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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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SCHEDULE
14A
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PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by
the Registrant x
Filed by
a Part other than the Registrant o
Check the
appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a-12
Regal-Beloit
Corporation
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(Exact
Name of Registrant as Specified in Its
Charter)
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Payment
of Filing Fee (Check the appropriate
box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
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(1)
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Title
of each class of securities to which the transaction applies:
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(2)
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Aggregate
number of securities to which the transaction applies:
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(3)
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Per
unit price or other underlying value of the transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of the transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration State No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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REGAL
BELOIT CORPORATION
200 State
Street
Beloit,
Wisconsin 53511
Notice
of 2009 Annual Meeting of Shareholders
To
Be Held April 27, 2009
To the
Shareholders of Regal Beloit Corporation:
You are
hereby notified that the 2009 annual meeting of shareholders of Regal Beloit
Corporation will be held at the
James L. Packard Learning Center located at the Company’s corporate
headquarters, 200 State Street, Beloit, Wisconsin 53511, on Monday,
April 27, 2009, at 9:00 a.m., Central Daylight Time, for the following
purposes:
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1.
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To
elect three directors to serve until the 2012 Annual Meeting of
Shareholders.
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2.
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To
ratify the selection of Deloitte & Touche LLP as the Company’s
independent auditors for 2009.
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3.
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To
transact such other business as may properly come before the meeting or
any adjournment or postponement
thereof.
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The Board
of Directors has fixed the close of business on March 4, 2009 as the record date
for the determination of the shareholders entitled to notice of and to vote at
the annual meeting.
We hope
that you will be able to attend the meeting in person, but if you are unable to
do so, please complete, sign and promptly mail back the enclosed proxy form,
using the return envelope provided. You also have the option to vote
your shares by the Internet or telephone by following the instructions printed
on the enclosed proxy card. If, for any reason, you should
subsequently change your plans, you may, of course, revoke your proxy at any
time before it is actually voted.
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By Order of the Board of
Directors
REGAL BELOIT
CORPORATION
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Beloit,
Wisconsin
March 27, 2009
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Paul J.
Jones
Vice
President, General Counsel and Secretary
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Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to Be Held on April 27, 2009. The Regal Beloit Corporation proxy
statement for the 2009 Annual Meeting of Shareholders and 2008 Annual Report to
Shareholders are available at www.proxydocs.com/rbc.
TABLE OF CONTENTS
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Page
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PROXY STATEMENT
This
proxy statement and accompanying proxy card are being mailed to holders of Regal
Beloit Corporation (“we” or the “Company”) beginning on or about March 27,
2009. The Company, on behalf of its Board of Directors (the “Board”),
is soliciting your proxy to vote your shares of Regal Beloit common stock at the
2009 annual meeting of shareholders, and all adjournments or postponements
thereof (the “Annual Meeting”). We solicit proxies to give all
shareholders of record an opportunity to vote on matters that will be presented
at the Annual Meeting. In this proxy statement, you will find
information on these matters, which is provided to assist you in voting your
shares.
COMMONLY
ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
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Q:
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What
am I being asked to vote on?
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A:
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Election
of directors; and
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Ratification
of the selection of Deloitte & Touche LLP as our independent auditors
for 2009.
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Q:
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Who
can vote?
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A:
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Holders
of our common stock as of the close of business on the record date, March
4, 2009, may vote at the Annual Meeting, either in person or by
proxy. Each share of common stock has one
vote.
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Q:
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How
do I vote?
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A:
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By Proxy—Before the
Annual Meeting, you can give a proxy to vote your shares of common stock
in one of the following ways:
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by
telephone;
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by
using the Internet; or
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by
completing and signing your proxy card and mailing it in time to be
received prior to the Annual
Meeting.
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The
telephone and Internet voting procedures are designed to confirm your identity,
to allow you to give your voting instructions and to verify that your
instructions have been properly recorded. If you wish to vote by telephone or
Internet, please follow the instructions that are printed on the enclosed proxy
card.
If you
mail us your properly completed and signed proxy card, or vote by telephone or
the Internet, then your shares of common stock will be voted according to the
choices that you specify. If you sign and mail your proxy card to us without
making any choices, your proxy will be voted:
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FOR
the election of all persons nominated by the Board for election as
directors; and
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FOR
the ratification of the selection of Deloitte & Touche LLP as our
independent auditors for 2009.
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Other
than the election of directors and the ratification of the selection of our
independent auditors, we are not currently aware of any other matters that will
be brought before the Annual Meeting. However, by giving your proxy,
you appoint the persons named as proxies as your representatives at the Annual
Meeting. If a matter comes up for a vote at the Annual Meeting that
is not included in the proxy material, then the proxy holders will vote your
shares in accordance with their best judgment.
In Person—You may come to the
Annual Meeting and cast your vote there. If your shares are held in
the name of your broker, bank or other nominee and you wish to vote at the
Annual Meeting, then your broker, bank or other nominee will provide you with
instructions for voting your shares.
Q: May
I change or revoke my vote?
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A:
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You
may change your vote or revoke your proxy at any time prior to your shares
being voted by:
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notifying
our Secretary in writing that you are revoking your
proxy;
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giving
another signed proxy that is dated after the date of the proxy that you
wish to revoke;
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using
the telephone or Internet voting procedures;
or
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attending
the Annual Meeting and voting in person (attendance at the Annual Meeting
alone will not revoke your proxy).
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Q: Will
my shares be voted if I do not provide my proxy?
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A:
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It
depends on whether you hold your shares in your own name or in the name of
a brokerage firm. If you hold your shares directly in your
name, then they will not be voted unless you provide a proxy or vote in
person at the Annual Meeting. Brokerage firms or other nominees
generally have the authority to vote customers’ unvoted shares on certain
“routine” matters. If your shares are held in the name of a
brokerage firm, the brokerage firm has the discretionary authority to vote
your shares in connection with the election of directors and the
ratification of our independent auditors if you do not timely provide your
proxy because these matters are considered “routine” under the New York
Stock Exchange (“NYSE”) listing
standards.
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Q:
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What
constitutes a quorum?
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A:
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As
of the record date, 31,493,515 shares of our common stock were issued and
outstanding and entitled to vote at the Annual Meeting. To
conduct the Annual Meeting, a majority of the shares entitled to vote must
be present in person or by proxy. This is referred to as a “quorum.” If
you submit a properly executed proxy card or vote by telephone or the
Internet, then you will be considered present at the Annual Meeting for
purposes of determining the presence of a quorum. Abstentions
and broker “non-votes” will be counted as present and entitled to vote for
purposes of determining the presence of a quorum. A broker
“non-vote” occurs when a broker or other nominee who holds shares for
another person has not received voting instructions from the owner of the
shares and, under the New York Stock Exchange listing standards, does not
have discretionary authority to vote on a
proposal.
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Q:
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What
vote is needed for these proposals to be
adopted?
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A:
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Proposal 1—The
affirmative vote of the holders of a majority of the shares of our common
stock represented and voted at the Annual Meeting is required to elect
each director (assuming a quorum is present). Withhold votes
and abstentions will be counted for purposes of determining the presence
of a quorum but will be disregarded in the calculation of votes
cast.
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Proposal 2—The
affirmative vote of the holders of a majority of the shares of our common
stock represented and voted at the Annual Meeting (assuming a quorum is
present) is required to ratify the selection of Deloitte & Touche LLP
as our independent auditors for 2009. Abstentions will be
counted for purposes of determining the presence of a quorum but will be
disregarded in the calculation of votes
cast.
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Q: Who
conducts the proxy solicitation and how much will it cost?
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A:
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Regal
Beloit is requesting your proxy for the Annual Meeting and will pay all
costs of soliciting shareholder proxies. In addition to
soliciting proxies by mail, we may request proxies personally and by
telephone, fax or other means. We can use our directors,
officers and regular employees to request proxies. These people
do not receive additional compensation for these services. We
will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket and clerical expenses for
forwarding solicitation materials to beneficial owners of our common
stock.
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Q: Are
the Company’s proxy materials available on the Internet?
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A:
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Yes. The
Company’s proxy statement for the 2009 Annual Meeting of Shareholders and
2008 Annual Report to Shareholders are available at www.proxydocs.com/rbc.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board
is currently comprised of nine directors, divided into three classes of three
members each, with the terms of one class of directors expiring each
year. The Board has nominated G. Frederick Kasten, Jr., Henry W.
Knueppel and Dean A. Foate for election at the Annual Meeting as Class A
directors to serve until the 2012 annual meeting of shareholders and, for all
nominees, until their successors are duly elected and qualified. All
of our other directors are expected to serve on the Board until their respective
terms expire as indicated below. As a result, the Board has nominated
individuals for election as directors with respect to all open seats on the
Board. Unless shareholders otherwise specify, the shares represented
by the proxies received will be voted in favor of the election as directors of
the persons named as nominees herein. The Board has no reason to
believe that any of the listed nominees will be unable or unwilling to serve as
a director if elected. However, in the event that any nominee should
be unable or unwilling to serve, the shares represented by proxies received will
be voted for another nominee selected by the Board.
The
following sets forth certain information, as of March 4, 2009, about each of the
Board nominees for election at the Annual Meeting and each director whose term
will continue after the Annual Meeting. Except as otherwise noted,
each nominee has engaged in the principal occupation or employment and has held
the offices shown for more than the past five years.
Nominees
for Election at the Annual Meeting
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Name
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Age
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Director
Since
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Principal
Occupation; Office, if any,
Held
in the Company; Other Directorships
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Class
A Directors—Terms Expiring at the 2012 Annual Meeting of
Shareholders
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 G.
Frederick Kasten, Jr.
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70
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1995
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Retired
Chairman and director, Robert W. Baird & Co., Inc.; served as
President of Robert W. Baird & Co., Inc. from 1979-1999; as Chief
Executive Officer from 1983-2000; and as Chairman and director from
2000-2005.
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 Henry
W. Knueppel
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60
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1987
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Chairman
of the Board and Chief Executive Officer of the Company since April 2006;
elected Chief Executive Officer April 2005; President and Chief Operating
Officer from 2002-2005; Executive Vice President from 1987-2002; employed
by the Company since 1979; director, Harsco
Corporation.
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 Dean
A. Foate
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50
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2005
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President
and Chief Executive Officer of Plexus Corporation (an electronics
manufacturing services company) since 2002; served as Chief Operating
Officer of Plexus Corporation from 2001-2002; director of Plexus
Corporation.
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THE
BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH
SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.
Directors
Continuing in Office:
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Name
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Age
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Director
Since
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Principal
Occupation; Office, if any,
Held
in the Company; Other Directorships
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Class
B Directors—Terms Expiring at the 2010 Annual Meeting of
Shareholders
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 Christopher
L. Doerr
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59
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2003
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Co-CEO
of Sterling Aviation Holdings, Inc. (aircraft management and charter
company) since 2004 and Co-CEO of Passage Partners, LLC (a private
investment company) since 2001; former President and Co-CEO, LEESON
Electric Corporation from 1986-2001.
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 Mark
J. Gliebe
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48
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2007
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President
and Chief Operating Officer of the Company since December 2006; Vice
President and President-Electric Motors Group of the Company from January
2005 to December 2005; prior thereto employed by General Electric Company
(a diversified industrial and commercial manufacturing corporation) as the
General Manager of GE Motors & Controls in the GE Consumer &
Industrial business unit from 2000-2004.
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 Curtis
W. Stoelting
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48
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2006
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Chief
Executive Officer of RC2 Corporation (a designer, producer and marketer of
high-quality toys, collectibles and infant and toddler products) since
2003; prior thereto as Chief Operating Officer from 2000-2003 and
Executive Vice President from 1998-2003 of RC2
Corporation.
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Class
C Directors—Terms Expiring at the 2011 Annual Meeting of
Shareholders
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 Thomas
J. Fischer
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61
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2004
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Corporate
financial and accounting consultant since 2002; retired Milwaukee office
managing partner, Arthur Andersen LLP; director, Badger Meter Inc.,
Actuant Corporation and Wisconsin Energy
Corporation.
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Name
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Age
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Director
Since
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Principal
Occupation; Office, if any,
Held in the Company; Other
Directorships
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 Rakesh
Sachdev
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52
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2007
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Vice
President and Chief Financial Officer of Sigma-Aldrich Corporation (a life
science and technology company that develops and sells biochemical and
organic chemical products and kits) since October 2008; prior thereto
worked in various positions with ArvinMeritor, Inc. since 1999, including
Senior Vice President and President of Asia Pacific from 2007 to October
2008, Senior Vice President-Strategy and Corporate Development from 2005
to 2007 and Vice President and Corporate Controller/Interim CFO
from 2003 to 2005.
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 Carol
N. Skornicka
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67
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2006
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Retired
Sr. Vice President-Corporate Affairs, Secretary and General Counsel of
Midwest Air Group (a holding company for a commercial airline company);
employed by Midwest from 1996 to her retirement in February 2008; director
of Johnson Financial Group,
Inc.
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BOARD OF DIRECTORS
Corporate
Governance and Independent Directors
The Board
has in effect Corporate Governance Guidelines that, in conjunction with the
Board committee charters, establish processes and procedures to help ensure
effective and responsive governance by the Board. The Corporate
Governance Guidelines are available, free of charge, on our website at www.regalbeloit.com
or in print to any shareholder who requests a copy in writing addressed to the
Company’s Secretary. We are not including the information contained
on or available through our website as a part of, or incorporating such
information by reference into, this Proxy Statement.
The
Corporate Governance Guidelines provide that a majority of the members of the
Board must be independent directors under the listing standards of the
NYSE. The Board has also adopted certain categorical standards of
director independence to assist it in making determinations of director
independence and which are contained in the Corporate Governance
Guidelines. A copy of these categorical standards of director
independence are also attached as Appendix A to this
Proxy Statement. The categorical standards of director independence
adopted by the Board are available on our website at www.regalbeloit.com.
Based on
these standards, the Board has affirmatively determined by resolution that
Messrs. Doerr, Fischer, Foate, Kasten, Sachdev and Stoelting and Ms. Skornicka
have no material relationship with the Company, and, therefore, each is
independent in accordance with the NYSE listing standards and with the
categorical standards of director independence adopted by the
Board. The Board will regularly review the continuing independence of
the directors.
Code
of Business Conduct and Ethics
The Board
has adopted the Regal Beloit Corporation Code of Business Conduct and Ethics,
which applies to our directors, officers and employees. The Code is available,
free of charge, on our website at www.regalbeloit.com
or in print to any shareholder who requests a copy in writing addressed to the
Company’s Secretary.
Presiding
Director; Executive Sessions
The
Corporate Governance Guidelines require that the Board designate a “Presiding
Director” to lead each executive session of the Board. The position
of the Presiding Director rotates periodically among the non-employee directors
as determined by the Board upon the recommendation of the Corporate Governance
and Director Affairs Committee. Mr. Foate currently serves as the
Presiding Director.
The Board
will have at least four regularly scheduled meetings a year at which the
non-employee directors will meet in executive session without members of our
management being present. The non-employee directors may also meet
without management present at such other times as they determine
appropriate. Members of the Company’s senior executive management who
are not members of the Board will participate in Board meetings to present
information, make recommendations, and be available for direct interaction with
members of the Board.
Communications
with the Board
Shareholders
and other interested parties may communicate with the full Board, the Chairman
of the Board, non-management directors as a group or individual directors,
including the Presiding Director, by delivering a written communication to Regal
Beloit Corporation, Attention: Board of Directors, 200 State Street, Beloit,
Wisconsin 53511, or by sending an e-mail communication to board.inquiry@regalbeloit.com. The
communications should be addressed to the specific director or directors whom
the shareholder or interested party wishes to contact and should specify the
subject matter of the communication. The Company’s Secretary will deliver
appropriate communication directly to the director or directors to whom it is
addressed. The Secretary will generally not forward to the director
or directors communication that he determines to be primarily commercial in
nature or concerns our day-to-day business activities, or that requests general
information about the Company.
Concerns
about accounting or auditing matters or possible violations of the Regal Beloit
Corporation Code of Ethics should be reported pursuant to the procedures
outlined in the Code of Conduct and in our policy regarding Reporting Ethical,
Legal and Accounting Concerns, both of which are available on our website at
www.regalbeloit.com.
Committees
We have
standing Audit, Compensation and Human Resources, and Corporate Governance and
Director Affairs Committees of the Board. Each committee is appointed
by and reports to the Board. The Board has adopted, and may amend
from time to time, a written charter for each of the Audit, Compensation and
Human Resources, and Corporate Governance and Director Affairs
Committees. We make copies of each of these charters available free
of charge on our website at www.regalbeloit.com. Shareholders
may also obtain a copy of the charters by directing a written request to the
Company’s Secretary.
Audit
Committee. The Audit Committee consists of Messrs. Fischer
(Chairperson), Sachdev and Stoelting. Each of the members of the
committee is independent as defined by the NYSE listing standards and the rules
of the Securities and Exchange Commission (the “SEC”). The Board has
determined that each of Messrs. Fischer, Sachdev and Stoelting qualifies as an
“audit committee financial expert” as defined in SEC rules and meets the
expertise requirements for audit committee members under the NYSE listing
standards. The principal functions performed by the Audit Committee,
which met seven times in 2008, are to assist the Board in monitoring the overall
quality of the Company’s financial statements and financial reporting, the
independent auditor’s qualifications and independence, our accounting controls
and policies, the performance of our internal audit function and independent
auditors, and our compliance with legal and regulatory requirements. The Audit
Committee has the sole authority to appoint, retain, compensate and terminate
our independent auditors and to approve the compensation paid to the independent
auditors. The committee has conditioned its selection of independent
auditors for 2009 upon the ratification of this selection by our shareholders at
the Annual Meeting. See “Proposal 2: Ratification of Deloitte &
Touche LLP as the Company’s Independent Auditors for 2009.”
One
member of the Audit Committee, Mr. Fischer, serves on the audit committees of
three other public companies. On January 30, 2009, the Board of
Directors considered what it believes to be all of the relevant facts and
responsibilities relating to such simultaneous service by Mr. Fischer and
affirmatively determined that the simultaneous service would not impair Mr.
Fischer’s ability to serve effectively on our Audit Committee.
Compensation and Human Resources
Committee. The Compensation and Human Resources Committee
consists of Messrs. Doerr (Chairperson), Foate, Kasten and
Stoelting. Each of the members of the Compensation and Human
Resources Committee is independent as defined by the NYSE listing
standards. The principal functions of the Compensation and Human
Resources Committee, which met four times in 2008, are to help develop our
overall compensation philosophy; administer our incentive compensation plans
(including our equity incentive plans); either as a committee or together with
the other independent directors (as directed by the Board) determine and approve
the compensation of the Chief Executive Officer and the other principal
corporate officers; review and monitor succession and leadership development
planning; and review, formulate, recommend and administer short- and long-range
compensation programs for the principal corporate officers and key
employees. A more complete description of our Compensation and Human
Resources Committee’s practices can be found in the Compensation Discussion and
Analysis section of this Proxy Statement.
Corporate Governance and Director
Affairs Committee. The Corporate Governance and Director
Affairs Committee consists of Ms. Skornicka (Chairperson) and Messrs. Kasten and
Sachdev. Each of the members of the Corporate Governance and Director
Affairs Committee is independent as defined by the NYSE listing
standards. The principal functions of the Corporate Governance and
Director Affairs Committee, which met four times in 2008, are to develop and
recommend to the Board a set of corporate governance principles applicable to
our company, including matters of (a) Board organization, membership,
compensation, independence and function, (b) committee structure and
membership; and (c) otherwise take a leadership role in shaping our
corporate governance; to identify directors qualified to serve on the committees
established by the Board; and to recommend to the Board the members and the
chairperson for each committee to be filled by the Board. This Committee also
serves as the nominating committee of the Board and is responsible for
identifying individuals qualified to become directors (consistent with the
criteria approved by the Board) and to recommend candidates for all
directorships to be filled by the Board or by our shareholders.
Nominations
of Directors
The
Corporate Governance and Director Affairs Committee will consider persons
recommended by shareholders to become nominees for election as directors in
accordance with the criteria set forth in the Corporate Governance Guidelines
under the heading “Director’s Qualifications”. The Corporate
Governance and Director Affairs Committee will only review recommendations for
director nominees from any shareholder or group of shareholders beneficially
owning in the aggregate at least 5% of the issued and outstanding shares of our
common stock for at least one year as of the date that the recommendation is
made. Recommendations with respect to the 2010 annual meeting of
shareholders must be submitted by February 10, 2010, for the recommendation to
be considered by the Corporate Governance and Director Affairs
Committee.
In
identifying and evaluating nominees for director, the Corporate Governance and
Director Affairs Committee believes that directors must possess the highest
personal and professional ethics, integrity and values, and commitment to
representing the long-term interest of the shareholders. Directors
must also possess a diverse set of skills and experience with a background in
areas that are relevant to our activities. Directors should also be inquisitive
and have an objective perspective, a practical wisdom and mature judgment.
Directors must be willing and able to devote whatever time is necessary to carry
out their duties and responsibilities effectively. Directors will not be
nominated unless they are willing to serve for an extended period of
time.
For a
timely recommendation submitted by a shareholder to be considered by the
Corporate Governance and Director Affairs Committee, the candidate recommended
by a shareholder must be “independent” as defined in the NYSE independence
standards and the SEC regulations, and meet the minimum expectations for a
director set forth in the Company’s Corporate Governance
Guidelines. The Corporate Governance and Director Affairs Committee
will have sole discretion whether to nominate an individual recommended by a
shareholder. As to any candidate identified by the Corporate Governance and
Director Affairs Committee to become a nominee, the candidate must possess the
requisite qualifications, although the Corporate Governance and Director Affairs
Committee need not require such nominee to be independent. Nevertheless, we
strive to have all directors, other than those directors who are members of our
management, be independent as defined by the NYSE independence standards and the
SEC regulations.
Policies
and Procedures Regarding Related Person Transactions
Our Board
of Directors has adopted written policies and procedures regarding related
person transactions. For purposes of these policies and
procedures:
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a
“related person” means any of our directors, executive officers, nominees
for director or greater than 5% shareholder, and any of their immediate
family members, as well as any entity in which any of these persons is
employed or is a partner or principal or in a similar position or in which
such person has a 5% or greater beneficial ownership interest;
and
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a
“related person transaction” generally is a transaction in which we were
or are to be a participant and the amount involved exceeds $120,000, and
in which any related person had or will have a direct or indirect
interest.
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The
related person, the director, executive officer, nominee or beneficial owner who
is an immediate family member of a related person, or a business unit or
function/department leader of the Company responsible for a proposed related
person transaction must notify our General Counsel of certain information
relating to proposed related person transactions. If our General
Counsel determines that a proposed transaction is a related person transaction
subject to the policy, then he will submit the transaction to the Corporate
Governance and Director Affairs Committee for consideration at the next
committee meeting or, if expedited consideration is required, to the committee
chairperson. The committee or chairperson, as applicable, will
consider all of the relevant facts and circumstances available regarding the
proposed related person transaction and will approve only those related person
transactions that are in, or are not inconsistent with, the best interests of
our company and our shareholders. The chairperson is required to
report to the committee at the next committee meeting any approval granted under
the policy.
The
policy also provides for ongoing review by the General Counsel of any amounts
paid or payable to, or received or receivable from, any related
person. Additionally, at least annually, the Corporate Governance and
Director Affairs Committee is required to review any previously approved or
ratified related person transactions that remain ongoing and have a remaining
term of more than six months or remaining amounts payable to or receivable from
us of more than $60,000. Based on all relevant facts and
circumstances, the committee will determine if it is in the best interests of
our company and our shareholders to continue, modify or terminate the related
person transaction.
If any of
our Chief Executive Officer, Chief Financial Officer or General Counsel becomes
aware of a pending or ongoing related person transaction that has not been
previously approved or ratified under the policy, then the transaction must be
disclosed to the Corporate Governance and Director Affairs Committee or its
chairperson. The committee or the chairperson must then determine
whether to ratify, amend or terminate the related person transaction, or take
any other appropriate action. If the related person transaction is
complete, then the committee or its chairperson will evaluate the transaction to
determine if rescission of the transaction and/or any disciplinary action is
appropriate.
In 2008,
there were no proposed, pending or ongoing related person transactions subject
to review by the Corporate Governance and Director Affairs Committee under the
policy.
Meetings
and Attendance
The Board
held four meetings in 2008. Each director attended at least 75% of
the aggregate of (a) the total number of meetings of the Board and (b) the total
number of meetings held by all committees of the Board on which the director
served during 2008 during the time that such person served as
director.
Directors
are expected to attend our annual meeting of shareholders each
year. All of the current directors who were directors at the time of
the 2008 annual meeting of shareholders attended that meeting.
STOCK OWNERSHIP
Management
The
following table sets forth information, as of March 4, 2009, regarding
beneficial ownership of our common stock by each director and nominee, each of
our named executive officers as set forth in the Summary Compensation Table, and
all of the directors and executive officers as a group. As of March
4, 2009, no director or executive officer beneficially owned one percent or more
of our common stock, other than Mr. Knueppel, who beneficially owned 1.6% of our
common stock. On that date, the directors and executive officers as a
group beneficially owned 2.8% of our common stock. Except as
otherwise indicated in the footnotes, all of the persons listed below have sole
voting and investment power over the shares of our common stock identified as
beneficially owned.
|
Name
of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership(1)(2)(3)(4)
|
||||
|
David
A. Barta . . . . . . . . . . . . . . . . . . . . . .
|
60,779
|
||||
|
Terry
R. Colvin . . . . . . . . . . . . . . . . . . . . .
|
8,894
|
||||
|
Christopher
L. Doerr . . . . . . . . . . . . . . . . .
|
28,075
|
||||
|
Thomas
J. Fischer . . . . . . . . . . . . . . . . . .
|
23,000
|
||||
|
Dean
A. Foate . . . . . . . . . . . . . . . . . . . .
.
|
20,000
|
||||
|
Mark
J. Gliebe . . . . . . . . . . . . . . . . . . . . .
..
|
97,568
|
||||
|
Paul
J. Jones . . . . . . . . . . . . . . . . . . . . . .
.
|
14,000
|
||||
|
G.
Frederick Kasten, Jr. . . . . . . . . . . . . . .
|
71,684
|
||||
|
Henry
W. Knueppel . . . . . . . . . . . . . . . . .
|
518,387
|
||||
|
Rakesh
Sachdev . . . . . . . . . . . . . . . . . . . .
|
7,000
|
||||
|
Carol
N. Skornicka . . . . . . . . . . . . . . . . .
..
|
11,000
|
||||
|
Curtis
W. Stoelting . . . . . . . . . . . . . . . . . .
|
20,500
|
||||
|
All
directors and executive officers
as
a group (12 persons) . . . . . . . . . . . .
|
880,887
|
||||
| (1) |
Includes
shares subject to currently exercisable rights to acquire common stock and
options exercisable within 60 days of March 4, 2009 as
follows: Mr. Barta, 51,667 shares; Mr. Colvin, 6,000 shares Mr.
Doerr, 23,000 shares; Mr. Fischer, 20,000 shares; Mr. Foate, 14,000
shares; Mr. Gliebe, 75,000 shares; Mr. Jones, 10,000 shares; Mr. Kasten,
20,000 shares; Mr. Knueppel, 196,000 shares; Mr. Sachdev, 7,000 shares;
Ms. Skornicka, 10,000 shares; Mr. Stoelting, 13,000 shares; and all
directors and executive officers as a group, 445,667
shares. Also includes shares of restricted stock that are
subject to forfeiture until they vest on the third anniversary of the date
of grant as follows: Mr. Barta, 3,000 shares; Mr. Colvin, 2,400 shares;
Mr. Gliebe, 16,000 shares; Mr. Jones, 4,000 shares; and Mr. Knueppel,
20,000 shares.
|
||||
| (2) |
The
amount shown for Mr. Knueppel includes 14,397 shares that are held in
trust under the Company’s Personal Savings Plan (401(k)) or a non-Company
sponsored individual retirement account. The amount shown for Mr. Knueppel
also includes 177,403 shares as to which he shares voting and investment
power with his spouse.
|
||||
| (3) |
The
amount shown for Mr. Stoelting includes 7,500 shares held in the Curtis W.
Stoelting 1994 Revocable Trust over which Mr. Stoelting retains sole
voting and investment power during his lifetime.
|
||||
| (4) |
Amounts
shown for Messrs. Colvin and Gliebe include 494 shares and 549 shares,
respectively, held in trust under the Company’s 401(k)
plans.
|
||||
Other
Beneficial Owners
The
following table sets forth information, as of December 31, 2008, regarding
beneficial ownership by the only persons known to us to own more than 5% of our
outstanding common stock. The beneficial ownership set forth below
has been reported on filings made on Schedule 13G with the SEC by the beneficial
owners.
|
Amount and Nature of Beneficial
Ownership
|
||||||
|
Voting Power
|
Investment Power
|
|||||
|
Name
and Address
of Beneficial Owner
|
Sole
|
Shared
|
Sole
|
Shared
|
Aggregate
|
Percent
of
Class
|
|
Barclays
Global Investors, NA
400
Howard Street
San
Francisco, CA 94105
|
1,664,820
|
--
|
2,169,882
|
--
|
2,169,882
|
6.91%
|
|
Dimensional
Fund Advisors LP
Palisades
West, Building One
6300
Bee Cave Road
Austin,
TX 78746
|
1,757,492
|
--
|
1,811,405
|
--
|
1,811,405
|
5.61%
|
COMPENSATION DISCUSSION AND ANALYSIS
What
is our company’s general compensation philosophy?
We
recognize the importance of maintaining sound principles for the development and
administration of our compensation and benefit programs. Our overall
compensation philosophy is to offer the opportunity for our management team to
earn competitive pay, with performance having a direct connection to total
compensation and the creation of shareholder value. Our Compensation
and Human Resources Committee, or the Committee, is responsible for making
executive compensation decisions and recommendations regarding program design
and individual pay. Our executive compensation programs are designed
to advance principles that we have identified as being core to the function of
executive compensation. These principles are:
|
·
|
Attract
and Retain Quality People — We provide the opportunity for executives to
be compensated at competitive levels to ensure we attract and retain a
highly competent and committed management
team.
|
|
·
|
Pay
for Creation of Value — We provide our executives the opportunity to earn
above-median pay (as measured against selected peer groups) for
performance that creates shareholder value by generating ever increasing
returns as compared to our cost of capital. We believe that
this level of performance results in long-term value creation for our
shareholders via appreciation in our stock
price. Alternatively, we pay compensation below the median
level for corporate performance that fails to generate those levels of
returns.
|
|
·
|
Link
to Shareholder Interests — We link compensation to corporate performance
through equity-based awards to ensure that executives receive above-median
compensation only when we create long-term value for our
shareholders.
|
|
·
|
Alignment
through Equity Ownership — We ensure that executives’ long-term interests
are further aligned with shareholders’ interests by requiring our
executives to own a significant equity stake in our
company.
|
We
believe that a focus on these principles will benefit our shareholders in the
long-term by assuring that we can attract and retain highly qualified executives
who are committed to our long-term success and the creation of shareholder
value.
How
do we set executive compensation?
Our
Board, our Committee and our Chief Executive Officer, or CEO, each play a role
in setting the compensation of our named executive officers. Our
Board appoints the members of the Committee, which consists entirely of
independent directors who are “outside directors” for purposes of Section 162(m)
of the Internal Revenue Code and “non-employee directors” for purposes of the
Securities Exchange Act of 1934. The current members of the Committee
are Messrs. Doerr (Chairman), Foate, Kasten and Stoelting. The
Committee, subject to the approval of our Board, is responsible for establishing
the executive compensation packages offered to our named executive
officers. The Committee administers and has final authority for
setting awards under our annual cash incentive and long-term equity incentive
plans.
The
Committee reviews data from market surveys, proxy statements of companies it
considers our peers and independent compensation consultants to assess our
competitive position with respect to total executive compensation, including
annual compensation, benefits and perquisites. In reviewing data with
respect to annual compensation, we assess the following components of executive
compensation:
|
·
|
Base
salary;
|
|
·
|
Annual
incentives; and
|
|
·
|
Long-term
incentive compensation.
|
The
Committee’s objective generally is to establish base salary compensation between
the thirty-fifth (35th) and
fiftieth (50th)
percentile as compared with our selected peer group, with the opportunity for
our executives to earn above-median total compensation as measured against our
peer group for performance that generates ever increasing returns in excess of
our cost of capital.
The
Committee also considers individual performance, the level of responsibility and
skills and the experience of our executive officers in recommending base salary
levels for approval by the Board. For annual and long-term
incentives, the Committee considers a peer group analysis as well as other
existing compensation awards or arrangements in making compensation decisions
and recommendations. The Committee considers internal comparisons
relative to pay equity among our executive officers, but does not use a
formulaic approach in setting compensation levels among those executive
officers. In its decision-making process, the Committee receives and
considers the recommendations of our CEO as to executive compensation to be paid
to all of our executive officers, other than his own compensation as to which he
makes no recommendation.
Based on
the foregoing information, the Committee reviews and makes recommendations to
the Board on our compensation and benefit programs, with the objective of making
our executive compensation and benefits programs consistent with our overall
compensation philosophy. The Committee makes and recommends to the
Board decisions regarding adjustments to future base salaries, annual incentives
and long-term incentives concurrent with the assessment of the executives’
performance for the year.
The
Committee periodically solicits proposals from a variety of independent
compensation consultants to assist the Committee in the performance of its
responsibilities. After selecting an independent compensation
consultant, the Committee periodically meets with that consultant throughout the
year at such times as the Committee deems appropriate, and receives reports and
advice from the consultant on matters of executive compensation. Our
CEO has access to the independent compensation consultant only at the direction
of the Committee.
The
Committee selected The Delves Group to serve as its independent compensation
consultant for 2008. The Committee has also engaged Stern Stewart
& Co. every three years to assist with the setting of goals under our
Shareholder Value Added (SVA) Plan. The independent compensation
consultants retained by the Committee perform no other services for us or our
named executive officers other than the services provided at the direction of
the Committee.
In
assisting the Committee in setting compensation for 2008, the Committee directed
The Delves Group to assemble compensation data for our named executive officers
and compare those data against aggregated data for persons holding
similarly-situated positions in other companies. Pursuant to its
engagement and to approximate our market, The Delves Group benchmarked
compensation data using two recognized national compensation surveys covering
companies in both the industrial manufacturing and the electronics and
scientific equipment industries. We refer to the companies included
in these surveys and the twenty-one companies described in the next paragraph as
our “peer group.” In reviewing and analyzing these data, The Delves
Group considered information for each named executive officer position with
respect to the following elements of compensation:
|
·
|
Base
salary;
|
|
·
|
Total
cash compensation (salary and actual
bonus);
|
|
·
|
Target
bonus;
|
|
·
|
Long-term
incentives; and
|
|
·
|
Total
direct compensation (salary, actual bonus and long-term
incentives).
|
The
Committee directed The Delves Group to prepare benchmarking statistics that
reflected performance at our peer group’s twenty-fifth (25th),
fiftieth (50th) and
seventy-fifth (75th)
percentiles in connection with the foregoing analysis. The Committee
requested The Delves Group to report on the methodology that it used in its
analysis, a summary of its findings, and its general views relating to market
trends in executive compensation.
In
addition to the peer analysis performed by The Delves Group on the aggregated
peer group data, the Committee also reviewed compensation data on a
company-by-company basis for twenty-one companies that the Committee identified
and considered to be most comparable to our company based on the criteria set
forth below. The twenty-one companies include the
following:
|
Ametek
Inc.
|
A.O.
Smith Corp.
|
Baldor
Electric Co.
|
||
|
Crane
Co.
|
Donaldson
Co. Inc.
|
Federal
Signal Corp.
|
||
|
Gardner
Denver Inc.
|
Hubbell
Inc.
|
IDEX
Corporation
|
||
|
Kennametal
Inc.
|
Lincoln
Electric Holdings Inc.
|
Modine
Manufacturing Co.
|
||
|
Nordson
Corp.
|
Pentair
Inc.
|
Roper
Industries Inc.
|
||
|
Sauer
Danfoss Inc.
|
Superior
Essex Inc.
|
Thomas
& Betts Corp.
|
||
|
Wabash
National Corp.
|
Watts
Water Technologies Inc.
|
Woodward
Governor Co.
|
The
Committee selected the companies in this comparison group because they generally
meet all or most of the following criteria:
|
·
|
Comparable
revenue and/or similar market
capitalization;
|
|
·
|
Compete
with our company in the
marketplace;
|
|
·
|
Compete
with our company for executive talent;
and
|
|
·
|
Are
manufacturing companies in our
industries.
|
What
specific steps did the Committee take in 2008?
In
fulfilling its objectives as described above, the Committee took the following
steps in 2008:
|
·
|
Engaged
and directed The Delves Group to assess the competitiveness of our overall
compensation and benefits programs and to provide the Committee with
guidance as to the composition of our peer group for compensation
benchmarking purposes.
|
|
·
|
Reviewed
in consultation with our CEO (other than with respect to his own
compensation) and The Delves Group each element of compensation per
officer individually as well as in the aggregate using tally sheets that
reflected each component of compensation as well as total
compensation.
|
|
·
|
With
the assistance of The Delves Group, adjusted executive compensation
structures in accordance with our philosophy to target base salaries
between the thirty-fifth (35th)
and fiftieth (50th)
percentile as measured against our peer group while also providing
executives the opportunity to earn above-median annual incentives for
above-average performance.
|
|
·
|
Reviewed
the performance of our CEO (independent of input from him) and recommended
to the independent members of the Board the total compensation for the CEO
based on competitive levels and using the same philosophies as stated
above as measured against our peer
group.
|
|
·
|
Reviewed
the performance of our other executive officers with assistance from our
CEO and recommended to the independent members of the Board the total
compensation for each individual officer based on competitive levels and
using the same philosophies as stated above as measured against our peer
group.
|
|
·
|
Maintained
the practice of holding executive sessions (without management present) at
every Committee meeting, including executive sessions in which our
independent compensation consultants
participated.
|
|
·
|
Reviewed
the overall incentive compensation program for our executive
officers.
|
How
do we determine total compensation?
We intend
to continue our strategy of compensating our executives at competitive levels as
compared to our peer group, with the opportunity to earn above-median
compensation for performance that generates ever increasing returns as compared
to our cost of capital (which we believe results in long-term equity
appreciation), through programs that emphasize performance-based incentive
compensation in the form of annual cash payments, deferred cash payments and
equity-based awards. To that end, total executive compensation is
tied directly to our performance and is structured to ensure that, due to the
nature of our business, there is an appropriate balance focused on our long-term
versus short-term performance, and also a balance between our financial
performance, individual performance of our executive officers and the creation
of shareholder value. The Committee’s balance with respect to annual
and long-term compensation is focused on providing above-median compensation
through long-term incentives, but only to the extent the executive officers
create long-term value for shareholders. In this regard, the
Committee does not fix a percentile at which it seeks to tie the amount of
overall compensation paid by us to each of our named executive officers; rather,
the Committee allows our named executive officers the opportunity to earn
above-median compensation for performance that generates ever increasing returns
as compared to our cost of capital. In this way, the Committee
believes our named executive officers are only rewarded with above-median pay if
they are able to create value for our shareholders.
We
believe that the total compensation paid or awarded to our named executive
officers during 2008 was consistent with our financial performance and the
individual performance of each of our named executive officers. Based
on the Committee’s analysis and the advice of The Delves Group, we also believe
that the compensation was reasonable in its totality as compared to our peer
group and is consistent with our compensation philosophies as described
above.
What
are the components of total compensation?
We
achieve our executive compensation objectives through the following ongoing
programs. All of our named executive officers participate in these
programs. A more detailed discussion of each program is provided
below in this Compensation Discussion and Analysis.
|
Progam
|
Description
|
Participants | Objectives | |||
| Annual Cash Compensation | ||||||
| Base Salary | ● | Annual cash compensation | ● | All employees | ● | Retention |
| ● | Drive superior performance | |||||
| ■ Individual contribution | ||||||
| Shareholder Value Added (SVA) Annual Cash Bonus |
●
|
Annual
bonus with target awards established at each employee
level
|
● | All executive officers and key managers |
●
|
Drive superior
performance
■
Across total company
■ Across
business units
|
|
|
●
|
Payments can be higher (subject to a 200% cap) or lower than target, based on business unit and total company annual results | ● | Retention | ||
|
Program
|
Description
|
Participants |
Objectives
|
|||
|
Long-Term Incentive
Programs
|
||||||
| Long-Term Incentive (LTI) Equity Awards | ● | Long-term incentive awards paid in SARs and/or RSUs; grant amounts vary to reflect individual contribution | ● | All executive officers and key managers | ● |
Drive
superior performance
■
Individual contribution
■
Increase stock price
|
| ● | Focus on long-term success | |||||
| ● | Ownership | |||||
| ● | Retention | |||||
|
Retirement
Programs
|
||||||
| Retirement (401(k)) Savings Plan | ● | Company matching and annual contributions | ● | All Employees |
●
|
Retention |
| Target Supplemental Retirement Plan | ● | Retirement benefits for executives who have at least 15 years of service and work with us until the age of 58 | ● | Key Executives |
●
●
|
Retention
Competitive Practices
|
|
Other
Executive Benefits
|
||||||
| Perquisites and Executive Benefits | ● | Available to certain executives to assure protection of Company assets and/or focus on Company business with minimal disruption | ● | Specific benefits are offered to different groups of executive officers based on business purpose |
●
●
|
Retention
Competitive Practices
|
| Other Benefits | ● | Medical, welfare and other benefits | ● | All employees | ● | Retention |
Base Salaries. We
believe that the purpose of base salary is to provide a competitive fixed rate
of pay, recognizing different levels of responsibilities within our
company. We determine base salaries for our executives based upon job
responsibilities, level of experience, individual performance and expectations
with respect to contributions to our future performance as well as comparisons
to the salaries of executives in similar positions as compared to our peer
group. The Committee’s goal for the base salary component is to
compensate executives between the thirty-fifth (35th) and
fiftieth (50th)
percentile as compared to similarly-situated executives within our peer
group. The Committee consulted with The Delves Group in making
recommendations for base salary adjustments for 2008 based on the factors set
forth above. Our CEO in turn made recommendations to the Committee
with respect to the base compensation of executives other than
himself. In setting base salary increases for 2008, the individual
performance factors reviewed for Mr. Knueppel included revenue growth (including
increases in organic revenue), return on invested capital, cash flow, total
shareholder returns and performance against specified individual performance
objectives, such as execution of our annual operating plan, improvement of the
depth of our management talent, completion of a new business strategy,
successful information technology transition related to prior acquisitions and
consummation of strategic acquisitions. The individual performance
factors reviewed for Messrs. Barta, Gliebe, Jones and Colvin included revenue
growth (including increases in organic revenue), operating profit improvement,
cash flow and performance against specified individual performance objectives,
including (i) for Mr. Barta, strengthening the finance team, reducing monthly
report cycles, perfecting metrics and data bases used to compute our critical
measures as against peer companies and reducing cash cycle days; (ii) for Mr.
Gliebe, improving the business talent review process, strengthening the
long-range planning process, achieving agreed upon Lean Six Sigma savings,
achieving a capital plan and associated productivity and executing an annual
operating plan; (iii) for Mr. Jones, reductions in outside legal expense,
implementing a global compliance program and improving the Company enterprise
risk management program; and (iv) for Mr. Colvin, implementation of retirement
plan changes across the Company, completion of a human resources management
system for the Company’s U.S. operations and additions to the curriculum of the
Company’s global learning center. The Committee does not employ a
formula or any type of weighting in its analysis of these factors but instead
considers these factors in the exercise of its subjective judgment in setting
salary levels for our named executive officers.
While
merit-based salary increases historically took effect in late January or early
February of each year, the 2008 merit-based increases took effect on April 1,
2008. Future merit-based salary increases will take effect in April of each
year. In 2008, Mr. Knueppel received a 4.0% increase in base salary, which
reflected the Company’s record performance in sales and profit, offset to some
degree by total shareholder returns, as well as his individual performance
against objectives. Mr. Knueppel’s salary for 2008 placed him in the
fortieth (40th)
percentile relative to CEOs in our peer group. The other named executive
officers, Mr. Barta, Mr. Gliebe, Mr. Jones and Mr. Colvin received base salary
increases of 5.9%, 5.0%, 6.2% and 5.9%, respectively. Mr. Barta’s
salary increase reflected our increased size, his individual performance and
contributions to our company’s performance, as well as the intent to increase
his salary over time to be within the stated thirty-fifth (35th) to fiftieth
(50th) percentile range as compared to our peer group. With the
increase for 2008, Mr. Barta was in the thirty-fifth (35th) percentile for
salaries relative to CFOs in our peer group. The salary increases for
Messrs. Gliebe, Jones and Colvin were reflective of their individual performance
and our objectives regarding the level of base salaries paid to our executives
as described above. The salaries for Messrs. Gliebe, Jones and Colvin
in 2008 placed them in the fiftieth (50th), thirty-fifth (35th) and thirty-fifth
(35th) percentiles, respectively, for salaries relative to similarly-situated
persons in our peer group.
Annual Incentives. We have in
effect a Shareholder Value Added (SVA) Plan, which was approved by our
shareholders in 2006 and is designed to promote the maximization of shareholder
value over the long term. We chose SVA as the basis for annual
incentives for the following reasons. First, it is the corporate
performance measure that is tied most directly, both theoretically and
empirically, to the creation of shareholder value. Managing for high
SVA is, by definition, managing for higher stock price. Second, it is
a framework developed for setting goals and measuring performance that rewards
participants for both short and long term results realized by the
Company. Finally, by focusing on our financial performance as a
function of invested capital, management is incented to make prudent investments
in assets that are capable of providing strong returns. In summary,
we believe that SVA, as we use it, best recognizes the value that members of our
management team add to the capital invested by our stockholders. We
intend the SVA plan to provide a competitive amount of compensation for the
executive officers based on their individual participation levels when the
Company achieves the SVA targets as approved by the Committee. The
SVA plan provides bonus opportunities based on a comparison of actual annual SVA
to target SVA for the year in question. Performance above target SVA
earns a bonus greater than the target bonus, while performance below target SVA
earns a bonus less than the target bonus or no bonus at all. In years
of strong corporate performance, the bonus amount that an executive can earn
would be considered above the median level for our peer group, and the bonus
amount that an executive can earn would be below the median level for our peer
group in years when we are underperforming. To benchmark and
determine target bonus amounts, and to determine an annual improvement factor
and leverage factor that impacts the target bonus amount, the Committee retains
nationally-recognized independent compensation consultants every three years, or
more frequently as deemed necessary. The targets for the SVA plan
were last established in 2005 with the assistance of Stern Stewart &
Co.
SVA is a
calculation that attempts to approximate the value executives add to our company
above our cost of capital. SVA is calculated by subtracting a charge
for the average net capital employed by us during a fiscal year from the net
operating profit after tax that we earn during that same year. For
this purpose, the cost of capital is determined based on our weighted average
cost of equity and our after-tax cost of debt. To encourage improved
performance in accordance with the SVA plan, the Committee establishes an
expected improvement factor in addition to setting a target SVA
amount. The SVA target amount for 2008 was $45,767,000, which we
surpassed. This target was set by formula. Under the formula the new
target set each year is calculated as follows:
|
(Previous
Year SVA Target + Previous Year SVA
Actual)
|
+
|
Improvement
Factor
|
=
|
New
SVA Target
|
|
2
|
As a
result of the improvement factor, incentive payments under the SVA plan are
dependent upon our executives driving ever increasing returns as compared to our
cost of capital. We have capped the maximum bonus that may be earned in any year
at 200% of the target bonus established for that year.
In
addition to setting target SVA, the Committee also sets the target bonus
percentage amount for each of our executive officers. This amount is
based on a percentage of the base salary paid to the executive
officers. For fiscal year 2008, Messrs. Knueppel, Barta, Gliebe,
Jones and Colvin had target bonus percentage amounts of 100%, 50%, 60%, 45% and
40%, respectively, which equated to target bonus amounts of $754,000, $177,500,
$286,800, $131,400 and $93,200, respectively. The Committee, in
consultation with The Delves Group and our CEO (other than with respect to his
own compensation), set target bonus amounts at the median level with respect to
each respective position held by our executive officers relative to our peer
group. As a result, our executives were given the opportunity to earn
above-median annual cash incentive awards for generating ever increasing returns
as compared to our cost of capital while at the same time facing below-median
awards (or no award at all) for failing to meet that objective. The
Committee believes that tying above-median incentives to generating increasing
returns in excess of our cost of capital is a disciplined way to reward our
named executive officers for creating shareholder value.
Based on
our performance in 2008, we achieved actual SVA in excess of our SVA target,
which would indicate an earned bonus of 102.75% of the target
bonus. The Committee approved bonuses for 2008 equal to 102.75% of
the target bonus in accordance with the terms of the SVA plan. As a
result, the Committee determined that Messrs. Knueppel, Barta, Gliebe, Jones and
Colvin earned SVA bonuses of $774,735, $182,381, $294,687, $135,014 and $95,763,
respectively. We pay
fully all bonuses earned up to the target bonus (100% bonus) in cash following
the end of that year in accordance with the SVA plan. Bonus amounts
earned above the target bonus value are paid in installments, with one-third of
the above-target amount being paid to the participant in cash after the end of
each of the following three years, so long as the named executive officer has
not voluntarily terminated his or her employment with us or been terminated for
cause. We do not credit participants with interest on amounts subject
to payment in installments. For 2008, since the bonus performance
value was approved at 102.75%, a portion of each of the SVA bonuses identified
above as being earned will be paid in installments. The 2008 SVA
bonus amounts that were deferred and subject to payment in installments over the
next three years for Messrs. Knueppel, Barta, Gliebe, Jones and Colvin were
$20,735, $4,881, $7,887, $3,614 and $2,563, respectively.
Long-Term
Compensation. We believe that equity-based compensation
ensures that our executives have a continuing stake in the long-term success of
our company and allows our executives to earn above-median compensation only if
our shareholders experience appreciation in their equity
holdings. The Committee granted stock appreciation rights and
restricted stock units to our named executive officers in fiscal year 2008 as
described below.
Consistent
with our overall compensation philosophy, the Committee, in consultation with
The Delves Group, granted long-term compensation awards (namely, stock
appreciation rights and restricted stock units) other than to Mr. Knueppel at
levels approximating the median level of these awards granted by the companies
in our peer group. We value such awards using the binomial
formula. After considering Mr. Knueppel’s substantial existing
holdings of our common stock, the Committee granted to Mr. Knueppel a long-term
compensation award below the median level of these awards granted by companies
in our peer group. In addition to the analysis undertaken against our
peer group, the Committee also considered our performance against our strategic
plan generally as well as the number of awards granted to our officers as
compared to grants to all of our other employees.
Other
than in the case of newly hired executives, we generally grant long-term
equity-based awards in April of each year coincident with the completion of
annual performance reviews. In any event, we make equity-based awards
only during an “open window” period following the release of either our
quarterly or annual company financial results.
Stock Appreciation
Rights. The Committee granted stock appreciation rights to
each named executive officer in 2008 in the amounts indicated in the “Grants of
Plan-Based Awards Table for Fiscal 2008” and the narrative following the
table. The Committee set the base price per share of all of the stock
appreciation rights that it granted in 2008 equal to the closing market price of
our common stock on the date of grant so that the stock appreciation rights will
have value only if the market price of our common stock increases after the
grant date. In addition, the Committee made the stock appreciation
rights subject to ratable vesting over five years to provide additional
incentive for our named executive officers to remain in our
employment. The Committee granted stock appreciation rights rather
than stock options because it views stock appreciation rights as less dilutive
to our shareholders.
Restricted Stock
Units. The Committee awarded restricted stock units to each of
our named executive officers in 2008 in the amounts indicated in the Grants of
Plan-Based Awards Table for Fiscal 2008 and the narrative following the
table. A restricted stock unit gives the holder a right to have us
issue a share of our common stock upon the conditions or date specified in the
award. In addition to providing competitive compensation and an
incentive to create shareholder value, these awards are intended to align
management and shareholder interests as well as provide a retention incentive
for the executive to remain employed by our company. The Committee
determined the number of restricted stock units to grant to each of our
executives with reference to the compensation philosophy described
above. The Committee made the restricted stock units subject to
forfeiture until the third anniversary of the grant date to provide an
additional incentive for our named executive officers to remain in our
employment.
What
other benefits do we provide to our executives?
We have
certain other plans that provide, or may provide, compensation and benefits to
our named executive officers. These plans are principally our 401(k)
Plan and our Target Supplemental Retirement Plan. We also provide
life and medical insurance as part of our compensation package. The
Committee considers all of these plans and benefits when reviewing total
compensation of our executive officers.
401(k). In 2008,
our named executive officers participated in a Company 401(k) plan that covers a
group of eligible hourly and salaried employees. In 2008,
participants in the 401(k) plan, including Messrs. Knueppel, Barta, Gliebe,
Jones and Colvin, received a Company contribution equal to 2% of their base
salary (which salary was capped at $230,000 for purposes of calculating the
Company contribution) plus a matching contribution from the Company equal to 50%
of the first 3% of base salary contributed by the employees into their 401(k)
accounts. The maximum total annual contribution allowed by a named
executive officer under the 401(k) plan is 6% of his base salary, not to exceed
the federal maximum 401(k) contribution.
Target Supplemental Retirement
Plan. The Target Supplemental Retirement Plan limits
participants to officers and other key employees recommended by our CEO and
approved by the Committee. The purpose of the plan is to extend
retirement benefits to participants without regard to statutory limitations
under tax-qualified plans. To be eligible for a benefit from this
plan, an employee must have provided fifteen (15) years of uninterrupted service
to our company and remain employed with us until at least age
58. When the plan was adopted by the Board in January 1994, the
benefit amounts were benchmarked against a group of then peer companies in
consultation with a compensation consultant. The Committee
periodically reviews these benchmarks to determine if they are still
appropriate. The Committee completed its most recent review of the
benefit amounts provided under the plan in 2006 with the assistance of Towers
Perrin. The peer companies the Committee considered in its 2006
benchmarking analysis approximate the companies included in our peer group as
discussed above. Our named executive officers participate in the
Target Supplemental Retirement Plan. The Committee’s intent in
offering benefits under the Target Supplemental Plan is to provide a competitive
retirement package to our named executive officers. For more
information regarding this plan, see the narrative discussion following the
“Pension Benefits for Fiscal 2008” table.
What
perquisites do we provide?
We
provided a modest level of personal benefits to named executive officers in
2008, as summarized below:
|
·
|
Mr.
Gliebe had limited use of a company aircraft for personal
travel.
|
|
·
|
All
of the executive officers had use of a company car for personal
travel.
|
|
·
|
Mr.
Knueppel has a special life insurance benefit and does not receive a life
insurance benefit under the basic program offered to other named executive
officers and other salaried employees. We are the owner of the
policy on the life of Mr. Knueppel with a basic death benefit of
$3,000,000. At the time Mr. Knueppel ceases to be employed by
us, we become the sole beneficiary on his policy. Mr.
Knueppel’s beneficiary would receive $500,000 in the event of his death
while employed by us. The balance of Mr. Knueppel’s death
benefit would be paid to us, including any increased death benefit, since
the policy has increasing death benefits as cash value is
created. We pay the entire annual premium on the policy, and
income is imputed to Mr. Knueppel in accordance with governmental
regulations.
|
|
·
|
Our
executive officers are provided with enhanced short-term and long-term
disability benefits compared with our other salaried
employees. For salaried employees who are not executive
officers, the short-term disability benefit provides up to six months of
salary replacement in an amount between 60% and 100% of the salaried
employee’s base salary depending on the salaried employee’s credited years
of service with our company. For our executive officers, salary
replacement is 100% regardless of credited years of
service. For salaried employees who are not executive officers,
the long-term disability benefit commences following six months of
disability and provides a benefit of 60% of base salary (which base salary
is capped at $300,000 for purposes of calculating the long-term disability
benefit). For our executive officers, the same formula applies
but there are no caps.
|
How
do we assure that compensation keeps our executives focused on long-term
success?
Our
long-term success depends on excellent financial and operational performance
year after year. Therefore, to focus on both the short and long-term
success of the Company, our named executive officers’ compensation includes a
significant portion—approximately 30% to 50%--that is “at risk” because the
value of such compensation is determined based on the achievement of specified
results. If short-term and long-term financial and operational goals
are not achieved, then performance-related compensation will
decrease. If goals are exceeded, then performance-related
compensation will increase.
In
addition, compensation paid in the form of equity awards, such as RSUs and SARs,
instead of cash is at-risk because its value varies with changes in the stock
price. By creating a total compensation package where a considerable
percentage is paid in equity awards, our executive officers have a significant
stake in the long-term success of the Company and gain financially along with
our shareholders.
As shown
in the following charts, in fiscal 2008, 33% of the CEO’s total compensation
and, on average, 50% of the other named executive officers’ compensation was
at-risk dependent on performance. Twenty percent (20%) of the
CEO’s total compensation and, on average, 35% of the other named executive
officers’ total compensation was paid in RSUs or SARs.
For 2008,
the CEO’s total compensation reported in the Summary Compensation Table includes
$2,813,866 in “Change in Pension Value and Nonqualified Deferred Compensation
Earnings.” This amount includes approximately $1,640,962 solely as a result of a
previous change in the terms of our Target Supplemental Retirement Plan that
reduced from 62 to 58 the minimum age at which participants who have at least
fifteen (15) years of uninterrupted service to our company may receive
retirement benefits without any reduction in those benefits. This is
not a current, cash benefit to Mr. Knueppel, but rather an actuarial calculation
of the change in value of a future retirement benefit. This change was adopted
to make the plan more competitive when benchmarked against our peer group of
companies. Mr. Knueppel is 60 years of age with 29 years of service with
our company and, therefore, qualifies for early retirement under the
plan. Without the effect of this change to the plan, the percent of
the CEO’s total compensation for 2008 that was at-risk would have been
forty-eight percent (48%).
What
are our executive’s stock ownership requirements?
To
underscore the importance of linking executive compensation and shareholder
interests, we have implemented stock ownership requirements for certain
executives, including our named executive officers. Executives
subject to these stock ownership requirements must own a certain dollar value
amount of stock before they are permitted to sell shares (other than shares sold
to pay option exercise prices or shares sold or surrendered to cover
taxes). Executives who sell shares in violation of these requirements
may be ineligible for future long-term incentive awards. The stock
ownership policy requires our CEO to hold shares with a value five (5) times his
base salary. For our Chief Operating Officer and Chief Financial
Officer, the ownership threshold is three (3) times base salary and for all
other executives the ownership threshold is one (1) times base
salary.
What
severance and change in control benefits do we provide?
We have
no employment agreements with any of our named executive officers that provide
benefits prior to a change in control of our company. However, we have entered
into change in control and termination agreements with Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin, and, under our equity incentive plans, a change in
control of our company may trigger potential benefits for all participants,
including accelerated vesting of awards. For a detailed description
of the material terms and conditions of these agreements and the change in
control provisions of our equity incentive plans, see the “Potential Payments
upon a Termination or Change in Control” section below.
The
Committee believes the change in control and termination benefits that we
provide our named executive officers under the change in control and termination
agreements and our equity incentive plans are consistent with the Committee’s
overall objective of building shareholder value and contain terms that are
similar to those offered to executives of comparable companies. The
purpose of the benefits is to focus our named executive officers on taking
actions that are in the best interests of our shareholders without regard to
whether such action may ultimately have an impact on their job security, and to
avoid the loss of key managers that may occur in connection with an anticipated
or actual change in control. The change in control benefits that we
provide our executive officers fulfill these purposes by generally maintaining
the executive officers’ expected current and long-term compensation for a
specified period following the change in control, vesting awards granted prior
to the change in control and making the executive officers whole for certain
excise taxes that may result from compensation paid and benefits provided in
connection with the change in control and any related termination of
employment. All of our change in control agreements contain “double
trigger” provisions, which means that, for an executive officer to receive
severance benefits under the agreement, in addition to the change in control
there must be some adverse change in the circumstances of the executive
officer’s employment. The Committee selected the triggering events for change in
control and termination benefits to our named executive officers based on its
judgment that these events were likely to result in the job security
distractions and retention concerns described above. Other than the
change in control and termination agreements, we have no formal severance
program in place for our named executive officers.
EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth for each of our named executive officers: (1) the
dollar value of base salary and bonus earned during the years indicated; (2) the
dollar value of the compensation cost of all outstanding stock and option awards
recognized during the years indicated, computed in accordance with FAS 123R; (3)
the dollar value of earnings for services pursuant to awards granted during the
indicated year under non-equity incentive plans; (4) the change in pension value
and non-qualified deferred compensation earnings during the years indicated; (5)
all other compensation for the years indicated; and, finally, (6) the dollar
value of total compensation for the years indicated. Our named
executive officers are our CEO, our vice president and chief financial officer
and each of our three other most highly compensated executive officers as of
December 31, 2008 (each of whose total cash compensation exceeded $100,000 for
fiscal year 2008). In accordance with the rules of the SEC, the table
includes information for the years ended December 30, 2006, December 29, 2007
and December 27, 2008 for Messrs. Knueppel, Barta and Gliebe and for the years
ended December 29, 2007 and December 27, 2008 for Messrs. Jones and Colvin, who
were not named executive officers for the year ended December 30,
2006.
SUMMARY
COMPENSATION TABLE FOR FISCAL YEARS
2006-2008
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive
Plan
Compensation
($)(3)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
|
All
Other
Compensation
($)(5)
|
Total
($)
|
|
Henry
W. Knueppel
|
2008
|
746,750
|
0
|
496,437
|
572,374
|
774,735
|
2,813,886
|
81,365
|
5,485,547
|
|
Chairman
and Chief
Executive
Officer
|
2007
|
725,000
|
0
|
442,300
|
567,371
|
1,450,000
|
626,255
|
103,075
|
3,914,001
|
|
(Principal
Executive Officer)
|
2006
|
613,686
|
0
|
300,430
|
627,826
|
968,000
|
1,946,774
|
82,365
|
4,539,081
|
|
David
A. Barta
|
2008
|
350,000
|
0
|
113,361
|
204,460
|
182,381
|
48,484
|
16,539
|
915,225
|
|
Vice
President and Chief
Financial
Officer
|
2007
|
335,000
|
0
|
103,865
|
228,667
|
335,000
|
9,774
|
18,920
|
1,031,226
|
|
(Principal
Financial Officer)
|
2006
|
319,851
|
0
|
58,310
|
133,019
|
315,000
|
0
|
21,628
|
847,808
|
|
Mark
J. Gliebe
|
2008
|
472,250
|
0
|
298,135
|
390,061
|
294,687
|
478,581
|
35,853
|
1,969,567
|
|
President
and Chief
Operating
Officer
|
2007
|
455,000
|
0
|
211,420
|
310,253
|
546,000
|
0
|
46,734
|
1,569,407
|
|
2006
|
429,851
|
0
|
118,505
|
190,512
|
510,000
|
232,661
|
37,360
|
1,518,889
|
|
|
Paul
J. Jones
|
2008
|
287,750
|
0
|
49,997
|
106,149
|
135,014
|
0
|
16,419
|
595,329
|
|
Vice
President, General
Counsel
and Secretary
|
2007
|
275,000
|
0
|
30,027
|
62,746
|
247,500
|
0
|
13,062
|
628,335
|
|
Terry
R. Colvin
|
2008
|
229,750
|
0
|
29,998
|
63,545
|
95,763
|
0
|
14,538
|
433,594
|
|
Vice
President, Corporate
Human
Resources
|
2007
|
220,000
|
0
|
18,016
|
37,836
|
176,000
|
0
|
8,431
|
460,283
|
|
(1)
|
These
amounts reflect the dollar value of the compensation cost of all
outstanding stock awards recognized for the indicated fiscal year,
computed in accordance with FAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. The assumptions made in
valuing the stock awards for 2008, 2007 and 2006 are included under the
caption “Shareholders Investment” in Notes 7, 2 and 7,
respectively, of the Notes to Consolidated Financial Statements in the
2008, 2007 and 2006 Annual Reports on Form 10-K, and such information is
incorporated herein by reference.
|
|
(2)
|
These
amounts reflect the dollar value of the compensation cost of all
outstanding option awards recognized over the requisite service period,
computed in accordance with FAS 123R. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. The assumptions made in
valuing the stock awards for 2008, 2007 and 2006 are included under the
caption “Shareholders Investment” in Notes 7, 2 and 7, respectively, of the
Notes to Consolidated Financial Statements in the 2008, 2007 and 2006
Annual Reports on Form 10-K, and such information is incorporated herein
by reference.
|
|
(3)
|
As
discussed in more detail in the Compensation Discussion and Analysis,
under the SVA plan we pay any bonus amounts earned above the target bonus
value in three equal annual installments. Since the amounts
shown with respect to each named executive officer are in excess of 100%
of the applicable target bonus values for the years indicated, we have
paid or will pay, as applicable, a portion of each amount in such
installments over the next three years as long as the named executive
officer has not voluntarily terminated his employment with us or been
terminated for cause on the installment payment date.
|
|
(4)
|
The
values shown are not current, cash benefits, but rather actuarial
calculations of the change in the accumulated benefit obligations under
the Target Supplemental Retirement Plan for Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin in 2008 and 2007 and, for Messrs. Knueppel, Barta
and Gliebe, in 2006. For 2008, the values shown for Messrs. Knueppel,
Barta, Gliebe, Jones and Colvin include $1,640,962, $21,859, $418,140, $0
and $0, respectively, solely as a result of a previous change in the terms
of our Target Supplemental Retirement Plan that reduced from 62 to 58 the
minimum age at which participants who have at least fifteen (15) years of
uninterrupted service to our company may receive retirement benefits
without any reduction in those benefits. This change was
adopted to make the plan more competitive when benchmarked against our
peer group of companies. Messrs. Knueppel and Gliebe have 29
years and 27 years, respectively, of credited service with our
company. Mr. Knueppel is 60 years of age, and with 29 years of
credited service, he currently qualifies for retirement under the Target
Supplemental Retirement Plan. While Mr. Knueppel is not
currently contemplating retirement, the fact that he could retire under
the plan without a reduction in benefits requires that the entire change
in the accumulated benefit be shown in the table.
|
|
(5)
|
The
amounts shown include payments for personal benefits and for the other
items identified below. We provide a modest level of personal
benefits to named executive officers. These personal benefits
include use of a company car and very limited use of company aircraft for
personal travel, the payment of certain moving expenses and the payment of
life insurance premiums. We value the personal use of company
aircraft under an incremental cost method calculated based on the average
variable operating costs to our company. Variable operating costs include
fuel, maintenance, landing/ramp fees and other miscellaneous variable
costs. The total annual variable costs are divided by the annual number of
passenger miles the company aircraft flew to derive an average variable
cost per mile. This average variable cost per mile is then multiplied by
the miles flown for personal use to derive the incremental cost. The
methodology excludes fixed costs that do not change based on usage, such
as pilots’ and other employees’ salaries, purchase costs of the aircraft
and non-trip related hangar expenses. Based on this method, the
value of the personal use of company aircraft by Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin in 2008 was $0, $0, $8,315, $0 and $0,
respectively. For 2008, other items included in this column
were: (a) quarterly payments, equal to the per share dividend paid to
shareholders, paid on the cumulative amount of restricted stock awards
held by the named executive officers of $13,150, $2,235, $4,960, $775 and
$465 for
Messrs. Knueppel, Barta, Gliebe, Jones and Colvin, respectively; (b)
payments in lieu of dividends for Mr. Knueppel of $51,969 on shares related
to his exercise of stock options in 2002, as delivery of the shares for
which the stock options were exercised was delayed until February 10,
2009; (c) company contributions to the named executive officers’ 401(k)
plans of $7,975, $7,975, $7,975, $7,975 and $7,392 for Messrs.
Knueppel, Barta, Gliebe, Jones and Colvin, respectively; and (d) the
reimbursement of amounts paid by Messrs. Knueppel, Barta, Gliebe, Jones
and Colvin for taxes related to their use of the company aircraft of $0,
$0, $1,275, $0 and $0,
respectively.
|
Grants
of Plan-Based Awards
The
following table sets forth information regarding all incentive plan awards that
the Committee made to our named executive officers during 2008, including
incentive plan awards (equity-based and non-equity based) and other plan-based
awards. Disclosure on a separate line item is provided for each grant
of an award made to a named executive officer during the year. The
information supplements the dollar value disclosure of stock, option and
non-stock awards in the Summary Compensation Table by providing additional
details about these awards. Non-equity incentive plan awards are
awards that are not subject to FAS 123R and are intended to serve as an
incentive for performance to occur over a specified period.
GRANTS
OF PLAN-BASED AWARDS TABLE FOR FISCAL 2008
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards (1)
|
All
Other Stock Awards: Number of Shares of Stock or Units (#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or Base Price
of
Option Awards ($/Sh)
|
Grant
Date
Fair
Value of Stock and Option
Awards
($)
|
||||||
|
Name
|
Grant
Date
|
Date
of Committee Action
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
|||||
|
Henry
W. Knueppel
|
5/02/2008
|
4/18/2008
|
10,000
|
422,800
|
||||||
|
5/02/2008
|
4/18/2008
|
70,000
|
42.28
|
1,027,600
|
||||||
|
0
|
754,000
|
1,508,000
|
||||||||
|
David
A. Barta
|
5/02/2008
|
4/18/2008
|
3,000
|
126,840
|
||||||
|
5/02/2008
|
4/18/2008
|
25,000
|
42.28
|
367,000
|
||||||
|
0
|
177,500
|
355,000
|
||||||||
|
Mark
J. Gliebe
|
5/02/2008
|
4/18/2008
|
8,000
|
338,240
|
||||||
|
5/02/2008
|
4/18/2008
|
35,000
|
42.28
|
513,800
|
||||||
|
0
|
286,800
|
573,600
|
||||||||
|
Paul
J. Jones
|
5/02/2008
|
4/18/2008
|
1,500
|
63,420
|
||||||
|
5/02/2008
|
4/18/2008
|
15,000
|
42.28
|
220,200
|
||||||
|
0
|
131,400
|
262,800
|
||||||||
|
Terry
R. Colvin
|
5/02/2008
|
4/18/2008
|
900
|
38,052
|
||||||
|
5/02/2008
|
4/18/2008
|
9,000
|
42.28
|
132,120
|
||||||
|
0
|
93,200
|
186,400
|
||||||||
|
(1)
|
The
table reflects the estimated future payouts at the time these awards were
granted under the SVA plan. As of the date of this proxy
statement, these awards have been earned and, up to the target amount,
paid out. As discussed in more detail in the Compensation
Discussion and Analysis, bonuses earned above the target bonus value under
the SVA plan are subject to payment in three equal annual
installments. To receive the installment payments, the named
executive officer must not have voluntarily terminated his employment with
us or been terminated for cause prior to the applicable payment
date. We do not credit interest on amounts subject to payment
in installments.
|
Equity
Incentive Plan Awards
As
reflected in the tables above, the Committee granted equity-based awards to our
named executive officers in 2008. The Committee granted these awards
under our two equity incentive plans: the 2003 Equity Incentive Plan,
or the 2003 Plan, and the 2007 Equity Incentive Plan, or the 2007
Plan. Our equity incentive plans are administered by the Committee
with respect to key employee participants, and the Committee generally has the
authority to set the terms of awards under the plans except to the extent the
plans specify such terms.
Effective
May 2008, the Committee awarded 10,000, 3,000, 8,000, 1,500 and 900 restricted
stock units to Messrs. Knueppel, Barta, Gliebe, Jones and Colvin, respectively,
under the 2003 Plan. Pursuant to its practice of granting equity-based awards
only during an “open window” period following the release of our quarterly or
annual financial results, the Committee awarded the restricted stock units with
an effective grant date of May 2, 2008, which was the beginning of the first
open window period following the Committee’s action. The restricted stock units
had a grant date fair value of $42.28 per share as determined pursuant to FAS
123R, which is equal to the closing market price of a share of our common stock
on the date of grant. The units remain subject to forfeiture for
three years following the date of grant.
The
Committee also granted stock appreciation rights, or SARs, to each of our named
executive officers in 2008. Effective May 2008, the Committee awarded
Messrs. Knueppel, Barta, Gliebe, Jones and Colvin SARs under the 2007 Plan with
respect to 70,000, 25,000, 35,000, 15,000 and 9,000 shares, respectively, at a
per share base price of $42.28. Pursuant to its practice of granting
equity-based awards only during an “open window” period following the release of
our quarterly or annual financial results, the Committee awarded the SARs with
an effective grant date of May 2, 2008, which was the beginning of the first
open window period following the Committee’s action. The base price of these
SARs equals the closing market price of a share of our common stock on the date
of grant. The SARs vest and become exercisable ratably over a
five-year period, and will expire on May 2, 2018.
Except as
otherwise provided by the Committee, awards under the 2003 Plan or any rights or
interest may not be assigned or transferred except by will or the laws of
descent and distribution during the lifetime of the
participant. Awards under the 2007 Plan and any rights under such
awards are generally not assignable, alienable, saleable or transferable by
participants.
Shareholder
Value Added Plan
As
reflected in the tables above, our named executive officers participated in the
SVA plan, which is designed to promote the maximization of shareholder value
over the long term. The SVA plan provides bonus opportunities based
on a comparison of actual annual SVA to target SVA for the year in
question. Performance above target SVA earns a bonus more than the
target bonus while performance below target SVA earns a bonus less than the
target bonus. Under the SVA plan, the bonuses earned in one year up
to the target bonus (100% bonus) are fully paid in cash following the end of
that year.
Bonus
amounts earned above the target bonus value are paid in installments, with
one-third of the above-target amount being paid to the participant in cash after
the end of each of the following three years, as long as the named executive
officer has not voluntarily terminated his employment with us or been terminated
for cause. We do not credit participants with interest on amounts
subject to payment in installments. In 2008, the percent of target
earned was 102.75%. Therefore, the SVA bonus amounts earned for 2008
were $774,735, $182,381, $294,687, $135,014 and $95,763 for
Messrs. Knueppel, Barta, Gliebe, Jones and Colvin, respectively. The
2008 SVA bonus amounts that were deferred and subject to payment in installments
over the next three years for Messrs. Knueppel, Barta, Gliebe, Jones and Colvin
were $20,735, $4,881, $7,887, $3,614 and $2,563, respectively.
Target
Supplemental Retirement Plan
The
column entitled “Change in Pension Value and Nonqualified Deferred Compensation
Earnings” in the Summary Compensation Table includes amounts attributable to the
change in the actuarial present value of the respective accumulated benefits
under the Target Supplemental Retirement Plan for Messrs. Knueppel, Barta,
Gliebe, Jones and Colvin. The change in pension value for Messrs.
Knueppel, Barta and Gliebe reflects an increase in the present value of the
accumulated benefit under the Target Supplemental Retirement Plan resulting from
a change in 2005 to include in the calculation of benefits bonuses earned under
the SVA plan. As indicated in Footnote 4 to the Summary Compensation Table, the
change in pension value also includes amounts attributable to a previous change
in the terms of the Target Supplemental Retirement Plan that reduced from 62 to
58 the minimum age at which participants who have at least fifteen (15) years of
uninterrupted service to our company may receive retirement benefits without any
reduction in those benefits.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information on outstanding option and stock awards
held by our named executive officers at December 27, 2008, including the number
of shares underlying both exercisable and unexercisable portions of each stock
option as well as the exercise price and expiration date of each outstanding
option.
OUTSTANDING
EQUITY AWARDS AT FISCAL 2008 YEAR-END
|
Option
Awards (1)
|
Stock
Awards
|
|||||||
|
Name
|
Number
of Securities
Underlying
Unexercised Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of Shares or Units of Stock That Have Not Vested (#) (2)
|
Market
Value of Shares or Units of Stock That Have Not Vested ($) (3)
|
||
|
Henry
W. Knueppel
|
40,000
|
0
|
16.38
|
4/22/2013
|
||||
|
36,000
|
0
|
20.30
|
4/22/2014
|
|||||
|
50,000
|
0
|
29.75
|
1/21/2015
|
|||||
|
28,000
|
42,000(4)
|
36.36
|
1/27/2016
|
|||||
|
0
|
70,000(5)
|
48.05
|
2/06/2017
|
|||||
|
0
|
70,000(6)
|
42.28
|
5/2/2018
|
|||||
|
40,000(7)
|
1,358,800
|
|||||||
|
David
A. Barta
|
16,667
|
8,333(8)
|
21.85
|
6/28/2014
|
||||
|
10,000
|
0
|
29.75
|
1/21/2015
|
|||||
|
10,000
|
15,000(9)
|
36.36
|
1/27/2016
|
|||||
|
0
|
25,000(10)
|
48.05
|
2/06/2017
|
|||||
|
0
|
25,000(11)
|
42.28
|
5/02/2018
|
|||||
|
9,000(12)
|
305,730
|
|||||||
|
Mark
J. Gliebe
|
30,000
|
20,000(13)
|
29.00
|
1/3/2015
|
||||
|
14,000
|
21,000(14)
|
36.36
|
1/27/2016
|
|||||
|
0
|
35,000(15)
|
48.05
|
2/06/2017
|
|||||
|
0
|
35,000(16)
|
42.28
|
5/02/2018
|
|||||
|
24,000(17)
|
815,280
|
|||||||
|
Paul
J. Jones
|
4,800
|
7,200(18)
|
42.94
|
9/11/2016
|
||||
|
0
|
13,000(19)
|
44.12
|
5/01/2017
|
|||||
|
0
|
15,000(20)
|
42.28
|
5/02/2018
|
|||||
|
4,000(21)
|
135,880
|
|||||||
|
Terry
R. Colvin
|
3,000
|
4,500(22)
|
42.94
|
9/11/2016
|
||||
|
0
|
7,500(23)
|
44.12
|
5/01/2017
|
|||||
|
0
|
9,000(24)
|
42.28
|
5/02/2018
|
|||||
|
2,400(25)
|
81,528
|
|||||||
_________________________
|
(1)
|
Exercisable
stock options are vested. Unexercisable stock options vest as
noted.
|
|
(2)
|
Restricted
stock and restricted stock units vest as
noted.
|
|
(3)
|
Based
on $33.97 per share closing price of our common stock on the New York
Stock Exchange on December 26,
2008.
|
|
(4)
|
14,000
options will vest on each of 1/27/2009, 1/27/2010 and
1/27/2011.
|
|
(5)
|
These
stock appreciation rights vest with respect to 14,000 shares per year,
commencing on 2/06/2008 through 2/06/2012, but none are
exercisable until 2/06/2009.
|
|
(6)
|
These
stock appreciation rights vest with respect to 28,000 shares on 5/02/2010,
and 14,000 shares per year commencing on 5/02/2011 through
5/02/2013.
|
|
(7)
|
20,000
shares vest on 1/27/2009, 10,000 shares vest on 2/06/2010 and 10,000
shares vest on 5/02/2011.
|
|
(8)
|
8,333
options vested on 6/28/2008, but are not exercisable until
6/28/2009.
|
|
(9)
|
5,000
options will vest on each of 1/27/2009, 1/27/2010 and
1/27/2011.
|
|
(10)
|
These
stock appreciation rights vest with respect to 5,000 shares per year,
commencing 2/06/2008 through 2/06/2012, but none are exercisable until
2/06/2009.
|
|
(11)
|
These
stock appreciation rights vest with respect to 10,000 shares on 5/02/2010,
and 5,000 shares on each of 5/2/2011, 5/02/2012 and
5/02/2013.
|
|
(12)
|
3,000
shares will vest on each of 1/27/2009, 1/27/2010 and
1/27/2011.
|
|
(13)
|
10,000
options will vest on each of 1/03/2009 and
1/03/2010.
|
|
(14)
|
7,000
options will vest on each of 1/27/2009, 1/27/2010 and
1/27/2011.
|
|
(15)
|
These
stock appreciation rights vest with respect to 7,000 shares per year,
commencing on 2/06/2008 through 2/06/2012, but none are exercisable until
2/06/2009.
|
|
(16)
|
These
stock appreciation rights vest with respect to 14,000 shares on 5/02/2010
and 7,000 shares on each of 5/02/2011, 5/02/2012 and
5/02/2013.
|
|
(17)
|
8,000
shares will vest on each of 1/27/2009, 2/06/2010 and
5/02/2011.
|
|
(18)
|
These
stock appreciation rights vest with respect to 2,400 shares per year
commencing on 9/11/2009 through
9/11/2011.
|
|
(19)
|
These
stock appreciation rights vest with respect to 2,600 shares per year
commencing on 5/01/2008 through 5/01/2012, but none are exercisable until
5/01/2009.
|
|
(20)
|
These
stock appreciation rights vest with respect to 6,000 shares on 5/02/2010,
and 3,000 shares each on 5/02/2011, 5/02/2012 and
5/02/2013.
|
|
(21)
|
1,250
shares will vest on 9/11/2009, 1,250 shares on 5/02/2010 and 1,500 shares
on 5/02/2011.
|
|
(22)
|
These
stock appreciation rights vest with respect to 1,500 shares on each of
9/11/2009, 9/11/2010 and 9/11/2011.
|
|
(23)
|
These
stock appreciation rights vest with respect to 1,500 shares per year
commencing on 5/01/2008 through 5/01/2012, but none are exercisable until
5/01/2009.
|
|
(24)
|
These
stock appreciation rights vest with respect to 3,600 shares on 5/02/2010
and 1,800 shares on each of 5/02/2011, 5/02/2012 and
5/02/2013.
|
|
(25)
|
750
shares vest on 9/11/2009, 750 shares vest on 5/01/2010 and 900 shares vest
on 5/02/2011.
|
Option
Exercises and Stock Vested
The
following table sets forth information relating to the number of stock options
exercised and the stock awards that vested during the last fiscal year for each
of our named executive officers on an aggregate basis.
OPTION
EXERCISES AND STOCK VESTED FOR FISCAL 2008
|
Option
Awards
|
Stock
Awards
|
|||
|
Name
of
Executive
Officer
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
On
Exercise
($)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
|
Henry
W. Knueppel
|
220,000
|
4,690,900
|
5,000
|
173,600
|
|
David
A. Barta
|
0
|
0
|
2,500
|
86,800
|
|
Mark
J. Gliebe
|
0
|
0
|
0
|
0
|
|
Paul
J. Jones
|
0
|
0
|
0
|
0
|
|
Terry
R. Colvin
|
0
|
0
|
0
|
0
|
RETIREMENT
BENEFITS
The
following table sets forth the actuarial present value of each named executive
officer’s accumulated benefit under each defined benefit plan, assuming benefits
are paid at normal retirement age based on current levels of
compensation. The valuation method and all material assumptions
applied in quantifying the present value of the current accumulated benefit for
each of our named executive officers are included under the caption “Retirement
Plans” in Note 6 of
the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K
for the year ended December 27, 2008, and such information is incorporated
herein by reference. The table also shows the number of years of
credited service under each such plan, computed as of the same pension plan
measurement date used in our audited financial statements for the year ended
December 27, 2008. The table also reports any pension benefits paid
to each named executive officer during the year.
PENSION
BENEFITS FOR FISCAL 2008
|
Name
|
Plan
name
|
Number
of
Years
Credited
Service
(#)
|
Present
Value
of
Accumulated
Benefit
($)
|
Payments
During
Last
Fiscal
Year ($)
|
|
Henry
W. Knueppel
|
Regal
Beloit Target Supplemental
Retirement
Plan (non-qualified)
|
29
|
6,496,188
|
0
|
|
David
A. Barta
|
Regal
Beloit Target Supplemental
Retirement
Plan (non-qualified)
|
4
|
58,258
|
0
|
|
Mark
J. Gliebe
|
Regal
Beloit Target Supplemental
Retirement
Plan (non-qualified)
|
27
|
1,274,679
(1)
|
0
|
|
Paul
J. Jones
|
Regal
Beloit Target Supplemental
Retirement
Plan (non-qualified)
|
2
|
0
|
0
|
|
Terry
R. Colvin
|
Regal
Beloit Target Supplemental
Retirement
Plan (non-qualified)
|
2
|
0
|
0
|
|
(1)
|
In addition to the four years
that Mr. Gliebe has been employed by us, he has been credited under the
Regal Beloit Target Supplemental Retirement Plan with the 23 years for
which he had credit under his previous employer’s retirement
plan. When Mr. Gliebe’s benefits are paid under the Target
Supplemental Retirement Plan, we will deduct from the benefit owed to Mr.
Gliebe those amounts paid by his previous employer under the previous
employer’s retirement plan.
|
Target
Supplemental Retirement Plan
Messrs.
Knueppel, Barta, Gliebe, Jones and Colvin participate in the Supplemental
Plan. The Supplemental Plan limits participants to officers and other
key employees selected by the Committee. The purpose of the
Supplemental Plan is to provide replacement income for executives, which is
comparable, on a percentage basis, to the retirement income that other employees
are entitled to receive and to provide competitive retirement benefits as
compared to our peer group of companies. The Supplemental Plan does
this by supplementing retirement income which is lost to higher paid employees
due to Social Security caps and limits on income considered for our qualified
retirement plans. Under the Supplemental Plan, participants are
entitled, upon normal or approved early retirement, to receive a target
supplemental retirement benefit. This benefit ensures that a
participant receives an annual pension benefit that provides up to a maximum of
60% of compensation replacement by paying a benefit that is equal to two percent
of the participant’s average annual earnings, which is comprised of the
participant’s base salary and target bonuses, including bonuses pursuant to the
SVA plan, during the final five years of service with our company, multiplied by
the participant’s years of service with our company (up to a maximum of 30
years). The monthly pension benefit payable to a participant under
the Supplemental Plan is reduced by estimated monthly Social Security and 401(k)
plan benefits. For Mr. Gliebe, the monthly pension benefit payable
under the Supplemental Plan is also reduced by the amount payable to Mr. Gliebe
under his previous employer’s retirement plan. To receive benefits
under the Supplemental Plan, a participant needs a minimum of 15 years of
continuous service and to have reached the age of at least 58 to qualify for
retirement benefits. However, the Committee has discretion to grant
additional years of service and/or revise the retirement age requirement for a
participant to qualify for benefits, which discretion has never been
exercised.
Potential
Payments on a Termination or Change in Control
We have
no employment agreements with any of our named executive officers that provide
for any benefits prior to a change in control of our company. We have
entered into agreements and maintain plans that require us to provide certain
benefits to our named executive officers if we undergo a change in control and
if the employment of our named executive officers terminates or is adversely
affected under circumstances specified in the agreements and plans.
Termination
of Employment Prior to a Change in Control
Under our
equity incentive plans, if a named executive officer’s employment with us
terminates for any reason other than “cause,” all outstanding stock option and
stock appreciation right awards generally expire on approximately the thirtieth
day following the termination, and all unvested restricted stock awards are
forfeited, subject, under certain circumstances, to exceptions permitted by the
Committee. If a named executive officer’s employment is terminated
for cause, restricted stock awards that have not vested are generally forfeited
immediately, and each unexpired and uncancelled stock option or stock
appreciation right award, to the extent not previously exercised, terminates
immediately. “Cause” is defined under our equity incentive plans as
(i) the participant’s commission of any felony; (ii) the participant’s
fraud, dishonesty, theft, embezzlement, disclosure of trade secrets or
confidential information or (iii) other acts or omissions by the participant
that result in a breach of any fiduciary duty the participant owes to
us.
Change
in Control without Termination of Employment
Other
than the protections provided by our equity incentive plans, we do not maintain
any formal severance program for our named executive officers outside of the
context of a change in control of our company. In the context of a
change in control, however, our key executive employment and termination
agreements with each of our named executive officers as well as our equity
incentive plans require us to provide certain benefits to covered named
executive officers in the event of a change in control of our
company. The agreements also provide for enhanced benefits if the
employment of the covered named executive officers terminates in connection with
a change in control of our company. A change in control under our
agreements with our named executive officers and our equity incentive plans
means any of the following: (i) a person or entity acquires 20% or more of our
common stock, (ii) a change occurs in the composition of the board of directors
that is not approved by at least two-thirds of the existing directors, (iii) our
shareholders approve a merger, consolidation or share exchange other than one
that would result in less than a 50% change in ownership of us as the surviving
entity, or (iv) our shareholders approve a plan for our dissolution or
liquidation.
Under our
agreements with our named executive officers, upon a change in control, we are
required to cause all restrictions on any restricted stock awards made to the
named executive officer prior to the change in control to lapse and to fully and
immediately vest all stock options and SARs granted to the named executive
officer prior to the change in control. We are also required, after
the change in control, generally to maintain base salaries, fringe benefits, and
incentive compensation opportunities at a level equivalent to or higher than the
level at which we provided such benefits prior to the change in
control.
In
addition, in the event of a change in control, under our equity incentive plans,
any participant holding a stock option or SAR may exercise the option or SAR in
full, even if the option was not otherwise exercisable, and has the right to
receive, upon sixty days’ written notice to us after the change in control, cash
equal to the excess of the change in control price of the shares covered under
the surrendered option or SAR over the exercise or base price of the surrendered
options or SARs. On the date of the change in control, any unvested
restricted stock awards held by a participant vests in full and each participant
has the right, upon sixty days’ written notice to us, to receive, in exchange
for the surrender of the restricted stock awards, an amount of cash equal to the
change in control price of the restricted stock awards.
If the
change in control transaction would trigger the adjustment provisions of our
equity incentive plans, because, under the 2003 Plan, it is a recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of shares, or because,
under the 2007 Plan, it is a merger, specified subdivision, combination or
dividend of shares, a cash dividend meeting certain requirements, or other event
that, in the judgment of the Board or the Committee requires an adjustment to
prevent dilution or enlargement of the benefits under the 2007 Plan, the
Committee or the Board may make appropriate adjustments to prevent dilution or
enlargement of the benefits or potential benefits available under our equity
incentive plans. Under the adjustment provision, the Committee may
also determine a cash payment amount to be paid to the holder of any outstanding
award in exchange for cancellation of all or a part of the
award. However, under the 2003 Plan, if the event or transaction
creates a change in control, then any such payment must be the greatest amount
the participant could have received under the change in control provisions
described above and, if the Committee determines it is necessary, each share
subject to an award may be substituted by the number and kind of shares, other
securities, cash or other property to which holders of our common stock are or
will be entitled pursuant to the transaction.
Termination
of Employment Connected to a Change in Control
The
severance benefits provided under our agreements with our named executive
officers are triggered if, during the period starting six months before and
ending, in the case of Messrs. Knueppel, Barta and Gliebe, three years or, in
the case of Messrs. Jones and Colvin, two years, after a change in control of
our company, the executive’s employment is terminated. If the
executive’s employment is terminated for cause, or as a consequence of death or
disability, our obligations under the agreement are limited to the payment of
amounts already earned, plus a prorated portion of any bonus, including under
the SVA plan, assuming the performance goal for such bonus had been
attained. We may terminate the executive for “cause” under these
agreements if he (i) engages in intentional conduct not taken in good faith
that has caused us demonstrable and serious financial injury, (ii) is convicted
of a felony which substantially impairs the executive’s ability to perform his
duties, or (iii) willfully and unreasonably refuses to perform his duties or
responsibilities.
If the
executive’s employment is terminated other than for cause or as a result of
death or disability, or by the executive with good reason, our full obligations
under the agreement will be triggered. The executive may terminate
his employment with “good reason” under the agreements if
|
·
|
we
breach the terms of the agreement;
|
|
·
|
we
reduce the executive’s base salary, bonus opportunity or
benefits;
|
|
·
|
we
remove the executive from positions within our
company;
|
|
·
|
the
executive determines in good faith that there has been a material adverse
change in his working conditions or
status;
|
|
·
|
we
relocate the executive; or
|
|
·
|
we
require the executive to travel 20% more frequently than prior to the
change in control.
|
Under the
agreements, the executive will receive a termination payment that is equal to,
in the case of Messrs. Knueppel, Barta and Gliebe, three times or, in the case
of Messrs. Jones and Colvin, two times the sum of (1) the executive’s
annual base salary then in effect (2) the higher of (i) the
executive’s annual incentive target bonus for the fiscal year of the
termination, which includes payments under the SVA plan, or (ii) the annual
bonus received in the year prior to the change in control and (3) the value of
all fringe benefits. The agreements also contain a gross-up
provision, which provides for additional payments to the executives to
compensate them for any excise taxes on payments related to the change in
control that may be imposed on the executives under the Internal Revenue
Code. Additionally, the executive will receive outplacement services,
health and life insurance for up to, in the case of Messrs. Knueppel, Barta and
Gliebe, three years, or, in the case of Messrs. Jones and Colvin, two years, and
the reimbursement of certain accounting and legal fees related to calculating
the tax impact of these payments. We will also waive any minimum
years of service requirements with respect to supplemental retirement programs,
including the Target Supplemental Retirement Plan, and will make a payment equal
to the value of any additional retirement benefits the executive would receive
if he had remained employed for, in the case of Messrs. Knueppel, Barta and
Gliebe, three years, or in the case of Messrs. Jones and Colvin, two
years. The executive will also be credited with, in the case of
Messrs. Knueppel, Barta and Gliebe, three years’ or, in the case of Messrs.
Jones and Colvin, two years’ additional service under any post-retirement
welfare benefit plan that we maintain. Finally, we will pay any
performance awards granted under a long-term incentive plan at target as if all
performance requirements were met, but offset by any amount paid upon the change
in control under the same award. We do not currently maintain any
long-term cash incentive plan and no awards are outstanding to our named
executive officers under any such plan.
Tables
Summarizing Payments Upon Termination or Change in Control
The
following tables describe the potential payments upon termination and change in
control. These tables assume that the triggering event or events
occurred on December 27, 2008, the last business day of our fiscal year,
and the price per share of our common stock was $33.97, the closing market price
on the last trading day prior to that date.
The
following table sets forth certain information relating to the compensation of
Mr. Knueppel, our Chairman and Chief Executive Officer, upon a change in control
of our company and following a termination of Mr. Knueppel’s
employment. Mr. Knueppel is currently eligible for early
retirement. Accordingly, the table omits a termination relating to
normal retirement.
|
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
Voluntary Termination/Early
Retirement(1)
|
Involuntary
Not for Cause Termination(2)
|
For
Cause Termination
|
Change
in Control without Termination
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(3)
|
Death
or Disability
|
||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||||||
|
Current
Year SVA Bonus
|
$ | 762,034 | $ | 762,034 | $ | 762,034 | $ | 762,034 | ||||||||||||||||
|
Payment
of SVA from Prior Years
|
$ | 1,145,517 | $ | 1,145,517 | $ | 1,145,517 | $ | 1,145,517 | ||||||||||||||||
|
Termination
Payment
|
$ | 4,768,095 | ||||||||||||||||||||||
|
Target
Supplemental Plan(4)
|
$ | 6,496,188 | $ | 6,496,188 | $ | 6,496,188 | $ | 6,496,188 | $ | 6,496,188 | $ | 6,496,188 | ||||||||||||
|
Stock
Options
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Restricted
Stock
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 1,358,800 | $ | 1,358,800 | $ | 1,358,800 | ||||||||||||||||||
|
Stock
Appreciation Rights
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Benefits
and Perquisites:
|
||||||||||||||||||||||||
|
Cash
Payment Under Retirement Plans
|
$ | 746,653 | (5) | |||||||||||||||||||||
|
Post-termination
Health & Life Insurance
|
$ | 52,053 | ||||||||||||||||||||||
|
Life
Insurance Proceeds
|
$ | 400,000 | (6) | |||||||||||||||||||||
|
Disability
|
$ | 152,400 | (7) | |||||||||||||||||||||
|
Accrued
Vacation Pay
|
$ | 57,442 | $ | 57,442 | $ | 57,442 | $ | 57,442 | $ | 57,442 | $ | 57,442 | ||||||||||||
|
Accounting
and Legal Services
|
$ | 15,000 | ||||||||||||||||||||||
|
Outplacement
Services
|
$ | 75,400 | ||||||||||||||||||||||
|
280G
Tax Gross-up
|
$ | 2,617,514 | ||||||||||||||||||||||
|
Total:
|
$ | 8,461,181 | $ | 8,461,181 | $ | 6,553,630 | $ | 7,912,430 | $ | 18,094,696 | $ | 10,372,381 | (8) | |||||||||||
|
(1)
|
Assumes
an approved early retirement. Benefits upon a voluntary
termination that is not an approved early retirement would consist of a
target supplemental retirement benefit of $6,496,188 and accrued vacation
of $57,442.
|
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason not in connection with a change in control of
our company.
|
|
(3)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason in connection with a change in control of our
company.
|
|
(4)
|
Present
value of annuity commencing on retirement and paid monthly for 15
years.
|
|
(5)
|
Reflects
a cash payment that is equal to the value of additional retirement
benefits that the executive would have received if he remained employed
with us for an additional three
years.
|
|
(6)
|
Life
insurance death benefit payable only in event of
death.
|
|
(7)
|
Disability
benefit payable only in event of disability. The amount shown
reflects only the enhanced disability benefits that would be payable to
the executive over the course of a year compared with the disability
benefits to which non-executive officer salaried employees would receive
over the same period.
|
|
(8)
|
The
total amount shown is larger than the amount the executive would receive
on a termination of employment in the event of death or disability because
it includes both amounts that would be payable only on death and amounts
that would be payable only on
disability.
|
The
following table sets forth certain information relating to the compensation of
Mr. Barta, our Vice President and Chief Financial Officer, upon a change in
control of our company and following a termination of Mr. Barta’s
employment. Mr. Barta is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
|
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
Voluntary
Termination
|
Involuntary
Not for Cause Termination(1)
|
For
Cause Termination
|
Change
in Control without Termination
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
Death
or Disability
|
||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||||||
|
Current
Year SVA Bonus
|
$ | 179,391 | $ | 179,391 | $ | 179,391 | ||||||||||||||||||
|
Payment
of SVA from Prior Years
|
$ | 308,892 | $ | 308,892 | $ | 308,892 | ||||||||||||||||||
|
Termination
Payment
|
$ | 1,670,055 | ||||||||||||||||||||||
|
Target
Supplemental Plan(3)
|
$ | 123,369 | ||||||||||||||||||||||
|
Stock
Options
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 101,000 | $ | 101,000 | $ | 101,000 | ||||||||||||||||||
|
Restricted
Stock
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 305,730 | $ | 305,730 | $ | 305,730 | ||||||||||||||||||
|
Stock
Appreciation Rights
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Benefits
and Perquisites:
|
||||||||||||||||||||||||
|
Cash
Payment Under Retirement Plans
|
$ | 300,529 | ||||||||||||||||||||||
|
Post-termination
Health & Life Insurance
|
$ | 53,718 | (4) | |||||||||||||||||||||
|
Life
Insurance Proceeds
|
$ | 150,000 | (5) | |||||||||||||||||||||
|
Accrued
Vacation Pay
|
$ | 26,923 | $ | 26,923 | $ | 26,923 | $ | 26,923 | $ | 26,923 | $ | 26,923 | ||||||||||||
|
Accounting
and Legal Services
|
$ | 15,000 | ||||||||||||||||||||||
|
Outplacement
Services
|
$ | 35,500 | ||||||||||||||||||||||
|
280G
Tax Gross-up
|
$ | 827,990 | ||||||||||||||||||||||
|
Total:
|
$ | 26,923 | $ | 515,206 | $ | 26,923 | $ | 433,653 | $ | 3,948,097 | $ | 1,071,936 | ||||||||||||
|
(1)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason not in connection with a change in control of
our company.
|
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason in connection with a change in control of our
company.
|
|
(3)
|
Present
value of annuity commencing on retirement and paid monthly for 15
years.
|
|
(4)
|
Reflects
a cash payment that is equal to the value of additional retirement
benefits that the executive would have received if he remained employed
with us for an additional three
years.
|
|
(5)
|
Life
insurance death benefit payable only in event of
death.
|
The
following table sets forth certain information relating to the compensation of
Mr. Gliebe, our President and Chief Operating Officer, upon a change in control
of our company and following a termination of Mr. Gliebe’s
employment. Mr. Gliebe is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
|
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
Voluntary
Termination
|
Involuntary
Not for Cause Termination(1)
|
For
Cause Termination
|
Change
in Control without Termination
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
Death
or Disability
|
||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||||||
|
Current
Year SVA Bonus
|
$ | 289,856 | $ | 289,856 | $ | 289,856 | ||||||||||||||||||
|
Payment
of SVA from Prior Years
|
$ | 503,427 | $ | 503,427 | $ | 503,427 | ||||||||||||||||||
|
Termination
Payment
|
$ | 2,401,959 | ||||||||||||||||||||||
|
Target
Supplemental Plan
|
$ | 2,669,252 | (3) | |||||||||||||||||||||
|
Stock
Options
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 99,400 | $ | 99,400 | $ | 99,400 | ||||||||||||||||||
|
Restricted
Stock
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 815,280 | $ | 815,280 | $ | 815,280 | ||||||||||||||||||
|
Stock
Appreciation Rights
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Benefits
and Perquisites:
|
||||||||||||||||||||||||
|
Cash
Payment Under Retirement Plans
|
$ | 475,803 | (4) | |||||||||||||||||||||
|
Post-termination
Health & Life Insurance
|
$ | 54,384 | ||||||||||||||||||||||
|
Life
Insurance Proceeds
|
$ | 250,000 | (5) | |||||||||||||||||||||
|
Accrued
Vacation Pay
|
$ | 36,327 | $ | 36,327 | $ | 36,327 | $ | 36,327 | $ | 36,327 | $ | 36,327 | ||||||||||||
|
Accounting
and Legal Services
|
$ | 15,000 | ||||||||||||||||||||||
|
Outplacement
Services
|
$ | 47,800 | ||||||||||||||||||||||
|
280G
Tax Gross-up
|
$ | 2,517,241 | ||||||||||||||||||||||
|
Total:
|
$ | 36,327 | $ | 829,610 | $ | 36,327 | $ | 951,007 | $ | 9,925,729 | $ | 1,994,290 | ||||||||||||
|
(1)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason not in connection with a change in control of
our company.
|
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason in connection with a change in control of our
company.
|
|
(3)
|
Present
value of annuity commencing on retirement and paid monthly for 15
years.
|
|
(4)
|
Reflects
a cash payment that is equal to the value of additional retirement
benefits that the executive would have received if he remained employed
with us for an additional three
years.
|
|
(5)
|
Life
insurance death benefit payable only in event of
death.
|
The
following table sets forth certain information relating to the compensation of
Mr. Jones, our Vice President, General Counsel and Secretary, upon a change in
control of our company and following a termination of Mr. Jones’s
employment. Mr. Jones is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
|
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
Voluntary
Termination
|
Involuntary
Not for Cause Termination(1)
|
For
Cause Termination
|
Change
in Control without Termination
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
Death
or Disability
|
||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||||||
|
Current
Year SVA Bonus
|
$ | 132,801 | $ | 132,801 | $ | 132,801 | ||||||||||||||||||
|
Payment
of SVA from Prior Years
|
$ | 145,496 | $ | 145,496 | $ | 145,496 | ||||||||||||||||||
|
Termination
Payment
|
$ | 879,638 | ||||||||||||||||||||||
|
Target
Supplemental Plan(3)
|
||||||||||||||||||||||||
|
Stock
Options
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Restricted
Stock
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 135,881 | $ | 135,881 | $ | 135,881 | ||||||||||||||||||
|
Stock
Appreciation Rights
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Benefits
and Perquisites:
|
||||||||||||||||||||||||
|
Cash
Payment Under Retirement Plans
|
$ | 127,963 | (4) | |||||||||||||||||||||
|
Post-termination
Health & Life Insurance
|
$ | 35,590 | ||||||||||||||||||||||
|
Life
Insurance Proceeds
|
$ | 100,000 | (5) | |||||||||||||||||||||
|
Accrued
Vacation Pay
|
$ | 22,135 | $ | 22,135 | $ | 22,135 | $ | 22,135 | $ | 22,135 | $ | 22,135 | ||||||||||||
|
Accounting
and Legal Services
|
$ | 15,000 | ||||||||||||||||||||||
|
Outplacement
Services
|
$ | 29,200 | ||||||||||||||||||||||
|
280G
Tax Gross-up
|
$ | 429,680 | ||||||||||||||||||||||
|
Total:
|
$ | 22,135 | $ | 300,432 | $ | 22,135 | $ | 158,016 | $ | 1,953,384 | $ | 536,313 | ||||||||||||
|
(1)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason not in connection with a change in control of
our company.
|
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason in connection with a change in control of our
company.
|
|
(3)
|
No
benefit based on years of service.
|
|
(4)
|
Reflects
a cash payment that is equal to the value of additional retirement
benefits that the executive would have received if he remained employed
with us for an additional two
years.
|
|
(5)
|
Life
insurance death benefit payable only in event of
death.
|
The
following table sets forth certain information relating to the compensation of
Mr. Colvin, our Vice President, Corporate Human Resources, upon a change in
control of our company and following a termination of Mr. Colvin’s
employment. Mr. Colvin is not currently eligible for either early
retirement or normal retirement. Accordingly, the table omits
terminations under those circumstances.
|
Executive
Benefits
and
Payments
Upon
Change in Control or Termination
|
Voluntary
Termination
|
Involuntary
Not for Cause Termination(1)
|
For
Cause Termination
|
Change
in Control without Termination
|
Involuntary
or
Good
Reason Termination /
Change
in Control
(2)
|
Death
or Disability
|
||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||||||
|
Current
Year SVA Bonus
|
$ | 94,193 | $ | 94,193 | $ | 94,193 | ||||||||||||||||||
|
Payment
of SVA from Prior Years
|
$ | 102,361 | $ | 102,361 | $ | 102,361 | ||||||||||||||||||
|
Termination
Payment
|
$ | 681,476 | ||||||||||||||||||||||
|
Target
Supplemental Plan(3)
|
||||||||||||||||||||||||
|
Stock
Options
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Restricted
Stock
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
$ | 81,529 | $ | 81,529 | $ | 81,529 | ||||||||||||||||||
|
Stock
Appreciation Rights
|
||||||||||||||||||||||||
|
Unvested and
Accelerated
|
||||||||||||||||||||||||
|
Benefits
and Perquisites:
|
||||||||||||||||||||||||
|
Cash
Payment Under Retirement Plans
|
||||||||||||||||||||||||
|
Post-termination
Health & Life Insurance
|
$ | 35,590 | ||||||||||||||||||||||
|
Life
Insurance Proceeds
|
$ | 100,000 | (4) | |||||||||||||||||||||
|
Accrued
Vacation Pay
|
$ | 17,673 | $ | 17,673 | $ | 17,673 | $ | 17,673 | $ | 17,673 | $ | 17,673 | ||||||||||||
|
Accounting
and Legal Services
|
$ | 15,000 | ||||||||||||||||||||||
|
Outplacement
Services
|
$ | 23,300 | ||||||||||||||||||||||
|
280G
Tax Gross-up
|
$ | 258,858 | ||||||||||||||||||||||
|
Total:
|
$ | 17,673 | $ | 214,227 | $ | 17,673 | 99,202 | $ | 1,309,980 | $ | 395,756 | |||||||||||||
|
(1)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason not in connection with a change in control of
our company.
|
|
(2)
|
Assumes
the executive’s employment is terminated by us without cause or by the
executive with good reason in connection with a change in control of our
company.
|
|
(3)
|
No
benefit based on years of service.
|
|
(4)
|
Life
insurance death benefit payable only in event of
death.
|
We set
forth below a description of the assumptions that we used in creating the tables
above. Unless otherwise noted, the descriptions of the payments below
are applicable to all of the above tables relating to potential payments upon
termination.
Current
Year SVA Bonus
In the
event of a termination of the executive upon retirement, death, disability or in
connection with or upon a change in control of our company, the executive is
entitled to receive a prorated portion of the target award for the current year
SVA. In the event of a voluntary termination, the executive is not
entitled to a portion of the target award for the current year SVA.
Prior Year SVA Bonus Subject to Installment
Payments
In the
event of an involuntary termination not for cause or a termination of the
executive upon retirement, death, disability or following a change in control,
the executive is entitled to receive the balance of the SVA awards from prior
years that have not been paid. Such amounts will be paid as soon as
practical following the termination. In the event of a voluntary termination,
the executive is not entitled to any deferred SVA awards from previous
years.
Stock Options, Restricted Stock, Restricted Stock Units and
Stock Appreciation Rights
Under our
equity incentive plans, in the event of a termination for death, disability or
retirement, other than in connection with a change in control, our Board
generally has discretion to fully vest any unvested awards. The
tables assume the Board exercises such discretion and fully vests the stock
options, SARs, restricted stock and restricted stock units. All
unvested stock options, SARs, restricted stock and restricted stock units vest
upon a change in control.
Life Insurance Proceeds
Life
insurance proceeds are the death benefits on company paid life
insurance. No life insurance payments will be made in connection with
a termination for disability.
The
following items apply only to a termination in the context of a change in
control for Messrs. Knueppel, Barta, Gliebe, Jones and Colvin. We
assume the termination is without cause or by the executive with good
reason. Further, we assume that the change in control and the
executive’s termination of employment both occurred on December 27, 2008, the
last business day of our fiscal year.
Target Supplemental Retirement Plan
In the
event of a termination related to a change in control, we will waive the years
of service requirement under the Target Supplemental Retirement
Plan. Amounts reported in the table reflect the present value of the
accumulated benefit, using a six and ninety five hundredths percent (6.95%)
discount rate.
Equity Acceleration
The
executive will be entitled to the vesting of all of the executive’s then
unvested stock options, SARs, restricted stock and restricted stock units upon a
change in control.
Cash
Payment Under Retirement Plans
The
amounts relating to the cash payments under our retirement plans in the tables
above reflect the cash payment that is equal to the value of additional
retirement benefits that each executive would have received if he remained
employed with our company for an additional three years, in the case of Messrs.
Knueppel , Barta and Gliebe, or two years, in the case of Messrs. Jones and
Colvin.
Post-Retirement Health Care Benefits
The
executive will be covered under our health and life insurance for, in the case
of Messrs. Knueppel, Barta and Gliebe, three years or, in the case of Messrs.
Jones and Colvin, two years unless the executive obtains equal or greater
benefits from another employer. We have assumed the executive will
not obtain benefits from another employer.
Accounting and Legal Services
We are
obligated to reimburse the executive for up to $15,000 for accounting and legal
services related to the calculation of the tax gross-up amount described
below. The tables assume the entire amount is reimbursed to the
executive.
Outplacement
The
executive will be entitled to receive outplacement services up to the amount
that is equal to ten percent (10%) of the executive’s base
salary. The tables assume the executive will use the full amount of
this benefit.
Section 280G Tax Gross-up
Upon a
change in control of our company the executive may be subject to certain excise
taxes pursuant to Section 280G of the Internal Revenue Code. We have
agreed to reimburse the executive for all excise taxes that are imposed on the
executive under Section 280G and any income and excise taxes that are payable by
the executive as a result of any reimbursements for Section 280G excise
taxes. The total Section 280G tax gross-up amount in the above tables
assumes that the executive is entitled to a full reimbursement by us of (i) any
excise taxes that are imposed upon the executive as a result of the change in
control, (ii) any income and excise taxes imposed upon the executive as a result
of our reimbursement of the excise tax amount and (iii) any additional income
and excise taxes that are imposed upon the executive as a result of our
reimbursement of the executive for any excise or income taxes. The
calculation of the Section 280G gross-up amount in the above tables is based
upon a Section 280G excise tax rate of 20%, a 35% federal income tax rate, a
1.45% Medicare tax rate and a 6.75% state income tax rate. For
purposes of the Section 280G calculation it is assumed that no amounts will be
discounted as attributable to reasonable compensation and no value will be
attributed to any non-competition agreement. The payment of the
Section 280G tax gross-up will be payable to the executive for any excise tax
incurred unless the executive is terminated for cause, death, disability or
pursuant to a voluntary termination without good reason. The
calculation of this gross-up assumes we can prove, by clear and convincing
evidence, that we did not make the equity-based awards in 2007 in connection
with or contemplation of a change in control of our company.
Non-Competition
As a
condition to each executive’s entitlement to receive the severance payments and
other benefits described above, the executive is required to execute a waiver of
claims and be bound by the terms of a non-competition agreement which prohibits
the executive from working in a business that engages in substantial competition
with us, for a period of one year from the executive’s termination of
employment. Our Board may waive this provision.
DIRECTOR COMPENSATION
The
following table sets forth certain information relating to the compensation of
the directors for the last fiscal year other than Messrs. Knueppel and Gliebe
who received no additional compensation for their service as
directors.
DIRECTOR
COMPENSATION FOR FISCAL 2008
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Option
Awards
($)(1)
|
Total
($)
|
|||||||||
|
Christopher
L. Doerr
(Chair,
Compensation and Human Resources Committee)
|
$ | 57,500 | $ | 8,573 | $ | 66,073 | ||||||
|
Thomas
J. Fischer
(Chair,
Audit Committee)
|
$ | 58,500 | $ | 8,573 | $ | 67,073 | ||||||
|
Dean
A. Foate
(Presiding
Director)
|
$ | 61,500 | $ | 33,584 | $ | 95,084 | ||||||
|
G.
Frederick Kasten, Jr.
|
$ | 57,000 | $ | 8,573 | $ | 65,573 | ||||||
|
Curtis
W. Stoelting
|
$ | 57,500 | $ | 16,002 | $ | 73,502 | ||||||
|
Carol
N. Skornicka
(Chair,
Corporate Governance and Director Affairs Committee)
|
$ | 59,000 | $ | 22,682 | $ | 81,682 | ||||||
|
Rakesh
Sachdev
|
$ | 53,250 | $ | 33,780 | $ | 87,030 | ||||||
__________________
|
(1)
|
These
amounts reflect the dollar value of the compensation cost of all
outstanding stock awards recognized for fiscal 2008, computed in
accordance with FAS 123R. As of December 31, 2008, the
outstanding number of option awards for Messrs. Doerr, Fischer, Foate,
Kasten, Stoelting and Sachdev and Ms. Skornicka were 23,000, 20,000,
14,000, 25,000, 13,000, 7,000 and 10,000, respectively. No
directors have received any stock
awards.
|
Our
compensation policies for directors are designed to attract and retain the most
qualified individuals to serve on the Board in the industry in which we
operate. The equity portion of director compensation is designed to
align directors’ interests with shareholders’ interests. The non-employee
directors are paid the following fees:
|
·
|
Annual
retainer fee of $40,000 for each
director.
|
|
·
|
Annual
retainer fee of $8,000 for the chair of the audit committee, and an annual
retainer fee of $4,000 for each of the other members of the audit
committee.
|
|
·
|
Annual
retainer fee of $7,000 for the chairs of other committees, and an annual
retainer fee of $3,000 for each of the other members of the other
committees.
|
|
·
|
Annual
retainer fee of $8,000 for the presiding
director.
|
|
·
|
Each
director receives a fee of $1,500 per day, plus expenses, for each Board
meeting attended in person or $750 per day if attended
telephonically.
|
|
·
|
Directors
do not receive an additional fee, other than reimbursement for expenses,
for committee meetings attended in person or
telephonically.
|
Under our
2003 Equity Incentive Plan, each individual non-employee director serving on the
Board on April 22, 2004, the date of our 2004 annual shareholders meeting, was
granted non-qualified stock options to purchase 20,000 shares of common stock at
$20.30 per share, which was the closing price of our common stock on that
date. Four thousand of the shares subject to these stock options were
immediately exercisable, with 4,000 shares becoming exercisable on the date of
our annual shareholders meeting in each of the four years following our 2004
annual shareholders meeting, as long as the non-employee director remains in
office.
For any
non-employee director initially elected or appointed subsequent to our 2004
annual shareholders meeting, the director was granted a non-qualified stock
option to purchase that number of shares of common stock equal to the
pro rata balance of 20,000 shares of common stock for the remainder of the
five-year period described above measured from the date of election or
appointment. The exercise price per share for these stock options is
the closing stock price of our common stock on the date of non-employee
director’s election or appointment.
Unexercised
options granted to non-employee directors terminate on the earlier of ten years
after the date of grant or ninety days after the non-employee director ceases to
be a member of our Board, unless the director is removed for cause, in which
case they terminate immediately.
REPORT OF THE COMPENSATION COMMITTEE
The
Compensation and Human Resources Committee has reviewed and discussed the
Compensation Discussion and Analysis set forth in this proxy statement with
management. Based on the foregoing review and discussions, the
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis section be included in this proxy statement and incorporated by
reference into our Annual Report on Form 10-K for the year ended December 27,
2008.
This
report of the Compensation and Human Resources Committee has been presented by
the following named directors currently comprising the Committee:
Christopher L. Doerr (Chairperson), Dean A Foate, G. Frederick Kasten, Jr.
and Curtis W. Stoelting.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
current members of the Compensation and Human Resources Committee of the Board
of Directors are Christopher L. Doerr (Chairperson), Dean A. Foate, G. Frederick
Kasten, Jr. and Curtis W. Stoelting. There are no interlocks among
the Committee members and the Company.
REPORT OF THE AUDIT COMMITTEE
The Audit
Committee of the Board is currently comprised of three directors, each of whom
is independent as defined in the NYSE’s listing standards and SEC
rules. The Audit Committee operates under a written charter adopted
by the Board.
The
Company’s management is responsible for the Company’s internal controls and the
financial reporting process, including the system of internal
controls. The Company’s independent auditors are responsible for
expressing an opinion on the conformity of the Company’s audited consolidated
financial statements with accounting principles generally accepted in the United
States. The Audit Committee’s responsibility is to monitor and
oversee this process.
The Audit
Committee has reviewed and discussed the audited consolidated financial
statements of the Company with management and Deloitte & Touche LLP, the
Company’s independent auditors. The Audit Committee has discussed
with Deloitte & Touche LLP matters required to be discussed by Statement on
Auditing Standards No. 114, “The Auditor’s Communication with Those
Charged with Governance.”
The Audit
Committee has received from Deloitte & Touche LLP the written disclosures
and the letter required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent auditors’ communications
with the audit committee concerning independence, and has discussed with the
independent auditors the independent auditors’ independence. The
Audit Committee considered whether Deloitte & Touche LLP’s provision of
non-audit services is compatible with maintaining Deloitte & Touche LLP’s
independence.
The Audit
Committee discussed with the Company’s internal and independent auditors the
overall scopes and plans for their respective audits. The Audit
Committee meets with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, the evaluation
of the Company’s internal controls and overall quality of the Company’s
financial reporting.
Based on
the Audit Committee’s reviews and discussions with management, the internal
auditors and the independent auditors referred to above, the Audit Committee
recommended to the Board that the audited consolidated financial statements be
included in the Company’s Annual Report on Form 10-K for the year ended
December 27, 2008 for filing with the SEC.
REGAL
BELOIT CORPORATION AUDIT COMMITTEE
Thomas J.
Fischer (Chairperson)
Rakesh
Sachdev
Curtis W.
Stoelting
PROPOSAL 2: RATIFICATION OF DELOITTE &
TOUCHE LLP
AS
THE COMPANY’S INDEPENDENT AUDITORS FOR 2009
Deloitte
& Touche LLP has served as our independent auditors since
2002. The Audit Committee has selected Deloitte & Touche LLP as
our independent auditors for 2009, and this selection is being presented to
shareholders for ratification. The Board recommends to the
shareholders the ratification of the selection of Deloitte & Touche LLP to
audit the financial statements of our company and our subsidiaries for
2009. Unless otherwise specified, the proxies solicited hereby will
be voted in favor of the ratification of Deloitte & Touche LLP as our
independent auditors for 2009.
If, prior
to the Annual Meeting, Deloitte & Touche LLP declines to act or its
engagement is otherwise discontinued by the Audit Committee, the Audit Committee
will appoint another independent auditor whose engagement for any period
subsequent to the Annual Meeting will be subject to ratification by the
shareholders at the Annual Meeting. If the shareholders fail to
ratify the appointment of Deloitte & Touche LLP, then the Audit Committee
will consider it a direction to select another independent auditor for
2009. Even if the selection is ratified, the Audit Committee, in its
discretion, may select a new independent auditor at any time during the year if
it believes that such a change would be in the best interests of our company and
our shareholders. Representatives of Deloitte & Touche LLP are expected to
be present at the Annual Meeting to answer appropriate questions and, if they so
desire, to make a statement.
Independent
Auditor Fees
During
the fiscal years ended December 27, 2008 and December 29, 2007, we retained and
paid Deloitte & Touche LLP to provide audit and/or other
services. The fees paid to Deloitte & Touche LLP for the years
ended December 27, 2008 and December 29, 2007 were as follows:
Audit Fees. Fees
for audit services totaled $2,100,700 in 2008 and $1,387,500 in
2007. Audit fees included fees and expenses associated with the
annual audit, assessment of internal control over financial reporting, the
reviews of our quarterly reports on Form 10-Q, and statutory audits required
internationally.
Audit-Related
Fees. Fees for audit-related services totaled $160,500 in 2008
and $259,800 in 2007. Audit-related fees included fees for services
in connection with employee benefit audits.
Tax Fees. Fees for
tax services totaled $574,200 in 2008 and $230,762 in 2007. Tax fees
included fees for tax return preparation and reviews, tax consultations and tax
advice and planning.
All Other
Fees. There were no such fees paid to Deloitte &
Touche LLP in either 2008 or 2007.
The Audit
Committee pre-approves all audit and permissible non-audit services provided by
the independent registered public accounting firm on a case-by-case
basis. The Audit Committee approved 100% of the services described
under the general categories of Audit-Related Fees and Tax Fees in 2008. The Audit
Committee does not consider the provision of these non-audit services by the
independent registered public accounting firm to be incompatible with
maintaining auditor independence.
THE
BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF THE SELECTION OF DELOITTE &
TOUCHE LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR 2009.
OTHER MATTERS
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers and directors
to file reports of ownership and changes of ownership with the
SEC. The regulations of the SEC require the officers and directors to
furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished
to us, or written representations that no Form 5 was required to be filed, we
believe that, during the fiscal year ended December 27, 2008, all of our
directors and executive officers timely complied with the Section 16(a) filing
requirements, with the exception of late Form 4s filed by or on behalf of
Messrs. Jones and Colvin to reflect the receipt of a new equity grant under the
Company’s long-term incentive compensation program.
Delivery
of Proxy Materials to Households
Pursuant
to the rules of the SEC, services that deliver our communications to
shareholders that hold their stock through a bank, broker or other holder of
record may deliver to multiple shareholders sharing the same address a single
copy of our annual report to shareholders and this proxy
statement. Upon oral or written request, we will promptly deliver a
separate copy of the annual report to shareholders and/or proxy statement to any
shareholder at a shared address to which a single copy of each document was
delivered. Shareholders sharing an address may also request delivery
of a single copy of the annual report or proxy statement if they are currently
receiving multiple copies of such documents. Shareholders may notify the Company
of their requests by calling or writing to Paul J. Jones, Vice President,
General Counsel and Secretary, Regal Beloit Corporation, 200 State Street,
Beloit, Wisconsin 53511, telephone number: (608) 364-8800.
SHAREHOLDER PROPOSALS
Proposals
of shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934
(“Rule 14a-8”) that are intended to be presented at the 2009 annual meeting of
shareholders must be received by us no later than November 27, 2009 to be
included in our proxy materials for that meeting.
Further,
a shareholder who otherwise intends to present business at the 2010 annual
meeting otherwise than pursuant to Rule 14a-8 (i.e., a proposal a
shareholder intends to present at the 2010 annual meeting, but does not intend
to have included in our proxy materials) must comply with the requirements set
forth in the Company’s Bylaws. Among other things, to bring business before the
2010 annual meeting, a shareholder must give written notice thereof, complying
with the Bylaws, to the Secretary of the Company not less than 45 days and
not more than 70 days prior to the first anniversary of the date that this
proxy statement was first mailed to shareholders. This proxy statement was first
mailed to shareholders on March 27, 2009. Under the Bylaws, if we do not receive
notice of a shareholder proposal submitted (otherwise than pursuant to
Rule 14a-8) on or prior to February 10, 2010, then the notice will be
considered untimely and we will not be required to present such proposal at the
2010 annual meeting. If the Board nonetheless chooses to present such
proposal at the 2010 annual meeting, then the persons named in proxies solicited
by the Board for the 2010 annual meeting may exercise discretionary voting power
with respect to such proposal.
|
By Order of the Board of Directors
REGAL BELOIT CORPORATION
|
|||
|
|
|
||
| Paul J. Jones | |||
| Vice President, General Counsel and Secretary | |||
|
|
We
will furnish to any shareholder, without charge, a copy of our Annual
Report on Form 10-K for 2008. You may obtain a copy of the Form
10-K by writing to Paul J. Jones, Vice President, General Counsel and
Secretary, Regal Beloit Corporation, 200 State Street, Beloit, Wisconsin
53511 or on the Company’s website at www.regalbeloit.com.
|
Appendix A
REGAL
BELOIT CORPORATION
CRITERIA
FOR DETERMINING DIRECTOR INDEPENDENCE
The Board of Directors has established
categorical standards to assist it in making determinations of director
independence. Under these categorical standards, the following
relationships that currently exist or that have existed, including during the
preceding three years, will not be considered to be material relationships that
would impair a director’s independence:
|
1.
|
An
immediate family member of the director is an employee (other than an
executive officer) of the Company;
|
|
2.
|
A
director, or a family member of the director, receives or received less
than $100,000 during any twelve-month period in direct compensation from
the Company, other than director and committee fees and pension or other
forms of deferred compensation for prior service (provided that such
compensation is not contingent in any way on continued service with the
Company); provided, however, that
compensation received by a director for former service as an interim
Chairman or Chief Executive Officer or other executive officer of the
Company need not be considered in determining independence under this
test; and provided, further, that compensation received by an immediate
family member of the director for service as an employee of the Company
(other than an executive officer) need not be considered in determining
independence under this test;
|
|
3.
|
(A)
A director, or a family member of the director, is a former partner or
employee of the Company’s internal or external auditor but did not
personally work on the Company’s audit within the last three years; or (B)
a family member of a director is employed by an internal or external
auditor of the Company but does not participate in such auditor’s audit,
assurance or tax compliance
practice;
|
|
4.
|
A
director, or a family member of the director, is or was an employee, other
than an executive officer, of another company where any of the Company’s
present executives serve on that company’s compensation
committee;
|
|
5.
|
A
director is or was an executive officer, employee or director of, or has
or had any other relationship (including through a family member) with,
another company, that makes payments (other than contributions to tax
exempt organizations) to, or receives payments from, the Company for
property or services in an amount which, in any single fiscal year, does
not exceed the greater of $1 million or 2% of such other company’s
consolidated gross revenues; provided, however, that
in applying this test, both the payments and the consolidated gross
revenues to be measured shall be those reported in the last completed
fiscal year; and provided, further, that this test applies solely to the
financial relationship between the Company and the director’s (or
immediate family member’s) current employer — the Company need not
consider former employment of the director or immediate family
member;
|
|
6.
|
A
family member of the director, other than his or her spouse, is an
employee of a company that has a relationship with the Company, but the
family member is not an executive officer of that
company;
|
|
7.
|
A
family member of the director has a relationship with the Company, but the
family member is not an immediate family member of the
director;
|
|
8.
|
The
director, or an immediate family member of the director, was an executive
officer of another company that was indebted to the Company, or to which
the Company was indebted, but the total amount of either company’s
indebtedness to the other was less than 2% of the total consolidated
assets of the company for which the director, or an immediate family
member of the director, served as an executive
officer;
|
|
9.
|
A
director is or was an executive officer, employee or director of, or has
or had any other relationship (including through a family member) with, a
tax exempt organization to which the Company’s and its foundation’s
contributions in any single fiscal year do not exceed the greater of $1
million or 2% of such organization’s consolidated gross revenues;
or
|
|
10.
|
A
director is a shareholder of the
Company.
|
For
purposes of the foregoing, an “immediate family member” shall be deemed to
include a person’s spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than domestic employees) who shares such person’s home; provided, however, that when
applying the three-year “look-back” provisions of the foregoing tests, the
Company need not consider individuals who are no longer immediate family members
as a result of legal separation or divorce, or those who have died or become
incapacitated.
For
relationships not covered by the categorical standards set forth above, the
determination of whether the relationship is material or not, and therefore
whether the director would be independent or not, shall be made by the directors
who satisfy the categorical standards set forth above. The Company must identify
which directors are independent and disclose the basis for that determination in
the next proxy statement.
In
addition, the Company shall disclose in its annual proxy statement any
contributions made by the Company to any tax exempt organization in which any
independent director serves as executive officer if, within the preceding three
years, contributions in any single year from the Company exceeded the greater of
$1 million or 2% of such charitable organization’s consolidated gross
revenues.
REGAL BELOIT
CORPORATION
Dear
Shareholder:
You are cordially
invited to attend the Regal Beloit Corporation Annual Meeting of Shareholders to
be held at 9:00 A.M. Central Daylight Time on Monday, April 27, 2009, at the
Company’s
headquarters, 200 State Street, Beloit,
WI 53511. The accompanying Notice of Annual Meeting
and Proxy Statement contain detailed information as to the formal business to be
transacted at the meeting.
Whether or not you
plan to attend the meeting, it is important that these shares be
voted. Accordingly, please complete, sign and date the proxy card
attached below and return it in the enclosed postage-paid
envelope. In the alternative, you have the option to vote these
shares by the Internet or telephone as indicated on the reverse side or by
attending the meeting and voting in person.
Sincerely,
REGAL BELOIT
CORPORATION
Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting:
The
Notice and Proxy Statement and Annual Report are available at www.proxydocs.rbc.
REGBE2
|
PROXY
REGAL
BELOIT CORPORATION
PROXY
FOR ANNUAL MEETING OF SHAREHOLDERS ON APRIL 27, 2009
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Henry W. Knueppel and Paul J. Jones or either
of them as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the
reverse side, all shares of common stock of REGAL BELOIT CORPORATION (the
“Company”) held of record by the undersigned as of the close of business
on March 4, 2009 at the Annual Meeting of Shareholders to be held on April
27, 2009, at 9:00 A.M. Central Daylight Time, at the Company’s
headquarters, 200 State Street, Beloit, WI 53511, or any adjournment or
postponement thereof.
This Proxy,
when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL DIRECTOR NOMINEES
LISTED IN ITEM 1 AND “FOR” THE PROPOSAL IN ITEM 2. THE PROXIES ARE
AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT
THEREOF.
Please mark,
sign, date and return this card promptly using the enclosed
envelope.
|
|||||||||
|
Address
Change/Comments:
|
|||||||||
|
(If you noted
any address change/comments above, please mark corresponding box on
reverse side.)
|
|||||||||
|
SEE
REVERSE
SIDE
|
SEE
REVERSE
SIDE
|
||||||||
|
Continued
and to be signed on Reverse Side
|
|||||||||
|
VOTE BY INTERNET - www.proxyvote.com
|
|||
|
REGAL
BELOIT CORPORATION
200 STATE STREET
BELOIT, WI 53511
|
Use the Internet to transmit
your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the meeting date. Have
your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
|
||
| VOTE BY PHONE - 1-800-690-6903 | |||
|
Use any touch-tone telephone to
transmit your voting instructions up until 11:59 P.M. Eastern Time the day
before the meeting date. Have your proxy card in hand when you call
and then follow the instructions.
|
|||
| VOTE BY MAIL | |||
|
Mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return
it to Regal Beloit, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS
FOLLOWS:
REGBE1
KEEP THIS PORTION FOR
YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED.
|
REGAL
BELOIT CORPORATION
|
||||||||||||||||
|
The
Board of Directors recommends a vote FOR all director nominees listed
below and FOR Proposal 2.
|
||||||||||||||||
|
Election
of Directors
|
For
|
Against
|
Abstain
|
|||||||||||||
|
1.
|
The election
of: (for terms expiring in 2012)
|
|||||||||||||||
|
1a.
|
G. Frederick
Kasten, Jr.
|
□
|
□
|
□
|
||||||||||||
|
1b.
|
Henry W.
Knueppel
|
□
|
□
|
□
|
||||||||||||
|
1c.
|
Dean A.
Foate
|
□
|
□
|
□
|
||||||||||||
|
Vote
On Other Proposal
|
For
|
Against
|
Abstain
|
|||||||||||||
|
2.
|
To ratify the
selection of Deloitte & Touche LLP as the Company’s independent
auditors for 2009.
|
□
|
□
|
□
|
||||||||||||
|
In their
discretion, the proxies are authorized to vote upon such other business as
may properly come before the meeting.
|
||||||||||||||||
|
PLEASE
SIGN EXACTLY AS NAME APPEARS ON THIS CARD. When shares
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
|
||||||||||||||||
|
For address
changes and/or comments, please check this box and write them on the back
where indicated.
|
□
|
|||||||||||||||
|
Signature
(PLEASE SIGN WITHIN BOX)
|
Date
|
Signature
(Joint Owners)
|
Date
|
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