit vests only upon his retirement from the Company. While his accumulation of years of service was frozen under the Europe Executive Plan in 2012, his benefit continues to reflect compensation increases since 2012. Following the freeze of accumulation of years of service under the Europe Executive Plan, Mr. Roellgen commenced earning benefits under the Company’s French qualified defined contribution plan (the “French DC”). The French DC provides contributions of 4% of eligible compensation to certainwere it not for Code limits. Affected employees under French law.Deferred Compensation
The Company permits certain employees, including the U.S.-based NEOs, to participate in the 1996 Deferred Compensation Plan, as amended and restated effective August 2, 2022 (the “Deferred Compensation Plan”), that allows them to defer, on a pre-tax basis, the receipt of certain types of compensation until a specified point in the future. Eligible compensation includes salary, incentive compensation payable in cash, employee or Company 401(k) contributions and/or core definedreceive these contributions in excess of tax limits. Cash deferrals earn interest quarterlytaxable cash at a rate based on the prime rate plus 1%. All of the NEOs (other than Mr. Roellgen) were eligible to participate in the Deferred Compensation Plan, but none earned “above-market” or preferential interest, as defined by the SEC.year-end.
|
Because Mr. Roellgen is based in Colmar, France, he does not participate in the U.S. plans outlined above. Instead, Mr. Roellgen participates in a legally required French Retirement Indemnity Plan (the “FRIP”) as well as the Timken Europe Supplementary Pension Plan with Defined Benefits (the “Europe Executive Plan”). The FRIP covers all French employees and pays a lump sum benefit based on service. The maximum FRIP benefit payable is six months of pay following 40 years of service. Mr. Roellgen’s benefits under the Europe Executive Plan are equal to 10% of his highest 3 years of pension earnings multiplied by the ratio of his years of service at December 31, 2012 to his years of service at retirement. The benefit is paid in the form of a 60% joint-and-survivor annuity. The Europe Executive Plan benefit vests only upon his retirement from the Company. While his accumulation of years of service was frozen under the Europe Executive Plan in 2012, his benefit continues to reflect compensation increases since 2012. Following the freeze of accumulation of years of service under the Europe Executive Plan, Mr. Roellgen commenced earning benefits under the Company’s French qualified defined contribution plan (the “French DC”). The French DC provides contributions of 4% of eligible compensation to certain employees under French law. Deferred Compensation The Company permits certain employees, including the U.S.-based NEOs, to participate in the 1996 Deferred Compensation Plan, as amended and restated effective January 1, 2023 (the “Deferred Compensation Plan”), that allows them to defer, on a pre-tax basis, the receipt of certain types of compensation until a specified point in the future. Eligible compensation includes salary and incentive compensation payable in cash. Beginning in 2023, the Company removed the ability to defer employee or Company 401(k) contributions and/or core defined contributions in excess of tax limits. Cash deferrals earn interest quarterly at a rate based on the prime rate plus 1%. All of the NEOs (other than Mr. Roellgen) were eligible to participate in the Deferred Compensation Plan. In 2023, Mr. Kyle, Mr. Fracassa and Mr. Patel earned above-market interest, as defined by the SEC, on amounts deferred under the Deferred Compensation Plan. The above-market interest earned resulted from an increase in the prime rate, relative to long term interest rates, due to the current interest rate environment. The Deferred Compensation Plan is not funded by the Company, and participants have an unsecured contractual commitment by the Company to pay the amounts due under the plan. When such payments are due, they will be distributed from the Company’s general assets. In the event of a change in control of the Company, as defined in the Deferred Compensation Plan, participants are entitled to receive deferred amounts immediately. The Compensation Committee believes that providing employees with tax deferral opportunities aids in recruitment and retention. Other Benefits The NEOs are eligible to participate in customary benefit programs offered broadly to certain other employees, including health, disability and life insurance programs. Additionally, Mr. Roellgen participates in the Timken European Stock Ownership Plan (the “TESOP”). The TESOP is a stock ownership plan established in accordance with French law that allows participants to make contributions to a fund with a corresponding company match of up to 1.4% (subject to certain legal limits) that invests a portion of the contribution in Company stock. Mr. Roellgen also participates in a legally required French profit-sharing plan that provides a modest benefit. The NEOs also may receive certain limited perquisites, including executive physicals, access to corporate country club memberships (although personal expenses are not reimbursed), and travel for spouses when accompanying NEOs on business travel. Mr. Roellgen also receives reimbursement of Company car-related expenses in accordance with local benefits practices in France. The Company does not provide tax gross-ups for these benefits to executives. These benefits are intended to provide executives with a competitive perquisite program that is reasonable and consistent with the Company’s overall approach to executive compensation. The total cost of these benefits is a very small percentage of each NEO’s total compensation. Additionally, Mr. Roellgen participates in the Timken European Stock Ownership Plan (the “TESOP”). The TESOP is a stock ownership plan established in accordance with French law that allows participants to make contributions to a fund with a corresponding company match of up to 1.4% (subject to certain legal limits) that invests a portion of the contribution in Company stock. Mr. Roellgen also participates in a legally required French profit-sharing plan that provides a modest benefit.
Table of Contents The NEOs also may receive certain limited perquisites, including executive physicals, access to corporate country club memberships (although personal expenses are not reimbursed), and travel for spouses when accompanying NEOs on business travel. Mr. Roellgen also receives reimbursement of Company car-related expenses in accordance with local benefits practices in France.
The Company does not provide tax gross-ups for these benefits to executives. These benefits are intended to provide executives with a competitive perquisite program that is reasonable and consistent with the Company’s overall approach to executive compensation. The total cost of these benefits is a very small percentage of each NEO’s total compensation.
Severance Agreements
In addition to retirement payments, the Company provides termination-related payments through severance agreements with individual NEOs in the event of involuntary termination of employment without cause or, following a change in control, in the event of involuntary termination of employment without cause or termination of employment by the executive under certain circumstances. Severance agreements are provided based on competitive market practice and the Company’s desire to ensure some level of income continuity should an executive’s employment be terminated without cause or terminated under other qualifying circumstances.
The level of severance benefits reflects the Company’s perception of competitive market practice for the NEOs’ positions, based on an assessment by WTW. Severance pay was established as a multiple of base salary and actual annual cash incentive compensation. In the event of a qualifying termination of employment, an NEO would also be entitled to vesting of equity-based awards in accordance with the respective grant agreement, health and welfare benefits, outplacement services, and (in the event of a qualifying termination that follows a change in control) benefits under our retirement benefit programs. The types of severance benefits for which our NEOs are potentially eligible, and the potential benefit and compensation amounts, are further described and quantified below under “Potential Payments Upon Termination or Change in Control” on page 66 and in the “Termination Scenarios” table on page 70.
The severance agreements do not contain excise tax gross-up provisions.
Stock Ownership Guidelines
Stock ownership guidelines have been established for all senior executives (including the NEOs) and are intended to align the interests of executive management with those of our shareholders. These guidelines establish a specific ownership target for each of the NEOs. In 2022, Mr. Kyle’s and Mr. Roellgen’s stock ownership guidelines were increased from five to seven times base salary, and from two to three times base salary, respectively.
In determining whether the executive met his or her individual ownership target for 2022, the Company considered shares owned by the executive and full-value equity awards held by the executive, including deferred shares and time-based restricted stock units (stock settled) still subject to vesting conditions. Performance-based shares/units are not counted towards ownership until they are vested, and shares that are subject to unexercised options are not counted towards ownership.
The stock ownership requirement is based on a multiple of base salary. Each NEO must meet this requirement within five years of becoming an NEO. The NEO must retain any net shares after tax until the ownership requirement is met. If ownership falls below the requirement due to a decline in share
Severance Agreements In addition to retirement payments, the Company provides termination-related payments through severance agreements with individual NEOs in the event of involuntary termination of employment without cause or, following a change in control, in the event of involuntary termination of employment without cause or termination of employment by the executive under certain circumstances. Severance agreements are provided based on competitive market practice and the Company’s desire to ensure some level of income continuity should an executive’s employment be terminated without cause or terminated under other qualifying circumstances. The level of severance benefits reflects the Company’s perception of competitive market practice for the NEOs’ positions, based on an assessment by WTW. Severance pay was established as a multiple of base salary and actual annual cash incentive compensation. In the event of a qualifying termination of employment, an NEO would also be entitled to vesting of equity-based awards in accordance with the respective grant agreement, health and welfare benefits, outplacement services, and (in the event of a qualifying termination that follows a change in control) benefits under our retirement benefit programs. The severance agreements do not contain excise tax gross-up provisions. The types of severance benefits for which our NEOs are potentially eligible, and the potential benefit and compensation amounts, are further described and quantified below under “Potential Payments Upon Termination or Change in Control” on page 67 and in the “Termination Scenarios” table on page 70. Stock Ownership Guidelines Stock ownership guidelines have been established for all senior executives (including the NEOs) and are intended to align the interests of executive management with those of our shareholders. These guidelines establish a specific ownership target for each of the NEOs. In determining whether the executive met his or her individual ownership target for 2023, the Company considered shares owned by the executive and full-value equity awards held by the executive, including deferred shares and time-based restricted stock units (stock settled) still subject to vesting conditions. Performance-based shares/units are not counted towards ownership until they are vested, and shares that are subject to unexercised options are not counted towards ownership. The stock ownership requirement is based on a multiple of base salary. Each NEO must meet this requirement within five years of becoming an NEO. The NEO must retain any net shares after tax until the ownership requirement is met. If ownership falls below the requirement due to a decline in share price, the expectation would be for the NEO to maintain net shares after tax with respect to vested equity awards until the ownership requirement is met. The stock ownership guidelines do not require purchasing shares on the open market, but rather maintaining net shares on future vestings. As of December 31, 2023, all NEOs exceeded their individual ownership targets. Officer Name | Stock Ownership Requirement – Multiple of Base Salary | Actual Stock Ownership – Multiple of Base Salary* | Mr. Kyle | 7x | 29.1x | Mr. Fracassa | 3x | 13.1x | Mr. Coughlin | 3x | 13.8x | Mr. Roellgen | 3x | 11.6x | Mr. Patel | 2x | 3.5x |
* Calculated by multiplying the number of shares held by each NEO on December 31, 2023 by the daily average stock price for the year ending December 31, 2023 and dividing that product by each NEO’s 2023 base salary. Anti-Hedging/Pledging Policies The Company has adopted formal policies that prohibit our Directors, NEOs, other officers, and employees (and related persons) from pledging Company common shares or hedging the economic risk related to such stock ownership. In addition to prohibiting hedging transactions generally, the policies also expressly forbid use of the following types of hedging transactions: puts, calls, short sales, and the purchase of Company stock on margin. Compensation Risk Assessment The Compensation Committee regularly reviews the risk associated with the Company’s compensation programs. As part of this process, the Compensation Committee reviewed a comprehensive risk assessment conducted by WTW in 2020 and concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company, and that several of our current practices effectively mitigate risk and promote performance. In each of 2021, 2022, and 2023, the Compensation Committee discussed any year-over-year changes that could impact risk with WTW. The Compensation Committee and WTW concluded that no plan changes were implemented in 2023 that would materially affect the existing risk profile of the compensation programs, and that several of our current practices effectively mitigate risk and promote performance. Clawback Provisions Historically, the Company has maintained specific provisions in its incentive compensation programs regarding the recovery of awards to deter certain types of conduct, including conduct that leads to a restatement of the Company’s financial statements. During 2023, in light of new rules promulgated by NYSE and SEC requirements, we adopted the Clawback Policy to comply with the new requirements. Mandatory Accounting Restatement Provisions The Clawback Policy provides for the reasonably prompt recovery (or clawback) of certain excess incentive-based compensation received during an applicable three-year recovery period by current or former executive officers (including the NEOs) in the event the Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the securities laws. Excess incentive-based compensation for these purposes generally means the amount of incentive-based compensation received (on or after October 2, 2023) by such executive officer that exceeds the amount of incentive-based compensation that would have been received by such executive officer had it been determined based on the restated amounts, without regard to any taxes paid. Incentive-based compensation potentially subject to recovery under the mandatory accounting restatement provisions of the Clawback Policy is generally limited to any compensation granted, earned or vested based wholly or in part on the attainment of one or more financial reporting measures. The Clawback Policy includes limited exceptions to the requirement to clawback amounts in the event of an accounting restatement in accordance with NYSE rules and SEC requirements. Amounts received prior to the adoption of the Clawback Policy continue to be governed by the historical clawback provisions in the Company’s incentive compensation documentation. Permissive Accounting Restatement Provisions The Clawback Policy also provides for permissive clawback (at the election of the Compensation Committee) from covered Company employees (including the NEOs) who are determined to be personally responsible for causing the accounting restatement due to their personal misconduct or fraudulent activity. Such recovery may include up to 100% of short-term incentive awards received during an applicable recovery period and up to 100% of certain equity awards identified in the Clawback Policy (but limited in both cases to the amount by which such awards exceeded the amounts that would have been earned and paid based on the restated amounts). Detrimental Activity and Restrictive Covenant Provisions The Clawback Policy further provides for forfeiture of outstanding but unpaid equity awards by certain Company employees (including the NEOs) who are determined to have engaged in certain detrimental activity during employment or service with the Company. In addition, the Clawback Policy requires certain Company employees (including the NEOs) to forfeit equity awards and dividend equivalents (and/or make certain repayments to the Company regarding such awards) if they breach their obligations under any restrictive covenant arrangements with the Company. Compensation Committee Report The Compensation Committee has reviewed and discussed the CD&A for the year ended December 31, 2023 with our management. Based on the review and discussion referred to above, the Compensation Committee recommended to our Board, and our Board approved, the inclusion of the CD&A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and this Proxy Statement for filing with the SEC. | Ajita G. Rajendra (Compensation Committee Chair) | | Elizabeth A. Harrell | | Sarah C. Lauber | | John A. Luke, Jr. | | James F. Palmer | | Frank C. Sullivan |
EXECUTIVE COMPENSATION 2023 Summary Compensation Table The following table sets forth information concerning compensation for our NEOs: Name and Principal Position | Year | Salary | Stock Awards (2) | Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compensation (5) | Total | Richard G. Kyle | 2023 | $1,145,380 | $5,982,334 | $1,857,835 | $1,258,413 | $534,447 | $10,778,409 | President & CEO | 2022 | $1,067,072 | $4,876,769 | $1,873,405 | $0 | $420,284 | $8,237,530 | | 2021 | $1,037,145 | $4,422,240 | $958,338 | $2,674,337 | $573,270 | $9,665,330 | Philip D. Fracassa | 2023 | $644,225 | $2,498,858 | $668,767 | $539,632 | $207,484 | $4,558,966 | Executive Vice President and Chief | 2022 | $608,396 | $1,405,114 | $683,603 | $0 | $150,144 | $2,847,257 | Financial Officer | 2021 | $573,159 | $1,249,358 | $337,694 | $708,956 | $166,410 | $3,035,577 | Christopher A. Coughlin | 2023 | $646,726 | $2,342,105 | $671,363 | $0 | $229,463 | $3,889,657 | Executive Vice President and | 2022 | $621,135 | $2,122,694 | $697,917 | $0 | $120,723 | $3,562,469 | President Industrial Motion | 2021 | $572,970 | $1,333,395 | $337,582 | $498,724 | $158,935 | $2,901,606 | Andreas Roellgen (1) | 2023 | $525,349 | $1,062,483 | $511,278 | $292,321 | $90,855 | $2,482,286 | Executive Vice President and | 2022 | $420,777 | $570,775 | $405,792 | $0 | $135,198 | $1,532,542 | President Engineered Bearings | 2021 | $375,501 | $472,478 | $151,609 | $0 | $72,420 | $1,072,008 | Hansal N. Patel | 2023 | $502,533 | $921,672 | $456,468 | $11,188 | $107,536 | $1,999,397 | Vice President, General Counsel | 2022 | $457,692 | $777,261 | $445,068 | - | $61,887 | $1,741,908 | & Secretary | 2021 | $415,215 | $704,048 | $198,400 | - | $53,761 | $1,371,424 |
| (1) | Mr. Roellgen’s compensation is generally based in Euros. The conversion rate used for purposes of converting the Euros earned by Mr. Roellgen into U.S. Dollars for purposes of the Change in Pension Value and Nonqualified Deferred Compensation Earnings column for 2023 was €1.00 = $1.1039, which was the applicable exchange rate as of December 31, 2022,2023. For all NEOs currently serving atother columns in this table, the Company exceeded their individual ownership targets.Officer
Name | Stock Ownership Requirement – Multiple of Base Salary | Actual Stock Ownership – Multiple of Base Salary* | Mr. Kyle | 7x | 24.5x | Mr. Fracassa | 3x | 11.0x | Mr. Coughlin | 3x | 12.8x | Mr. Patel | 2x | 2.2x | Mr. Roellgen | 3x | 8.9x |
* Calculatedconversion rate used for purposes of converting the Euros earned by multiplying the number of shares held by each NEO on December 31, 2022 by the dailyMr. Roellgen into U.S. Dollars for 2023 was €1.00 = $1.0817 (the average stock pricemonthly exchange rate for the year ending December 31, 2022 and dividing2023 calendar year), which approach we believe provides a reasonable representation of his compensation by accounting for currency exchange fluctuations that product by each NEO’s 2022 base salary.
Anti-Hedging/Pledging Policies
The Company has adopted formal policies that prohibit our Directors, NEOs, other officers, and employees (and related persons) from pledging Company common shares or hedgingoccurred throughout the economic risk related to such stock ownership. In addition to prohibiting hedging transactions generally, the policies also expressly forbid use of the following types of hedging transactions: puts, calls, short sales, and the purchase of Company stock on margin.
Compensation Risk Assessment
The Compensation Committee regularly reviews the risk associated with the Company’s compensation programs. As part of this process, the Compensation Committee reviewed a comprehensive risk assessment conducted by WTW in 2020 and concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company, and that several of our current practices effectively mitigate risk and promote performance. In 2022, the Compensation Committee discussed any year-over-year changes that could impact risk with WTW. The Compensation Committee and WTW concluded that no plan changes were implemented in 2022 that would materially affect the existing risk profile of the compensation programs, and that several of our current practices effectively mitigate risk and promote performance.
Clawback Provisions
The Company maintains specific provisions regarding the recovery of awards to deter certain types of conduct, including conduct that could affect the accuracy of the Company’s financial statements. These provisions apply to both short- and long-term incentive programs where, if personal misconduct or any fraudulent activity on the part of the executive leads to the restatement of Company financial results, the Company can clawback an award. In such cases, the Compensation Committee has discretion, based on applicable facts and circumstances, to cause the Company to seek to recover all or any portion of the equity-based or cash incentive paid or payable to the executive for some or all of the years covered by the restatement. In the wake of the SEC’s recent promulgation of final Dodd-Frank Act clawback rules, the Company expects to review and consider changes to its clawback provisions during 2023.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the CD&A for the year ended December 31, 2022 with our management. Based on the review and discussion referred to above, the Compensation Committee recommended to our Board, and our Board approved, the inclusion of the CD&A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and this Proxy Statement for filing with the SEC.
| Ajita G. Rajendra (Compensation Committee Chair) | | Elizabeth A. Harrell | | Sarah C. Lauber | | John A. Luke, Jr. | | James F. Palmer | | Jacqueline F. Woods | | |
EXECUTIVE COMPENSATION
2022 Summary Compensation Table
The following table sets forth information concerning compensation for our NEOs for 2022, 2021 and 2020, as applicable:
Name and Principal Position | | Year | | Salary (2) | | Stock Awards (3) | | Non-Equity Incentive Plan Compensation (4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) | | All Other Compensation (6) | | Total | Richard G. Kyle | | 2022 | | $1,067,072 | | $4,876,769 | | $1,873,405 | | $0 | | $420,284 | | $8,237,530 | President & CEO | | 2021 | | $1,037,145 | | $4,422,240 | | $958,338 | | $2,674,337 | | $573,270 | | $9,665,330 | | | 2020 | | $843,093 | | $4,421,376 | | $974,914 | | $4,448,000 | | $576,880 | | $11,264,263 | Philip D. Fracassa | | 2022 | | $608,396 | | $1,405,114 | | $683,603 | | $0 | | $150,144 | | $2,847,257 | Executive Vice President and Chief | | 2021 | | $573,159 | | $1,249,358 | | $337,694 | | $708,956 | | $166,410 | | $3,035,577 | Financial Officer | | 2020 | | $499,112 | | $1,226,319 | | $338,373 | | $1,399,000 | | $174,084 | | $3,636,888 | Christopher A. Coughlin | | 2022 | | $621,135 | | $2,122,694 | | $697,917 | | $0 | | $120,723 | | $3,562,469 | Executive Vice President and | | 2021 | | $572,970 | | $1,333,395 | | $337,582 | | $498,724 | | $158,935 | | $2,901,606 | President Industrial Motion | | 2020 | | $497,200 | | $1,332,379 | | $337,210 | | $1,150,000 | | $167,245 | | $3,484,034 | Hansal N. Patel | | 2022 | | $457,692 | | $777,261 | | $445,068 | | - | | $61,887 | | $1,741,908 | Vice President, General Counsel | | 2021 | | $415,215 | | $704,048 | | $198,400 | | - | | $53,761 | | $1,371,424 | & Secretary | | | | | | | | | | | | | | | Andreas Roellgen (1) | | 2022 | | $420,777 | | $570,775 | | $405,792 | | $0 | | $135,198 | | $1,532,542 | Executive Vice President and | | 2021 | | $375,501 | | $472,478 | | $151,609 | | $0 | | $72,420 | | $1,072,008 | President Engineered Bearings | | 2020 | | $304,998 | | $395,074 | | $136,003 | | $315,000 | | $55,845 | | $1,206,920 | Hans Landin | | 2022 | | $230,760 | | $512,019 | | $201,890 | | - | | $819,559 | | $1,764,228 | Former Group Vice President | | | | | | | | | | | | | | |
| (1) | Mr. Roellgen’s compensation is generally based in Euros. The conversion rate used for purposes of converting the Euros earned by Mr. Roellgen into U.S. Dollars for purposes of the Change in Pension Value and Nonqualified Deferred Compensation Earnings column for 2022 was €1.00 = $1.0705, which was the applicable exchange rate as of December 31, 2022. For all other columns in this table, the conversion rate used for purposes of converting the Euros earned by Mr. Roellgen into U.S. Dollars for 2022 was €1.00 = $1.0539 (the average monthly exchange rate for the 2022 calendar year), which approach we believe provides a reasonable representation of his compensation by accounting for currency exchange fluctuations that occurred throughout the calendar year. | | | | | (2) | 2020 base salaries reflect Board approved temporary reductions that occurred between April and July 2020 for each of the Company’s NEOs to help mitigate the financial impact to the Company from COVID-19, as approved by the Board. | | | | | (3) | The amounts shown in this column for 2022 include the grant date fair value of time-based restricted stock units granted in 2022. See the description of time-based restricted stock units on page 52. Additionally, this column includes the grant date fair market value of the performance-based restricted stock units for the 2022-2024 performance cycle at target. See the description of the performance-based restricted stock units on page 50. Should performance equal or exceed the maximum goals for these performance-based restricted stock units, the grant date fair value for such awards would be: Mr. Kyle - $5,852,123; Mr. Fracassa - $1,685,465; Mr. Coughlin - $1,782,833; Mr. Patel - $933,385; Mr. Roellgen - $684,930; and Mr. Landin - $614,423. |
For Mr. Coughlin, the amount shown in this column also includesfor 2023 include the grant date fair value of a one-timetime-based restricted stock units granted in 2023. See the description of time-based restricted stock units on page 53. Additionally, this column includes the grant date fair market value of 10,000 deferred shares made tothe performance-based restricted stock units for the 2023-2025 performance cycle at target. See the description of the performance-based restricted stock units on page 51. Should performance equal or exceed the maximum goals for these performance-based restricted stock units, the grant date fair value for such awards would be: Mr. Kyle - $7,177,094; Mr. Fracassa - $1,915,883; Mr. Coughlin on August 3, 2022 in connection with being named Executive Vice President, President of Industrial Motion. These shares vest- $2,014,024; Mr. Roellgen - $1,275,833; and Mr. Patel - $1,105,153.
|
For Mr. Coughlin, the amount shown in this column for 2022 also includes the grant date fair value of a grant of 10,000 deferred shares made to Mr. Coughlin on August 3, 2022 in connection with being named Executive Vice President, President of Industrial Motion. These shares vested in full on December 31, 2023. The amount shown in this column for 2023 also includes the grant date fair value of an award of 8,000 deferred shares made to Mr. Coughlin on February 10, 2023, and an award of 12,000 deferred shares to Mr. Fracassa on December 7, 2023. These one-time grants were made in connection with the Company’s ongoing executive officer succession planning process to promote the retention of Mr. Coughlin and Mr. Fracassa. These shares vest in full on March 31, 2025, for Mr. Coughlin, and on March 31, 2026, for Mr. Fracassa, both contingent on continued employment with the Company. The entire award will be forfeited if either individual voluntarily leaves the Company for any reason prior to the vesting date. The amounts shown in this column are computed in accordance with FASB ASC Topic 718. | (3) | The amounts shown in this column are computed in accordance with FASB ASC Topic 718. | (4) | The amounts shown in this column for 2022 represent actual cash award payouts under the annual cash incentive plan for 2022 performance. Mr. Landin’s actual award payout was prorated based on the number of months worked during the year, prior to his employment ending with the Company on August 1, 2022. Both Mr. Fracassa and Mr. Patel elected to defer receipt of a portion of their 2022for 2023 represent actual cash award payouts under the annual cash incentive plan for 2023 performance. Both Mr. Fracassa and Mr. Patel elected to defer receipt of a portion of their 2023 annual cash incentive plan payout under the Deferred Compensation Plan. | | | | | (5) | There are no amounts to report in this column for 2022 because the difference between the accumulated benefit amounts shown in the 2022 Pension Benefits Table as of December 31, 2022 and those amounts calculated as of December 31, 2021 was a negative number for each applicable NEO. See “2022 Pension Benefits Table” on page 65 for a description of how the amounts as of December 31, 2022 were calculated. For U.S.-based NEOs, the amounts as of December 31, 2021 were calculated in the same manner as the December 31, 2022 amounts, except that discount rates of 3.06% for nonqualified plans and 3.07% for qualified plans were used (compared to discount rates of 5.70% for the 2022 amounts for nonqualified benefits and 5.62% for the 2022 amounts for qualified benefits). For Mr. Roellgen, the amounts as of December 31, 2021 were calculated in the same manner as 2022 amounts, except that a discount rate of 1.00% was used (compared to a discount rate of 3.75% for 2022). While the Summary Compensation Table includes a $0 value for change in pension value for Messrs. Kyle, Fracassa, Coughlin, and Roellgen, the value of their pensions actually decreased $6,775,503, $2,796,998, $2,440,273 and $473,035, respectively, primarily due to the increase in discount rate year over year. Values were determined assuming no probability of termination, retirement, death, or disability before age 62, the earliest age unreduced pension benefits are payable from the applicable plans in each case. A measurement date of December 31, 2022 was used for all NEOs. |
| (4) | The amounts shown in this column for 2023 represent the difference between the accumulated benefit amounts shown in the 2023 Pension Benefits Table as of December 31, 2023 and those amounts calculated as of December 31, 2022. See “2023 Pension Benefits Table” on page 65 for a description of how the amounts as of December 31, 2023 were calculated. For U.S.-based NEOs, the amounts as of December 31, 2022 were calculated in the same manner as the December 31, 2023 amounts, except that discount rates of 5.70% for nonqualified plans and 5.62% for qualified plans were used (compared to discount rates of 5.45% and 5.37%, respectively, for the 2023 amounts). For Mr. Roellgen, the amounts as of December 31, 2022 were calculated in the same manner as 2023 amounts, except that a discount rate of 3.75% was used (compared to a discount rate of 3.20% for 2023). Values were determined assuming retirement at age 62 for U.S. NEOs and 63.75 for Mr. Roellgen, the earliest age unreduced pension benefits are payable from the applicable plans in each case. While the Summary Compensation Table includes a $0 value for change in pension value for Mr. Coughlin, the value of his pension actually decreased $68,151 in 2023, primarily due to Mr. Coughlin having passed age 62. Mr. Patel does not participate in the Pension Plan. |
Several years ago, the Company closed the Pension Plan, to new entrants and ceased providingreceive supplemental pension plan benefits, or have an Excess Benefit AgreementsAgreement. The amounts shown in this column for 2023 also include above-market interest, as defined by the SEC, earned on amounts deferred under the Deferred Compensation Plan for Mr. Kyle, Mr. Fracassa and Mr. Patel, in the amounts of $54,049, $71,215, and $11,188, respectively. The above-market interest earned resulted from an increase in the prime rate, relative to newly appointed officers. Effective December 31, 2022,long term interest rates, due to the current interest rate environment.
|
| (5) | The amounts shown in this column for 2023 are detailed in the following table: |
Name | Annual Company Contribution to SIP, Core DC, and/or French DC (a) | Annual Company Contribution to Post-Tax Savings Plan (b) | Executive Physicals | Personal Use of Company Country Club Memberships (c) | Personal and Spousal Travel and Related Expenses (d) | Cash Dividend Equivalents (e) | Life Insurance (f) | Other (g) | Richard G. Kyle | $28,050 | $228,547 | $2,110 | $10,347 | $20,068 | $240,046 | $5,279 | - | Philip D. Fracassa | $28,050 | $84,815 | $3,013 | $12,660 | $9,894 | $66,131 | $2,921 | - | Christopher A. Coughlin | $29,700 | $91,318 | $1,316 | $4,790 | $7,930 | $89,807 | $4,602 | - | Andreas Roellgen | $37,673 | - | $3,369 | - | $2,398 | $21,308 | $1,523 | $24,584 | Hansal N. Patel | $24,750 | $46,320 | $1,868 | - | $7,865 | $26,234 | $499 | - |
| (a) | “SIP” refers to the Savings and Investment Retirement Plan, which is the Company’s primary U.S. qualified defined contribution plan for eligible salaried employees, under which the Company froze benefits under bothmakes matching contributions and “Core DC” contributions to the Pension Plan and the Excess Benefit Agreements. See the “Retirement Programs” section on page 52 for additional details. | (6) | The amounts shown in this column for 2022 are detailed in the following table: |
Name | | Annual Company Contribution to SIP, Core DC, and/or French DC (a) | | Annual Company Contribution to Post-Tax Savings Plan (b) | | Executive Physicals | | Personal Use of Company Country Club Memberships (c) | | Personal and Spousal Travel and Related Expenses (d) | | Cash Dividend Equivalents (e) | | Life Insurance (f) | | Other (g) | Richard G. Kyle | | $25,925 | | $146,235 | | $1,914 | | $9,145 | | $1,063 | | $230,883 | | $5,119 | | - | Philip D. Fracassa | | $25,925 | | $54,493 | | $3,017 | | $5,598 | | $1,063 | | $58,596 | | $1,452 | | - | Christopher A. Coughlin | | $13,725 | | $29,417 | | $1,177 | | $3,675 | | - | | $68,563 | | $4,166 | | - | Hansal N. Patel | | $22,875 | | $26,332 | | $2,236 | | - | | $1,185 | | $8,814 | | $445 | | - | Andreas Roellgen | | $22,232 | | - | | - | | - | | $6,660 | | $75,291 | | $1,402 | | $29,613 | Hans Landin | | $25,925 | | $6,407 | | - | | - | | - | | $72,191 | | $562 | | $714,474 |
| (a) | “SIP” refers to the Savings and Investment Retirement Plan, which is the Company’s primary U.S. qualified defined contribution plan for eligible salaried employees, under which the Company makes matching contributions and “Core DC” contributions to the accounts of |
accounts of eligible U.S. salaried employees. Messrs. Kyle, Fracassa, Coughlin Patel and LandinPatel received SIP matching contributions during 2022. Messrs. Kyle, Fracassa, Patel and Landin received Core DC contributions during 2022.2023. “French DC” refers to the Company’s French qualified defined contribution plan under which Mr. Roellgen received contributions. See the “Retirement Programs” section on page 5253 for plan details. | (b) | The “Post-Tax Savings Plan” is the Company’s non-tax qualified restoration plan for eligible U.S. salaried employees whose contributions and benefits in qualified retirement plans are limited by Section 415 of the Code. Amounts shown in this column may also include amounts deferred into the Deferred Compensation Plan for Company 401(k) contributions and/or core defined contributions in excess of tax limits, if elected by the NEO. | | | | | (c) | The amounts shown for personal use of country club memberships reflect prorated amounts of Company-paid annual membership dues in 2022 that relate to personal use by the NEOs. There are no incremental costs to the Company for personal use, as just one annual payment is made to cover membership dues for both business use and personal use, but all personal expenses are allocated to, and borne by, the NEOs. | | | | | (d) | The amounts shown in this column represent expenses related to spousal travel and/or personal travel. If applicable, spousal travel amounts may include the incremental cost of transportation and meals while traveling. Personal travel amounts may include incremental travel expenses for personal use of the Company aircraft such as direct variable operating costs related to fuel, maintenance expenses, landing and parking fees, crew accommodations and meals. Since the aircraft is used primarily for business travel, the Company does not include in the calculation the fixed costs that do not change based on usage. No tax gross-ups on the related imputed income are paid. | | | | | (e) | Reflects cumulative dividend equivalents paid in cash in 2022 upon vesting for applicable time-based restricted stock units, performance-based restricted stock units, and deferred shares (if applicable). | | | | | (f) | The amounts shown represent the actual premiums paid by the Company for term life insurance (which is provided by the Company for all eligible employees at a level equal to one times their annual salary) and long-term disability insurance. | | | | | (g) | This column reflects Mr. Roellgen’s Company car benefit, Company contributions into his TESOP, and an additional amount of $16,863 paid under the legally required French profit-sharing plan. For Mr. Landin, this column reflects a severance payment of $660,280 which was made to Mr. Landin in connection with the end of his employment with the Company (as further described below under “Potential Payments Upon Termination or Change in Control), continuation of health and welfare benefits of $30,203, outplacement services of $8,600, and a payout for accrued, but unused vacation in 2022 in the amount of $15,390. |
| 60 | 60 | (b) | The “Post-Tax Savings Plan” is the Company’s non-tax qualified restoration plan for eligible U.S. salaried employees whose contributions and benefits in qualified retirement plans are limited by Section 415 of the Code. |
2022 Grants
| (c) | The amounts shown for personal use of Plan-Based AwardsThe following table sets forth information concerning certain grantscountry club memberships reflect prorated amounts of Company-paid annual membership dues in 2023 that relate to personal use by the NEOs. There are no incremental costs to the Company for personal use, as just one annual payment is made to our NEOs during 2022:
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock | Grant Date Fair Value | | | | | | | | | Awards: Number of Shares of Stock or Units | of Stock and Option Awards (5) | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | Richard G. | 02/10/2022 RSUs (1) | | | | | | | 29,050 | $ 1,950,708 | Kyle | 02/10/2022 CSTIP (2) | $ 133,384 | $ 1,333,840 | $ 2,667,680 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 8,715 | 43,575 | 87,150 | | $ 2,926,061 | Philip D. | 02/10/2022 RSUs (1) | | | | | | | 8,375 | $ 562,381 | Fracassa | 02/10/2022 CSTIP (2) | $ 48,672 | $ 486,717 | $ 973,433 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 2,510 | 12,550 | 25,100 | | $ 842,733 | Christopher A. | 02/10/2022 RSUs (1) | | | | | | | 8,850 | $594,278 | Coughlin | 02/10/2022 CSTIP (2) | $ 49,691 | $ 496,908 | $ 993,816 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 2,655 | 13,275 | 26,550 | | $ 891,416 | | 08/03/2022 Def Shrs (4) | | | | | | | 10,000 | $637,000 | Hansal N. | 02/10/2022 RSUs (1) | | | | | | | 4,625 | $ 310,569 | Patel | 02/10/2022 CSTIP (2) | $ 31,688 | $316,883 | $633,765 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 1,390 | 6,950 | 13,900 | | $ 466,693 | Andreas | 02/10/2022 RSUs (1) | | | | | | | 3,400 | $ 228,310 | Roellgen | 02/10/2022 CSTIP (2) | $ 28,892 | $ 288,919 | $ 577,837 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 1,020 | 5,100 | 10,200 | | $ 342,465 | Hans | 02/10/2022 RSUs (1) | | | | | | | 3,050 | $204,808 | Landin | 02/10/2022 CSTIP (2) | $ 25,114 | $ 251,137 | $ 502,275 | | | | | | | 02/10/2022 Perf RSUs (3) | | | | 915 | 4,575 | 9,150 | | $307,211 |
| (1) | The “RSUs” amounts shown reflect the time-based restricted stock units granted to each NEO in 2022 under the Equity and Incentive Compensation Plan. See the description of time-based restricted stock units on page 52.cover membership dues for both business use and personal use, but all personal expenses are allocated to, and borne by, the NEOs. | | | |
| (d) | The amounts shown in this column represent expenses related to spousal travel and/or personal travel. If applicable, spousal travel amounts may include the incremental cost of transportation and meals while traveling. Personal travel amounts may include incremental travel expenses for personal use of the Company aircraft such as direct variable operating costs related to fuel, maintenance expenses, landing and parking fees, crew accommodations and meals. Since the aircraft is used primarily for business travel, the Company does not include in the calculation the fixed costs that do not change based on usage. No tax gross-ups on the related imputed income are paid. | | (2) | The “CSTIP” amounts shown reflect payout opportunities at threshold, target and maximum performance levels under the annual cash incentive plan design for 2022. |
| (e) | Reflects cumulative dividend equivalents paid in cash in 2023 upon vesting for applicable time-based restricted stock units, performance-based restricted stock units, and deferred shares (if applicable). |
| (f) | The amounts shown represent the actual premiums paid by the Company for term life insurance (which is provided by the Company for all eligible employees at a level equal to one times their annual salary) and long-term disability insurance. |
| (g) | This column reflects Mr. Roellgen’s Company car benefit, Company contributions into his TESOP, and an additional amount of $11,250 paid under the legally required French profit-sharing plan. |
2023 Grants of Plan-Based Awards The following table sets forth information concerning certain grants made to our NEOs during 2023: Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards (5) | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | Richard G. | 02/09/2023 RSUs (1) | | | | | | | 28,050 | $ 2,393,787 | Kyle | 02/09/2023 CSTIP (2) | $ 143,172 | $ 1,431,725 | $ 2,863,450 | | | 02/09/2023 Perf RSUs (3) | | | | 4,205 | 42,050 | 84,100 | | $ 3,588,547 | Philip D. | 02/09/2023 RSUs (1) | | | | | | | 7,475 | $ 637,917 | Fracassa | 02/09/2023 CSTIP (2) | $ 51,538 | $ 515,380 | $ 1,030,760 | | | | | | | 02/09/2023 Perf RSUs (3) | | | | 1,123 | 11,225 | 22,450 | | $ 957,942 | | 12/7/2023 Def Shrs (4) | | | | | | | 12,000 | $ 903,000 | Christopher A. | 02/09/2023 RSUs (1) | | | | | | | 7,875 | $ 672,053 | Coughlin | 02/09/2023 CSTIP (2) | $ 51,738 | $ 517,380 | $ 1,034,761 | | | | | | | 02/09/2023 Perf RSUs (3) | | | | 1,180 | 11,800 | 23,600 | | $ 1,007,012 | | 02/10/2023 Def Shrs (4) | | | | | | | 8,000 | $ 663,040 | Andreas | 02/09/2023 RSUs (1) | | | | | | | 4,975 | $ 424,567 | Roellgen | 02/09/2023 CSTIP (2) | $ 39,568 | $ 395,683 | $ 791,365 | | | | | | | 02/09/2023 Perf RSUs (3) | | | | 748 | 7,475 | 14,950 | | $ 637,917 | Hansal N. | 02/09/2023 RSUs (1) | | | | | | | 4,325 | $ 369,096 | Patel | 02/09/2023 CSTIP (2) | $ 35,177 | $ 351,773 | $ 703,546 | | | | | | | 02/09/2023 Perf RSUs (3) | | | | 648 | 6,475 | 12,950 | | $ 552,577 |
| (1) | The “RSUs” amounts shown reflect the time-based restricted stock units granted to each NEO in 2023 under the Equity and Incentive Compensation Plan. See the description of time-based restricted stock units on page 53. |
| (2) | The “CSTIP” amounts shown reflect payout opportunities at threshold, target and maximum performance levels under the annual cash incentive plan design for 2023. Threshold is reflected as the minimum payout if (a) the adjusted EBITDA results would lead to a payout under that metric of zero, (b) one of either the adjusted EBITDA margin or free cash flow metric results would lead to a payout of zero, (c) the results for the other metric identified in clause (b) (either adjusted EBITDA margin or free cash flow) would lead to a payout at threshold under that metric, and (d) adjusted EBITDA margin was greater than 12.5%. Mr. Landin’s actual award payout was prorated based on the number of months worked during the year, prior to the end of his employment with the Company on August 1, 2022. See the “Annual Cash Incentive” section on page 48 for additional details. | | | | | (3) | The “Perf RSUs” amounts shown indicate aggregate threshold, target and maximum award opportunities for the performance-based restricted stock units covering the 2022-2024 cycle granted to each NEO in 2022 under the Equity and Incentive Compensation Plan. Threshold is reflected as the minimum payout if the adjusted EPS metric payout is zero and the adjusted ROIC metric pays at threshold, and above the plan circuit breaker. Upon his exit from the Company, Mr. Landin’s unvested nonqualified stock options, time-based restricted stock units and performance-based restricted stock units were treated in accordance with the original terms of the respective grants, as described in the “Potential Payments Upon Termination or Change in Control” section on page 66. See the description of the performance-based restricted stock units on page 50. |
| (4) | The “Def Shrs” amounts shown reflect a one-time grant of 10,000 deferred shares made to Mr. Coughlin on August 3, 2022 under the Equity and Incentive Compensation Plan in connection with being named Executive Vice President, President of Industrial Motion. These shares vest in full on December 31, 2023, contingent on continued employment with the Company. | | | | | (5) | The amounts shown reflect the grant date fair value of time-based restricted stock units and performance-based restricted stock units granted in 2022, calculated in accordance with FASB ASC Topic 718. The fair market value of time-based restricted stock units and performance-based restricted stock units is the opening price of our common shares on the date of grant multiplied by the number of shares granted (or, for performance-based restricted stock units, the “target” number of shares granted, which represents the probable outcome of the applicable performance conditions as of the grant date). |
For more information regarding certain compensation arrangements with our NEOs, please refer to the “Potential Payments Upon Termination or Change in Control” section on page 66.48 for additional details.
|
| (3) | The “Perf RSUs” amounts shown indicate aggregate threshold, target and maximum award opportunities for the performance-based restricted stock units covering the 2023-2025 cycle granted to each NEO in 2023 under the Equity and Incentive Compensation Plan. Threshold is reflected as the minimum payout if the adjusted EPS metric pays at threshold, the adjusted ROIC metric pays at threshold, but performs above the plan circuit breaker, and the relative TSR metric pays at threshold. See the description of the performance-based restricted stock units on page 51. |
| (4) | The “Def Shrs” amounts shown reflect a one-time grant of 8,000 deferred shares made to Mr. Coughlin on February 10, 2023, and a one-time grant of 12,000 deferred shares made to Mr. Fracassa on December 7, 2023. These one-time grants were made in connection with the Company’s ongoing executive officer succession planning process to promote the retention of Mr. Coughlin and Mr. Fracassa. These shares vest in full on March 31, 2025, for Mr. Coughlin, and on March 31, 2026, for Mr. Fracassa, both contingent on continued employment with the |
Company. The entire award will be forfeited if either individual voluntarily leaves the Company for any reason prior to the vesting date. | (5) | The amounts shown reflect the grant date fair value of time-based restricted stock units and performance-based restricted stock units granted in 2023, calculated in accordance with FASB ASC Topic 718. The fair market value of time-based restricted stock units and performance-based restricted stock units is the opening price of our common shares on the date of grant multiplied by the number of shares granted (or, for performance-based restricted stock units, the “target” number of shares granted, which represents the probable outcome of the applicable performance conditions as of the grant date). |
For more information regarding certain compensation arrangements with our NEOs, please refer to the “Potential Payments Upon Termination or Change in Control” section on page 67. For information regarding the amount of various compensation elements in proportion to total compensation, see the NEO pay mix charts in the “Aligning Pay with Performance” section on page 41.43. | 62 | Outstanding Equity Awards at 2023 Fiscal Year-End |
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table sets forth information concerning unexercised Company stock options and stock awards that have not vested for each of our NEOs as of December 31, 2022:2023: | Option Awards (2) | Stock Awards | Name | Grant Date | Number of Securities Underlying Unexercised (#) Options | Number of Securities Underlying Unexercised (#) Options | Option Exercise Price | Option Expiration Date | Grant Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have | | | | | | | | | | | | | | Exercisable | Unexercisable | | | | | | | | Richard G. Kyle | 02/11/2016 | 10,000 | - | $27.75 | 02/11/2026 | 02/12/2019 (3) | 5,194 | $367,060 | - | - | | 02/13/2017 | 20,000 | - | $45.35 | 02/13/2027 | 02/10/2020 (3) | 16,675 | $1,178,422 | - | - | | 02/12/2018 | 121,300 | - | $44.65 | 02/12/2028 | 02/10/2021 (4) | - | - | 35,525 | $2,510,552 | | 02/12/2019 | 103,818 | 34,607 | $42.60 | 02/12/2029 | 02/10/2021 (3) | 17,757 | $1,254,887 | - | - | | | | | | | 02/10/2022 (4) | - | - | 43,575 | $3,079,445 | | | | | | | 02/10/2022 (3) | 29,050 | $2,052,964 | - | - | Philip D. Fracassa | 02/12/2019 | 26,118 | 8,707 | $42.60 | 02/12/2029 | 02/12/2019 (3) | 1,307 | $92,366 | - | - | | | | | | | 02/10/2020 (3) | 4,625 | $326,849 | - | - | | | | | | | 02/10/2021 (4) | - | - | 10,025 | $708,467 | | | | | | | 02/10/2021 (3) | 5,025 | $355,117 | - | - | | | | | | | 02/10/2022 (4) | - | - | 12,550 | $886,909 | | | | | | | 02/10/2022 (3) | 8,375 | $591,861 | - | - | Christopher A. Coughlin | 02/11/2016 | 57,475 | - | $27.75 | 02/11/2026 | 02/12/2019 (3) | 1,482 | $104,733 | - | - | | 02/13/2017 | 36,825 | - | $45.35 | 02/13/2027 | 02/10/2020 (3) | 4,859 | $343,386 | - | - | | 02/12/2018 | 37,925 | - | $44.65 | 02/12/2028 | 02/10/2021 (4) | - | - | 10,700 | $756,169 | | 02/12/2019 | 30,562 | 10,188 | $42.60 | 02/12/2029 | 02/10/2021 (3) | 5,185 | $366,424 | - | - | | | | | | | 02/10/2022 (4) | - | - | 13,275 | $938,144 | | | | | | | 02/10/2022 (3) | 8,558 | $604,794 | - | - | | | | | | | 08/03/2022 (5) | 10,000 | $706,700 | - | - | Hansal N. Patel | 02/12/2019 | - | 968 | $42.60 | 02/12/2029 | 02/12/2019 (3) | 148 | $10,459 | - | - | | | | | | | 02/10/2020 (3) | 1,888 | $133,425 | - | - | | | | | | | 02/10/2021 (4) | - | - | 5,650 | $399,286 | | | | | | | 02/10/2021 (3) | 2,832 | $200,137 | - | - | | | | | | | 02/10/2022 (4) | - | - | 6,950 | $491,157 | | | | | | | 02/10/2022 (3) | 4,625 | $326,849 | - | - | Andreas Roellgen | 02/13/2017 | 6,850 | - | $45.35 | 02/13/2027 | 02/12/2019 (3) | 325 | $22,968 | - | - | | 02/12/2018 | 7,925 | - | $44.65 | 02/12/2028 | 02/10/2020 (3) | 1,488 | $105,157 | - | - | | 02/12/2019 | 6,393 | 2,132 | $42.60 | 02/12/2029 | 02/10/2021 (4) | - | - | 3,800 | $268,546 | | | | | | | 02/10/2021 (3) | 1,894 | $133,849 | - | - | | | | | | | 02/10/2022 (4) | - | - | 5,100 | $360,417 | | | | | | | 02/10/2022 (3) | 3,400 | $240,278 | - | - | Hans Landin (1) | 02/12/2018 | 7,925 | - | $44.65 | 08/01/2025 | 02/12/2019 (3) | 315 | $22,261 | - | - | | 02/12/2019 | 8,525 | - | $42.60 | 08/01/2025 | 02/10/2020 (3) | 720 | $50,882 | - | - | | | | | | | 02/10/2021 (4) | - | - | 3,272 | $231,232 | | | | | | | 02/10/2021 (3) | 609 | $43,038 | - | - | | | | | | | 02/10/2022 (4) | - | - | 2,414 | $170,597 | | | | | | | 02/10/2022 (3) | 736 | $52,013 | - | - |
| Option Awards (1) | Stock Awards | Name | Grant Date | Number of Securities Underlying Unexercised (#) Options | Number of Securities Underlying Unexercised (#) Options | Option Exercise Price | Option Expiration Date | Grant Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | | Exercisable | Unexercisable | | | | | | | | Richard G. Kyle | | | | | | 02/10/2020 (2) | 8,338 | $668,291 | - | - | | | | | | | 02/10/2021 (2) | 11,838 | $948,816 | - | - | | | | | | | 02/10/2022 (3) | - | - | 43,575 | $3,492,536 | | | | | | | 02/10/2022 (2) | 21,788 | $1,746,308 | - | - | | | | | | | 02/09/2023 (3) | - | - | 42,050 | $3,370,308 | | | | | | | 02/09/2023 (2) | 28,050 | $2,248,208 | - | - | Philip D. Fracassa | | | | | | 02/10/2020 (2) | 2,313 | $185,387 | - | - | | | | | | | 02/10/2021 (2) | 3,350 | $268,503 | - | - | | | | | | | 02/10/2022 (3) | - | - | 12,550 | $1,005,883 | | | | | | | 02/10/2022 (2) | 6,282 | $503,502 | - | - | | | | | | | 02/09/2023 (3) | - | - | 11,225 | $899,684 | | | | | | | 02/09/2023 (2) | 7,475 | $599,121 | - | - | | | | | | | 12/07/2023 (4) | 12,000 | $961,800 | - | - | Christopher A. Coughlin | 02/13/2017 | 36,825 | - | $45.35 | 02/13/2027 | 02/10/2020 (2) | 2,513 | $201,417 | - | - | | 02/12/2018 | 37,925 | - | $44.65 | 02/12/2028 | 02/10/2021 (2) | 3,575 | $286,536 | - | - | | 02/12/2019 | 40,750 | - | $42.60 | 02/12/2029 | 02/10/2022 (3) | - | - | 13,275 | $1,063,991 | | | | | | | 02/10/2022 (2) | 6,638 | $532,036 | - | - | | | | | | | 02/09/2023 (3) | - | - | 11,800 | $945,770 | | | | | | | 02/09/2023 (2) | 7,615 | $610,342 | - | - | | | | | | | 02/10/2023 (4) | 8,000 | $641,200 | - | - | Andreas Roellgen | 02/13/2017 | 6,850 | - | $45.35 | 02/13/2027 | 02/10/2020 (2) | 744 | $59,632 | - | - | | 02/12/2018 | 7,925 | - | $44.65 | 02/12/2028 | 02/10/2021 (2) | 1,263 | $101,229 | - | - | | 02/12/2019 | 8,525 | - | $42.60 | 02/12/2029 | 02/10/2022 (3) | - | - | 5,100 | $408,765 | | | | | | | 02/10/2022 (2) | 2,550 | $204,383 | - | - | | | | | | | 02/09/2023 (3) | - | - | 7,475 | $599,121 | | | | | | | 02/09/2023 (2) | 4,975 | $398,746 | - | - | Hansal N. Patel | | | | | | 02/10/2020 (2) | 944 | $75,662 | - | - | | | | | | | 02/10/2021 (2) | 1,888 | $151,323 | - | - | | | | | | | 02/10/2022 (3) | - | - | 6,950 | $557,043 | | | | | | | 02/10/2022 (2) | 3,469 | $278,040 | - | - | | | | | | | 02/09/2023 (3) | - | - | 6,475 | $518,971 | | | | | | | 02/09/2023 (2) | 4,325 | $346,649 | - | - |
| (1) | Upon his exit from the Company, Mr. Landin’s unvested nonqualified stock options, time-based restricted stock units and performance-based restricted stock units were treated in accordance with the original terms of the respective grants, as described in the “Potential Payments Upon Termination or Change in Control” section on page 66. | | | | | (2) | All option awards shown are nonqualified stock options that vest 25% per year over the four-year period from the date of grant and will expire ten years after the date of grant. Nonqualified stock options were eliminated from our long-term incentive award mix in 2020. |
| | | | (3)(2) | Time-based restricted stock units vest 25% per year over the four-year period from the date of grant. Upon an NEO becoming retirement eligible, restricted stock units may be withheld prior to vesting for taxes owed on such restricted stock units being deemed nonforfeitable. |
| (4)(3) | Performance-based restricted stock units vest after the end of the three-year performance cycle based on the achievement of performance objectives. For the performance-based restricted stock units granted on February 10, 20212022 and February 10, 2022,9, 2023, amounts are shown at target. |
| | | | (5)(4) | Deferred shares for Mr. Fracassa granted on December 7, 2023 vest 100% on March 31, 2026. Deferred shares for Mr. Coughlin granted on February 10, 2023 vest 100% on DecemberMarch 31, 20232025. Both grants vest in full, contingent on continued employment with the Company. |
The market value of the stock awards shown in the table above was determined based upon the closing price of our common shares on December 31, 2022,2023, which was $70.67.$80.15. 2022 Option Exercises and Stock Vested64
2023 Option Exercises and Stock Vested |
The following table sets forth information with respect to the exercise of stock options by and vesting of other equity-based awards for our NEOs during 2022:2023: | Option Awards (1) | Stock Awards (2) | Option Awards (1) | Stock Awards (2) | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise (3) | Number of Shares Acquired on Vesting | Value Realized on Vesting | Number of Shares Acquired on Exercise | Value Realized on Exercise (3) | Number of Shares Acquired on Vesting | Value Realized on Vesting | Richard G. Kyle | 70,000 | $2,233,400 | 70,011 | $5,487,140 | 289,725 | $ 10,786,837 | 78,529 | $6,428,868 | Philip D. Fracassa | 40,025 | $913,821 | 19,156 | $1,504,444 | 34,825 | $ 1,509,438 | 22,009 | $1,801,557 | Christopher A. Coughlin | - | 21,125 | $1,655,357 | 57,475 | $ 3,346,195 | 32,965 | $2,678,631 | Andreas Roellgen | | - | - | 8,093 | $662,062 | Hansal N. Patel | 1,405 | $41,667 | 7,316 | $580,854 | 968 | $ 31,537 | 11,433 | $934,324 | Andreas Roellgen | - | 16,113 | $1,153,311 | | Hans Landin | 10,300 | $260,143 | 16,113 | $1,083,711 | |
| (1) | Nonqualified stock options were eliminated from our long-term incentive award mix in 2020. |
| | | | (2) | Stock awards include time-based restricted stock units and performance-based restricted stock units for all NEOs. For Mr. Roellgen and Mr. Landin,Coughlin, stock awards also include deferred shares. The value realized on vesting for time-based and performance-based restricted stock units and deferred shares is the number of shares that vested in 20222023 multiplied by the fair market value of our common shares on the date of vesting. Fair market value for performance-based restricted stock units is determined by the average of the high and low price of our common shares on the date of vesting, which is the date that the Compensation Committee approves the performance score payout associated with such award. |
| | | | (3) | The value realized on the exercise of stock options is the difference between the exercise price and the fair market value of our common shares at the time of exercise. Fair market value is determined by a real-time trading quote from the NYSE at the time of exercise. |
2023 Pension Benefits Table |
2022 Pension Benefits Table
Year-over-year changes in pension values are influenced by plan participation, age, length of service, and, solely for Mr. Roellgen, changes in annual cash compensation, as well as external factors such as changes to mortality assumptions, discount rates, and interest on the prior year’s values as the benefits are one year closer to being paid. Significantly higherLower interest rates resulted in negativepositive change in actuarial pension values from the prior year measurement period. Effective December 31, 2022, eligible U.S. participants ceased to accrue pension benefits underperiod for the Company’s primaryfrozen U.S. defined benefit pension plans. The following table sets forth the number of years of credited service and actuarial present value of the defined benefit pension plans for our NEOs as of December 31, 20222023 (see the “Retirement Programs” section on page 5253 for additional details of the material features of these plans): Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit (1) | Richard G. Kyle (2) | Supplemental Pension Plan | 16.7 | $11,773,834 | | Pension Plan | - | - | Philip D. Fracassa (2) | Supplemental Pension Plan | 17.2 | $4,184,958 | | Pension Plan | - | - | Christopher A. Coughlin | Supplemental Pension Plan | 38.5 | $5,625,555 | | Pension Plan | 38.5 | $1,118,896 | Hansal N. Patel (2) | Supplemental Pension Plan | - | - | | Pension Plan | - | - | Andreas Roellgen (3) | Europe Executive Plan | 15.3 | $487,646 | | FRIP | 25.3 | $162,219 | Hans Landin | Supplemental Pension Plan | - | - | | Pension Plan | - | - |
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit (1) | Richard G. Kyle (2) | Supplemental Pension Plan | 16.7 | $12,978,198 | | Pension Plan | - | - | Philip D. Fracassa (2) | Supplemental Pension Plan | 17.2 | $4,653,375 | | Pension Plan | - | - | Christopher A. Coughlin | Supplemental Pension Plan | 38.5 | $5,550,356 | | Pension Plan | 38.5 | $1,125,944 | Andreas Roellgen (3) | Europe Executive Plan | 15.3 | $662,302 | | FRIP | 26.3 | $279,884 | Hansal N. Patel (2) | Supplemental Pension Plan | - | - | | Pension Plan | - | - |
| (1) | (1) | The “Present Value of Accumulated Benefit” is the present value of pension benefits earned as of December 31, 20222023 that would be payable under that plan for the life of the executive, beginning at age 62.62 for U.S. NEOs and age 63.75 for Mr. Roellgen. See Note 1617 – Retirement Benefit Plans in the Notes to the Consolidated Financial Statement in the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 20222023 for details about the assumptions used to determine present value. |
| (2) | | | | (2) | Because Mr. Kyle, Mr. Fracassa and Mr. Patel were not employed by the Company as of December 31, 2003, they did not accumulate any service under the Pension Plan. Mr. Patel also does not receive Supplemental Pension Plan benefits. |
| (3) | | | | (3) | Because Mr. Roellgen is based in Colmar, France, he is not eligible for either the Pension Plan or the Supplemental Pension Plan. Instead, Mr. Roellgen is a participant in the FRIP and the Europe Executive Plan. Mr. Roellgen had earned 15.3 years of service under the Europe Executive Plan when his accumulation of years of service under such plan was frozen at the end of 2012. Mr. Roellgen’s compensation is based in Euros. The conversion rate used for purposes of converting the Euros earned by Mr. Roellgen into U.S. Dollars for purposes of this table was €1.00 = $1.0705,$1.1039, which was the applicable exchange rate as of December 31, 2022.2023. |
2023 Nonqualified Deferred Compensation |
2022 Nonqualified Deferred Compensation
The table below sets forth information regarding Deferred Compensation Plan contributions, earnings and withdrawals during 20222023 and the account balances as of December 31, 20222023 for the NEOs: Name | Executive Contributions in 2022 (1) | Company Contributions in 2022 (2) | Aggregate Earnings in 2022 (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at December 31, 2022 (4) | Richard G. Kyle | $160,061 | - | $54,469 | - | $1,125,971 | Philip D. Fracassa | $58,148 | $54,493 | $56,441 | - | $1,139,478 | Christopher A. Coughlin | - | - | - | - | - | Hansal N. Patel | $46,535 | $10,533 | $9,600 | - | $214,689 | Andreas Roellgen | - | - | - | - | - | Hans Landin | - | - | - | - | - |
Name | Executive Contributions in 2023 (1) | Company Contributions in 2023 | Aggregate Earnings in 2023 (2) | Aggregate Withdrawals/ Distributions | Aggregate Balance at December 31, 2023 (3) | Richard G. Kyle | $229,076 | - | $113,688 | - | $1,468,735 | Philip D. Fracassa | $581,063 | - | $148,311 | - | $1,868,852 | Christopher A. Coughlin | - | - | - | - | - | Andreas Roellgen | - | - | - | - | - | Hansal N. Patel | $66,907 | - | $23,456 | - | $305,052 |
| (1) | Amounts shown as executive contributions in 2022,2023, if any, were reported in the 20222023 Summary Compensation Table (for base salary) or in the 20212022 Summary Compensation Table (for payments made under the annual cash incentive plan). |
| | | | (2) | Amounts shown as Company contributions in 2022, if any, were reported in the 2022 Summary Compensation Table under the “All Other Compensation” column (for Company contributions into the Deferred Compensation Plan). | | | | | (3) | This column includes interest earned from cash deferrals. In 2023, Mr. Kyle, Mr. Fracassa and Mr. Patel earned above-market interest, as defined by the SEC, on amounts deferred under the Deferred Compensation Plan in the amounts of $54,049, $71,215, and $11,188, respectively. The above-market interest earned resulted from an increase in the prime rate, relative to long term interest rates, due to the current interest rate environment. The earnings during this year and previous years were not above market or preferential; therefore, these amounts were not included in the 20222023 Summary Compensation Table. |
| | | | (4)(3) | Includes $753,960$914,021 for Mr. Kyle, $785,153$897,794 for Mr. Fracassa, and $141,351$198,419 for Mr. Patel that was previously reported as compensation in Summary Compensation Tables for prior years. |
The Deferred Compensation Plan allows certain employees, including the U.S.-based NEOs, to defer, on a pre-tax basis, the receipt of certain types of compensation until a specified point in the future. Eligible compensation includes salary and incentive compensation payable in cash, employee or Company 401(k) contributions and/or core defined contributions in excess of tax limits.cash. Cash deferrals earn interest quarterly at a rate equal to the prime rate plus 1%. For further information, see the “Deferred Compensation” section on page 54.55. Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control |
We have entered into severance agreements with each of the NEOs that provide for compensation in the event of termination of employment under certain circumstances (the “Severance Agreements”). In addition, the NEOs are entitled to post-termination payments or benefits under agreements entered into under the Equity and Incentive Compensation Plan, the Predecessor Long-Term Incentive Plan, and our retirement and benefit plans in certain situations. The following circumstances would trigger post-termination payments to the NEOs: change in control followed by certain events described below; involuntary termination without cause; retirement; permanent disability; and death. All scenarios are assumed to have occurred on December 31, 2022.2023. Change in Control Under the Severance Agreements with the NEOs, when certain events occur, such as a reduction in the NEO’s responsibilities or base salary, or termination of the NEO’s employment without cause, within a specified number of years following a change in control of the Company (as defined in the Severance Agreements), each NEO will be entitled to receive a lump sum payment in an amount equal to a multiple (that is set forth in the table below for the respective NEO) of the sum of: (1) the greater of (a) the NEO’s annual base salary in effect prior to the termination and (b) the NEO’s annual base salary in effect prior to the change in control; plus (2) the greater of (a) the NEO’s target annual cash incentive compensation for the year in which the NEO terminates employment and (b) the NEO’s target annual cash incentive compensation for the year in which the change in control occurs. For Mr. Roellgen, the amount is reduced by any severance payments he is entitled to receive under French law. Mr. Roellgen’s Change in Control Multiple increased in connection with his appointment to Executive Vice President and President Engineered of Bearings in August 2022. NEO | Change In Control Multiple | Mr. Kyle | 3.0x | Mr. Fracassa | 3.0x | Mr. Coughlin | 3.0x | Mr. PatelRoellgen | 1.5x2.0x | Mr. RoellgenPatel | 2.0x1.5x |
In addition, each U.S.-based NEO who is eligible for a supplemental retirement benefit would receive a lump sum amount. The lump sum amount is determined by calculating the benefit under each of the Pension Plan and the Supplemental Pension Plan. Under the Severance Agreements, pension benefits for Messrs. Kyle, Fracassa, and Coughlin would be based on service through the December 31, 2022 pension freeze date. The lump sum amount is reduced by the lump sum equivalent of the benefit otherwise payable from the Pension Plan. This lump sum is determined based on the mortality table and interest rate promulgated by the IRS under Section 417(e)(3) of the Code. The Severance Agreements also provide Messrs. Kyle, Fracassa, and Coughlin with contributions to the SIP Plan and the Post-Tax Savings Plan on the three years of change in control compensation they would receive. The agreements for Messrs. Patel and Roellgen do not provide for any such contributions in the event of a change in control. At the time the conditions are met after a change in control, any unvested equity-based grants would vest and become nonforfeitable and the NEO would have three years to exercise all stock options. Performance-based restricted stock units would vest based on actual performance through the most recent date prior to the change in control. In the event of a change in control, the amounts payable under the Severance Agreements would become secured by a trust arrangement. As consideration for providing severance benefits, the Company receives confidentiality and non-compete covenants from the NEOs, and (where legally permissible) a customary release of claims against the Company. The U.S.-based NEOs also would be entitled to continuation of health and welfare benefits through the applicable severance period (in other words, a number of years equal to the change in control multiple in the table above) and career outplacement services (or French unemployment benefits in the case of Mr. Roellgen). None of the Severance Agreements with the NEOs contains an excise tax gross-up provision. Voluntary Termination If an NEO voluntarily terminates his or her employment with the Company, we generally provide no enhanced termination benefits such as severance, benefits, perquisites or vesting of any equity-based grants, although the Compensation Committee reserves the right to make adjustments where warranted. Involuntary Termination With Cause The Company provides no standard severance, benefits, perquisites or vesting of any equity-based grants in the case where an NEO is terminated by the Company with cause. As provided in the Severance Agreements, termination with cause can occur only in the event that the NEO has committed any of the following: an intentional act of fraud, embezzlement or theft in connection with his duties with the Company; intentional wrongful disclosure of secret processes or confidential information of the Company or a Company subsidiary; or intentional wrongful engagement in any Competitive Activity (as defined in the Severance Agreements) that would constitute a material breach of the NEO’s duty of loyalty to the Company (or a Company subsidiary as applicable). If the Company terminates an NEO’s employment for cause, no benefit is payable under the Excess Benefit Agreements. Involuntary Termination Without Cause In the case of an involuntary termination without cause other than in connection with a change in control, each NEO is entitled to a lump sum severance payment equal to a multiple (that is set forth in the table below for the respective NEO) of the sum of: (1) the NEO’s base salary and (2) an amount equal to the highest annual cash incentive payout percentage during the preceding five years (not to exceed 100%) multiplied by the target annual cash incentive compensation for the year in which the NEO is terminated (or, for Mr. Roellgen, the actual annual cash incentive compensation earned for the full year in which he is terminated). For Mr. Roellgen, the amount is reduced by any severance payments he is entitled to receive under French law. As consideration for providing severance benefits, the Company receives confidentiality and non-compete covenants from the NEOs, and (where legally permissible) a customary release of claims against the Company. Each NEO also is entitled to continuation of certain health and welfare benefits through the applicable severance period (in other words, a number of years equal to the applicable multiple in the table below) and career outplacement services (or French unemployment benefits in the case of Mr. Roellgen). Equity-based grants vest through the period of time equal to one year multiplied by the severance multiple in the table below in the case of an involuntary termination without cause, with up to three years to exercise stock options. NEO | Severance Multiple | Mr. Kyle | 2.0x | Mr. Fracassa | 1.5x | Mr. Coughlin | 1.5x | Mr. PatelRoellgen | 1.0x | Mr. RoellgenPatel | 1.0x |
The values shown in the Termination Scenarios table below for the retirement benefits (where eligible) are payable in the same form and manner as described in the “Retirement Programs” discussion on pages 5253 to 54.55. In the event of involuntary termination without cause, the benefit is determined and payable as described in the “Retirement Programs” discussion on pages 5253 to 54,55, but with up to two additional years of service credit, except with respect to pension benefits for Messrs. Kyle, Fracassa, and Coughlin, which would be calculated based on service through the December 31, 2022 pension freeze date. Retirement “Retirement” for purposes of outstanding grants to NEOs under the Equity and Incentive Compensation Plan means either: (1) voluntary termination of the NEO at or after age 62; or (2) retirement after the NEO has reached age 55 and has accrued at least 15 years of continuous service, with the consent of the Board or the Compensation Committee. Treatment of equity awards for NEOs who retire includes normal vesting of Equity and Incentive Compensation Plan awards as if the officer had remained in the continuous employ of the Company (except performance-based restricted stock units, which are prorated through the last day of employment and paid at the end of the performance period). Amounts shown in the retirement column in the Termination Scenarios table below for “Retirement Benefits” are for NEOs who are eligible to retire under the Pension Plan or under an individual Excess Benefit Agreement as of December 31, 20222023 assuming the NEOs immediately retire. The amounts shown are in addition to the corresponding amounts reflected in the 20222023 Pension Benefits Table on page 65 (which assumes retirement of the NEO at age 62). See the “Retirement Programs” section on page 5253 for additional details. Death or Permanent Disability “Permanent Disability” occurs if an NEO qualifies for permanent disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company, under a government-sponsored disability program. Benefits for U.S.-based NEOs who die while actively employed are payable to the surviving spouse from the defined benefit pension plans at the NEO’s normal retirement date (or on a reduced basis at an early retirement date). The benefit is equal to 50% of the benefit payable as if such NEO had terminated employment on the date of his death, survived to the payment date (as elected by spouse), elected the 50% joint and survivor form of payment, and died the next day. If the U.S.-based NEO has at least 15 years of service at time of death, the benefit is equal to 50% of the accrued benefit at time of death payable immediately, but with any applicable early commencement reduction. All equity-based Equity and Incentive Compensation Plan and Predecessor Long-Term Incentive Plan grants immediately vest in the event of death or permanent disability, except performance-based restricted stock units, which are prorated and paid at the end of the performance period. In the case of disability, the employee has up to five years to exercise stock options. In the case of death, the survivor has up to five years to exercise stock options. Termination Scenarios Mr. Kyle | Mr. Kyle | Mr. Kyle | | | Voluntary Resignation | | Termination With Cause | | Retirement | | Death & Disability | | Termination Without Cause | | Change in Control and Termination | Voluntary Resignation | Termination With Cause | Retirement | Death & Disability | Termination Without Cause | Change in Control and Termination | Cash Severance (1) | | - | | - | | - | | - | | $4,801,824 | | $7,202,736 | - | $5,154,209 | $7,731,314 | Equity (2) | | - | | - | | - | | $8,430,112 | | $9,861,472 | | $10,784,142 | - | $9,063,362 | $10,768,233 | $11,912,374 | Retirement Benefits (3) | | - | | - | | $2,118,669 | | - | | - | | $622,103 | - | $1,817,247 | - | $695,818 | Other Benefits (4) | | - | | - | | - | | - | | $79,500 | | $79,500 | - | $79,500 | $79,500 | Total | | - | | - | | $2,118,669 | | $8,430,112 | | $14,742,796 | | $18,688,481 | - | $1,817,247 | $9,063,362 | $16,001,942 | $20,419,006 | | | | | | | | | | | | | | | Mr. Fracassa | Mr. Fracassa | Mr. Fracassa | | | Voluntary Resignation | | Termination With Cause | | Retirement | | Death & Disability | | Termination Without Cause | | Change in Control and Termination | Voluntary Resignation | Termination With Cause | Retirement | Death & Disability | Termination Without Cause | Change in Control and Termination | Cash Severance (1) | | - | | - | | - | | - | | $1,642,668 | | $3,285,336 | - | $1,739,407 | $3,478,814 | Equity (2) | | - | | - | | - | | $2,352,432 | | $2,615,212 | | $3,025,482 | - | $3,488,689 | $2,878,988 | $4,274,079 | Retirement Benefits (3) | | - | | - | | - | | - | | - | | $276,820 | - | $1,081,343 | - | $301,497 | Other Benefits (4) | | - | | - | | - | | - | | $79,500 | | $79,500 | - | $79,500 | $79,500 | Total | | - | | - | | - | | $2,352,432 | | $4,337,380 | | $6,667,138 | - | $1,081,343 | $3,488,689 | $4,697,895 | $8,133,890 | | | | | | | | | | | | | | | Mr. Coughlin | Mr. Coughlin | Mr. Coughlin | | | Voluntary Resignation | | Termination With Cause | | Retirement | | Death & Disability | | Termination Without Cause | | Change in Control and Termination | Voluntary Resignation | Termination With Cause | Retirement | Death & Disability | Termination Without Cause | Change in Control and Termination | Cash Severance (1) | | - | | - | | - | | - | | $1,677,064 | | $3,354,127 | - | $1,746,159 | $3,492,318 | Equity (2) | | - | | - | | $2,542,111 | | $3,242,111 | | $3,027,351 | | $3,956,391 | - | $3,030,391 | $3,316,928 | $3,281,501 | $4,144,316 | Retirement Benefits (3) | | - | | - | | - | | - | | - | | $293,486 | - | $314,309 | Other Benefits (4) | | - | | - | | - | | - | | $79,500 | | $79,500 | - | $79,500 | $79,500 | Total | | - | | - | | $2,542,111 | | $3,242,111 | | $4,783,915 | | $7,683,504 | - | $3,030,391 | $3,316,928 | $5,107,160 | $8,030,443 | Mr. Roellgen (5) | | Mr. Roellgen (5) | | | | | | | | | | | | | | Voluntary Resignation | Termination With Cause | Retirement | Death & Disability | Termination Without Cause | Change in Control and Termination | Cash Severance (1) | | - | $919,361 | $1,838,723 | Equity (2) | | - | $1,236,153 | $1,304,602 | $1,504,335 | Retirement Benefits (3) | | - | - | Other Benefits (4) | | - | $19,633 | $39,265 | Total | | - | $1,236,153 | $2,243,596 | $3,382,323 | Mr. Patel | Mr. Patel | Mr. Patel | | | Voluntary Resignation | | Termination With Cause | | Retirement | | Death & Disability | | Termination Without Cause | | Change in Control and Termination | Voluntary Resignation | Termination With Cause | Retirement | Death & Disability | Termination Without Cause | Change in Control and Termination | Cash Severance (1) | | - | | - | | - | | $778,077 | | $1,167,115 | - | $854,306 | $1,281,459 | Equity (2) | | - | | - | | - | | $1,116,773 | | $1,182,853 | | $1,410,913 | - | $1,395,973 | $1,488,546 | $1,575,028 | Retirement Benefits (3) | | - | | - | | - | | - | | - | | - | - | - | Other Benefits (4) | | - | | - | | - | | - | | $26,500 | | $39,750 | - | $26,500 | $39,750 | Total | | - | | - | | - | | $1,116,773 | | $1,987,430 | | $2,617,778 | - | $1,395,973 | $2,369,352 | $2,896,237 | | | | | | | | | | | | | | | Mr. Roellgen (5) | | | | Voluntary Resignation | | Termination With Cause | | Retirement | | Death & Disability | | Termination Without Cause | | Change in Control and Termination | | Cash Severance (1) | | - | | - | | - | | - | | $736,360 | | $1,472,720 | | Equity (2) | | - | | - | | - | | $852,217 | | $896,667 | | $1,059,907 | | Retirement Benefits (3) | | - | | - | | - | | - | | - | | - | | Other Benefits (4) | | - | | - | | - | | - | | $19,129 | | $38,258 | | Total | | - | | - | | - | | $852,217 | | $1,652,156 | | $2,570,885 | |
| (1) | “Cash Severance” amounts are determined by multiples of annual pay provided in the Severance Agreements. |
| | | | (2) | “Equity” includes deferred shares, time-based restricted stock units, performance-based restricted stock units and stock option grants. Treatment of equity-based grants in the event of a termination or change in control is described in the “Potential Payments Upon Termination or Change in Control” section on page 66.67. Beginning with the Predecessor Long-Term Incentive Plan grant for 2012, we modified our equity grant agreements to require double-trigger vesting for awards in the event of a qualifying termination following a change in control. All stock options are valued based on the difference between the below closing stock price and the exercise price (or zero if the difference is negative), times the number of unvested stock options that would accelerate, as provided for in the Severance Agreements. For retirement eligible NEOs, amounts shown reflect both the value of unvested restricted stock units and stock options that would vest as described in the “Retirement” section on page 6853 following retirement as well as the value of performance-based restricted stock units, which are prorated through the last day of employment (for purposes of this table, assuming December 31, 20222023 as the termination date). All full-value awards are valued at the closing price of our common shares on December 31, 2022,2023, which was $70.67.$80.15. |
| | | | (3) | “Retirement Benefits” for eligible NEOs represent the value of additional benefits earned under the qualified and supplemental plans as a result of retirement, termination without cause, or a qualifying termination following a change in control. |
Values are shown under the retirement scenario for only those NEOs who were eligible for early retirement as defined in the applicable retirement plan as of December 31, 20222023 and reflect the incremental present value above what they would receive at age 62. As of December 31, 2022,2023, Mr. Kyle wasand Mr. Fracassa were eligible for early retirement as defined in the applicable retirement plan. Mr. Coughlin reached the earliest unreduced retirement age of 62 for the plan year,year; therefore, there is no longer an incremental benefit value to report in the event of an early retirement. | (4) | “Other Benefits” consist of continuation of health and welfare benefits through the severance period, with estimated values for U.S.-based NEOs of $16,500 per year and for Mr. Roellgen of $770 per year, plus outplacement services (if elected) with estimated values of $10,000 per year for U.S.-based NEOs and $20,700 per year for Mr. Roellgen. |
| | | | (5) | Mr. Roellgen’s compensation is generally based in Euros. The conversion rate used for purposes of converting the Euros earned by Mr. Roellgen into U.S. Dollars was €1.00 = $1.0539$1.0817 (the average monthly exchange rate for the calendar year). |
Mr. Landin is not included in the table above due to his separation from the Company on August 1, 2022. In connection with his separation from the Company, Mr. Landin received cash payments71
Table of $660,280 per his severance agreement, $201,893 for his annual incentive award and $15,390 for accrued, but unused vacation paid to him in 2022. Upon his exit from the Company, Mr. Landin’s unvested nonqualified stock options, time-based restricted stock units and performance-based restricted stock units were treated in accordance with the original terms of the respective grants, as described in the “Potential Payments Upon Termination or Change in Control” section on page 66. The value of his unvested equity upon separation on August 1, 2022 was $856,005 assuming performance-based restricted stock units at target and valued at the closing price of our common shares on August 1, 2022, which was $64.17.Contents Equity Compensation Plan Information The table below sets forth information as of December 31, 20222023 regarding the Predecessor Long-Term Incentive Plan and the Equity and Incentive Compensation Plan. Under the Predecessor Long-Term Incentive Plan and Equity and Incentive Compensation Plan, we have made equity compensation available to Directors, officers and other employees of the Company. The Predecessor Long-Term Incentive Plan and Equity and Incentive Compensation Plan were approved by our shareholders. Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)(1) | | Weighted-average exercise price of outstanding options, warrants and rights
(b)(2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)(3) | Equity compensation plans | | | | | | | approved by security holders (4) | | 1,859,281 | | $41.61 | | 6,281,725 | | | | | | | | Equity compensation plans not | | | | | | | approved by security holders | | - | | - | | - | | | | | | | | Total: | | 1,859,281 | | $41.61 | | 6,281,725 |
Plan Category | Number of securities to be issued upon exercise of outstanding options,warrants and rights (a)(1) | Weighted-average exercise price of outstanding options, warrants and rights (b)(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)(3) | Equity compensation plans approved by security holders (4) | 1,256,003 | $42.69 | 5,023,240 | Equity compensation plans not approved by security holders | - | - | - | Total: | 1,256,003 | $42.69 | 5,023,240 |
| (1) | The amount shown in column (a) includes the following grants made under both the Predecessor Long-Term Incentive Plan and the Equity and Incentive Compensation Plan: nonqualified stock options – 921,310;386,617; deferred shares – 36,830;45,500; performance-based restricted stock units – 567,267509,032 (assuming payout levels at target and settlement in shares; at maximum payout levels for performance-based restricted stock units, an additional 567,267509,032 shares would be issued); and time-based restricted stock units – 333,874314,854 (assuming settlement in shares). |
| | (2) | The weighted average exercise price in column (b) includes nonqualified stock options only. |
| | (3) | The amount shown in column (c) represents common shares remaining available under the Equity and Incentive Compensation Plan, under which the Compensation Committee is authorized to make awards of common shares, nonqualified stock options, incentive stock options, appreciation rights, restricted shares, deferred shares, performance shares, performance units and restricted stock units, and is inclusive of eligible recycled shares from the Predecessor Long Term Incentive Plan as described below. Awards may be credited with dividend equivalents payable in the form of cash or common shares. In addition, under the Equity and Incentive Compensation Plan, nonemployee Directors are eligible for awards of restricted shares, restricted stock units, common shares and option rights. In 2019, the Equity and Incentive Compensation Plan was approved by shareholders at the annual meeting of shareholders authorizing 10,000,000 shares of common stock that may be issued.stock. Shares from the Predecessor Long-Term Incentive Plan are no longer available to be issued. However, if any common shares subject to an award granted under the Predecessor Long Term Incentive Plan are forfeited, or an award granted under the Predecessor Long Term Incentive Plan (in whole or in part) is canceled or forfeited, expires, is settled in cash, or is unearned, the common shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the Equity and Incentive Compensation Plan. Under the Equity and Incentive Compensation Plan, for any award that is not an option right or a stock appreciation right, 3.5 common shares are subtracted from the maximum number of common shares available under the plan for every common share granted under the award. For awards of option rights and stock appreciation rights, however, only one common share is subtracted from the maximum number of common shares available under the plan for every common share granted. Recycled option rights and stock appreciation rights from the Predecessor Long Term Incentive Plan are added back to the maximum number of common shares available under the plan by one common share. For any award that is not an option right or stock appreciation right, 3.5 common shares are added to the maximum number of shares available under the plan. |
by one common share. For any award that is not an option right or stock appreciation right, 3.5 common shares are added to the maximum number of shares available under the plan.
| (4) | The Company also maintains the Director Deferred Compensation Plan and the Deferred Compensation Plan pursuant to which Directors and other employees, respectively, may defer receipt of incentive compensation payable in common shares (other than restricted shares or options) authorized for issuance under the Equity and Incentive Compensation Plan. The table does not include separate information about these plans because they merely provide for the deferral, rather than the issuance, of common shares. |
CEO PAY RATIO For 2022,2023, the ratio of our CEO’s annual total compensation (“CEO Compensation”) to the median of the annual total compensation of all of our employees (other than our CEO and the Excluded Employees (as defined below)) as described below (“Median Annual Compensation”), commonly referred to as the “CEO Pay Ratio”, was 171193 to 1. This CEO Pay Ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below, but there may be a degree of imprecision due to the permitted use of reasonable estimates and assumptions in preparing this CEO Pay Ratio disclosure. In this summary, we refer to the employee who received our Median Annual Compensation as our “Median Employee.” For purposes of this disclosure, the date used to identify our Median Employee was October 1, 20212023 (the “Determination Date”). In accordance with applicable SEC rules, we utilizedWe did not use the same Median Employee to calculate the CEO Pay Ratio for 20222023 that we identified for the calculation in 2021 since2022 (the “2022 Median Employee”), as there were nowas a material changeschange in our employee population or employee compensation arrangements in 2022 that we reasonably believe would result2023 which resulted in the selection of a significant change to our CEO Pay Ratio disclosure. Thenew Median Employee. Our new Median Employee held the same position at the Company (aholds a position in our operations group in the United States) in 2022 as in 2021.States. For purposes of this CEO Pay Ratio disclosure, CEO Compensation was $8,237,530,$10,778,409, which represents the total compensation reported for our CEO in the “20222023 Summary Compensation Table”. Also. on page 59. Also, for purposes of this CEO Pay Ratio disclosure, Median Annual Compensation was $48,267,$55,740, which was calculated by totaling all applicable elements of compensation that our Median Employee earned during the 20222023 fiscal year in accordance with Item 402(c)(2)(x) of Regulation S-K. To identify our Median Employee in 2021,2023, we utilized the consistently applied compensation measure of “target total direct compensation” for the period from January 1, 20212023 to December 31, 2021,2023, which measure consisted of the sum of annual base pay plus the targeted value of annual and long-term incentives. For hourly workers, annual base pay was calculated using a reasonable estimate of hours worked during 20212023 multiplied by the applicable hourly rate. In addition, we annualized the total compensation (based on reasonable assumptions and estimates relating to our employee compensation program) for any employees (full-time and part-time) that commenced employment with the Company after January 1, 2021.2023. To establish our employee pool, as permitted by the applicable SEC rules, we excluded 6058497 non-U.S employees (the “Excluded Employees”) from our total global workforce of 17,95019,233 employees as of October 1, 20212023 who were employed in locations that individually represented less than 5% of our total global workforce from our Median Employee determination process to arrive at a pool of 17,34518,386 employees (this pool, excluding the Excluded Employees and the CEO, is hereinafter referred to as the “Employee Pool”). The Employee Pool did not include any independent contractors or “leased” 7 The Excluded Employees included the following number of employees from the following countries: (a) United Kingdom – 188 employees; (b) Mexico – 182 employees; (c) Brazil – 87 employees; (d) South Africa – 83 employees; (e) Russian Federation – 24 employees; (f) Turkey – 8 employees; (g) Indonesia – 6 employees; (h) Israel – 6 employees; (i) Colombia – 3 employees; (j) Ghana – 3 employees; (k) Taiwan – 3 employees; (l) Thailand – 3 employees; (m) Bosnia and Herzegovina – 1 employee; (n) the Democratic Republic of the Congo – 1 employee; (o) Egypt – 1 employee; (p) Kazakhstan – 1 employee; (q) Nigeria – 1 employee; (r) Philippines – 1 employee; (s) Tanzania – 1 employee; (t) Ukraine – 1 employee; and (u) Vietnam – 1 employee.
workers and excluded employees of businesses acquired by us in 2021 (and 2022),2023, as permitted by the applicable SEC rules. We next calculated the median target total direct compensation for our Employee Pool and identified the subset of employees who were paid within a 1% range of such median (the “Comparison Group”). Finally, we selected a representative employee from the Comparison Group as our Median 7 The Excluded Employees included the following number of employees from the following countries: (a) Austria – 28 employees; (b) Brazil – 130 employees; (c) Colombia – 4 employees; (d) Egypt – 2 employees; (e) Ghana – 2 employees; (f) Indonesia – 6 employees; (g) Kazakhstan – 2 employees; (h) the Republic of Korea – 18 employees; (i) Malaysia – 1 employee; (j) Nigeria – 1 employee; (k) Philippines – 1 employee; (l) Portugal – 5 employees; (m) Singapore – 17 employees; (n) Slovakia – 524 employees; (o) South Africa – 81 employees; (p) Sweden – 1 employee; (q) Switzerland – 1 employee; (r) Thailand – 4 employees; (s) Tunisia – 1 employee; (t) Turkey – 8 employees; (u) Ukraine – 1 employee; and (v) United Arab Emirates – 11 employees. Employee in 2021. Here in 2022, using the same Median Employee, we determined our Median Employee’s Median Annual Compensation as described above.2023. We did not utilize any cost-of-living adjustments for purposes of this CEO Pay Ratio disclosure. PAY VERSUS PERFORMANCE Pay Versus Performance Table As required by the SEC’s pay versus performance rules adopted by the SEC in 2022 (“PVP Rules”) and in effect for the first time for this Proxy Statement,, the below Pay Versus Performance table (“PVP Table”) provides information about compensation for this Proxy Statement’s NEOs, as well as NEOscertain prior years’ NEOs. The PVP Rules require disclosure from this year’s Proxy Statement and each of our 2022 and 2021preceding three years of proxy statements (each of 2020, 2021, 2022, and 2022,2023, a “Covered Year”). The PVP Table also provides information about the results for certain financial performance measures during those same Covered Years. In reviewing this information, there are a few important things to consider: | · | The information in columns (b) and (d) comes directly from this and prior year’s Summary Compensation Tables, without adjustment; |
| | | | · | As required by the PVP Rules, we describe the information in columns (c) and (e) as “compensation actually paid” (or “CAP”) to the applicable NEOs, but these CAP amounts do not necessarilyentirely reflect compensation that our NEOs actually earned for their service in the Covered Years. Instead, CAP reflects a calculation involving a combination of realized pay (for cash amounts and some equity award amounts) and realizable or accrued pay (primarily for pension benefits and other equity awards);pay; |
| | | | · | The PVP Rules require that we chooseuse a peer group or index for purposes of TSRtotal shareholder return (“TSR”) comparisons, and we have chosencontinued to use the S&P 400 Industrials index (the “PVP Peer Index”) for this purpose; and |
| | | | · | As required by the PVP Rules, we provide information about our cumulative TSR, cumulative PVP Peer Index TSR results and U.S. GAAP net income results (the(collectively, the “External Measures”) during the Covered Years in the PVP Table, but we did not actually base any compensation decisions for the NEOs on, or link any NEO pay to, these particular External Measures. |
Pursuant to the PVP Rules, the Company is required to designate one financial metric as the “Company-Selected Measure,” or the most important financial measure that demonstrates how the Company sought to link 20222023 executive pay to performance. For 2022,2023, the Company has again selected adjusted EPS.EPS, as it did for 2022. However, the Company believes that all of the metrics designated in the chart under “Most Important Financial Performance Measures” section on page 7977 are important drivers of Company performance that are designed to link executive pay to performance. Pay Versus Performance (1) | | | | | Value of initial fixed $100 Investment based on: | | | Year | Summary Compensation Table ("SCT") Total for PEO | Compensation Actually Paid to PEO | Average Summary Compensation Total for Non- PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | Total Shareholder Return | PVP Peer Index Total Shareholder Return | Net Income | Adjusted EPS | (a) | (b) | (c)(2) | (d) | (e)(2) | (f )(3) | (g)(3) | (h)(4) | (i)(5) | 2023 | $10,778,409 | $13,340,698 | $3,232,577 | $3,862,463 | $153 | $174 | $394 | $7.05 | 2022 | $8,237,530 | $12,315,153 | $2,289,681 | $3,076,448 | $133 | $132 | $407 | $6.02 | 2021 | $9,665,330 | $4,260,457 | $1,968,075 | $1,224,728 | $128 | $150 | $369 | $4.72 | 2020 | $11,264,263 | $15,459,072 | $2,576,293 | $3,260,353 | $140 | $116 | $285 | $4.10 |
| | | | | | | | | | | | | | | | | Pay Versus Performance (1) | | | | | | | | | | | Value of initial fixed $100 Investment based on: | | | | | Year | | Summary Compensation Table ("SCT") Total for PEO | | Compensation Actually Paid to PEO | | Average Summary Compensation Table Total for non- PEO NEOs | | Average Compensation Actually Paid to non-PEO NEOs | | Total Shareholder Return | | PVP Peer Index Total Shareholder Return | | Net Income | | Adjusted EPS | (a) | | (b) | | (c)(2) | | (d) | | (e)(2) | | (f)(3) | | (g)(3) | | (h)(4) | | (i)(5) | 2022 | | $8,237,530 | | $12,315,153 | | $2,289,681 | | $2,957,968 | | $133 | | $132 | | $407 | | $6.02 | 2021 | | $9,665,330 | | $4,260,457 | | $1,968,075 | | $1,248,938 | | $128 | | $150 | | $369 | | $4.72 | 2020 | | $11,264,263 | | $15,459,072 | | $2,576,293 | | $3,111,028 | | $140 | | $116 | | $285 | | $4.10 |
(1) | Richard G. Kyle was our principal executive officer (“PEO”) for each of the Covered Years. In this disclosure, we refer to our NEOs other than Mr. Kyle in any Covered Year as our “Other NEOs” or our “Non-PEO Named Executive Officers.NEOs.” Christopher A. Coughlin, Philip D. Fracassa and Andreas Roellgen were “Other NEOs” for each of the Covered Years. In addition, Hansal N. Patel was an “Other NEO” for 2023, 2022 and 2021, Ronald J. Myers was onean “Other NEO” for 2021 and 2020, and Hans Landin was onean “Other NEO” for 2022. |
| | (2) | For each Covered Year, in determining both the CAP for our PEO and the average CAP for our Other NEOs, we deducted from or added back the following amounts from or to the total amounts of compensation reported in column (b) and column (d) for such Covered Year: |
| | | Item and Value Added (or Deducted) | | 2022 | | 2021 | | 2020 | 2023 | 2022 | 2021 | 2020 | For Mr. Kyle: | | | | | | | | For Mr. Kyle: | | | - change in actuarial present value of pension benefits, as reported in SCT for Covered Year | | $0 | | ($2,674,337) | | ($4,448,000) | ($1,204,364) | $0 | ($2,674,337) | ($4,448,000) | + service cost of pension benefits, as calculated for Covered Year | | $0 | | $53,321 | | $872,557 | $0 | $0 | $53,321 | $872,557 | + prior service cost of pension benefits, as calculated for Covered Year | | N/A- | | N/A | | N/A | N/A- | N/A | N/A | - SCT “Stock Awards” column value | | ($4,876,769) | | ($4,422,240) | | ($4,421,376) | ($5,982,334) | ($4,876,769) | ($4,422,240) | ($4,421,376) | - SCT “Option Awards” column value | | N/A- | | N/A | | N/A | N/A- | N/A | N/A | +/- adjusted amount for applicable stock/option awards, as calculated for Covered Year | | $8,954,392 | | $1,638,383 | | $12,191,628 | $9,748,987 | $8,954,392 | $1,638,383 | $12,191,628 | + the Covered Year-end fair value of equity awards granted in (and still outstanding as of the end of) the Covered Year | | $7,260,306 | | $3,978,892 | | $5,830,701 | $7,438,418 | $7,260,305 | $3,978,892 | $5,830,701 | +/- the change in fair value of equity awards granted in prior Covered Years (and still outstanding as of the end of the Covered Year) | | $1,468,606 | | ($1,565,525) | | $4,965,371 | $1,057,923 | $1,468,606 | ($1,565,525) | $4,965,371 | + the vesting date fair value of equity awards granted and vested in the Covered Year | | $0 | | $0 | | $0 | $0 | $0 | $0 | $0 | +/- the change in fair value of equity awards granted in prior Covered Years that vested in the Covered Year | | $225,480 | | ($774,984) | | $1,395,557 | $1,252,645 | $225,480 | ($774,984) | $1,395,557 | - the prior Covered Year-end fair value of equity awards granted in prior Covered Years that were forfeited in the Covered Year | | $0 | | $0 | | $0 | $0 | $0 | $0 | $0 | + dividends/earnings paid or accrued on equity awards during or for the Covered Year (if not otherwise included in CAP) | | $0 | | $0 | | $0 | $0 | $0 | $0 | $0 | Total Added (or Deducted): | | $4,077,623 | | ($5,404,873) | | $4,194,809 | | | | | | | | | | Total: | | $2,562,289 | $4,077,623 | ($5,404,873) | $4,194,809 |
For the Other NEOs (on Average): | | | | | - change in actuarial present value of pension benefits, as reported in SCT for Covered Year | ($190,185) | $0 | ($277,922) | ($840,500) | + service cost of pension benefits, as calculated for Covered Year | $2,043 | $7,436 | $17,114 | $23,144 | + prior service cost of pension benefits, as calculated for Covered Year | N/A- | N/A | N/A | N/A | - SCT “Stock Awards” column value | ($1,706,280) | ($1,077,573) | ($868,388) | ($949,966) | - SCT “Option Awards” column value | N/A- | N/A | N/A | N/A | +/- adjusted amount for applicable stock/option awards, as calculated for Covered Year | $2,524,308 | $1,856,904 | $385,849 | $2,451,383 | + the Covered Year-end fair value of equity awards granted in (and still outstanding as of the end of) the Covered Year | $2,035,626 | $1,555,912 | $781,349 | $1,255,379 | +/- the change in fair value of equity awards granted in prior Covered Years (and still outstanding as of the end of the Covered Year) | $227,637 | $277,332 | ($271,499) | $942,616 | + the vesting date fair value of equity awards granted and vested in the Covered Year | $0 | $0 | $0 | $0 | +/- the change in fair value of equity awards granted in prior Covered Years that vested in the Covered Year | $261,046 | $23,660 | ($124,001) | $253,388 | - the prior Covered Year-end fair value of equity awards granted in prior Covered Years that were forfeited in the Covered Year | $0 | $0 | $0 | $0 | + dividends/earnings paid or accrued on equity awards during or for the Covered Year (if not otherwise included in CAP) | $0 | $0 | $0 | $0 | Total: | $629,887 | $786,767 | ($743,347) | $684,060 |
Footnote disclosure is included for the 2020-2022 Covered Years for the Other NEOs to reflect our updated calculations for such Covered Years to include four one-time equity grants made to the Non-PEO NEO group over the 2017 to 2022 fiscal years that were previously omitted from the 2022 PVP Table disclosure. These updates were not significant in the aggregate but led to an increase of approximately 4% to the 2022 CAP, a decrease of approximately 2% to the 2021 CAP, and an increase of approximately 5% to the 2020 CAP for the Other NEOs as reported in column (e) in the 2022 PVP Table disclosure. For the Other NEOs (on Average): | | | | | | | - change in actuarial present value of pension benefits, as reported in SCT for Covered Year | | $0 | | ($277,922) | | ($840,500) | + service cost of pension benefits, as calculated for Covered Year | | $7,436 | | $17,114 | | $23,144 | + prior service cost of pension benefits, as calculated for Covered Year | | N/A- | | N/A | | N/A | - SCT “Stock Awards” column value | | ($1,077,573) | | ($868,388) | | ($949,966) | - SCT “Option Awards” column value | | N/A- | | N/A | | N/A | +/- adjusted amount for applicable stock/option awards, as calculated for Covered Year | | $1,738,424 | | $410,059 | | $2,302,057 | + the Covered Year-end fair value of equity awards granted in (and still outstanding as of the end of) the Covered Year | | $1,414,572 | | $781,349 | | $1,158,678 | +/- the change in fair value of equity awards granted in prior Covered Years (and still outstanding as of the end of the Covered Year) | | $277,331 | | ($255,359) | | $889,990 | + the vesting date fair value of equity awards granted and vested in the Covered Year | | $0 | | $0 | | $0 | +/- the change in fair value of equity awards granted in prior Covered Years that vested in the Covered Year | | $46,520 | | ($115,931) | | $253,388 | - the prior Covered Year-end fair value of equity awards granted in prior Covered Years that were forfeited in the Covered Year | | $0 | | $0 | | $0 | + dividends/earnings paid or accrued on equity awards during or for the Covered Year (if not otherwise included in CAP) | | $0 | | $0 | | $0 | Total Added (or Deducted): | | $668,287 | | ($719,137) | | $534,735 |
| (3) | TSR as set forth in the PVP Table assumes, in each case, an initial investment of $100 on December 31, 2019, in (A) Timken common shares for our cumulative TSR, and in(B) the PVP Peer Index for the PVP Peer Index cumulative TSR, based on market prices at the end of each fiscal year through and including December 31, 2022,2023, and reinvestment of dividends.The PVP Rules require that we choose a peer group or index for purposes of TSR comparisons, and we have chosen the S&P 400 Industrials index (the “PVP Peer Index”) for this purpose; |
| | (4) | Net income for purposes of this pay versus performance disclosure is calculated as the consolidated net income of the Company and its subsidiaries, determined in accordance with U.S. GAAP. Dollar values are in millions. |
| | (5) | For purposes of this pay versus performance disclosure, adjusted EPS is calculated based on the Company’s adjusted earnings per share as used for external reporting purposes for the Covered Year (net of taxes), further adjusted to exclude the effect of material changes in accounting principles, methods, and/or significant changes in tax law that are not reflected in externally reported diluted earnings per share. See Appendix A for a reconciliation of adjusted EPS as used for external reporting to its most directly comparable GAAP financial measure. |
Graphical Descriptions of Relationships Between CAP and Certain Financial Performance Measure Results The PVP Rules require that comparisons be made between certain columns in the PVP Table. Such comparisons can be providedmade graphically without further explanation,description, and we have done so below. In accordance with that approach, the following charts show the relationships between our cumulative TSR, the cumulative TSR for the PVP Peer Index reflected in the PVP Table above, and Mr. Kyle’s CAP or Other NEO CAP, as applicable. Relationship of PEO CAP to Total ShareholSder Return Relationship of Other NEO CAP to Total Shareholder Return
Relationship of Other NEO CAP to Total Shareholder Return
The following charts show the relationships between GAAP net income and Mr. Kyle’s CAP or Other NEO CAP, as applicable. Relationship
Table of PEO CAP to Company U.S. GAAP Net Income Relationship of Other NEO CAP to Company U.S. GAAP Net IncomeContents
Lastly, the following charts show the relationships between adjusted EPS and Mr. Kyle’s CAP or Other NEO CAP, as applicable. Relationship of PEO CAP to Adjusted EPS Relationship of Other NEO CAP to Adjusted EPS
Most Important Financial Performance Measures The following table provides what we believe are the most important financial performance measures (including adjusted EPS) we used to link executive pay for our PEO and Other NEOs for 20222023 to our performance: Performance Measure | Type of Performance Measure | Adjusted EPS | Financial | Adjusted EBITDA | Financial | Adjusted EBITDA Margin | Financial | Free Cash Flow | Financial | Adjusted Return on Invested Capital | Financial | Relative TSR | Financial |
PROPOSAL NO. 3: RECOMMENDATION, ON AN ADVISORY BASIS, OF THE FREQUENCY OF THE SHAREHOLDER VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION The Securities Exchange Act of 1934 requires companies to hold a non-binding shareholder vote, at least once every six years, to determine whether a shareholder advisory vote on executive compensation should be held every one, two or three years.
After thoughtful consideration of the outcomes of our shareholder votes on this topic at both the 2017 Annual Meeting of Shareholders and the 2011 Annual Meeting of Shareholders and the current preference evident from voting results at other comparable companies, the Board of Directors is recommending that the frequency of the shareholder advisory vote on named executive officer compensation be every year. This recommendation reflects our commitment to strong corporate governance and accountability to our shareholders. An annual advisory vote will foster useful communication with our shareholders by allowing our shareholders to annually express their views on the Company’s executive compensation practices.
As an advisory vote, the outcome of the vote on this resolution is not binding on us. However, the Board of Directors values the opinions expressed by our shareholders in their vote on this proposal and will consider the outcome of the vote when determining the frequency of the shareholder advisory vote on named executive officer compensation.
Shareholders are being asked to vote on the following resolution:
RESOLVED, that the shareholders of the Company recommend, on an advisory basis, that the frequency with which the shareholders of the Company shall have an advisory vote on the compensation of the Company’s named executive officers set forth in the Company’s proxy statement is:
| ● | Choice 1 – every year; | | ● | Choice 2 – every two years; | | ● | Choice 3 – every three years; or | | ● | Choice 4 – abstain from voting. |
Shareholders are not voting to approve or disapprove the Board of Director’s recommendation. Shareholders may choose among the four choices listed in the resolution set forth above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT AN ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION BE HELD EVERY YEAR. |
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP (“EY”), an independent registered public accounting firm, to perform the audit of our financial statements and our internal control over financial reporting for the 20232024 fiscal year. EY has acted as our independent accounting firm for over 100 years. We believe the long tenure of EY’s audit relationship with us is beneficial as EY has developed significant expertise and experience with our business, accounting policies and practices and our internal control over financial reporting, which we believe allows for a higher quality audit and a competitive fee structure. The appointment of EY as our independent auditor is not required to be submitted to a vote of our shareholders for ratification. However, the Board of Directors believes that obtaining shareholder ratification is a sound governance practice. If our shareholders fail to vote in favor of the appointment of EY, the Audit Committee will reconsider whether to retain EY and may retain that firm or another firm without resubmitting the matter to our shareholders. Even if the shareholders ratify the appointment, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Company and its shareholders. The affirmative vote of a majority of the votes cast on this matter is necessary to ratify the appointment of EY. Abstentions will not be counted for determining whether this matter is approved. Because the ratification of the appointment of EY is a routine matter, we do not expect any broker non-votes with respect to this matter. Representatives of EY are expected to be present at the 20232024 Annual Meeting of Shareholders. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITOR FOR THE 2023 2024 FISCAL YEAR. |
Auditor
Set forth below are the aggregate fees billed by EY for professional services rendered to us in 20222023 and 2021:2022: | 2022 | | 2021 | 2023 | 2022 | Audit Fees: | | | | | Consolidated financial statements | $4,047,500 | | $3,263,500 | $5,427,500 | $4,047,500 | New accounting standards, method changes, and accounting consultations on matters addressed during the audit or interim reviews | $35,000 | | - | $50,000 | $35,000 | Statutory audits and SEC filings | $760,500 | | $558,000 | $640,000 | $760,500 | Total Audit Fees | $4,843,000 | | $3,821,500 | $6,117,500 | $4,843,000 | Audit-Related Fees: | | | | | Agreed upon procedures and permitted advisory services | $49,000 | | - | - | $49,000 | Total Audit-Related Fees | $49,000 | | - | - | $49,000 | Tax Fees: | | | | | | Tax compliance | $313,400 | | $205,000 | $300,000 | $313,400 | Tax advisory and transfer pricing | $778,800 | | $1,220,000 | $1,080,000 | $778,800 | Total Tax Fees | $1,092,200 | | $1,425,000 | $1,380,000 | $1,092,200 | All Other Fees: | | | | | | Publications and online subscriptions/content | $7,200 | | $7,200 | $8,200 | $7,200 | Total Other Fees | $7,200 | | $7,200 | $8,200 | $7,200 | Total Fees | $5,991,400 | | $5,253,700 | $7,505,700 | $5,991,400 |
The Audit Committee has adopted policies and procedures requiring pre-approval of all services provided by the independent auditor. Other than services pre-approved in connection with the annual engagement of the independent auditor, all services to be provided by the independent auditor must be, and have been, pre-approved by the Audit Committee. Requests for pre-approval must contain sufficient detail to ensure the Audit Committee knows what services it is being asked to pre-approve so that it can make a well-reasoned assessment of the impact of the service on the auditor’s independence. Additionally, the Audit Committee has pre-approved the provision of a limited number of specific services that do not require further action by the Audit Committee. The Audit Committee has delegated its pre-approval authority to one of its members who must report any pre-approval decisions to the full Audit Committee at its next scheduled meeting. Audit Committee Report
The Audit Committee has reviewed and discussed with management and our independent auditor the audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.2023. The Audit Committee also has discussed with our independent auditor the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Audit Committee has received and reviewed the written disclosures and the letter from our independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, has discussed with our independent auditor such independent auditor’s independence, and has considered the compatibility of non-audit services with the auditor’s independence. Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, for filing with the SEC. | James F. Palmer (Audit Committee Chair) | | Maria A. Crowe | | Sarah C. Lauber | | Christopher L. Mapes | | Ajita G. Rajendra | | Frank C. Sullivan |
PROPOSAL NO. 5: AMENDMENTS TO4: Approval of The AMENDMENT AND RESTATEMENT OF THE COMPANY’S AMENDED ARTICLES OF INCORPORATION AND AMENDED REGULATIONS TO REDUCE CERTAIN SHAREHOLDER VOTING REQUIREMENT THRESHOLDSTimken Company 2019 Equity and Incentive Compensation Plan A majorityWe are asking shareholders to approve the amendment and restatement of votes cast, or a simple majority, is already the voting standard for most matters votedEquity and Incentive Compensation Plan (as so amended and restated, the “Amended Plan”). The Board, upon byrecommendation of the Compensation Committee, approved and adopted the Amended Plan on February 8, 2024, subject to shareholder approval. The Amended Plan continues to provide the Board and the Compensation Committee flexibility to design equity-based compensatory awards that are responsive to the Company’s shareholders. business needs and continues to authorize a variety of awards designed to advance the interests and long-term success of the Company.
The express voting standards applicableEquity and Incentive Compensation Plan was originally approved by shareholders at the Company’s 2019 Annual Meeting of Shareholders. The Amended Plan amends and restates in its entirety the Equity and Incentive Compensation Plan. Outstanding awards under the Equity and Incentive Compensation Plan will continue in effect in accordance with their terms. The Board recommends that you vote to approve the Amended Plan. If the Amended Plan is approved by shareholders at the Annual Meeting, it will be effective as of the day of the Annual Meeting, and future grants will be made on or after such date under the Amended Plan. If the Amended Plan is not approved by our shareholders, no awards will be made under the Amended Plan. Our principal reason for amending and restating the Equity and Incentive Compensation Plan is to increase the number of common shares available for issuance or transfer under the Amended Plan. The Amended Plan will increase the maximum number of shares available for awards from 10,000,000 common shares, without par value, to 14,500,000, an increase of 4,500,000 common shares with such amount subject to adjustment, including under the Amended Plan’s share counting rules. The Amended Plan also includes various other substantive changes and non-substantive and conforming changes. The material changes are described in the “Summary of Material Changes” below, which is followed by a description of the highlights of the Amended Plan and then a summary description of the entire Amended Plan. The actual text of the Amended Plan is attached to this Proxy Statement as Appendix B. The following description of the Amended Plan is only a summary of its principal terms and provisions and is qualified by reference to the actual text of the Amended Plan as set forth in Appendix B. Why We Believe You Should Vote for this Proposal |
Share Increase The Amended Plan authorizes our Compensation Committee to provide cash awards and equity-based compensation as further described below, for the purpose of providing our non-employee Directors, employees of the Company and its subsidiaries, and certain consultants and other service providers to the Company and its subsidiaries, incentives and rewards for service and/or performance. Some of the key features and characteristics of the Amended Plan that reflect our commitment to effective management of equity and incentive compensation are set forth below. As of February 20, 2024, only 1,968,538 shares remained available for issuance under the Equity and Incentive Compensation Plan (assuming maximum payout for performance-based restricted stock units and settlement in shares). If the Amended Plan is not approved, we may need to significantly increase the cash component of our nonemployee Director and employee compensation, which may not necessarily align director or employee compensation interests with the investment interests of our shareholders as well as equity-based awards. Replacing equity awards with cash would also increase cash compensation expense and use cash that may be better utilized for other purposes. The below includes aggregated information regarding our view of the overhang associated with the Predecessor Long-Term Incentive Plan and the Equity and Incentive Compensation Plan as well as the potential dilution associated with the approval of the Amended Plan (reflecting a 1:1 share ratio, rather than application of the fungible share ratio). This information is as of February 20, 2024. On that date, there were approximately 70,389,366 common shares outstanding. | · | Outstanding full-value awards (deferred shares, time-based restricted shares, performance-based restricted stock units, and time-based restricted stock units): 1,462,364 shares, assuming maximum payout for performance-based restricted stock units (approximately 2.1% of our outstanding common shares); |
| · | Outstanding stock options: 362,524 shares (approximately 0.5% of our outstanding common shares) (outstanding stock options have a weighted average exercise price of $42.70 and a weighted average remaining term of 4.0 years); |
| · | In summary, total common shares subject to outstanding awards, as described above (full-value awards and stock options): 1,824,888 shares assuming maximum payout for performance-based restricted stock units (approximately 2.6% of our outstanding common shares); |
| · | Total common shares available for future awards under the Equity and Incentive Compensation Plan: 1,968,538 shares (assuming maximum payout for performance-based restricted stock units and settlement in shares); |
| · | Proposed additional common shares available for awards under the Amended Plan: 4,500,000 shares (approximately 6.4% of our outstanding common shares – this percentage reflects the simple dilution of our shareholders that would occur if the Amended Plan is approved); and |
| · | The total common shares subject to outstanding awards as of February 20, 2024 (1,824,888 shares, assuming maximum payout for performance-based restricted stock units), plus the proposed common shares available for future awards under the Equity and Incentive Compensation Plan (1,968,538 shares), plus the proposed additional shares available for future issuance under the Amended Plan (4,500,000 shares), represent a total overhang of 8,293,426 shares (11.8% under the Amended Plan). |
Based on the closing price on the NYSE for our common shareholders in our Amended Articlesshares on February 20, 2024 of Incorporation and Amended Regulations are simple majority standards. Ohio corporate law, like$79.77 per share, the corporate lawaggregate market value as of most states, does, however, provide a default voting standard for certain extraordinary matters (requiring the affirmative voteFebruary 20, 2024 of the holdersadditional 4,500,000 common shares requested under the Amended Plan was $358,965,000. In fiscal years 2021, 2022, and 2023, we granted target awards under the Equity and Incentive Compensation Plan covering 306,830 shares, 369,845 shares, and 342,235 shares, respectively. Based on our basic weighted average of shares outstanding for those three fiscal years of 75,885,316, 73,602,247, and 71,377,656, respectively, for the three-fiscal-year period 2021-2023, our outstanding voting securities)average burn rate, not taking into account forfeitures, was 0.46% (our individual years’ burn rates were 0.40% for fiscal 2021, 0.50% for fiscal 2022, and 0.48% for fiscal 2023). Because In determining the number of additional shares to request for approval under the Amended Plan, our organizational documents are otherwise silentmanagement team worked with WTW and the Compensation Committee to evaluate a number of factors, including our recent share usage and criteria expected to be utilized by institutional proxy advisory firms in evaluating our proposal for the Amended Plan. We currently anticipate that the shares requested in connection with the approval of the Amended Plan will last for about five years, based on our historic grant rates and the required voting standardapproximate current share price, but could last for such extraordinary matters, certain matters, such as a mergerdifferent period of time if actual practice does not match historic grant rates or saleour share price changes materially. As noted below, our Compensation Committee retains full discretion under the Amended Plan to determine the number and amount of all or substantiallyawards to be granted under the Amended Plan, subject to the terms of the Amended Plan. In evaluating this proposal, shareholders should consider all of the Company’s assetsinformation in this proposal. Summary of Material Changes from the Equity and Incentive Compensation Plan |
Increase in the Number of Available Shares The Equity and a voluntary dissolutionIncentive Compensation Plan authorizes the issuance or transfer of an aggregate of 10,000,000 common shares, subject to the share counting rules of the plan. As of February 20, 2024, 9,899,330 of these shares had been granted or earmarked for grants (inclusive of outstanding awards and assuming maximum payout for performance-based restricted stock units and settlement in shares) and 1,968,538 shares were available for future awards under the Equity and Incentive Compensation Plan, totaling more than 10,000,000 common shares due to the share counting rules of the plan and limited share add-back provisions described below. The Amended Plan increases the total aggregate number of shares available for issuance or transfer for awards under the Amended Plan by 4,500,000 shares to 14,500,000 common shares, plus the shares that are subject to awards granted under the Predecessor Plans (as defined in the Amended Plan), the Equity and Incentive Compensation Plan or the Amended Plan that are added (or added back, as applicable) pursuant to the share counting rules in the Amended Plan. The number and kind of shares available under the Amended Plan are subject to adjustment for stock dividends and stock splits and in certain other situations as further described in the Amended Plan. In addition, the Amended Plan correspondingly increases the limit on shares that may be issued or transferred upon the exercise of incentive stock options by 4,500,000 shares. Other Material Plan Changes In addition, the Amended Plan revises the clawback provisions from the Equity and Incentive Compensation Plan to incorporate the requirements of the final NYSE clawback listing standards and SEC requirements as well as certain additional permissive clawback and forfeiture provisions as further detailed under “Clawback Provisions” on page 57. The Amended Plan also extends the term of the Equity and Incentive Compensation Plan until the 10th anniversary of the date of shareholder approval of the Amended Plan. We are not seeking to make any other material changes to the terms of the Equity and Incentive Compensation Plan in the Amended Plan. Other Amended Plan Highlights |
Allowances for Conversion Awards and Assumed Plans Common shares issued or transferred under awards granted under the Amended Plan in substitution for or conversion of, or in connection with an assumption of, stock options, stock appreciation rights (“SARs”), restricted shares, restricted stock units, deferred shares, or other share or share-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with us or any of our subsidiaries will not count against (or be added to) the aggregate share limit or other Amended Plan limits described above. Additionally, shares available under certain plans that we or our subsidiaries may assume in connection with corporate transactions from another entity may be available for certain awards under the Amended Plan, under circumstances further described in the Amended Plan, but will not count against the aggregate share limit or other Amended Plan limits described above. Fungible Share Counting Subject to the share counting rules in the Amended Plan, the aggregate number of common shares available under the Amended Plan will be reduced by (a) one common share for every one common share subject to a stock option or SAR granted under the Amended Plan, and (b) 3.50 common shares for every one common share subject to an award other than a stock option or SAR granted under the Amended Plan. Limited Share Recycling Provisions Subject to certain exceptions described in the Amended Plan, if any award granted under the Amended Plan (in whole or in part) is canceled or forfeited, expires, is settled for cash, or is unearned, the common shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, again be available under the Amended Plan. Additionally, if, after the effective date of the Amended Plan, any common shares subject to an award granted under the Predecessor Long-Term Incentive Plan or the Equity and Incentive Compensation Plan are forfeited, or an award granted under the Predecessor Long-Term Incentive Plan (in whole or in part) or the Equity and Incentive Compensation Plan is canceled or forfeited, expires, is settled in cash, or is unearned, the common shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the Amended Plan. Generally, the following will not be added (or added back, as applicable) to the aggregate number of common shares available under the Amended Plan: (a) common shares used in payment of the exercise price of a stock option; (b) common shares used to satisfy tax withholding; and (c) common shares reacquired by the Company would requireusing cash proceeds from the exercise of stock options. Further, none of the common shares covered by stock-settled SARs that are exercised and settled in shares, whether or not all common shares covered by the SARs are actually issued to the participant upon exercise, will be added back to the aggregate number of shares available under the Amended Plan. If a supermajority vote.participant elects to give up the right to receive compensation in exchange for common shares based on fair market value, such common shares will not count against the aggregate number of shares available under the Amended Plan. Our Board has unanimously approved amendments to both ourGenerally, any common share that becomes available under the Amended Articles of Incorporation and our Amended Regulations to eliminate any supermajority voting requirements, includingPlan as a result of default voting standardsthe recycling provisions of the Amended Plan will be added back as (a) one common share if such common share was subject to a stock option or SAR, and (b) as 3.50 common shares if such common share was subject to an award other than a stock option or SAR.
Minimum Vesting Periods The Amended Plan provides that awards granted under Ohiothe Amended Plan will have a minimum vesting or performance period of at least one year, except that an aggregate of up to 5% of the common shares available for awards under the Amended Plan (as may be adjusted under the adjustment provisions of the Amended Plan) may be used for awards that do not comply with the minimum vesting requirement at the time of the grant. However, notwithstanding the minimum vesting requirement, the Compensation Committee is permitted to (a) provide for continued vesting or accelerated vesting for any award under the Amended Plan upon certain events, including in connection with or following a participant’s death, disability, or termination of service, or a change in control of the Company, or (b) exercise its discretionary vesting authority under the Amended Plan (as described below and in the Amended Plan) at any time following the grant of an award. No Repricing Without Shareholder Approval Except in connection with certain corporate transactions, changes in the capital structure of the Company or in connection with a change in control, the terms of outstanding awards may not be amended to (a) reduce the exercise price or base price of outstanding stock options or SARs, respectively, or (b) cancel outstanding “underwater” stock options or SARs (including following a participant’s voluntary surrender of “underwater” stock options or SARs) in exchange for cash, other awards or stock options or SARs with an exercise price or base price, as applicable, that is less than the exercise price or base price of the original stock options or SARs, as applicable, without shareholder approval. The Amended Plan specifically provides that this provision is intended to prohibit the repricing of “underwater” stock options and SARs and that it may not be amended without approval by our shareholders. Exercise or Base Price Limitation The Amended Plan also provides that, except with respect to certain converted, assumed or substituted awards as described in the Amended Plan, no stock options or SARs will be granted with an exercise or base price less than the fair market value of a common share on the date of grant. Summary of Other Material Terms of the Amended Plan |
Administration The Amended Plan will generally be administered by our Compensation Committee (except as otherwise contemplated in the Amended Plan) or such other body or subcommittee that may administer the Amended Plan pursuant to its terms or that has received a delegation of authority from the Compensation Committee. Any interpretation, construction and determination by our Compensation Committee of any provision of the Amended Plan, or of any agreement, notification or document evidencing the grant of awards under the Amended Plan, will be final and conclusive. To the extent permitted by applicable law, our Compensation Committee may delegate to one or more of its members or to one or more officers, or to one or more agents or advisors of the Company, such administrative duties or powers as it deems advisable. In addition, our Compensation Committee may by resolution, subject to certain restrictions set forth in the full textAmended Plan, authorize one or more officers of both the proposed amendmentCompany to Article Seventh(a) designate employees to be recipients of awards under the Amended Plan, and (b) determine the size or memorialize the term of such awards, as an agent of the Committee, subject to express limitations. Our Compensation Committee is authorized to take action under the Amended Plan subject to the express limitations contained in the Amended Plan. Eligibility Participation in the Amended Plan is available to any person who is selected by our Compensation Committee to receive benefits under the Amended Plan and who is at that time (a) a non-employee Director of the Company, (b) an officer or other employee of the Company or any of its subsidiaries (including a person who has agreed to commence serving in such capacity within 90 days of the date of grant), (c) a consultant of the Company or a subsidiary, or (d) a person who provides services to the Company or any subsidiary that are equivalent to those typically provided by an employee. However, participants in the Amended Plan must generally satisfy the Form S-8 definition of “employee.” As of February 20, 2024, we had more than 19,000 employees and there were approximately 270 employees, 0 consultants, and 9 non-employee Directors of the Company expected to participate in the Amended Plan. The basis for participation in the Amended Plan by eligible persons is the selection of such persons for participation by our Compensation Committee (or its proper delegate). Types of Awards Under the Amended Plan Pursuant to the Amended Plan, the Company may grant cash awards and stock options (including stock options intended to be “incentive stock options” as defined in Section 422 of the Code (“Incentive Stock Options”), SARs, restricted shares, restricted stock units, deferred shares, performance shares, performance units, cash incentive awards, and certain other awards based on or related to common shares. Generally, each grant of an award under the Amended Plan will have an award agreement, certificate, resolution or other type or form of writing or other evidence approved by our Compensation Committee (an “Evidence of Award”), which will contain such terms and provisions as our Compensation Committee may determine, consistent with the Amended Plan. A brief description of the types of awards which may be granted under the Amended Plan is set forth below. Stock Options A stock option is a right to purchase common shares upon exercise. Stock options under the Amended Plan may consist of either an Incentive Stock Option (subject to applicable tax-based limitations), a non-qualified stock option that is not intended to be an “incentive stock option” under Section 422 of the Code, or a combination of both. The term of a stock option may not extend more than 10 years from the date of grant. Our Compensation Committee may provide for the automatic exercise of a stock option in an Evidence of Award. Each grant of a stock option will specify the applicable terms of the stock option, including the number of common shares subject to the stock option and the required period or periods of the participant’s continuous service, if any, before any stock option or portion of a stock option will become exercisable (subject to the Amended Plan’s minimum vesting rules). Each grant will specify whether the consideration to be paid in satisfaction of the exercise price will be payable: (a) in cash, by check acceptable to the Company, or by wire transfer of immediately available funds; (b) by the actual or constructive transfer to the Company of common shares owned by the participant with a value at the time of exercise that is equal to the total exercise price; (c) subject to any conditions or limitations established by our Compensation Committee, by a net exercise arrangement pursuant to which the Company will withhold common shares otherwise issuable upon exercise of a stock option; (d) by a combination of the foregoing methods; or (e) by such other methods as may be approved by our Compensation Committee. To the extent permitted by law, any grant may provide for deferred payment of the exercise price from the proceeds of a sale through a bank or broker of some or all of the shares to which the exercise relates. Stock options granted under the Amended Plan may not provide for dividends or dividend equivalents. SARs A SAR is a right to receive from us an amount equal to 100%, or such lesser percentage as our Compensation Committee may determine, of the spread between the base price and the value of our common shares on the date of exercise. Each grant of SARs will specify the period or periods of continuous service, if any, by the participant with the Company or any subsidiary that is necessary before the SARs or installments of such SARs will become exercisable (subject to the Amended ArticlesPlan’s minimum vesting rules). A SAR may be paid in cash, common shares or any combination of Incorporationthe two. The term of a SAR may not extend more than 10 years from the date of grant. Our Compensation Committee may provide for the automatic exercise of a SAR in Appendix Ban Evidence of Award. SARs granted under the Amended Plan may not provide for dividends or dividend equivalents. Restricted Shares Restricted shares constitute an immediate transfer of the ownership of common shares to the participant in consideration of the performance of services, entitling such participant to dividend, voting and other ownership rights, subject to the substantial risk of forfeiture and restrictions on transfer determined by our Compensation Committee for a period of time determined by our Compensation Committee or until certain management objectives specified by our Compensation Committee are achieved. Each such grant or sale of restricted shares may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per common share on the date of grant. Restricted shares are subject to the Amended Plan’s minimum vesting rules. Any grant of restricted shares may require that any and all dividends or distributions paid on restricted shares that remain subject to a substantial risk of forfeiture be automatically deferred and/or reinvested in additional restricted shares, which will be subject to the same restrictions as the underlying restricted shares. Any such dividends or other distributions on restricted shares will be deferred until, and paid contingent upon, the vesting of such restricted shares. Restricted Stock Units Restricted stock units awarded under the Amended Plan constitute an agreement by the Company to deliver common shares, cash, or a combination of the two, to the participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the restriction period as our Compensation Committee may specify. Each grant or sale of restricted stock units may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value of our common shares on the date of grant. Restricted stock units are subject to the Amended Plan’s minimum vesting rules. During the restriction period applicable to restricted stock units, the participant will have no right to transfer any rights under the award and will have no rights of ownership in the common shares underlying the restricted stock units and no right to vote them. Rights to dividend equivalents may be extended to and made part of any restricted stock unit award on the terms determined by our Compensation Committee, on a deferred and contingent basis, either in cash or in additional common shares, but dividend equivalents or other distributions on common shares under the restricted stock units will be deferred until and paid contingent upon vesting of such restricted stock units. A restricted stock unit may be paid in cash, common shares or any combination of the two. Deferred Shares The grant or sale of deferred shares represents an agreement to issue or transfer common shares to the participant following a deferral period in consideration of the participant’s performance of services, subject to fulfillment of conditions specified by our Compensation Committee. Each such grant or sale may be made without additional consideration from the participant or in consideration of a payment by the participant that is less than the fair market value of common shares on the date of grant. During the deferral period, the participant will have no right to transfer any rights under the award and will have no rights of ownership in the deferred shares and no right to vote them. Our Compensation Committee may authorize the payment of dividend equivalents on the deferred shares, in cash or additional deferred shares, on a deferred and contingent basis, but dividend equivalents or other distributions on deferred shares will be deferred until and paid contingent upon the earning and vesting of such deferred shares. Deferred shares are subject to the Amended Plan’s minimum vesting rules. A deferred share may be paid in cash, common shares or any combination of the two. Performance Shares, Performance Units and Cash Incentive Awards Performance shares, performance units and cash incentive awards may also be granted to participants under the Amended Plan. A performance share is a bookkeeping entry that records the equivalent of one common share, and a performance unit is a bookkeeping entry that records a unit equivalent to $1.00 or such other value as determined by our Compensation Committee. Each grant will specify the number or amount of performance shares or performance units, or the amount payable with respect to a cash incentive award being awarded, which number or amount may be subject to adjustment to reflect changes in compensation or other factors. These awards, when granted under the Amended Plan, generally become payable to participants based on the achievement of specified management objectives and upon such terms and conditions as our Compensation Committee determines at the time of grant. The performance period with respect to each cash incentive award or grant of performance shares or performance units will be a period of time determined by our Compensation Committee (subject to the Amended Plan’s minimum vesting rules) and within which the management objectives relating to such award are to be achieved. Any grant of performance shares or performance units may provide for the payment of dividend equivalents in cash or in additional common shares, subject to deferral and payment on a contingent basis based on the participant’s earning and vesting of the performance shares or performance units, as applicable, with respect to which such dividend equivalents are paid. Other Awards Subject to applicable law and applicable share limits under the Amended Plan, our Compensation Committee may authorize the grant to any participant of common shares or such other awards that may be based on or related to common shares, as further described in the Amended Plan (“Other Awards”). The terms and conditions of any such awards will be determined by our Compensation Committee. Common shares delivered under an award in the nature of a purchase right granted under the Amended Plan will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, common shares, other awards, notes or other property, as our Compensation Committee determines. In addition, our Compensation Committee may grant cash awards, as an element of or supplement to any other awards granted under the Amended Plan. Our Compensation Committee may also authorize the grant of common shares as a bonus, or may authorize the grant of other awards in lieu of obligations of the Company or a subsidiary to pay cash or deliver other property under the Amended Plan or under other plans or compensatory arrangements, subject to terms determined by our Compensation Committee in a manner that complies with Section 409A of the Code. Other Awards are subject to the Amended Plan’s minimum vesting rules. Our Compensation Committee may provide for the payment of dividends or dividend equivalents on Other Awards in cash or in additional common shares, subject to deferral and payment on a contingent basis based on the participant’s earning and vesting of the Other Awards with respect to which such dividends or dividend equivalents are paid. Change in Control The Amended Plan includes a definition of “change in control” that will apply to awards under the Amended Plan, unless otherwise determined by our Compensation Committee. Management Objectives The Amended Plan provides that any of the awards set forth above may be granted subject to the achievement of specified management objectives. Management objectives are defined as the measurable performance objective or objectives established pursuant to the Amended Plan for participants who have received grants of performance shares, performance units or cash incentive awards or, when so determined by our Compensation Committee, other types of awards under the Amended Plan, all as determined by our Compensation Committee. Additionally, if our Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the management objectives unsuitable, our Compensation Committee may in its discretion modify such management objectives or the goals or actual levels of achievement, in whole or in part, as our Compensation Committee deems appropriate and equitable. Transferability of Awards In general, and except as otherwise provided by our Compensation Committee, and subject to the terms of the Amended Plan, awards under the Amended Plan will not be transferrable by a participant except by will or the laws of descent and distribution. In no event will any such award granted under the Amended Plan be transferred for value. Except as otherwise determined by our Compensation Committee, stock options and SARs will be exercisable during the participant’s lifetime only by him or her or, in the event of the participant’s legal incapacity to do so, by his or her guardian or legal representative as described in the Amended Plan. Adjustments; Corporate Transactions Our Compensation Committee will make or provide for such adjustments in: (a) if and as applicable, the number of and kind of common shares covered by, and the proposedexercise price or base price provided under, awards granted pursuant to the Amended Plan; (b) cash incentive awards; and (c) other award terms, as our Compensation Committee in its sole discretion, exercised in good faith, determines to be equitably required in order to prevent dilution or enlargement of the rights of participants that otherwise would result from certain corporate transactions and events that are described in the Amended Plan. Also, in the event of any such transaction or event, or in the event of a change in control of the Company, our Compensation Committee may provide in substitution for any or all outstanding awards under the Amended Plan such alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the circumstances. In addition, for each stock option or SAR with an exercise price or base price, respectively, greater than the consideration offered in connection with any such transaction or event or change in control of the Company, our Compensation Committee may in its sole discretion elect to cancel such stock option or SAR without any payment to the person holding such award. Our Compensation Committee will make or provide for such adjustments to the numbers of common shares available under the Amended Plan and the share limits of the Amended Plan as our Compensation Committee in its sole discretion, exercised in good faith, may determine to be appropriate in connection with such transaction or event (subject to applicable limitations described in the Amended Plan). Detrimental Activity and Recapture Awards granted under the Amended Plan will be subject to the terms and conditions of the Company’s clawback provisions, policy or policies (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act, and any applicable rules or regulations (including those of the stock exchange on which the shares are traded) (referred to as the “Compensation Recovery Policy”). Evidences of Award will be interpreted consistently with or otherwise subject to the terms and conditions of the Compensation Recovery Policy. Further, by accepting any award under the Amended Plan, each participant will fully cooperate with and assist the Company in connection with any participant obligation to the Company pursuant to the Compensation Recovery Policy. Participants agree that the Company may enforce its rights under the Compensation Recovery Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Compensation Recovery Policy. Such cooperation and assistance shall include, but is not limited to, executing, completing, and submitting any documentation necessary to facilitate the recovery or recoupment by the Company from such participant of any such amounts, including from such participants’ accounts or from any other compensation, to the extent permissible under Section 409A of the Code. Otherwise, Evidences of Award may provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain or earnings related to an award (or other provisions intended to have similar effects), including upon such terms and conditions as may be determined by the Board or the Committee in accordance with the Compensation Recovery Policy or any applicable laws, rules, regulations or requirements that impose mandatory clawback or recoupment requirements under the circumstances set forth in such laws, rules, regulations or requirements in effect from time to time (including as may operate to create additional rights for the Company with respect to such awards and the recovery of amounts or benefits relating thereto). Withholding The Amended Plan includes provisions governing the satisfaction of the Company’s tax and other withholding obligations with respect to awards under the Amended Plan. Generally, absent other arrangements being made by a participant, if a participant’s benefit is to be received in the form of common shares, unless otherwise determined by our Compensation Committee, we will withhold common shares having a value equal to the amount required to be withheld. When a participant is required to pay the Company an amount required to be withheld, the participant may elect, unless otherwise determined by our Compensation Committee, to satisfy the obligation, in whole or in part, by having withheld, from the shares required to be delivered to the participant, common shares having a value equal to the amount required to be withheld or by delivering to us other common shares held by such participant. In no event will the fair market value of the common shares to be withheld and delivered pursuant to the Amended Plan exceed the minimum amount required to be withheld, unless (a) an additional amount can be withheld and not result in adverse accounting consequences, (b) such additional withholding amount is authorized by our Compensation Committee, and (c) the total amount withheld does not exceed the participant’s estimated tax obligations attributable to the applicable transaction. Participants will also make such arrangements as the Company may require for the payment of any withholding tax or other obligation that may arise in connection with the disposition of common shares acquired upon the exercise of stock options. Effective Date of the Amended Plan The Amended Plan will become effective on the date it is approved by the Company’s shareholders. Amendment and Termination of the Amended Plan The Board generally may amend the Amended Plan from time to time in whole or in part. However, if any amendment, for purposes of applicable stock exchange rules (and except as permitted under the adjustment provisions of the Amended Plan) must be approved by our shareholders in order to comply with applicable law or the rules of the NYSE (including as described in the Amended Plan), or, if the common shares are not traded on the NYSE, the principal national securities exchange upon which the common shares are traded or quoted, all as determined by the Board, then such amendment will be subject to shareholder approval and will not be effective unless and until such approval has been obtained. Further, subject to the Amended Plan’s prohibition on repricing and other limitations set forth in the Amended Plan, our Compensation Committee generally may amend the terms of any award prospectively or retroactively. If permitted by Section 6409A of Article Vthe Code and subject to certain other limitations set forth in the Amended Plan (but notwithstanding the Amended Plan’s minimum vesting rules), including in the case of termination of employment or service, or in the case of unforeseeable emergency or other circumstances or in the event of a change in control, our Compensation Committee may in its sole discretion provide for continued vesting or accelerate the vesting of certain awards granted under the Amended RegulationsPlan. The Board may, in Appendix Cits discretion, terminate the Amended Plan at any time. Termination of the Amended Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the date of termination. No grant will be made under the Amended Plan on or after the tenth anniversary of the effective date of the Amended Plan, but all grants made prior to such date will continue in effect thereafter subject to their terms and the terms of the Amended Plan. It is not possible to determine specific amounts and types of awards that may be granted in the future under the Amended Plan because the grant and actual settlement of awards under the Amended Plan will be discretionary. The Amended Plan does not mandate set benefits or amounts, and no awards have been granted under the Amended Plan that are contingent upon shareholder approval. Awards Granted to Certain Persons |
The table below shows the total number of awards granted assuming target payout for performance-based restricted stock units under the Equity and Incentive Compensation Plan to the named executive officers and the other individuals and groups indicated below since its inception through February 20, 2024: Name | Number of Deferred Shares and Restricted Stock Units Granted (at target) | Named Executive Officers: | | Richard G. Kyle, President & CEO | 360,300 | Philip D. Fracassa Executive Vice President and Chief Financial Officer | 111,725 | Christopher A. Coughlin Executive Vice President and President Industrial Motion | 123,450 | Andreas Roellgen Executive Vice President and President Engineered Bearings | 49,575 | Hansal N. Patel Vice President, General Counsel & Secretary | 53,125 | All current executive officers as a group | 721,155 | All current non-employee Directors as a group | 107,215 | Each non-employee nominee for election as a Director | 96,135 | Each associate of any of the foregoing | - | Each other person who received at least 5% of all shares granted | - | All employees, excluding current executive officers | 996,945 |
Each non-employee nominee for election as a Director has received a total of 11,080 time-based restricted stock units under the Equity and Incentive Compensation Plan, other than Sarah Lauber who has received a total of 7,495 time-based restricted stock units since her election to the Board in January 2021.
U.S. Federal Income Tax Consequences |
The following is a brief summary of certain of the federal income tax consequences of certain transactions under the Amended Plan based on federal income tax laws in effect. This summary, which is presented for the information of shareholders considering how to vote on this proposal and not for Amended Plan participants, is not intended to be complete and does not describe federal taxes other than income taxes (such as Medicare and Social Security taxes), or state, local or foreign tax consequences. Tax Consequences to Participants |
Restricted Shares The recipient of restricted shares generally will be subject to tax at ordinary income rates on the fair market value of the restricted shares (reduced by any amount paid by the recipient for such restricted shares) at such time as the restricted shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (“Restrictions”). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted shares. If a Section 83(b) election has not been made, any dividends received with respect to restricted shares that are subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the recipient. Performance Shares, Performance Units and Cash Incentive Awards No income generally will be recognized upon the grant of performance shares, performance units or cash incentive awards. Upon payment in each case attachedrespect of the earn-out of performance shares, performance units or cash incentive awards, the recipient generally will be required to this Proxy Statement: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 common shares received. Nonqualified Stock Options In general: | · | no income will be recognized by an optionee at the time a non-qualified stock option is granted; |
| · | at the time of exercise of a non-qualified stock option, ordinary income will be recognized by the optionee in an amount equal to the difference between the option price paid for the shares and the fair market value of the shares, if unrestricted, on the date of exercise; and |
| · | at the time of sale of shares acquired pursuant to the exercise of a non-qualified stock option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held. |
Incentive Stock Options No income generally will be recognized by an optionee upon the grant or exercise of an Incentive Stock Option. If common shares are issued to the optionee pursuant to the exercise of an Incentive Stock Option, 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 transfer of such shares to the optionee, then upon sale of such shares, any amount realized in excess of the option 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 common shares acquired upon the proposalexercise of an Incentive Stock Option are disposed of prior to amend our Amended Articlesthe expiration of Incorporationeither 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 if 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. SARs No income will be recognized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and Amended Regulationsthe fair market value of any unrestricted common shares received on the exercise. Restricted Stock Units No income generally will be recognized upon the award of restricted stock units. The recipient of a restricted stock unit award generally will be subject to tax at ordinary income rates on the fair market value of unrestricted common shares on 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/loss holding period for such shares will also commence on such date. Deferred Shares No income generally will be recognized upon the award of deferred shares. The participant generally will be subject to tax at ordinary income rates on the fair market value of unrestricted common shares on the date that such shares are transferred to the participant under the award (reduced by any amount paid by the participant for such deferred shares), and the capital gains/loss holding period for such shares will also commence on such date. Tax Consequences to the Company or its Subsidiaries |
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not approved,an “excess parachute payment” within the default Ohio corporate law voting standard will continuemeaning of Section 280G of the Code and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code. Registration with the SEC |
We intend to requirefile a Registration Statement on Form S-8 relating to the issuance of the additional common shares under the Amended Plan with the SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the Amended Plan by our shareholders. Vote Required for Approval |
The affirmative vote of the holders of at least two-thirds of our outstanding voting securities for certain extraordinary matters. Because our Board has unanimously approved the proposed amendments to our Amended Articles of Incorporation and Amended Regulations, the affirmative vote of holders of at least a majority of our outstanding common sharesthe votes cast on this proposal is necessary for approval of this proposal. Accordingly, abstentionsthe Amended Plan. Abstentions and broker non-votes will have the same effect as votes cast against the not be counted for determining whether this proposal to amend our Amended Articles of Incorporation and Amended Regulations. Shares represented by properly executed proxies will be voted at the meeting in accordance with the shareholders’ instructions. In the absence of specific instructions, the shares will be voted FOR the proposal to amend our Amended Articles of Incorporation and Amended Regulations.is approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND OURAPPROVE THE AMENDED ARTICLES OF INCORPORATION AND AMENDED REGULATIONS.PLAN. |
PROPOSAL NO. 6:5: SHAREHOLDER PROPOSAL – Improve the Shareholder Right to Call a Special Shareholder MeetingADOPT AMBITIOUS EMISSIONS REDUCTION TARGETS AGreen Century Capital Management, Inc. on behalf of the Green Century Equity Fund, a shareholder John Chevedden, whose address and share ownership are available upon request as described on page 90,99, has notified the Company of hisits intention to offer the following proposal for consideration of our shareholders at the 20232024 Annual Meeting of Shareholders. By including the proposal below in our proxy materials, the Company makes no representation as to the accuracy or completeness of the proponent’s claims or assertions.
Proposal 6Adopt Ambitious Emissions Reduction Targets
Whereas: Climate change is creating systemic risks to the economy, and immediate, sharp emissions reduction is required.8 Companies lacking ambitious goals to cut greenhouse gas (GHG) emissions may jeopardize shareholder value as climate change poses undiversifiable and unhedgeable risks.9 Acknowledging this, more than 6,500 companies representing a broad range of industries have set or committed to set science-based GHG reduction targets, aligned with a 1.5 degrees Celsius scenario and 8https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf 9https://www.unepfi.org/fileadmin/documents/universal_ownership_full.pdf. Pg4. covering their Scopes 1 – Improve3 emissions, with the Shareholder RightScience Based Targets initiative (SBTi). SBTi provides third party validation of targets. Although Timken has committed to Call a Special Shareholder Meetingreduce its GHG emissions intensity by 50% per unit of revenue by 2030, its target focuses exclusively on Scope 1 and 2 emissions, is not aligned with the Paris Agreement’s goal of limiting global temperature rise to 1.5 degrees Celsius, and lacks third party verification. Further, Timken notes in its 2022 sustainability report that by normalizing emissions to Company revenue, its “emissions intensity could experience volatility during both recessions and high growth periods for industrial markets,” creating uncertainty about the reliability of this metric.
Shareholders ask our Board to take the steps necessary to amend the appropriate company governing documents toIntensity targets may give the ownersappearance of progress even when absolute reductions are moderate or non-existent. For example, Timken reports a combined 10% of our outstanding common stock25% Scope 1 and 2 emissions intensity decrease from 2018 to 2022, but its absolute emissions fell only 5.4% during the power to callsame period. On this trajectory, Timken would only achieve a special shareholder meeting.
One of the main purposes of this proposal is to give all shareholders the right to formally participate13% reduction in calling for a special shareholder meeting regardless of length of stock ownershipabsolute emissions by 2030 compared to the fullest extent possible.43% reduction called for by climate experts.
Currently only non-street name shareholders can participate in calling a special shareholder meeting. Thus, if one makes the reasonable estimate that 50%Industry peers SKF, Schaeffler AG, and JTEKT have set or committed to set near-term science-based 1.5 degrees Celsius aligned targets with SBTi, inclusive of Scope 1 – 3 emissions. In Timken’s supply chain, its largest supplier, TimkenSteel, committed to cut its Scope 1 and Scope 2 emissions 40% by 2030, making it easier for Timken stock is non street name stock, it means that our current requirement that 25% of shares are needed to callreduce supply chain emissions.
By adopting ambitious targets, Timken may better align with investor expectations for a special shareholder meeting translates into 50% of this one category of stock and all other Timken shares are 100% excluded. Thus, what seems to be a somewhat favorable 25% right to call special shareholder meeting turns into an unfavorable 50% right to call for a special shareholder meeting plus we have no right to act by written consent. A 50% stock ownership threshold to call for a special shareholder meeting means that any fleeting shareholder thought of calling for a special shareholder meeting is killedaddressing climate risk, bolster its credibility with customers in the crib.renewable energy industry, its largest and growing customer segment, and better prepare the Company for the transition to a low carbon economy.
Plus, many companies allow for both a rightResolved: Shareholders request that Timken adopt independently-verified short- and medium-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to call a shareholder meeting and a shareholder rightachieve net-zero emissions by 2050 in line with the Paris Agreement’s goal of limiting global temperature rise to act by written consent and1.5 degrees Celsius.
SUPPORTING STATEMENT: In assessing targets, we have no right to act by written consent and we never will have such a right at Timken. This is all the more reason to have a shareholder right to call for a special shareholder that is not loaded up with a major roadblock as it is now at Timken.recommend, Calling for a special shareholder meeting is hardly ever used by shareholders but the main point of the right to call for a special shareholder meeting is that it gives shareholders at least significant standing to engage effectively with management.
Management will have an incentive to genuinely engage with shareholders instead of stonewalling if shareholders have a realistic Plan B option of calling a special shareholder meeting.
The Board may claim that the Board has open lines of communication with shareholders but sadly most of the open lines are black holes with no impact on the Board other than an exchange of courtesies. A reasonable shareholder right to call a special shareholder meeting is an important step for effective shareholder engagement with management.
Please vote yes:
Improve the Shareholder Right to Call a Special Shareholder Meeting – Proposal 6.
| · | 84 | Taking into consideration approaches used by advisory groups like SBTi; |
| · | Developing a transition plan showing how the Company plans to meet its goals, taking into consideration criteria used by advisory groups such as Task Force for Climate Related Financial Disclosures, Transition Plan Taskforce, and We Mean Business Coalition. |
THE BOARD OF DIRECTORS’ RESPONSE TO THE SHAREHOLDER PROPOSAL THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THIS SAME SHAREHOLDER PROPOSAL THAT YOU VOTED AGAINST IN 2020 AND 2021.PROPOSAL. |
AfterThe Company steadfastly supports global efforts to mitigate the impact of climate change and recognizes the importance of reducing our greenhouse gas (“GHG”) emissions in furtherance of this effort. However, after careful consideration, the Board has once again concluded that this proposal submitted by John Chevedden, is not in the best interests of the Company and its shareholders. AtAccordingly, the Board unanimously recommends a vote AGAINST this proposal for the following reasons:
| · | We have an established and comprehensive CSR program; |
| · | We already report our scope 1 and scope 2 GHG emissions on an annual basis, have established a meaningful aggregate scope 1 and scope 2 GHG emissions intensity reduction target, and have demonstrated progress towards making reductions to those emissions; |
| · | Our CSR program has been well-received, as evidenced by significant third-party recognition and positive feedback from our shareholders and other interested stakeholders; |
| · | We have established meaningful initiatives to support environmental sustainability objectives and are committed to identifying new, challenging initiatives at an appropriate pace, taking into consideration the operating environment and our overall strategic objectives; and |
| · | The scope and extent of target setting proposed above would be burdensome and would divert resources away from the Company’s current focus on meeting its existing emissions reduction targets and preparing for compliance with upcoming comprehensive sustainability regulations enacted around the world. |
We have an established, comprehensive CSR program and produce a detailed CSR report annually that provides information on our annual meetings heldenergy and emissions reduction initiatives, scopes 1 and 2 GHG emissions data, and progress towards our existing GHG emissions reduction target. CSR is a priority for all of us at the Company – from our Board, to our executive leadership, to our employees around the globe. We agree with the proponent that action is needed to mitigate the impact of climate change, and we have taken concrete and meaningful steps to demonstrate our commitment to action. In 2018, the Company established a formal CSR program, sponsored and guided by executive leadership and managed by a steering committee comprised of subject matter experts. Our steering committee has been tasked with establishing practices to identify, measure, track, and develop objectives to advance the program and report on such progress in 2020a consistent and 2021,transparent way. In 2019, in connection with the development of our shareholders agreed when they voted against this same proposal submittedformal CSR program, we published our first CSR report in accordance with the Global Reporting Initiative Standards Core level and committed to providing an update on our progress annually. In subsequent years, we included reference to both the Sustainability Accounting Standards Board and Task Force on Climate-Related Financial Disclosures standards in response to stakeholder feedback. In 2022, we advanced our program by this same shareholdersetting a target to reduce the ownership thresholdour aggregate scope 1 and scope 2 GHG emissions intensity by 50% off of a 2018 baseline. We use total company revenue as our normalizing factor to 10%. These outcomes were consistent with the voting outcomes on special meeting proposals at other public companies during the 2022 proxy season, when only 10 out of 118 special meeting proposals were approved by shareholders.8 Of the 10 special meeting proposals that were approved, seven, or 70%, involved companies with no right to call a special meeting (six) or a very limited right provided to shareholders holding at least 50% of that company’s voting power (one). Those situations are not very comparable to this one where a very reasonable right already exists for shareholders holding 25% of the voting power. The Board continues totrack emissions intensity. We believe the current 25% threshold strikesrevenue is an appropriate balance between granting shareholdersnormalizing factor due to the rightsignificant amount of growth the Company has experienced from acquisitions in recent years (having allocated over $2.1 billion of capital to call special meetings whenacquire 15 businesses from 2018-2023). In our fifth and most recent report, we announced that we have made considerable progress toward meeting our target as we have reduced our aggregate scope 1 and scope 2 GHG emissions intensity as of December 31, 2022 by approximately 25% since 2018. We will continue to report on reduction initiatives and our progress towards achievement of this goal on an annual basis, and will set new, challenging initiatives in the future at an appropriate pace to continue making meaningful progress.
We also show our commitment to GHG emissions reduction by: (1) making investments, innovating technologies and protecting allgrowing our shareholders’ interestbusiness to support renewable energy solutions and other global sustainability efforts that will be necessary to drive GHG emissions reductions; (2) developing and executing on our plans and initiatives to operate more efficiently and in promotinga more environmentally sustainable manner; (3) partnering with customers and suppliers to share knowledge and best practices to make a positive impact on climate change; and (4) providing products and services that contribute to the appropriate useefficiency and reliability of Company resources.our customers’ products and applications, thereby helping to improve the sustainability of their businesses. Our Shareholders Already Have the Right to Call Special Shareholder Meetingscomprehensive CSR program, enhanced disclosure in our CSR reports, renewable energy business investments and growth, and existing GHG emissions reduction target have all been well received, as evidenced by significant third-party recognition and positive feedback from our shareholders. The Board recognizes the importance of having in place strong corporate governance practices that ensure that the Company is responsive to the concerns of our shareholders. As such, our Amended Regulations already provide that shareholders who together hold at least 25% of the Company’s outstanding common shares can call a special meeting. A threshold of 25% or higher is in line with practices at a strong majority of publicly traded companies that offer shareholders the right to call special meetings. In fact, the current 25% ownership threshold is the same as, or more favorable than, approximately 68% of the S&P 500, including companies that do not provide shareholders with a right to call a special meeting.9 Additionally, our Amended Regulations do not qualify this right by utilizing exclusionary or prohibitive language such as minimum ownership periods. We also have regular dialogue with our shareholders, large and small, regarding important issues relating to our business and items of interest to our shareholders. Other than the proponent, none of our shareholders have ever expressed to us that our current requirement for shareholders to call a special meeting is overly burdensome.
A 10% Ownership Threshold Could Give a Small Group of Shareholders with Special Interests a Disproportionate Amount of Influence Over the Company’s Affairs
Special meetings should only be utilized for out of the ordinary circumstances that are time sensitive and of interest to all or most of our shareholders and not for business that can be more appropriately addressed through other available means. Reducing the threshold to call a special meeting to 10% could lead to abuse by just a few shareholders with special interests and individual agendas who may call special meetings to pursue matters that may not be in the best interests of the Company or our shareholders generally.
The inability of a special meeting proponent to convince holders of at least 25% of our common shares to support a special meeting could provide a strong indication that our shareholders are not interested in the topic, do not believe that the proposed action requires immediate attention, or do not think a special meeting is warranted. Our shareholders twice supported that position when they voted against this same proposal submitted by this same shareholder to reduce the threshold to 10% at our annual meetings held in 2020 and 2021, including by a margin of 41.3 million shares voted “AGAINST” compared to 26.4 million
8 According to Georgeson, based on annual meeting results for companies in the Russell 3000 Index held during the period from July 1, 2021 through June 30, 2022.
9 According to FactSet, as of November 2022.
shares voted “FOR” this same shareholder proposal in 2021. When important matters are brought to the attention of the Board, it considers the issues carefully and determines a recommended course of action for shareholder consideration, including calling a special meeting, if appropriate. Unlike a shareholder with a special interest or agenda, our Directors have a fiduciary duty to represent the best interests of all our shareholders and are mindful of that duty in determining whether to call a special meeting.
We Have Established Governance Practices and Mechanisms to Ensure Accountability of the Board and Management to Shareholders
Because the Company maintains open lines of communication with our shareholders and welcomes shareholder engagement and dialogue with the Board and our management team, shareholders already have various opportunities to voice their questions and concerns. In 2022 alone, we attended nine investor conferences, completed seven non-deal roadshows, and held a significant number of individual investor meetings. We also hosted an investor day that had almost 100 virtual attendees and many additional in-person attendees. In total, the Company completed over 400 interactions with investors during 2022 (including the virtual attendees at our investor day). During these contacts, shareholders were invited to share any feedback they had regarding the Company’s operations, strategy and governance practices as well as other topics they deemed material. In 2020 and 2021, we specifically reached out to a number of our largest shareholders to gauge their views on our 25% ownership threshold. Well over a majority of those shareholders who engaged supported our existing 25% ownership threshold over the proponent’s proposal to reduce the ownership threshold to call a special meeting to 10%.
In 2020 and 2021, well over a majority of the top shareholders whom we specifically engaged on the topic supported our existing 25% ownership threshold over a reduction to 10%. |
The Board believes that this proposal should be evaluated in the context of the Company’s overall commitmentsuccess in implementing its CSR program. Our approach to strongCSR has earned us recognition as a corporate governanceleader alongside many of the world’s most respected companies. For example, we have been honored as: | · | One of the World’s Most Ethical Companies® for the 12th time by The Ethisphere Institute in 2023; |
| · | One of America’s Best Large Employers by Forbes in 2023; |
| · | One of America’s Most Innovative Companies by Fortune in 2023; and |
| · | One of America’s Most Responsible Companies by Newsweek for 2021, 2022, and 2023. |
In addition to enhancements to our CSR reporting, our shareholders have applauded the significant growth and leadership position we have achieved in renewable energy. In fact, renewable energy, which consists of both wind and solar products and solutions, became the Company’s single-largest end-market sector in 2021 and has remained so since, representing over 9% of total Company sales in 2023. Our products and services are critical for improving the performance and efficiency of solar installations and wind turbines to support the growing demand for and competitiveness of renewable energy. We regularly engage with shareholders who have provided positive feedback on Timken’s significant investments underway to reinforce the Company’s leadership position in renewable energy and our CSR program objectives and reporting, including our aggregate scope 1 and scope 2 emissions intensity reduction target. Furthermore, management has also engaged with numerous shareholders and other interested stakeholders to discuss environmental sustainability, GHG reductions and other related issues over the past few years, and we believe based on those discussions that our shareholders are generally satisfied with the Company’s current plans for addressing these issues. We remain committed to continuing to advance and report on our progress towards our existing GHG emissions reduction target in a transparent and comprehensive manner. And while we are increasing our efforts to meet the challenges of GHG emissions reduction, our approach remains thoughtful and deliberate, which includes balancing the needs of our businesses, employees, investors and other stakeholders and understanding the implications on our operations and our ability to meet any such commitments. We believe that setting targets that require substantial future technological achievements outside of our control could create reputational risk and potential harm to our business and shareholders should such technology and infrastructure fail to materialize. For these reasons, we do not believe it is responsivein the Company’s or our shareholders’ best interests to make the commitments requested by the proponent at this time. The Company has already established meaningful GHG emissions reduction initiatives, is learning from its completed projects, and is committed to setting additional goals in the future to continue to make meaningful progress. We believe the most effective way we can contribute to the viewsbroad societal goal of reducing GHG emissions is to remain focused on achieving our existing emissions reduction target and concernsthen setting new, challenging goals to continue our progress, while continuing to support our customers’ needs for more efficient and productive technologies. Some of the recent highlights of our sustainability efforts include: | · | Our sourcing of renewable energy within our own operations has increased by approximately tenfold since 2018; |
| · | Ten of our plants are currently sourcing renewable energy using either bio-mass or on-site solar or wind, or through purchasing solar, wind and/or hydro energy; |
| · | We reduced our aggregate scope 1 and scope 2 GHG emissions intensity by approximately 25% since 2018; |
| · | In 2022, we diverted nearly 90% of our waste from landfills and recycled more than 56,000 metric tons of waste; |
| · | Approximately 90% of our packaging in our operations is reusable or recyclable; and |
| · | Examples of targeted actions include: installing solar panels on a number of our plants in India, with such panels providing a meaningful portion of such plant’s needs for electricity; installing new air compressors in our facility in Sosnowiec, Poland, which allows us to capture the heat generated by the compressors and redistribute it throughout the facility during cold-weather months; and reusing more than 1,300 megaliters of water for cooling in one of our facilities in Ohio. |
We remain committed to these and other efforts to reduce our GHG emissions and eliminate waste. These efforts are informed by our local operations and demonstrate our methodical approach to emissions, waste reduction, and broader climate risk management. At this point, the Company believes that continuing to focus its efforts on reducing its scope 1 and scope 2 emissions, while preparing for new, comprehensive legal requirements related to climate change, remains the best and most appropriate use of resources. The proponent requests that we adopt independently-verified short- and medium-term science-based GHG emissions targets, inclusive of emissions from our full value chain, and recommends that we consider setting emissions targets in accordance with the Science Based Targets Initiative (SBTi), a third-party provider of products and resources to companies who set emissions reduction targets in line with their particular methodologies. It is important to note that SBTi has changed its methodology, requirements, or target-setting preferences numerous times over the years with plans for further updates, leading to confusion and uncertainty in terms of target setting under the standard, particularly with respect to mid- to long-term targets. Moreover, in support of this proposal, the proponent states that the Company’s initial targets fall short of a “43% reduction called for by climate experts.” It is unclear which climate experts are currently setting emissions targets for the Company and how they are in a better position to set appropriate targets than the Company itself. The figure may come from a recent United Nations report10that calls for an at least 42% reduction in GHG emissions globally to try to achieve targets set in the 2015 Paris Climate Agreement. If so, the proponent’s supporting statement is an oversimplification because it fails to apportion reductions by industry, geography, or elements of various value chains, among other things. The proponent also points to a steel supplier’s emissions targets as a reason why it should be “easier” for the Company to reduce the emissions of its supply chain. The proposal further notes that this steel supplier is the Company’s largest supplier. In fact, the named supplier is not even among the top 5 and represented less than 5% of our total spending on material in 2023. These comments reveal an apparent lack of understanding of the Company’s shareholders,business and value chain. As a global, diversified industrial company working with well over 10,000 direct and indirect material suppliers, serving approximately 70 end-market sectors and maintaining over 300,000 stock keeping units (SKUs), our value chain is highly complex. Given the complexity of our value chain, the thereby burdensome nature of setting a scope 3 GHG emissions target, and the relative inaccuracy we have observed in other companies’ reporting, scope 3 GHG emissions target setting and reporting has not yet been a main priority for the Company. We believe continued active engagement with our primary suppliers is the most effective way to impact our value chain. Also, as evidenced bynoted below, various global regulatory requirements will make Scope 3 GHG emissions reporting mandatory in the following practices:near term, which should improve the quality and availability of this data and allow the Company to provide more fulsome and accurate scope 3 GHG emissions reporting in the future. | ● | We have a declassified Board – all of our Directors are elected annually. | | ● | We have an independent Board Chairman. | | ● | The Board is comprised of a substantial majority of independent Directors (10 of 12 Directors on our current Board are independent). | | ● | We have shown a strong commitment to Board refreshment – half of our current board is comprised of Directors that have been added in the past decade. | | ● | We align our Directors’ and executive officers’ interests with those of our shareholders through robust ownership requirements. | | ● | We have granted our shareholders proxy access with 3/3/20/20 parameters. | | ● | We hold an annual say-on-pay vote and have had consistently strong shareholder support over the past five years. | | ● | All Director nominees are evaluated in the same manner by the Nominating and Corporate Governance Committee, without regard to the source of the nominee recommendation. | | ● | Our Directors are elected by a majority of votes cast and our Majority Voting Policy requires any Director who fails to receive a majority of the votes cast in favor of his or her election to submit his or her resignation to the Board. | | ● | Shareholders holding 25% of the Company’s common shares already have the right to call special meetings. |
See page 25The Company must balance its resources to advance all of its strategic goals, including sustainability, and we believe the most effective use of Company resources at this time is to: (1) remain focused on achieving our existing climate-related goals; (2) continue to satisfy our customers’ needs for more detailslower-emission technologies, while also supporting the renewable energy industry in wind and solar; (3) collaborate with our suppliers to share knowledge and best practices to make a positive impact on climate change; and (4) prepare for a variety of comprehensive regulations that will require reporting related to climate change that are being finalized throughout the Company’s commitment to strong corporate governance.
Shareholders’ Rightsglobe. The regulatory environment is changing rapidly, and the Company needs to be Informedable to allocate sufficient resources towards compliance with a number of new laws and to Vote on Significant Matters are Already Protected by State Law
Shareholders can also be assured that their right to be informed of and vote on significant matters is protected not only by their existing right to call special meetings, but also by state law and other rules and regulations. Ohio law provides that shareholders must be given the opportunity to vote on significant corporate actions such as: (a) mergers; (b) the sale or disposition of all or substantially all of the assets of a company; and (c) amendments to a company’s articles of incorporation or regulations that are reserved by law to be acted upon only by vote of the shareholders. Additionally, the listing standards of the NYSE similarly require us to seek shareholder approval for other significant matters, including the issuanceCorporate Sustainability Reporting Directive, California SB 253 – The Climate Corporate Data Accountability Act, California SB 261 – Greenhouse Gases: Climate-Related Financial Risk, the SEC climate disclosure requirements, and various other regulations in our local areas of common sharesoperation. We also plan to continue to invest in many circumstances,new products, technologies and services to increase operational efficiency, reduce our carbon footprint and reduce GHG emissions. As such, as when such issuance would result in a change in control of the Company. Additionally, as described in proposal 5 on page 83, the Company is supporting a proposal to eliminate “supermajority” voting requirements from its charter documents in response to the vote on the shareholder proposal at the annual meeting in 2022. Thus, the opportunity for shareholder votes on many important matters that may arise between annual meetings of shareholders is already well-established.
Certain of the Proponent’s Supporting Statements are Misleading and Lack Support
The proponent claims that only non-street name shareholders can call a special shareholder meeting, and then, without support, speculates that 50% of the Company’s common stock is held in street name. Based on this unsupported assumption, the proponent argues that the 25% ownership threshold translates to a 50% threshold for shares of common stock held in street name. However, the Company’s Amended Regulations do not limit the ability to call a special shareholder meeting to shares of the Company’s common stock held in street name, contrary to this misleading statement by the proponent. While it is true that only holders of record may submit a request to call a special meeting, beneficial owners (if not holders of record themselves) may direct their corresponding holders of record to make such a request on their behalf. Beneficial shareholders are not excluded if they are not record holders of the Company’s common stock. In fact, our shareholders have the same rights whether they hold their common shares of record or in street name, as evidenced by the proponent’s ability to have his shareholder proposal presented at the annual meeting.
****
In light of the Company’s strong corporate governance practices, including our shareholders’ existing right to call a special meeting, as well as the ample alternatives already available for our shareholders to express their views and vote on important matters, the Board believes that continued focus on reporting and reducing scope 1 and scope 2 emissions intensity, while preparing for new and more stringent regulations, is a better use of the 10% thresholdCompany’s
10 See https://www.unep.orgB/resources/emissions-gap-report-2023. resources and more impactful for the environment than diverting substantial time, effort, and resources to comply with this proposal. * * * * Considering the Company’s comprehensive CSR program, detailed reporting, and already existing GHG emissions intensity reduction target, the Board believes that would be imposed underadoption of this proposal will dilute, not enhance, our efforts to advance our initiatives that are already underway. Rather than approving a prescriptive and detailed proposal that we believe is not in the best interests of the Company or its shareholders. Our shareholders, voted against this very same proposal in 2020 and 2021 and we recommend a similar vote against this proposal again this year.would instead invite our shareholders to continue their ongoing dialogue with the Company so that we can continue to ensure strong alignment of our CSR program with shareholder expectations. The affirmative vote of a majority of the votes cast is necessary for the approval of this proposal. Abstentions and broker non-votes will not be counted for determining whether the resolutionthis proposal is approved. FOR THESE REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THIS SHAREHOLDER PROPOSAL. |
OTHER INFORMATION Participation at the Annual Meeting
Participation at the Annual Meeting |
In order to attend the online-only meeting, you will need to pre-register prior to 10:00 a.m., Eastern Time, on May 4, 2023.2, 2024. To pre-register for the meeting, please follow these instructions: Registered Shareholders If your shares are registered in your name with our transfer agent or you are a participant holding shares in a Timken-sponsored employee savings plan and you wish to attend the virtual meeting, go to www.cesonlineservices.com/tkr23_vmtkr24_vm. Please have your Proxy Card or Notice of the Meeting, containing your 11-digit control number, available and follow the instructions to complete your registration request.
Beneficial Shareholders (those holding shares through a stock brokerage account or by a bank or other holder of record) Beneficial shareholders who wish to attend the virtual meeting may pre-register by visiting the website www.cesonlineservices.com/tkr23_vmtkr24_vm. Please have available the voting instruction form, notice, or other communication from your broker, bank, or other holder of record that sets forth the control number provided to you and follow the instructions to complete your registration request. After pre-registering for the meeting, shareholders will receive a confirmation email with a link and instructions for accessing the virtual Annual Meeting and submitting questions. Shareholders may review the rules of conduct for the virtual meeting or vote during the virtual Annual Meeting by following the instructions available on the meeting website. Proxy Solicitation
The enclosed proxy is solicited by the Board of Directors, and the entire cost of solicitation will be paid by the Company. In addition to solicitation by mail, our officers and other employees, without extra remuneration, may solicit the return of proxies by any means of communication. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward soliciting material to the beneficial owners of shares held of record by them and will be reimbursed for their expenses. We have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for a fee not to exceed $17,500 plus reasonable out-of-pocket expenses. How Proxies will be Voted
How Proxies will be Voted |
On the record date of February 21, 2023,20, 2024, we had 72,618,64870,389,366 outstanding common shares, each entitled to one vote upon all matters presented to the meeting. The presence in person or by proxy of not less than 50% of such shares shall constitute a quorum for purposes of the 20232024 Annual Meeting of Shareholders. Voting at the Meeting
Shares represented by properly executed proxies will be voted at the meeting in accordance with the shareholders’ instructions. In the absence of specific instructions, the shares will be voted FOR all of the Director nominees as indicated under Proposal No. 1, FOR Proposal No. 2, FOR choice 1 – every year on Proposal No. 3, FOR Proposal No. 4, FOR Proposal No. 5, and AGAINST Proposal No. 6.5. The time limits established under our Amended Regulations for Non-Rule 14a-8 Proposals (as defined below) described under “Submission of Shareholder Proposals” also apply in determining whether notice is timely for purposes of SEC rules relating to the exercise of discretionary voting authority. We do not know of any matters to be brought before the 20232024 Annual Meeting except as indicated in the accompanying Notice of 20232024 Annual Meeting of Shareholders and this Proxy Statement. However, if any other matters properly come before the meeting for action that we did not have notice on or prior to February 5, 2023,2024, or that applicable law otherwise permits proxies to vote on a discretionary basis, it is intended that the proxy holders may vote or act thereon in their discretion. You may revoke your proxy at any time before the 20232024 Annual Meeting of Shareholders by a later dated proxy received by us or by giving notice to us either in writing or at the meeting. Corporate Election Services, Inc. (“CES”) will be responsible for tabulating the results of shareholder voting. CES will submit a total vote only, keeping all individual votes confidential. Representatives of CES will serve as inspectors of election for the 20232024 Annual Meeting of Shareholders. Under Ohio law, our Amended Articles of Incorporation and Amended Regulations, properly executed proxies marked “abstain” and broker non-votes will be counted for purposes of determining whether a quorum has been achieved at the 20232024 Annual Meeting of Shareholders. Submission of Shareholder Proposals
Submission of Shareholder Proposals |
We must receive by November 21, 202315, 2024 any proposal of our shareholders intended to be presented at the 20242025 Annual Meeting of Shareholders and to be included in our proxy materials related to the 20242025 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the 1934 Act. Such proposals should be submitted by certified mail, return receipt requested. A shareholder submitting a proposal outside the processes of Rule 14a-8 under the 1934 Act in connection with the 20242025 Annual Meeting of Shareholders (“Non-Rule 14a-8 Proposals”) must submit written notice of such proposal in accordance with Article I, Sections 12 and 14 of our Amended Regulations. In general, to be timely, a shareholder’s notice must be delivered to or received by our Vice President, General Counsel & Secretary at our principal executive offices not less than 90 nor more than 120 days prior to the first anniversary of the date on which the Company held the preceding year’s annual meeting of shareholders. If the date of the 20242025 Annual Meeting of Shareholders is scheduled for a date more than 30 days prior to or more than 30 days after the first anniversary of the 20232024 Annual Meeting of Shareholders, then a shareholder’s notice must be delivered to our Vice President, General Counsel & Secretary at our principal executive offices not later than the close of business on the later of the 90th day prior to the 20242025 Annual Meeting of Shareholders or the 10th day following the day on which public announcement of the date of the 20242025 Annual Meeting of Shareholders is first made. Our proxy related to the 20242025 Annual Meeting of Shareholders will give discretionary authority to the proxy holders to vote with respect to all Non-Rule 14a-8 Proposals received by us after February 5, 2024.2, 2025. The summaries set forth immediately above are qualified in their entirety by our Amended Regulations and Rule 14a-8. In addition to satisfying the requirements under our Amended Regulations, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth any additional information required by Rule 14a-19 under the 1934 Act, which notice must be postmarked or transmitted electronically to our Vice President, General Counsel & Secretary at our principal executive offices no later than 60 calendar days prior to the anniversary date of the 20232024 Annual Meeting (for the 20242025 Annual Meeting, no later than March 6, 2024)4, 2025). However, if the date of the 20242025 Annual Meeting is changed by more than 30 calendar days from such anniversary date, then notice must be provided by the later of 60 calendar days prior to the date of the 20242025 Annual Meeting or the 10th calendar day following the day on which public announcement of the date of the 20242025 Annual Meeting is first made. General
The SEC permits companies to send a single set of annual disclosure documents to any household at which two or more shareholders reside, unless contrary instructions have been received, but only if we provide advance notice and follow certain procedures. In such cases, such shareholders continue to receive a separate notice of the meeting and proxy card. This “householding” process reduces the volume of duplicate information and reduces printing and mailing expenses. We have not instituted householding for shareholders of record; however, a number of brokerage firms may have instituted householding for beneficial owners of our common shares held through such brokerage firms. If your family has multiple accounts holding common shares, you already may have received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of the annual disclosure documents. The broker will arrange for delivery of a separate copy of this Proxy Statement or our Annual Report on Form 10-K for the year ended December 31, 20222023 promptly upon your written or oral request. You may decide at any time to revoke your decision to household and thereby receive multiple copies. After April 1, 2023,2024, we will furnish to each shareholder, upon written request and without charge, a copy of our Annual Report to Shareholders for the year ended December 31, 2022,2023, including financial statements and schedules thereto, filed with the SEC. Requests should be addressed to Hansal N. Patel, Vice President, General Counsel & Secretary, The Timken Company, 4500 Mt. Pleasant Street NW, North Canton, Ohio 44720. The address and share ownership of the shareholder submitting the shareholder proposal on page 8492 may be obtained using the contact information above or by calling 234-262-3000. APPENDIX A RECONCILIATIONS OF NON-GAAP MEASURES TO MOST DIRECTLY COMPARABLE GAAP MEASURES (dollars in millions, excluding EPS and Adjusted EPS) Reconciliation of Net Income to Adjusted Net Income and EBITDA1 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | Net Sales | $4,496.7 | $4,132.9 | $3,513.2 | $3,789.9 | $3,580.8 | $3,003.8 | | Net Income (Loss) Attributable to The Timken Company | $407.4 | $369.1 | $284.5 | $362.1 | $302.8 | $203.4 | | Impairment, restructuring and reorganization charges2 | 39.5 | 15.1 | 29.0 | 9.8 | 7.1 | 13.1 | | Corporate pension and other postretirement benefit related expense (income)3 | 2.9 | 0.3 | 18.5 | (4.1) | 12.8 | 18.1 | | Acquisition related charges4 | 14.8 | 3.2 | 3.7 | 15.5 | 20.6 | 9.0 | | Acquisition-related gain5 | - | (0.9) | (11.1) | - | - | - | | Russia-related charges6 | 15.6 | - | - | - | - | - | | (Gain) loss on divestitures and sale of real estate7 | (2.9) | - | (0.4) | (4.5) | 0.8 | (3.6) | | Property (recoveries) losses and related expenses8 | - | - | (5.5) | 7.6 | - | - | | Brazil legal matter | - | - | - | 1.8 | - | - | | Tax Indemnification and related items | 0.3 | 0.2 | 0.5 | 0.7 | 1.5 | (1.0) | | Health care plan modification costs | - | - | - | - | - | (0.7) | | Noncontrolling interest | (5.3) | - | (0.1) | (0.5) | (1.3) | - | | Provision for income taxes | (24.5) | (23.6) | (6.0) | (34.6) | (16.8) | (30.8) | | Adjusted Net Income | $447.8 | $363.4 | $313.1 | $353.8 | $327.5 | $207.5 | | Net income (loss) attributable to noncontrolling interest | 9.6 | 12.4 | 7.9 | 12.6 | 2.7 | (1.1) | | Provision for income taxes (as reported) | 133.9 | 95.1 | 103.9 | 97.7 | 102.6 | 57.6 | | Interest expense | 74.6 | 58.8 | 67.6 | 72.1 | 51.7 | 37.1 | | Interest income | (3.8) | (2.3) | (3.7) | (4.9) | (2.1) | (2.9) | | Depreciation and amortization expense9 | 164.0 | 167.0 | 164.0 | 159.9 | 146.0 | 135.8 | | Noncontrolling interest | 5.3 | - | 0.1 | 0.5 | 1.3 | - | | Provision for income taxes | 24.5 | 23.6 | 6.0 | 34.6 | 16.8 | 30.8 | | Adjusted EBITDA | $855.9 | $718.0 | $658.9 | $726.3 | $646.5 | $464.8 | | Adjusted EBITDA Margin (% of net sales) | 19.0% | 17.4% | 18.8% | 19.2% | 18.1% | 15.5% | | | | | | | | | | Reconciliation of Diluted EPS to Adjusted EPS1 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | Diluted Earnings per Share (EPS) | $5.48 | $4.79 | $3.72 | $4.71 | $3.86 | $2.58 | | Adjusted EPS | $6.02 | $4.72 | $4.10 | $4.60 | $4.18 | $2.63 | | Diluted Shares | 74,323,839 | 77,006,589 | 76,401,366 | 76,896,565 | 78,337,481 | 78,911,149 | |
Reconciliation of Adjusted Net Operating Profit after Taxes | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | Adjusted EBITDA | $855.9 | $718.0 | $658.9 | $726.3 | $646.5 | $464.8 | | Less: Depreciation and amortization expense9 | 164.0 | 167.0 | 164.0 | 159.9 | 146.0 | 135.8 | | Adjusted EBIT | $691.9 | $551.0 | $494.9 | $566.4 | $500.5 | $329.0 | | Adjusted tax rate | 25.5% | 24.0% | 25.5% | 26.5% | 26.5% | 30.0% | | Calculated income taxes | 176.4 | 132.2 | 126.2 | 150.1 | 132.6 | 98.7 | | Adjusted net operating profit after taxes (ANOPAT) | $515.5 | $418.8 | $368.7 | $416.3 | $367.9 | $230.3 | | | | | | | | | | Reconciliation of Adjusted Invested Capital | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | Total debt | $1,963.2 | $1,464.9 | $1,564.6 | $1,730.1 | $1,681.6 | $962.3 | $659.2 | Total equity | 2,352.9 | 2,377.7 | 2,225.2 | 1,954.8 | 1,642.7 | 1,474.9 | 1,310.9 | Invested capital (Total debt + Total equity) | $4,316.1 | $3,842.6 | $3,789.8 | $3,684.9 | $3,324.3 | $2,437.2 | $1,970.1 | Invested capital (two-point average) | $4,079.4 | $3,816.2 | $3,737.4 | $3,504.6 | $2,880.8 | $2,203.7 | | | | | | | | | | Calculation of Return on Adjusted Invested Capital10 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | ANOPAT | $515.5 | $418.8 | $368.7 | $416.3 | $367.9 | $230.3 | | Invested capital (two-point average) | $4,079.4 | $3,816.2 | $3,737.4 | $3,504.6 | $2,880.8 | $2,203.7 | | Return on invested capital | 12.6% | 11.0% | 9.9% | 11.9% | 12.8% | 10.5% | | | | | | | | | | Reconciliation of Free Cash Flow11 | 2022 | 2021 | | | | | | Net cash provided from operating activities | $463.8 | $387.3 | | | | | | Less: capital expenditures | 178.4 | 148.3 | | | | | | Free cash flow | $285.4 | $239.0 | | | | | | | | | | | | | | Reconciliation of Net Debt12 | 2022 | | | | | | | Short-term debt | $49.0 | | | | | | | Long-term debt | 1,914.2 | | | | | | | Total debt | $1,963.2 | | | | | | | Less: cash and cash equivalents | 331.6 | | | | | | | Net debt | $1,631.6 | | | | | | | Ratio of net debt to adjusted EBITDA | 1.9 | | | | | | |
Note: In 2023, the Company began excluding intangible amortization expense from acquisitions in its calculations of adjusted net income, adjusted earnings per share, and adjusted return on invested capital. Amortization expense has grown in recent years due to the large number of acquisitions completed, and the Company believes this change better reflects its core operating earnings and improve comparability. The Company is showing reconciliations of these non-GAAP measures as calculated using the prior methodology (including acquisition intangible amortization), given that performance-based restricted stock unit awards made prior to 2023 utilize this prior methodology in calculating performance. Reconciliation of Net Income to Adjusted | | | | | | | | | | | | | Net Income (Excluding Acquisition Intangible Amortization) and EBITDA1 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | Net Sales | | $ | 4,769.0 | | | $ | 4,496.7 | | | $ | 4,132.9 | | | $ | 3,513.2 | | | $ | 3,789.9 | | | $ | 3,580.8 | | Net Income Attributable to The Timken Company | | | 394.1 | | | | 407.4 | | | | 369.1 | | | | 284.5 | | | | 362.1 | | | | 302.8 | | Net Income Attributable to The Timken Company as a Percentage of Sales | | | 8.3 | % | | | 9.1 | % | | | 8.9 | % | | | 8.1 | % | | | 9.6 | % | | | 8.5 | % | Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition intangible amortization | | | 65.7 | | | | 43.9 | | | | 46.8 | | | | 47.3 | | | | 46.7 | | | | 35.0 | | Impairment, restructuring and reorganization charges2 | | | 51.6 | | | | 39.5 | | | | 15.1 | | | | 29.0 | | | | 9.8 | | | | 7.1 | | Corporate pension and other postretirement benefit related expense (income)3 | | | 20.6 | | | | 2.9 | | | | 0.3 | | | | 18.5 | | | | (4.1 | ) | | | 12.8 | | Acquisition-related charges4 | | | 31.8 | | | | 14.8 | | | | 3.2 | | | | 3.7 | | | | 15.5 | | | | 20.6 | | Acquisition-related gain5 | | | — | | | | — | | | | (0.9 | ) | | | (11.1 | ) | | | — | | | | — | | Russia-related charges6 | | | 8.5 | | | | 15.6 | | | | — | | | | — | | | | — | | | | — | | Gain (loss) on divestitures and sale of certain assets7 | | | (5.2 | ) | | | (2.9 | ) | | | — | | | | (0.4 | ) | | | (4.5 | ) | | | 0.8 | | Property losses (recoveries) and related expenses8 | | | — | | | | — | | | | — | | | | (5.5 | ) | | | 7.6 | | | | — | | Brazil legal matter | | | — | | | | — | | | | — | | | | — | | | | 1.8 | | | | — | | Tax indemnification and related matters | | | — | | | | 0.3 | | | | 0.2 | | | | 0.5 | | | | 0.7 | | | | 1.5 | | Non-controlling interest of above adjustments | | | (2.1 | ) | | | (5.3 | ) | | | — | | | | (0.1 | ) | | | (0.5 | ) | | | (1.3 | ) | Provision for income taxes9 | | | (56.9 | ) | | | (35.9 | ) | | | (35.0 | ) | | | (18.2 | ) | | | (47.2 | ) | | | (26.1 | ) | Adjusted Net Income | | $ | 508.1 | | | $ | 480.3 | | | $ | 398.8 | | | $ | 348.2 | | | $ | 387.9 | | | $ | 353.2 | | Net income attributable to non-controlling interest | | | 13.9 | | | | 9.6 | | | | 12.4 | | | | 7.9 | | | | 12.6 | | | | 2.7 | | Provision for income taxes (as reported) | | | 122.5 | | | | 133.9 | | | | 95.1 | | | | 103.9 | | | | 97.7 | | | | 102.6 | | Interest expense | | | 110.7 | | | | 74.6 | | | | 58.8 | | | | 67.6 | | | | 72.1 | | | | 51.7 | | Interest income | | | (9.3 | ) | | | (3.8 | ) | | | (2.3 | ) | | | (3.7 | ) | | | (4.9 | ) | | | (2.1 | ) | Depreciation and amortization10 | | | 200.5 | | | | 164.0 | | | | 167.0 | | | | 164.0 | | | | 159.9 | | | | 146.0 | | Acquisition intangible amortization | | | (65.7 | ) | | | (43.9 | ) | | | (46.8 | ) | | | (47.3 | ) | | | (46.7 | ) | | | (35.0 | ) | Non-controlling interest | | | 2.1 | | | | 5.3 | | | | — | | | | 0.1 | | | | 0.5 | | | | 1.3 | | Provision for income taxes9 | | | 56.9 | | | | 35.9 | | | | 35.0 | | | | 18.2 | | | | 47.2 | | | | 26.1 | | Adjusted EBITDA | | $ | 939.7 | | | $ | 855.9 | | | $ | 718.0 | | | $ | 658.9 | | | $ | 726.3 | | | $ | 646.5 | | Adjusted EBITDA Margin (% of Sales) | | | 19.7 | % | | | 19.0 | % | | | | | | | | | | | | | | | | |
Reconciliation of Diluted EPS to Adjusted EPS | | | | | | | | | | (Excluding Acquisition Intangible Amortization)1 | | 2023 | | 2022 | | 2021 | | 2020 | | Diluted Earnings Per Share (EPS) | | $ | 5.47 | | | $ | 5.48 | | | $ | 4.79 | | | $ | 3.72 | | | Adjusted EPS | | $ | 7.05 | | | $ | 6.46 | | | $ | 5.18 | | | $ | 4.56 | | | Diluted Shares | | | 72,081,884 | | | | 74,323,839 | | | | 77,006,589 | | | | 76,401,366 | | |
Reconciliation of Adjusted Net Operating | | | | | | | | Profit After Taxes (ANOPAT) (Excluding Acquisition Intangible Amortization) | | 2023 | | 2022 | | 2021 | | Adjusted EBITDA1, 11 | | $ | 939.7 | | | $ | 855.9 | | | $ | 718.0 | | | Acquisition intangible amortization | | | 65.7 | | | | 43.9 | | | | 46.8 | | | Less: Depreciation and amortization10 | | | 200.5 | | | | 164.0 | | | | 167.0 | | | Adjusted EBIT | | | 804.9 | | | | 735.8 | | | | 597.8 | | | Adjusted tax rate | | | 25.5 | % | | | 25.5 | % | | | 24.0 | % | | Calculated income taxes | | | 205.2 | | | | 187.6 | | | | 143.5 | | | ANOPAT | | $ | 599.7 | | | $ | 548.2 | | | $ | 454.3 | | |
Reconciliation of Adjusted | | | | | | | | | | Invested Capital (Excluding Acquisition Intangible Amortization) | | | 2023 | | | | 2022 | | | | 2021 | | | | 2020 | | | Total debt | | $ | 2,395.9 | | | $ | 1,963.2 | | | $ | 1,464.9 | | | $ | 1,564.6 | | | Less: cash and cash equivalents | | | 418.9 | | | | 331.6 | | | | 257.1 | | | | 320.3 | | | Net debt | | | 1,977.0 | | | | 1,631.6 | | | | 1,207.8 | | | | 1,244.3 | | | Total equity | | | 2,702.4 | | | | 2,352.9 | | | | 2,377.7 | | | | 2,225.2 | | | Invested capital (net debt plus total equity) | | | 4,679.4 | | | | 3,984.5 | | | | 3,585.5 | | | | 3,469.5 | | | Invested capital (two-point average) | | $ | 4,332.0 | | | $ | 3,785.0 | | | $ | 3,527.5 | | | | | | |
Calculation of Return on Adjusted | | | | | | | | Invested Capital (Excluding Acquisition Intangible Amortization)12 | | 2023 | | 2022 | | 2021 | | ANOPAT | | $ | 599.7 | | | $ | 548.2 | | | $ | 454.3 | | | Invested capital (two-point average) | | | 4,332.0 | | | | 3,785.0 | | | | 3,527.5 | | | Return on invested capital | | | 13.8 | % | | | 14.5 | % | | | 12.9 | % | |
Reconciliation of Free Cash Flow13 | | 2023 | | 2022 | | Net cash provided by operating activities | | $ | 545.2 | | | $ | 463.8 | | | Capital expenditure | | | (187.8 | ) | | | (178.4 | ) | | Free cash flow | | $ | 357.4 | | | $ | 285.4 | | |
Reconciliation of Net Debt14 | | 2023 | | Short-term debt | | $ | 605.6 | | | Long-term debt | | | 1,790.3 | | | Total debt | | $ | 2,395.9 | | | Less: Cash and cash equivalents | | | 418.9 | | | Net debt | | $ | 1,977.0 | | | Ratio of net debt to adjusted EBITDA | | | 2.1 | | |
Reconciliation of Net Income to Adjusted | | | | | | | | | | | | | Net Income (Including Acquisition Intangible Amortization)1 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | Net Sales | | $ | 4,769.0 | | | $ | 4,496.7 | | | $ | 4,132.9 | | | $ | 3,513.2 | | | $ | 3,789.9 | | | $ | 3,580.8 | | Net Income Attributable to | | | | | | | | | | | | | | | | | | | | | | | | | The Timken Company | | | 394.1 | | | | 407.4 | | | | 369.1 | | | | 284.5 | | | | 362.1 | | | | 302.8 | | Net Income Attributable to The Timken | | | | | | | | | | | | | | | | | | | | | | | | | Company as a Percentage of Sales | | | 8.3 | % | | | 9.1 | % | | | 8.9 | % | | | 8.1 | % | | | 9.6 | % | | | 8.5 | % | Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | Impairment, restructuring and Reorganization charges2 | | | 51.6 | | | | 39.5 | | | | 15.1 | | | | 29.0 | | | | 9.8 | | | | 7.1 | | Corporate pension and other postretirement benefit related expense (income)3 | | | 20.6 | | | | 2.9 | | | | 0.3 | | | | 18.5 | | | | (4.1 | ) | | | 12.8 | | Acquisition-related charges4 | | | 31.8 | | | | 14.8 | | | | 3.2 | | | | 3.7 | | | | 15.5 | | | | 20.6 | | Acquisition-related gain5 | | | — | | | | — | | | | (0.9 | ) | | | (11.1 | ) | | | — | | | | — | | Russia-related charges6 | | | 8.5 | | | | 15.6 | | | | — | | | | — | | | | — | | | | — | | Gain (loss) on divestitures and sales of certain assets7 | | | (5.2 | ) | | | (2.9 | ) | | | — | | | | (0.4 | ) | | | (4.5 | ) | | | 0.8 | | Property losses (recoveries) and related expenses8 | | | — | | | | — | | | | — | | | | (5.5 | ) | | | 7.6 | | | | — | | Brazil legal matter | | | — | | | | — | | | | — | | | | — | | | | 1.8 | | | | — | | Tax indemnification and related matters | | | — | | | | 0.3 | | | | 0.2 | | | | 0.5 | | | | 0.7 | | | | 1.5 | | Non-controlling interest of above adjustments | | | (2.1 | ) | | | (5.3 | ) | | | — | | | | (0.1 | ) | | | (0.5 | ) | | | (1.3 | ) | Provision for income taxes9 | | | (40.1 | ) | | | (24.5 | ) | | | (23.6 | ) | | | (6.0 | ) | | | (34.6 | ) | | | (16.8 | ) | Adjusted Net Income | | $ | 459.2 | | | $ | 447.8 | | | $ | 363.4 | | | $ | 313.1 | | | $ | 353.8 | | | $ | 327.5 | |
Reconciliation of Diluted EPS to Adjusted EPS | | | | | | | | | | | | | (Including Acquisition Intangible Amortization)1 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | Diluted Earnings Per Share (EPS) | | $ | 5.47 | | | $ | 5.48 | | | $ | 4.79 | | | $ | 3.72 | | | $ | 4.71 | | | $ | 3.86 | | Adjusted EPS | | $ | 6.37 | | | $ | 6.02 | | | $ | 4.72 | | | $ | 4.10 | | | $ | 4.60 | | | $ | 4.18 | | Diluted Shares | | | 72,081,884 | | | | 74,323,839 | | | | 77,006,589 | | | | 76,401,366 | | | | 76,896,565 | | | | 78,337,481 | |
Reconciliation of Adjusted Net Operating | | | | | | | | | | | | | Profit After Taxes (ANOPAT) (Including Acquisition Intangible Amortization) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | Adjusted EBITDA1. 11 | | $ | 939.7 | | | $ | 855.9 | | | $ | 718.0 | | | $ | 658.9 | | | $ | 726.3 | | | $ | 646.5 | | Less: Depreciation and amortization10 | | | 200.5 | | | | 164.0 | | | | 167.0 | | | | 164.0 | | | | 159.9 | | | | 146.0 | | Adjusted EBIT | | | 739.2 | | | | 691.9 | | | | 551.0 | | | | 494.9 | | | | 566.4 | | | | 500.5 | | Adjusted tax rate | | | 25.5 | % | | | 25.5 | % | | | 24.0 | % | | | 25.5 | % | | | 26.5 | % | | | 26.5 | % | Calculated income taxes | | | 188.5 | | | | 176.4 | | | | 132.2 | | | | 126.2 | | | | 150.1 | | | | 132.6 | | ANOPAT | | $ | 550.7 | | | $ | 515.5 | | | $ | 418.8 | | | $ | 368.7 | | | $ | 416.3 | | | $ | 367.9 | |
Reconciliation of Adjusted | | | | | | | | | | | | | | | Invested Capital (Including Acquisition Intangible Amortization) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | Total debt | | $ | 2,395.9 | | | $ | 1,963.2 | | | $ | 1,464.9 | | | $ | 1,564.6 | | | $ | 1,730.1 | | | $ | 1,681.6 | | | $ | 962.3 | | Total equity | | | 2,702.4 | | | | 2,352.9 | | | | 2,377.7 | | | | 2,225.2 | | | | 1,954.8 | | | | 1,642.7 | | | | 1,474.9 | | Invested capital (total debt plus total equity) | | | 5,098.3 | | | | 4,316.1 | | | | 3,842.6 | | | | 3,789.8 | | | | 3,684.9 | | | | 3,324.3 | | | | 2,437.2 | | Invested capital (two-point average) | | $ | 4,707.2 | | | $ | 4,079.4 | | | $ | 3,816.2 | | | $ | 3,737.4 | | | $ | 3,504.6 | | | $ | 2,880.8 | | | | | |
Calculation of Return on Adjusted | | | | | | | | | | | | | Invested Capital (Including Acquisition Intangible Amortization)12 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | ANOPAT | | $ | 550.7 | | | $ | 515.5 | | | $ | 418.8 | | | $ | 368.7 | | | $ | 416.3 | | | $ | 367.9 | | Invested capital (two-point average) | | | 4,707.2 | | | | 4,079.4 | | | | 3,816.2 | | | | 3,737.4 | | | | 3,504.6 | | | | 2,880.8 | | Return on invested capital | | | 11.7 | % | | | 12.6 | % | | | 11.0 | % | | | 9.9 | % | | | 11.9 | % | | | 12.8 | % |
1Management believes consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP measure that is useful to investors as it is representative of the Company's performance and that it is appropriate to compare GAAP net income to consolidated EBITDA. Management also believes that non-GAAP measures of adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are useful to investors as they are representative of the Company's core operations and are used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. 2Impairment, restructuring and reorganization charges (including items recorded in cost of products sold) relate to: (i) plant closures; (ii) the rationalization of certain plants; (iii) severance related to cost reduction initiatives; (iv) impairment of assets held for sale;assets; and (v) related depreciation and amortization. Impairment, restructuring and reorganization charges for 2023 included $28.3 million related to the impairment of goodwill. Impairment, restructuring and reorganization charges for 2022 included $29.3 million related to the sale of Timken Aerospace DriveDrives Systems, LLC. The Company re-assesses its operating footprint and cost structure periodically and makes adjustments as needed that result in restructuring charges. However, management believes these actions are not representative of the Company’s core operations. 3Corporate pension and other postretirement benefit related expense (income) primarily represents actuarial losses and (gains) that resulted from the remeasurement of plan assets and obligations as a result of changes in assumptions. The Company recognizes actuarial losses and (gains) through earnings in connection with the annual remeasurement in the fourth quarter, or on an interim basis if specific events trigger a remeasurement. Corporate pension and other postretirement benefit related expense (income) also includes curtailments. 4Acquisition-related charges represent deal-related expenses associated with completed transactions and certain unsuccessful transactions, as well as any resulting inventory step-up impact. 5The acquisition-related gain represents a bargain purchase price gain on the acquisition of the assets of Aurora Bearing Company that closed on November 30, 2020. 6Russia-related charges include impairments or allowances recorded against certain property, plant and equipment, inventory and trade receivables to reflect the current impact of Russia's invasion of Ukraine (and associated sanctions) on the Company's operations. In addition to impairments and allowances recorded, the Company recorded a loss on the divestiture of its Timken-RusTimkenRus Service Company ooo business during the third quarter of 2022. 7Represents the net gain (loss) resulting from divestitures and the sale of real estate.certain assets. 8Property (recoveries) losses and related expenses represent property loss and related expenses during the periods presented (net of insurance recoveries received) that occurred during the first quarter of 2019 at one of the Company's warehouses in Knoxville, Tennessee and during the third quarter of 2019 at one of the Company's warehouses in Yantai, China. 9 Provision for income taxes includes the net tax impact on pre-tax adjustments (listed above), the impact of discrete tax items recorded during the respective periods as well as other adjustments to reflect the use of one overall effective tax rate on adjusted pre-tax income. 10Depreciation and amortization shown excludes depreciation recognized in reorganization charges, if any. 1011 See page A-1 for a reconciliation of Adjusted EBITDA to its most directly comparable GAAP financial measure.
12The Company uses ANOPAT/Average Invested Capital as a non-GAAP ratio that indicates return on invested capital (ROIC), which is useful to investors as a measure of return on their investment. 1113Management believes that free cash flow is a non-GAAP measure that is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.
1214Management believes Net Debt is anand the Ratio of Net Debt to Adjusted EBITDA are important measuremeasures of the Company's financial position, due to the amount of cash and cash equivalents on hand.
APPENDIX B AMENDMENTS TO THE TIMKEN COMPANY
2019 EQUITY AND INCENTIVE COMPENSATION PLAN
(AMENDED ARTICLESAND RESTATED AS OF INCORPORATIONMAY 3, 2024) RESOLVED1. Purpose. The purpose of this Plan is to permit award grants to Participants as incentives and rewards for service and/or performance.
2. Definitions. As used in this Plan: (a) “Appreciation Right” means a right granted pursuant to Section 5 of this Plan. (b) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of an Appreciation Right. (c) “Board” means the Board of Directors of the Company. (d) “Cash Incentive Award” means a cash award granted pursuant to Section 9 of this Plan. (e) “Change in Control” has the meaning set forth in Section 13 of this Plan. (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder, as such law and regulations may be amended from time to time. (g) “Committee” means the Compensation Committee of the Board (or its successor(s)), or any other committee of the Board designated by the Board to administer this Plan pursuant to Section 11 of this Plan. In addition, the Board may act on behalf of the Committee with respect to the terms of this Plan regarding any awards granted to non-employee Directors under this Plan. (h) “Common Shares” means the common shares, without par value, of the Company or any security into which such common shares may be changed by reason of any transaction or event of the type referred to in Section 12 of this Plan. (i) “Company” means The Timken Company, an Ohio corporation, and its successors. (j) “Date of Grant” means the date provided for by the Committee on which a grant of Option Rights, Appreciation Rights, Performance Shares, Performance Units, Cash Incentive Awards, or other awards contemplated by Section 10 of this Plan, or a grant or sale of Restricted Shares, Restricted Stock Units, Deferred Shares or other awards contemplated by Section 10 of this Plan, will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto). (k) “Deferral Period” means the period of time during which Deferred Shares are subject to deferral limitations, as provided in Section 8 of this Plan. (l) “Deferred Shares” means an award made pursuant to Section 8 of this Plan of the right to receive Common Shares at the end of the applicable Deferral Period. (m) “Director” means a member of the Board. (n) “Effective Date” means May 10, 2019. (o) “Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the awards granted under this Plan. An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant. (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time. (q) “Incentive Stock Option” means an Option Right that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision. (r) “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares, Performance Units or Cash Incentive Awards or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Shares, Restricted Stock Units, Deferred Shares, dividend equivalents or other awards pursuant to this Plan. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the goals or actual levels of achievement regarding the Management Objectives, in whole or in part, as the Committee deems appropriate and equitable. (s) “Market Value per Share” means, as of any particular date, the price per Common Share under the fair market value pricing method adopted by the Committee (provided such method is in compliance with the fair market value pricing rules set forth in Section 409A of the Code), which pricing method may include (but is not limited to) the closing price, opening price or average price of a Common Share as reported for the particular date on the New York Stock Exchange (or, if the Common Shares are not then listed on the New York Stock Exchange, on any other national securities exchange on which the Common Shares are listed), or if there are no sales on such date, on the next preceding trading day during which a sale occurred. If there is no regular public trading market for the Common Shares, then the Market Value per Share shall be the fair market value of the Common Shares as determined in good faith by the Committee. The Committee is authorized to adopt another fair market value pricing method provided such method is stated in the applicable Evidence of Award and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code. (t) “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding Option Right. (u) “Option Price” means the purchase price payable on exercise of an Option Right. (v) “Option Right” means the right to purchase Common Shares upon exercise of an award granted pursuant to Section 4 of this Plan. (w) “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at the time (i) a non-employee Director, (ii) an officer or other employee of the Company or any Subsidiary, including a person who has agreed to commence serving in such capacity within 90 days of the Date of Grant, (iii) a consultant to the Company or a Subsidiary, or (iv) a person who provides services to the Company or any Subsidiary that are equivalent to those typically provided by an employee; provided, however, that no person may be selected by the Committee as a Participant unless such person satisfies the Form S-8 definition of an “employee.” (x) “Performance Period” means, in respect of a Cash Incentive Award, Performance Share or Performance Unit, a period of time established pursuant to Section 9 of this Plan within which the Management Objectives relating to such Cash Incentive Award, Performance Share or Performance Unit are to be achieved. (y) “Performance Share” means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 9 of this Plan. (z) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 9 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee. (aa) “Plan” means this The Timken Company 2019 Equity and Incentive Compensation Plan, as may be amended or amended and restated from time to time. This Plan was last amended and restated effective as of the Amendment and Restatement Date, as described in Section 21. (bb) “Predecessor Plans” means The Timken Company 2011 Long-Term Incentive Plan and The Timken Company Long-Term Incentive Plan, in each case including as amended or amended and restated from time to time. (cc) “Restricted Shares” means Common Shares granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfer has expired. (dd) “Restricted Stock Units” means an award made pursuant to Section 7 of this Plan of the right to receive Common Shares, cash or a combination thereof at the end of the applicable Restriction Period. (ee) “Restriction Period” means the period of time during which Restricted Stock Units are subject to restrictions, as provided in Section 7 of this Plan. (ff) “Shareholder” means an individual or entity that owns one or more Common Shares. (gg) “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised over the Base Price provided for with respect to the Appreciation Right. (hh) “Subsidiary” means a corporation, company or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, unincorporated association or other similar entity), but more than 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; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which the Company at the time owns or controls, directly or indirectly, more than 50% of the total combined Voting Power represented by all classes of stock issued by such corporation. (ii) “Voting Power” means, at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of Directors in the case of the Company or members of the board of directors or similar body in the case of another entity. 3. Shares Available Under this Plan. (a) Maximum Shares Available Under this Plan. Subject to adjustment as provided in Section 12 of this Plan and the share counting rules set forth in Section 3(b) of this Plan, the number of Common Shares available under this Plan for (i) Option Rights or Appreciation Rights, (ii) Restricted Shares, (iii) Restricted Stock Units, (iv) Deferred Shares, (v) Performance Shares or Performance Units, (vi) awards contemplated by Section 10 of this Plan, or (vii) dividend equivalents, will not exceed in the aggregate (x) 14,500,000 Common Shares (consisting of 10,000,000 Common Shares that were approved by the Shareholders in 2019 and 4,500,000 Common Shares to be approved by the Shareholders in 2024), plus (y) the Common Shares that are subject to awards granted under this Plan or the Predecessor Plans that are added (or added back, as applicable) to the aggregate number of Common Shares available under this Section 3(a) pursuant to the share counting rules of this Plan. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. (b) Share Counting Rules. (i) Subject to the share counting rules set forth in Section 3(b) of this Plan, the aggregate number of Common Shares available under Section 3(a) of this Plan will be reduced by (A) one Common Share for every one Common Share subject to an Option Right or Appreciation Right granted under this Plan, and (B) 3.50 Common Shares for every one Common Share subject to an award other than an Option Right or Appreciation Right granted under this Plan. (ii) Except as provided in Section 23 of this Plan, if any award granted under this Plan (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, again be available under Section 3(a) above. (iii) If, after the Effective Date, any Common Shares subject to an award granted under the Predecessor Plans are forfeited, or an award granted under the Predecessor Plans (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under this Plan. (iv) Notwithstanding anything to the contrary contained in this Plan: (A) Common Shares withheld by the Company, tendered or otherwise used in payment of the Option Price of an Option Right will not be added (or added back, as applicable) to the aggregate number of Common Shares available under Section 3(a) of this Plan; (B) Common Shares withheld by the Company, tendered or otherwise used to satisfy tax withholding will not be added (or added back, as applicable) to the aggregate number of Common Shares available under Section 3(a) of this Plan; (C) Common Shares subject to a share-settled Appreciation Right that are not actually issued in connection with the settlement of such Appreciation Right on the exercise thereof will not be added back to the aggregate number of Common Shares available under Section 3(a) of this Plan; and (D) Common Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Option Rights will not be added to the aggregate number of Common Shares available under Section 3(a) of this Plan. (v) Any Common Share that becomes available under this Plan under this Section 3(b) will be added back as (A) one Common Share if such Common Share was subject to an Option Right or Appreciation Right granted under this Plan or an option right or a stock appreciation right granted under a Predecessor Plan, and (B) as 3.50 Common Shares if such Common Share was subject to an award granted under this Plan other than an Option Right or an Appreciation Right (or was subject to an award other than an option right or a stock appreciation right granted under a Predecessor Plan). (vi) If, under this Plan, a Participant has elected to give up the right to receive compensation in exchange for Common Shares based on fair market value, such Common Shares will not count against the aggregate limit under Section 3(a) of this Plan. (c) Limit on Incentive Stock Options. Notwithstanding anything to the contrary contained in this Plan, and subject to adjustment as provided in Section 12 of this Plan, the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not exceed 14,500,000 Common Shares. (d) Non-Employee Director Compensation Limit. Notwithstanding anything to the contrary contained in this Plan, in no event will any non-employee Director in any one calendar year be granted compensation for such service having an aggregate maximum value (measured as of the Date of Grant as applicable and calculating the value of any awards based on the grant date fair value for financial reporting purposes) in excess of $650,000. (e) Minimum Vesting Requirements. Notwithstanding anything in this Plan (outside of this Section 3(e)) to the contrary, awards granted under this Plan shall have a minimum vesting or performance period of at least one year; provided, however, that, notwithstanding the foregoing, an aggregate of up to 5% of the maximum number of Common Shares available for awards under this Plan as provided for in Section 3 of this Plan, as may be adjusted under Section 12 of this Plan, may be used for awards that do not comply with such minimum vesting requirements at the time of the grant. Nothing in this Section 3(e) or otherwise in this Plan, however, shall preclude the Committee, in is sole discretion, from (i) providing for continued vesting or accelerated vesting for any award under the Plan upon certain events, including in connection with or following a Participant’s death, disability, or termination of service or a Change in Control, or (ii) exercising its authority under Section 19(c) at any time following the grant of an award. 4. Option Rights. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of Option Rights. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (a) Each grant will specify the number of Common Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan. (b) Each grant will specify an Option Price per Common Share, which Option Price (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant. (c) Each grant will specify whether the Option Price will be payable (i) in cash, by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of Common Shares owned by the Optionee having a value at the time of exercise equal to the total Option Price, (iii) subject to any conditions or limitations established by the Committee, by the Company’s withholding of Common Shares otherwise issuable upon exercise of an Option Right pursuant to a “net exercise” arrangement (it being understood that, solely for purposes of determining the number of treasury shares held by the Company, the Common Shares so withheld will not be treated as issued and acquired by the Company upon such exercise), (iv) by a combination of such methods of payment, or (v) by such other methods as may be approved by the Committee. (d) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the Common Shares to which such exercise relates. (e) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary, if any, that is necessary before any Option Rights or installments thereof will vest. (f) Any grant of Option Rights may specify Management Objectives regarding the vesting of such rights. (g) Option Rights granted under this Plan may be (i) options, including Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended to so qualify, or (iii) combinations of the foregoing. Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code. (h) No Option Right will be exercisable more than 10 years from the Date of Grant. The Committee may provide in any Evidence of Award for the automatic exercise of an Option Right upon such terms and conditions as established by the Committee. (i) Option Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon. (j) Each grant of Option Rights will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. 5. Appreciation Rights. (a) The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to any Participant of Appreciation Rights. An Appreciation Right will be the right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise. (b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (i) Each grant may specify that the Amended Articlesamount payable on exercise of Incorporationan Appreciation Right will be amendedpaid by deleting “Article SEVENTH”the Company in cash, Common Shares or any combination thereof. (ii) Each grant will specify the period or periods of continuous service by the Participant with the Company or any Subsidiary, if any, that is necessary before the Appreciation Rights or installments thereof will vest. (iii) Any grant of Appreciation Rights may specify Management Objectives regarding the vesting of such Appreciation Rights. (iv) Appreciation Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon. (v) Each grant of Appreciation Rights will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and insertingwill contain such terms and provisions, consistent with this Plan, as the Committee may approve. (c) Also, regarding Appreciation Rights: (i) Each grant will specify in respect of each Appreciation Right a Base Price, which (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant; and (ii) No Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. The Committee may provide in any Evidence of Award for the automatic exercise of an Appreciation Right upon such terms and conditions as established by the Committee. 6. Restricted Shares. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the grant or sale of Restricted Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale will constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights (subject in particular to Section 6(f) of this Plan), but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter described. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share on the Date of Grant. (c) Each such grant or sale will provide that the Restricted Shares covered by such grant or sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee on the Date of Grant or until achievement of Management Objectives referred to in Section 6(e) of this Plan. (d) Each such grant or sale will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares will be prohibited or restricted in the manner and to the extent prescribed by the Committee on the Date of Grant (which restrictions may include rights of repurchase or first refusal of the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture while held by any transferee). (e) Any grant of Restricted Shares may specify Management Objectives regarding the vesting of such Restricted Shares. (f) Any such grant or sale of Restricted Shares may require that any and all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and/or reinvested in additional Restricted Shares, which will be subject to the same restrictions as the underlying award. For the avoidance of doubt, any such dividends or other distributions on Restricted Shares will be deferred until, and paid contingent upon, the vesting of such Restricted Shares. (g) Each grant or sale of Restricted Shares will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, (i) all certificates representing Restricted Shares will be held in custody by the Company until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares or (ii) all Restricted Shares will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Restricted Shares. 7. Restricted Stock Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Restricted Stock Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale will constitute the agreement by the Company to deliver Common Shares or cash, or a combination thereof, to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include achievement regarding Management Objectives) during the Restriction Period as the Committee may specify. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share on the Date of Grant. (c) During the Restriction Period, the Participant will have no right to transfer any rights under his or her award and will have no rights of ownership in the Common Shares deliverable upon payment of the Restricted Stock Units and will have no right to vote them, but the Committee may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Restricted Stock Units on a deferred and contingent basis, either in cash or in additional Common Shares; provided, however, that dividend equivalents or other distributions on Common Shares underlying Restricted Stock Units will be deferred until and paid contingent upon the vesting of such Restricted Stock Units. (d) Each grant or sale of Restricted Stock Units will specify the time and manner of payment of the Restricted Stock Units that have been earned. Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in Common Shares or cash, or a combination thereof. (e) Each grant or sale of Restricted Stock Units will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. 8. Deferred Shares. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Deferred Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale will constitute the agreement by the Company to issue or transfer Common Shares to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include achievement regarding Management Objectives) during the Deferral Period as the Committee may specify. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share on the Date of Grant. (c) Each such grant or sale will provide that the Deferred Shares covered by such grant or sale will be subject to a Deferral Period to be determined by the Committee on the Date of Grant or until Management Objectives are achieved. (d) During the Deferral Period, the Participant will have no right to transfer any rights under his or her award, will have no rights of ownership in the Deferred Shares and will have no right to vote them, but the Committee may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Deferred Shares on a deferred and contingent basis, either in cash or in additional Deferred Shares; provided, however, that dividend equivalents or other distributions on Deferred Shares will be deferred until and paid contingent upon the earning and vesting of such Deferred Shares. (e) Each grant or sale of Deferred Shares will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. (f) Each grant or sale of Deferred Shares will specify the time and manner of payment of the Deferred Shares that have been earned. Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in Common Shares or cash, or a combination thereof. 9. Cash Incentive Awards, Performance Shares and Performance Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Cash Incentive Awards, Performance Shares and Performance Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions: (a) Each grant will specify the number or amount of Performance Shares or Performance Units, or amount payable with respect to a Cash Incentive Award, to which it pertains, which number or amount may be subject to adjustment to reflect changes in compensation or other factors. (b) The Performance Period with respect to each Cash Incentive Award or grant of Performance Shares or Performance Units will be such period of time as will be determined by the Committee. (c) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will specify Management Objectives regarding the earning of the award. (d) Each grant will specify the time and manner of payment of a Cash Incentive Award, Performance Shares or Performance Units that have been earned. (e) The Committee may, on the Date of Grant of Performance Shares or Performance Units, provide for the payment of dividend equivalents to the holder thereof either in cash or in additional Common Shares, which dividend equivalents will be subject to deferral and payment on a contingent basis based on the Participant’s earning and vesting of the Performance Shares or Performance Units, as applicable, with respect to which such dividend equivalents are paid. (f) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will have an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. 10. Other Awards. (a) Subject to applicable law and the applicable limits set forth in Section 3 of this Plan, the Committee may authorize the grant to any Participant of Common Shares or such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Common Shares or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Common Shares, purchase rights for Common Shares, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates or other business units thereof or any other factors designated by the Committee, and awards valued by reference to the book value of the Common Shares or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of the Company. The Committee will determine the terms and conditions of such awards. Common Shares delivered pursuant to an award in the nature of a purchase right granted under this Section 10 will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, cash, Common Shares, other awards, notes or other property, as the Committee determines. (b) Cash awards, as an element of or supplement to any other award granted under this Plan, may also be granted pursuant to this Section 10. (c) The Committee may authorize the grant of Common Shares as a bonus, or may authorize the grant of other awards in lieu thereof:of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as will be determined by the Committee in a manner that complies with Section 409A of the Code. “SEVENTH:(d) The Committee may, at or after the Date of Grant, authorize the payment of dividends or dividend equivalents on awards granted under this Section 10 on a deferred and contingent basis, either in cash or in additional Common Shares; provided, however, that dividend
equivalents or other distributions on Common Shares underlying awards granted under this Section 10 will be deferred until and paid contingent upon the earning and vesting of such awards. (e) Each grant of an award under this Section 10 will have an Evidence of Award. Each such Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve, and will specify the time and terms of delivery of the applicable award. 11. Administration of this Plan. (a) This Plan will be administered by the Committee. The Committee may from time to time delegate all or any part of its authority under this Plan to a subcommittee thereof. To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee. (b) The interpretation and construction by the Committee of any provision of this Plan or of any Evidence of Award (or related documents) and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. In addition, the Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained in this Plan, and no authorization in any Plan section or other provision of this Plan is intended or may be deemed to constitute a limitation on the authority of the Committee. (c) To the extent permitted by law, the Committee may delegate to one or more of its members, to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under this Plan. To the extent permitted by law, and in compliance with any applicable legal requirements, the Committee may, by resolution, authorize one or more officers of the Company to authorize the granting or sale of awards under this Plan on the same basis as the Committee; provided, however, that: (i) the Committee will not delegate such authority to any such officer(s) for awards granted to an employee who is an officer, Director, or more than 10% “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined in accordance with Section 16 of the Exchange Act; (ii) the resolution providing for such authorization shall set forth the total number of Common Shares such officer(s) may grant; and (iii) the officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated. 12. Adjustments. The Committee shall make or provide for such adjustments in the number of and kind of Common Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Shares, Restricted Stock Units, Deferred Shares, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of and kind of Common Shares covered by other awards granted pursuant to Section 10 of this Plan, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, respectively, in Cash Incentive Awards, and in other award terms, as the Committee, in its sole discretion, exercised in good faith, determines is equitably required to prevent dilution or enlargement of the rights of Participants that otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee may provide in substitution for any or all outstanding awards under this Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and shall require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price, respectively, greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its sole discretion elect to cancel such Option Right or Appreciation Right without any payment to the Person holding such Option Right or Appreciation Right. The Committee shall also make or provide for such adjustments in the number of Common Shares specified in Section 3 of this Plan as the Committee in its sole discretion, exercised in good faith, determines is appropriate to reflect any transaction or event described in this Section 12; provided, however, that any such adjustment to the number specified in Section 3(c) of this Plan will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail to so qualify. 13. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Committee in an Evidence of Award made under this Plan, “Change in Control” means the occurrence of any of the following events: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either: (i) the then-outstanding Common Shares or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c); or (b) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively of the Common Shares and Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66-2/3% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Common Shares and Voting Shares of the Company, as the case may be, (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) approval by the Shareholders of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, with respect to any award under the Plan that is characterized as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, an event shall not be considered to be a Change in Control under the Plan for purposes of any payment in respect of such award unless such event would also constitute a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets of” the Company under Section 409A of the Code. 14. Detrimental Activity and Recapture Provisions. (a) Awards granted under this Plan are subject to the terms and conditions of the Company’s clawback provisions, policy or policies (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares at any point may be traded) (the “Compensation Recovery Policy”), and applicable sections of any Evidence of Award to which this Plan is applicable or any related documents shall be interpreted consistently with (or deemed superseded by and/or subject to, as applicable) the terms and conditions of the Compensation Recovery Policy. Further, by accepting any award under the Plan, each Participant agrees (or has agreed) to fully cooperate with and assist the Company in connection with any of such Participant’s obligations to the Company pursuant to the Compensation Recovery Policy, and agrees (or has agreed) that the Company may enforce its rights under the Compensation Recovery Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Compensation Recovery Policy, in each case from and after the effective dates thereof. Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation necessary to facilitate the recovery or recoupment by the Company from such Participant of any such amounts, including from such Participants’ accounts or from any other compensation, to the extent permissible under Section 409A of the Code. (b) Otherwise, any Evidence of Award (or any part thereof) may provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain or earnings related to an award (or other provisions intended to have similar effects), including upon such terms and conditions as may be determined by the Board or the Committee in accordance with the Compensation Recovery Policy or any applicable laws, rules, regulations or requirements that impose mandatory clawback or recoupment requirements under the circumstances set forth in such laws, rules, regulations or requirements in effect from time to time (including as may operate to create additional rights for the Company with respect to such awards and the recovery of amounts or benefits relating thereto). 15. Non-U.S. Participants. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America or who provide services to the Company or any Subsidiary under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan (including, without limitation, sub-plans) (to be considered part of this Plan) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the Shareholders. 16. Transferability. (a) Except as otherwise determined by the Committee, and subject to compliance with Section 18(b) of this Plan and Section 409A of the Code, no Option Right, Appreciation Right, Restricted Share, Restricted Stock Unit, Deferred Share, Performance Share, Performance Unit, Cash Incentive Award, award contemplated by Section 10 of this Plan or dividend equivalents paid with respect to awards made under this Plan will be transferable by the Participant except by will or the laws of descent and distribution. In no event will any such award granted under this Plan be transferred for value. Where transfer is permitted, references to “Participant” shall be construed, as the Committee deems appropriate, to include any permitted transferee to whom such award is transferred. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law or court supervision. (b) The Committee may specify on the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions on transfer, including minimum holding periods. 17. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by a Participant or other Person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other Person make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit. If a Participant’s benefit is to be received in the form of Common Shares, and such Participant fails to make arrangements for the payment of taxes or other amounts, then, unless otherwise determined by the Committee, the Company will withhold Common Shares having a value equal to the amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to pay the Company an amount required to be withheld under applicable income, employment, tax and other laws, the Participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the Common Shares delivered or required to be delivered to the Participant, Common Shares having a value equal to the amount required to be withheld or by delivering to the Company other Common Shares held by such Participant. The Common Shares used for tax or other withholding will be valued at an amount equal to the fair market value of such Common Shares on the date the benefit is to be included in Participant’s income. In no event will the fair market value of the Common Shares to be withheld and delivered pursuant to this Section 17 exceed the maximum amount of taxes that could be required to be withheld. Participants will also make such arrangements as the Company may require for the payment of any withholding tax or other obligation that may arise in connection with the disposition of Common Shares acquired upon the exercise of Option Rights. 18. Compliance with Section 409A of the Code. (a) To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such section by the U.S. Department of the Treasury or the Internal Revenue Service. (b) Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owed by a Participant to the Company or any of its Subsidiaries. (c) If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the tenth business day of the seventh month after such separation from service. (d) Solely with respect to any award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that is payable on account of a Change in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time and form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for any purpose in respect of such award. (e) Notwithstanding any provision of Section 1701.01, et seq.,this Plan and grants hereunder to the contrary, in light of the Ohio Reviseduncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any successor statutes now or hereafter in force, requiringcase, a Participant will be solely responsible and liable for the authorizationsatisfaction of all taxes and penalties that may be imposed on a Participant or taking offor a Participant’s account in connection with this Plan and grants hereunder (including any action the vote or consenttaxes and penalties under Section 409A of the holdersCode), and neither the Company nor any of sharesits affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of capitalsuch taxes or penalties. 19. Amendments. (a) The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that if an amendment to this Plan, for purposes of applicable stock entitling themexchange rules and except as permitted under Section 12 of this Plan, (i) would materially increase the benefits accruing to exercise two-thirdsParticipants under this Plan, (ii) would materially increase the number of securities which may be issued under this Plan, (iii) would materially modify the requirements for participation in this Plan, or (iv) must otherwise be approved by the Shareholders in order to comply with applicable law or the rules of the voting powerNew York Stock Exchange or, if the Common Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Common Shares are traded or quoted, all as determined by the Board, then, such amendment will be subject to Shareholder approval and will not be effective unless and until such approval has been obtained. (b) Except in connection with a corporate transaction or event described in Section 12 of this Plan or in connection with a Change in Control, the terms of outstanding awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding “underwater” Option Rights or Appreciation Rights (including following a Participant’s voluntary surrender of “underwater” Option Rights or Appreciation Rights) in exchange for cash, other awards or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the Corporationoriginal Option Rights or of any class or classes of such shares thereof, such action, unless otherwise expressly required by law, these Amended Articles of Incorporation or the Amended RegulationsBase Price of the Corporation,original Appreciation Rights, as applicable, without Shareholder approval. This Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 12 of this Plan. Notwithstanding any provision of this Plan to the contrary, this Section 19(b) may not be authorized or takenamended without approval by the vote or consentShareholders. (c) If permitted by Section 409A of the holdersCode, but subject to Section 19(d), notwithstanding the Plan’s minimum vesting requirements, and including in the case of shares entitling them to exercisetermination of employment or service, or in the case of unforeseeable emergency or other circumstances or in the event of a majority of the voting power of the Corporation or of such class or classes of shares thereof.” APPENDIX C
AMENDMENTS TO AMENDED REGULATIONS
RESOLVED that the Amended Regulations be amended by deleting the provisions of “Section 6. Amendments” of Article V thereof and inserting the followingChange in lieu thereof:
“These Regulations may be amended (i)Control, to the extent permitteda Participant holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Deferred Shares as to which the Deferral Period has not been completed, or any Cash Incentive Awards, Performance Shares or Performance Units which have not been fully earned, or any dividend equivalents or other awards made pursuant to Section 10 of this Plan subject to any vesting schedule or transfer restriction, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 16(b) of this Plan, the Committee may, in its sole discretion, provide for continued vesting or accelerate the time at which such Option Right, Appreciation Right or other award may vest or be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time when such Deferral Period will end or the time at which such Cash Incentive Awards, Performance Shares or Performance Units will be deemed to have been earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.
(d) Subject to Section 19(b) of this Plan, the Committee may amend the terms of any award theretofore granted under this Plan prospectively or retroactively. Except for adjustments made pursuant to Section 12 of this Plan, no such amendment will materially impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any awards outstanding hereunder and not exercised in full on the date of termination. 20. Governing Law. This Plan and all grants and awards and actions taken hereunder will be governed by Chapter 1701and construed in accordance with the internal substantive laws of the Ohio Revised Code,State of Ohio. 21. Effective Date/Termination. The Timken Company 2019 Equity and Incentive Compensation Plan was effective as of the Effective Date. This 2024 amendment and restatement of The Timken Company 2019 Equity and Incentive Compensation Plan will be effective as of the date on which such amendment and restatement is approved by the Directors,Shareholders (the “Amendment and Restatement Date”). No grants will be made on or (ii)after the Effective Date under the Predecessor Plans, provided that outstanding awards granted under the Predecessor Plans continued following the Effective Date. No grant will be made under this Plan on or after the tenth anniversary of the Amendment and Restatement Date, but all grants made prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan. For clarification purposes, the terms and conditions of this Plan shall not apply to or otherwise impact previously granted and outstanding awards under the Predecessor Plans, as applicable (except for purposes of providing for Common Shares under such awards to be added to the aggregate number of Common Shares available under Section 3(a) of this Plan pursuant to the share counting rules of this Plan). 22. Miscellaneous Provisions. (a) The Company will not be required to issue any fractional Common Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash. (b) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time. (c) Except with respect to Section 22(e) of this Plan, to the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan. (d) No award under this Plan may be exercised by the affirmative voteholder thereof if such exercise, and the receipt of cash or shares thereunder, would be, in the opinion of counsel selected by the Company, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan. (e) Absence on leave approved by a duly constituted officer of the holdersCompany or any of record entitledits Subsidiaries will not be considered interruption or termination of service of any employee for any purposes of this Plan or awards granted hereunder. (f) No Participant will have any rights as a Shareholder with respect to exercise a majorityany Common Shares subject to awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such Common Shares upon the share records of the voting powerCompany. (g) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant. (h) Except with respect to Option Rights and Appreciation Rights, the Committee may permit Participants to elect to defer the issuance of Common Shares under this Plan pursuant to such proposal.”rules, procedures or programs as it may establish for purposes of this Plan and which are intended to comply with the requirements of Section 409A of the Code. The Committee also may provide that deferred issuances and settlements include the crediting of dividend equivalents or interest on the deferral amounts. (i) If any provision of this Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the Committee, such provision will be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it will be stricken and the remainder of this Plan will remain in full force and effect. Notwithstanding anything in this Plan or an Evidence of Award to the contrary, nothing in this Plan or in an Evidence of Award prevents a Participant from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations, and for purpose of clarity a Participant is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Exchange Act. 23. Share-Based Awards in Substitution for Awards Granted by Another Company. Notwithstanding anything in this Plan to the contrary: (a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted shares, restricted stock units, deferred shares or other share or share-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any Subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code. The awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan and may account for Common Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction. (b) In the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary merges has shares available under a pre-existing plan previously approved by shareholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for awards made after such acquisition or merger under this Plan; provided, however, that awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of the Company or any Subsidiary prior to such acquisition or merger. (c) Any Common Shares that are issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 23(a) or 23(b) of this Plan will not reduce the Common Shares available for issuance or transfer under this Plan or otherwise count against the limits contained in Section 3 of this Plan. In addition, no Common Shares subject to an award that is granted by, or becomes an obligation of, the Company under Sections 23(a) or 23(b) of this Plan, will be added to the aggregate limit contained in Section 3(a) of this Plan.
| | | | | | | | | |
| | c/o Corporate Election Services P. O. Box 32301150 Pittsburgh, PA 15230 | | Vote by Telephone | | | | Have your proxy card available when you call the Toll-Free number 1-888-693-8683 using a touchtone phone, and follow the simple instructions to record your vote. | Vote by Internet | | | | Vote by Internet | | | | | | | Have your proxy card available when you access the website www.cesvote.com and follow the simple instructions to record your vote. | | | | | | | | | | Vote by Mail | | | | | | | | | | Please mark, sign and date your proxy card and return it in the postage-paid envelope provided or return it to: Corporate Election Services, P.O. Box 3230,1150, Pittsburgh, PA 15230. |
| | | | | | | | | | | | | Internet | | | | QR Code
| | | | Telephone
Call Toll-Free:
1-888-693-8683
| | | | Mail
Return your proxy
| Access the Internet site and cast your vote:www.cesvote.com | | | | QR Code
| | | | | cast your vote: | | | | | | | | card/voting instruction form | www.cesvote.com | | | | | | | | in the postage-paid | | | | | Scan with a mobile device | | | | | | Telephone Call Toll-Free: 1-888-693-8683 | | Mail Return your proxy card/voting instruction form in the postage-paid envelope provided |
Vote 24 hours a day, 7 days a week! If you vote by telephone or Internet, please do NOT send your proxy by mail. Proxy must be signed and dated below. Please fold and detach card at perforation before mailing. | | | | | | The Timken Company | | proxy / voting instruction card |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned appoints John M. Timken, Jr.; Richard G. Kyle; and Hansal N. Patel; and each of them, as true and lawful proxies, with full power of substitution, to vote and act for the undersigned as specified on the reverse hereof at the Annual Meeting of Shareholders of THE TIMKEN COMPANY to be held online at http://www.cesonlineservices.com/tkr23_vmtkr24_vm, on May 5, 2023,3, 2024, at 10:00 a.m., and at any adjournment thereof, as fully as the undersigned could vote and act if personally present on the matters set forth on the reverse hereof, and, in their discretion on such other matters as may properly come before the meeting, and/or if the undersigned is a participant in one or more of the Company’s or its subsidiaries’ employee share ownership plans and has stock of the Company allocated to his or her account(s), the undersigned directs the trustee(s) of such plan(s) likewise to appoint the above-named individuals as proxies to vote and act with respect to all shares of such stock so allocated on the record date for such meeting in the manner specified on the reverse hereof at such meeting or any adjournment thereof, and in their discretion on such other matters as may properly come before the meeting. | Signature | | | Signature (if jointly held) | | Date: | | Please sign exactly as the name appears hereon. Joint owners should each sign. When signing as an attorney, executor, administrator, trust or guardian, please give full title as such. |
PLEASE SIGN AND RETURN AS SOON AS POSSIBLE Notice Of Annual Meeting Of Shareholders May 5, 20233, 2024 at 10:00 a.m. http://www.cesonlineservices.com/tkr23_vmtkr24_vm ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE If you are a registered holder of shares, you have the option to access future shareholder communications (e.g., annual reports, proxy statements, related proxy materials) over the Internet instead of receiving those documents in print. Participation is completely voluntary. If you give your consent, in the future, when our material is available over the Internet you will receive notification that will contain the Internet location where the material is available. Our material will be presented in PDF format. There is no cost to you for this service other than any charges you may incur from your Internet provider, telephone and/or cable company. Once you give your consent, it will remain in effect until you inform us otherwise. You may revoke your consent at any time by notifying the Company in writing. To give your consent, follow the prompts when you vote by telephone or over the Internet or check the appropriate box located at the bottom of the attached proxy card when you vote by mail. Please fold and detach card at perforation before mailing. | | | | | | The Timken Company | | proxy / voting instruction card |
The shares represented by this proxy will be voted as recommended by the Board of Directors unless otherwise specified. The Board of Directors recommends a vote FOR proposals 1, 2, 43 and 5, and Every Year on Proposal 3.4. 1. | Election of eleventen Directors to serve for a term of one year: |
| | | | | | | | | | | | | | | | | | | Nominees: | | (01) | | Maria A. Crowe | | (02) | | Elizabeth A. Harrell | | (03) | | Richard G. Kyle | | (04) | | Sarah C. Lauber | | | | (05) | | John A. Luke, Jr. | | (06) | | Christopher L. Mapes | | (07) | | James F. Palmer | | (08) | | Ajita G. Rajendra | | | | (09) | | Frank C. Sullivan | | (10) | | John M. Timken, Jr. | | (11) | | Ward J. Timken, Jr. | | | | |
| Nominees: | | (01) | Maria A. Crowe | (02) | Elizabeth A. Harrell | (03) | Richard G. Kyle | (04) | Sarah C. Lauber | | | | (05) | Christopher L. Mapes | (06) | James F. Palmer | (07) | Ajita G. Rajendra | (08) | Frank C. Sullivan | | | | (09) | John M. Timken, Jr. | (10) | Ward J. Timken, Jr. | | | | |
| | | | | | | | | | | ☐ FOR all nominees listed above | | ☐ WITHHOLD AUTHORITY to vote for all nominees listed above | | | | | | | | | | | | To withhold authority to vote for individual Nominee(s), write the name(s) or number(s) on the line below: | | | | | |
| | 2. | Approval, on an advisory basis, of our named executive officer compensation. |
3. | Recommendation, on an advisory basis, of the frequency (every 1, 2 or 3 years) of the shareholder advisory vote on named executive officer compensation. |
| | | | | | | | | | | | | | | | | ☐ | | EVERY YEAR | | ☐ | | EVERY 2 YEARS | | ☐ | | EVERY 3 YEARS | | ☐ | | ABSTAIN | | | | | | | | | | | | | | | | | |
4. | Ratification of the appointment of Ernst & Young LLP as our independent auditor for the fiscal year ending December 31, 2023.2024. |
4. | Approval of the amendment and restatement of The Timken Company 2019 Equity and Incentive Compensation Plan. |
5. | Approval of amendments to our Amended Articles of Incorporation and Amended Regulations to reduce certain shareholder voting requirement thresholds. |
The Board of Directors recommends a vote AGAINST proposal 6.5. 6.5. | Consideration of a shareholder proposal requesting our Boardthat The Timken Company adopt independently-verified short- and medium-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to takeachieve net-zero emissions by 2050 in line with the steps necessaryParis Agreement’s goal of limiting global temperature rise to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.1.5 degrees Celsius. |
☐ | | | | | | | | | | | | | | | | ☐ PLEASE CHECK THIS BOX IF YOU CONSENT TO ACCESS FUTURE ANNUAL REPORTS AND PROXY MATERIAL VIA THE INTERNET ONLY. |
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE. |
|
|
|
|