UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for use of the Commission only (as permitted by Rule 14a-6(e) (2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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METHODE ELECTRONICS, INC.
(Exact Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Aggregate number of securities to which transaction applies:
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Fee paid previously with preliminary materials.
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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METHODE ELECTRONICS,
INC.
7401 West Wilson Avenue
Chicago, Illinois 60706
(708)
867-6777
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 14, 2017
______________________
To the Shareholders of Methode Electronics,
Inc.:
Notice is hereby
given that the annual meeting of shareholders of Methode Electronics, Inc. will be held on Thursday, September 14, 2017 at 11:00
a.m., Central Daylight Time, at Methode’s corporate offices at 7401 West Wilson Avenue, Chicago, Illinois, 60706 for the
following purposes:
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1.
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To elect a Board of Directors;
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2.
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To ratify the Audit Committee’s selection
of Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending April 28, 2018;
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3.
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To provide advisory approval of Methode’s
named executive officer compensation;
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4.
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To cast an advisory vote on the frequency of
future advisory votes on Methode’s named executive officer compensation; and
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5.
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To transact such other business as may properly
come before the annual meeting or any adjournment or postponement thereof.
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The Board of
Directors recommends that you vote “FOR” each of Methode’s nominees for director, “FOR” the ratification
of Ernst & Young LLP as our independent registered public accounting firm, “FOR” advisory approval of Methode’s
named executive officer compensation and in favor of a “ONE-YEAR” frequency for the advisory vote on executive compensation.
Our Board of Directors
has fixed the close of business on July 17, 2017 as the record date for the determination of shareholders entitled to notice of
and to vote at the annual meeting and at any adjournment or postponement thereof.
We are furnishing
materials for our annual meeting on the Internet. You may vote your shares in person by attending our annual meeting, or by proxy.
To vote by proxy, you may vote using the Internet, by toll-free telephone number or, if you request and receive a paper copy of
the proxy card by mail, by signing, dating and mailing the proxy card in the self-addressed, postage-paid envelope provided.
Information
regarding voting by using the Internet or by telephone is contained in the Notice of Internet Availability of Proxy Materials.
Instructions regarding voting by mail are contained on the proxy card.
It is important
that your shares be represented and voted at the annual meeting. Whether or not you plan to attend the annual meeting, please vote
on the matters to be considered. Thank you for your interest and cooperation.
By Order of the Board
of Directors,
Walter J. Aspatore
Chairman
Chicago, Illinois
August 1, 2017
METHODE ELECTRONICS,
INC.
7401 West Wilson Avenue
Chicago, Illinois 60706
(708) 867-6777
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
September 14, 2017
GENERAL INFORMATION
We are furnishing
this proxy statement to you in connection with the solicitation of proxies on behalf of Methode Electronics, Inc. (“Methode”
or the “Company”) for use at our annual meeting of shareholders to be held on Thursday, September 14, 2017 at 11:00
a.m., Central Daylight Time, at Methode’s corporate offices at 7401 West Wilson Avenue, Chicago, Illinois, 60706 and at any
adjournment or postponement of the annual meeting. On August 1, 2017, we mailed our Notice of Internet Availability of Proxy Materials,
which contains instructions for our shareholders to access our proxy statement and annual report over the Internet or request a
paper copy of the proxy materials.
At the annual meeting,
we will ask our shareholders to (i) elect our Board of Directors, (ii) ratify the Audit Committee’s selection of Ernst &
Young LLP (“Ernst & Young”) to serve as our independent registered public accounting firm for fiscal 2018, (iii)
provide advisory approval of Methode’s named executive officer compensation, (iv) cast an advisory vote on the frequency
of future advisory votes on Methode’s named executive officer compensation, and (v) consider and vote upon any other business
which properly comes before the annual meeting.
The Board of
Directors recommends that you vote “FOR” each of Methode’s nominees for director, “FOR” the ratification
of Ernst & Young as our independent registered public accounting firm, “FOR” advisory approval of Methode’s
named executive officer compensation and in favor of a “ONE-YEAR” frequency for the advisory vote on executive compensation.
You may vote your
shares in person, by attending our annual meeting, or by proxy. To vote by proxy, you may vote using the Internet, by toll-free
telephone number or, if you request and receive a paper copy of the proxy card by mail, by signing, dating and mailing the proxy
card in the self-addressed, postage-paid envelope provided.
Information regarding voting by using the Internet or by telephone
is contained in the Notice of Internet Availability of Proxy Materials. Instructions regarding voting by mail are contained on
the proxy card.
Please do not submit a proxy card if you have voted by telephone or the Internet.
It is important
that your shares be represented and voted at the annual meeting. Whether or not you plan to attend the annual meeting in person,
please vote on the matters to be considered.
Record Date; Shares Outstanding
Our Board of Directors
has fixed the close of business on July 17, 2017 as the record date for the determination of shareholders entitled to notice of
and to vote at the annual meeting and at any adjournment or postponement thereof. As of the record date, there were 36,810,853
shares of our common stock outstanding and entitled to vote at the annual meeting.
Quorum; Votes Required
In deciding all
questions, assuming a quorum is present, a holder of Methode’s common stock is entitled to one vote, in person or by proxy,
for each share held in such holder’s name on the record date. The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of Methode’s common stock is necessary to constitute a quorum at the annual meeting. Both abstentions
and broker non-votes are counted as present for the purpose of determining the presence of a quorum at the annual meeting. Generally,
broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal
because the broker lacks discretionary power to vote such shares.
With respect to
the election of directors, the ratification of the selection of Ernst & Young as our independent registered public accounting
firm and providing advisory approval of our executive compensation, shareholders may vote (1) “for,” (2) “against,”
or (3) to “abstain” from voting on each matter and each such matter requires approval by a majority of the shares of
common stock represented at the meeting and entitled to vote. On the proposal regarding an advisory vote on the frequency of future
advisory votes on executive compensation, shareholders may vote to hold such votes (A) each year, (B) every two years, (C) every
three years, or (D) may abstain from voting. On this proposal, the frequency option that receives the affirmative vote of a majority
of the shares of common stock represented at the meeting and entitled to vote will be deemed to be approved by the shareholders.
If none of the options for this proposal receives a majority vote, we will consider the alternative that receives the highest number
of votes cast by the shareholders to be the frequency that has been selected by the shareholders. Both abstentions and broker non-votes
will be considered as present but will not be considered as votes in favor of any matter. Broker non-votes are excluded from the
“for,” “against” and “abstain” counts, and instead are reported as simply “broker non-votes.”
Consequently, abstentions have the effect of voting against these matters, while broker non-votes have no effect as to voting for
or against any such matter.
Under New York Stock
Exchange rules, the proposal to ratify the selection of Ernst & Young is considered a routine item. Therefore, brokers may
vote in their discretion on this matter on behalf of clients who have not furnished voting instructions to the broker. In contrast,
all other proposals set forth in this proxy statement are considered non-routine items, and brokers who have not received voting
instructions from their clients may not vote on these proposals.
All properly executed
and timely delivered proxies will be voted in accordance with the instructions provided. Unless contrary instructions are indicated,
proxies will be voted “FOR” each of Methode’s nominees for director, “FOR” the ratification of the
selection of Ernst & Young, “FOR” advisory approval of Methode’s named executive officer compensation and
in favor of a “ONE-YEAR” frequency for the advisory vote on executive compensation. The Board of Directors knows of
no other business that will be presented for consideration at the annual meeting. If any other matter is properly presented, it
is the intention of the persons named in the proxy to vote in accordance with their best judgment.
Voting Procedures
It is important
that your shares be represented at the annual meeting. You may vote your shares in person, by attending our annual meeting, or
by proxy. To vote by proxy, you may vote using the Internet, by toll-free telephone number or, if you request and receive a paper
copy of the proxy card by mail, by signing, dating and mailing the proxy card in the self-addressed, postage-paid envelope provided.
Information regarding voting by using the Internet or by telephone is contained in the Notice of Internet Availability of Proxy
Materials. Instructions regarding voting by mail are contained on the proxy card. Please do not submit a proxy card if you have
voted by telephone or the Internet. You may revoke your proxy as described below.
Revoking Your Proxy
If you decide to
change your vote, you may revoke your proxy at any time before the annual meeting. You may revoke your proxy by notifying our Corporate
Secretary in writing that you wish to revoke your proxy at the following address: Methode Electronics, Inc., 7401 West Wilson Avenue,
Chicago, Illinois 60706, attention: Corporate Secretary. You may also revoke your proxy by submitting a later-dated and properly
executed proxy (including by means of the telephone or Internet) or by voting in person at the annual meeting. Attendance at the
annual meeting will not, by itself, revoke a proxy.
Proxy Solicitation Expenses
The proxy is being
solicited on behalf of Methode. We will bear the entire cost of this solicitation. Our directors, officers or other regular employees
may solicit proxies by telephone, by e-mail, by fax or in person. No additional compensation will be paid to directors, officers
and other regular employees for such services. We have retained the services of Innisfree M&A Incorporated (“Innisfree”)
to serve as our proxy solicitor in connection with the annual meeting. Innisfree may assist us in soliciting proxies by telephone,
email and by other means, and we expect to pay Innisfree a fee of $20,000, plus reasonable expenses.
In the event that
beneficial owners of our shares request paper copies of our proxy materials, banks, brokerage houses, fiduciaries and custodians
holding shares of our common stock beneficially owned by others as of the record date will be requested to forward such proxy soliciting
material to the beneficial owners of such shares and will be reimbursed by Methode for their reasonable out-of-pocket expenses.
Householding of Annual Meeting
Materials
We are sending
only one copy of our Notice of Internet Availability of Proxy Materials and, if applicable, our proxy materials, to shareholders
who share the same last name and address, unless they have notified us that they want to continue receiving multiple copies. This
practice, known as “householding,” is designed to reduce duplicate mailings and save printing and postage costs. Shareholders
who participate in householding will continue to be able to access and receive separate proxy cards. If you received a householded
mailing this year and you would like to have additional copies of our Notice of Internet Availability of Proxy Materials and,
if applicable, our proxy materials, mailed to you; if you received multiple copies of our Notice of Internet Availability of Proxy
Materials and would prefer to participate in householding; or if you would like to opt out of householding for future mailings,
you may do so at any time by contacting us at: Methode Electronics, Inc., 7401 West Wilson Avenue, Chicago, Illinois 60706, Attention:
Corporate Secretary, or telephonically at 708-867-6777.
CORPORATE GOVERNANCE
We are committed
to maintaining high standards of corporate governance in order to serve the long-term interests of Methode and our shareholders.
Director Independence
Our Board of Directors
has considered the independence of the nominees for director under the applicable standards of the U.S. Securities and Exchange
Commission (“SEC”) and the New York Stock Exchange. Our Board has determined that all of the nominees for director
are independent under the applicable standards, except for Donald Duda, our President and Chief Executive Officer. Mr. Duda’s
lack of independence relates solely to his service as an executive officer and is not due to any other transactions or relationships.
In addition, our
Board of Directors has determined that each member of our Audit Committee, our Compensation Committee and our Nominating and Governance
Committee satisfies the independence requirements of the applicable standards, if any, of the SEC and the New York Stock Exchange.
Board Committees
The following chart
sets forth the committees of our Board for fiscal 2017.
Committee
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Members
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Principal Functions
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Number of Meetings in Fiscal 2017
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Audit
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Isabelle C. Goossen (Chair)
Walter J. Aspatore
Stephen F. Gates
Paul G. Shelton
Lawrence B. Skatoff
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Oversees
accounting and financial reporting and audits of financial statements.
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Monitors
performance of internal audit function and our system of internal control.
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Monitors
performance, qualifications and independence of our independent registered public accounting firm and makes decisions regarding
retention, termination and compensation of the independent registered public accounting firm and approves services provided by
the independent registered public accounting firm.
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Monitors
compliance with legal and regulatory requirements pertaining to financial statements.
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Reviews
our financial press releases and certain SEC filings.
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Discusses
with management major financial risk exposures and the steps taken to monitor and control such exposures, and discuss guidelines
and policies by which risk assessment and risk management is undertaken.
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If
applicable, reviews related party transactions and potential conflict of interest situations.
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9
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Compensation
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Stephen F. Gates (Chair)
Warren L. Batts
Darren M. Dawson
Martha Goldberg Aronson
Isabelle C. Goossen
Paul G. Shelton
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Oversees
our executive compensation policies and plans.
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Approves
goals and incentives for the compensation of our Chief Executive Officer and, with the advice of the Chief Executive Officer, the
other executive officers.
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Approves
grants under our stock and bonus plans.
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Makes
decisions regarding the retention, compensation and termination of any compensation consultants, and monitors their independence.
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Evaluates
whether risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect.
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5
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Nominating and
Governance
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Christopher J. Hornung (Chair)
Walter J. Aspatore
Warren L. Batts
Stephen F. Gates
Lawrence B. Skatoff
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Recommends
director candidates for election to our Board at the annual meeting or to fill vacancies.
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Recommends
Board committee assignments.
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Recommends
compensation and benefits for directors.
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Reviews
our Corporate Governance Guidelines.
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Conducts
an annual assessment of Board and committee performance.
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Reviews
our risk management policies and practices.
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Reviews
succession planning for our Chief Executive Officer.
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5
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Committee
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Members
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Principal Functions
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Number of Meetings in Fiscal 2017
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Technology
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Darren M. Dawson (Chair)
Walter J. Aspatore
Warren L. Batts
Martha Goldberg Aronson
Christopher J. Hornung
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Reviews
with management our technology assets and future needs.
•
Reviews
technology research and development activities and possible acquisitions of technology.
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4
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Mr. Gates passed
away in July, 2017. Subsequently, the size of the Board was reduced from ten directors to nine directors and Ms. Goldberg Aronson
was appointed Chair of our Compensation Committee. The Board expressed its great appreciation for all of the contributions Mr.
Gates made over the years.
If applicable, our
Audit Committee reviews related party transactions and potential conflict of interest situations in accordance with the Audit Committee
Charter and our Code of Business Conduct. We do not have a separate written policy regarding related party transactions and potential
conflict of interest situations. Our Code of Business Conduct states that conflicts of interest are prohibited, except as approved
by our Board of Directors. In reviewing any such transaction, our Audit Committee and Board of Directors would consider Methode’s
rationale for entering into the transaction, alternatives to the transaction, whether the transaction is on terms at least as fair
to Methode as would be the case were the transaction entered into with a third party and other relevant factors.
During the 2017
fiscal year, our Board of Directors held twelve meetings, and no director attended less than 75% of the aggregate of the total
number of meetings of our Board and the total number of meetings held by the respective committees on which he or she served. Under
our Corporate Governance Guidelines, our directors are expected to attend Board and shareholder meetings and meetings of committees
on which they serve. Our directors are expected to meet as frequently as necessary to properly discharge their responsibilities.
Our independent
directors hold regularly scheduled executive sessions at which only independent directors are present. Pursuant to our Corporate
Governance Guidelines, our Chairman of the Board is the Presiding Director of such sessions.
Our Audit, Compensation,
Nominating and Governance and Technology Committees operate pursuant to charters adopted by the Board, which are available on our
website at
www.methode.com
or in print upon any shareholder’s request. Our Corporate Governance Guidelines are also
available on our website at
www.methode.com
or in print upon any shareholder’s request.
Board Leadership Structure, Evaluations,
Risk Oversight and Compensation Policy Risks
The Board of Directors
has determined that having an independent director serve as Chairman of the Board is in the best interests of our shareholders.
This structure provides for a greater role for the independent directors in the oversight of Methode and active participation of
the independent directors in setting agendas and establishing priorities and procedures for the work of the Board.
The Nominating and
Governance Committee oversees the annual Board and committee evaluation process. Each year, our independent directors complete
a written evaluation which focuses on Board practices, processes and skills, and seeks input on opportunities for improvement.
To protect the directors’ anonymity and the integrity of the process, the directors send their completed evaluations directly
to outside legal counsel. Legal counsel compiles the responses into a written report, which is then distributed to, and discussed
by, the Nominating and Governance Committee and the full Board.
Our Board of Directors
oversees Methode’s risk management practices. Our Board and committees review information regarding Methode’s markets,
competition and financial risks, as well as risks associated with Methode’s operations, Methode’s employees and political
risks encountered by Methode throughout the world. Our Audit Committee discusses with management Methode’s major financial
risk exposures and the steps management has taken to monitor and control such exposures, and reviews the process by which risk
is managed and assessed. Our Audit Committee also reviews the Company’s cyber-security and information technology practices
and policies. Our Compensation Committee evaluates risks arising from Methode’s compensation practices and policies. Our
Nominating and Governance Committee reviews and evaluates Methode’s policies and practices with respect to risk management
and risk assessment in areas such as business operations, human resources, international operations and
intellectual property. The entire Board
of Directors is regularly informed about the risk management policies and practices monitored by the various committees. The Board
of Directors also receives reports directly from officers responsible for assessing and managing particular risks within Methode.
We believe that
risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse
effect on Methode. The Compensation Committee monitors the mix and design of the elements of executive compensation and believes
that our compensation programs do not encourage management to assume excessive risks.
Nominating Process of the Nominating
and Governance Committee
Our Nominating and
Governance Committee is responsible for identifying and recommending to our Board of Directors individuals qualified to become
directors consistent with criteria approved by our Board. In considering potential candidates for our Board, including with respect
to nominations for re-election of incumbent directors, the Committee considers the potential candidate’s integrity and business
ethics; strength of character, judgment and experience consistent with our needs; specific areas of expertise and leadership roles;
and the ability to bring diversity to our Board. While the Nominating and Governance Committee charter and our Corporate Governance
Guidelines do not prescribe diversity standards, the Committee considers diversity in the context of the Board as a whole, including
whether the potential candidate brings complementary skills and viewpoints. The Committee also considers the ability of the individual
to allocate the time necessary to carry out the tasks of Board membership, including membership on appropriate committees.
The Committee identifies
potential nominees by asking current directors and others to notify the Committee if they become aware of persons, meeting the
criteria described above, who may be available to serve on our Board. The Committee has sole authority to retain and terminate
any search firm used to identify director candidates and has sole authority to approve the search firm’s fees and other retention
terms. Historically, the Committee has not engaged third parties to assist in identifying and evaluating potential nominees, but
would do so in those situations where particular qualifications are required to fill a vacancy and our Board’s contacts are
not sufficient to identify an appropriate candidate.
The Committee will
consider suggestions from our shareholders. Any recommendations received from shareholders will be evaluated in the same manner
that potential nominees suggested by Board members are evaluated. Upon receiving a shareholder recommendation, the Committee will
initially determine the need for additional or replacement Board members and evaluate the candidate based on the information the
Committee receives with the shareholder recommendation or may otherwise acquire, and may, in its discretion, consult with the other
members of our Board. If the Committee determines that a more comprehensive evaluation is warranted, the Committee may obtain additional
information about the director candidate’s background and experience, including by means of interviews with the candidate.
Our shareholders
may recommend candidates at any time, but the Committee requires recommendations for election at an annual meeting of shareholders
to be submitted to the Committee no later than 120 days before the first anniversary of the date of the proxy statement in connection
with the previous year’s annual meeting. The Committee believes this deadline is appropriate and in the best interests of
Methode and our shareholders because it ensures that the Committee has sufficient time to properly evaluate all proposed candidates.
Therefore, to submit a candidate for consideration for nomination at the 2018 annual meeting of shareholders, a shareholder must
submit the recommendation, in writing, by April 3, 2018. The written notice must include:
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the name, age, business address and residential address of each proposed
nominee and the principal occupation or employment of each nominee;
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the number of shares of our common stock that each nominee beneficially
owns;
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a statement that each nominee is willing to be nominated; and
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any other information concerning each nominee that would be required
under the rules of the SEC in a proxy statement soliciting proxies for the election of those nominees.
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Recommendations
must be sent to the Nominating and Governance Committee, Methode Electronics, Inc., 7401 West Wilson Avenue, Chicago, Illinois
60706. Information regarding the requirements to nominate a director at our 2018 Annual Meeting are set forth below under “Other
Information -- Shareholder Proposals and Director Nominations.”
Communications with Directors
Our annual meeting
of shareholders provides an opportunity each year for shareholders to ask questions of, or otherwise communicate directly with,
members of our Board of Directors on appropriate matters. All of our directors attended the 2016 annual meeting. We anticipate
that all of our directors will attend the 2017 annual meeting.
In addition, interested
parties may, at any time, communicate in writing with any particular director, or our independent directors as a group, by sending
such written communication to the Corporate Secretary of Methode Electronics, Inc. at 7401 West Wilson Avenue, Chicago, Illinois
60706. Copies of written communications received at such address will be provided to the relevant director or the independent directors
as a group unless such communications are considered, in the reasonable judgment of the Corporate Secretary, to be improper for
submission to the intended recipient(s). Examples of shareholder communications that would be considered improper for submission
include, without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to us
or our business or communications that relate to other improper or irrelevant topics.
Code of Business Conduct and Ethics
Our Board of Directors
has adopted a Code of Business Conduct that applies to our directors, principal executive officer, principal financial officer,
principal accounting officer or controller and persons performing similar functions, as well as other employees. The code is available
on our website at
www.methode.com
or in print upon any shareholder’s request.
If we make any substantive
amendments to the Code of Business Conduct or grant any waiver, including any implicit waiver, from a provision of the Code of
Business Conduct to our principal executive officer, principal financial officer, principal accounting officer or controller or
persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a report on
Form 8-K in accordance with applicable rules and regulations.
Stock Ownership Guidelines
Our Compensation
Committee considers stock ownership by directors to be an important means of linking their interests with those of our shareholders.
We maintain stock ownership guidelines for our directors. All directors are expected to own stock with a value equal to at least
five times the annual cash retainer paid to Methode directors. The requirements are subject to a five-year phase-in period. All
of our directors were in compliance with our stock guidelines for fiscal 2017.
DIRECTOR COMPENSATION
We use a combination
of cash and common stock to compensate our non-employee directors. Directors who are also our full-time employees are not paid
for their services as directors or for attendance at meetings.
For the fiscal year
ended April 29, 2017, our non-employee directors received an annual cash retainer of $44,000 and an attendance fee of $1,000 per
committee meeting and for each board meeting other than the regularly scheduled quarterly meetings. In addition, in July 2016,
the Compensation Committee, upon the recommendation of the Nominating and Governance Committee, granted each non-employee director
serving at such time a stock award for 3,000 shares of common stock. Our Chairman of the Board and the Chair of each of our board
committees received supplemental annual retainers in the following amounts: Chairman of the Board, $30,000; Chair of each of the
Audit Committee and the Compensation Committee, $24,000; and Chair of each of the Nominating and Governance Committee and the Technology
Committee, $12,000. In addition, members of our Audit Committee and Compensation Committee (other than the Chair) received an additional
annual retainer of $10,000. Pursuant to our Deferred Compensation Plan, our directors may elect to defer up to 100% of their retainers
and attendance fees per year. Additional information regarding the Deferred Compensation Plan is described under “Executive
Compensation — Nonqualified Deferred Compensation” below.
The following table
sets forth certain information regarding compensation earned by our non-employee directors during the fiscal year ended April 29,
2017.
Name
|
Fees Earned
or Paid in Cash
($)
|
Stock Awards
($) (1)
|
Total
($)
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Walter J. Aspatore
|
111,270
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102,870
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214,140
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Warren L. Batts
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70,770
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102,870
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173,640
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Darren M. Dawson
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84,270
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102,870
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187,140
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Stephen F. Gates
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101,770
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102,870
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204,640
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Martha Goldberg Aronson
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69,770
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102,870
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172,640
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Isabelle C. Goossen
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101,270
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102,870
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204,140
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Christopher J. Hornung
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78,770
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102,870
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181,640
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Paul G. Shelton
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87,270
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102,870
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190,140
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Lawrence B. Skatoff
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80,770
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102,870
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183,640
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(1)
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The
reported amounts reflect the fair value at the date of grant calculated in accordance with the Financial Accounting Standards
Board’s Accounting Standards Codification Topic 718. Details of the assumptions used in valuing these awards
are set forth in Note 4 to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year
ended April 29, 2017.
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SECURITY OWNERSHIP
Five Percent Shareholders
The following table sets
forth information regarding all persons known by Methode to be the beneficial owners of more than 5% of Methode’s common
stock as of July 17, 2017.
Name and Address of Beneficial Owner
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Amount and Nature
of Beneficial Ownership
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Percent of Class (%)
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BlackRock, Inc. (1)
55 East 52nd Street
New York, New York 10055
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4,106,670
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11.2
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The Vanguard Group (2)
100 Vanguard Blvd.
Malvern, Pennsylvania 19355
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3,040,563
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8.3
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The Bank of New York Mellon Corporation (3)
225 Liberty Street
New York, New York 10286
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2,853,738
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7.8
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Dimensional Fund Advisors LP (4)
Building One
6300 Bee Cave Road
Austin, TX 78746
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2,049,446
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5.6
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(1)
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Information is based on a Schedule 13G/A filed with the SEC on January 12, 2017. In the Schedule 13G/A, BlackRock, Inc. reported that, as of December 31, 2016, it had sole voting power with respect to 4,027,468 shares and sole dispositive power with respect to 4,106,670 shares.
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(2)
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Information is based on a Schedule 13G/A filed with the SEC on February 10, 2017. In the Schedule 13G/A, The Vanguard Group reported that, as of December 31, 2016, it had sole voting power with respect to 70,194 shares, shared voting power with respect to 5,559 shares, sole dispositive power with respect to 2,966,715 shares and shared dispositive power with respect to 73,848 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 68,289 shares of the Company’s common stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 7,464 shares of the Company’s common stock as a result of its serving as investment manager of Australian investment offerings.
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(3)
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Information is based on a Schedule 13G/A filed with the SEC on February 3, 2017. In the Schedule 13G/A, The Bank of New York Mellon Corporation reported that, as of December 31, 2016, it had sole voting power with respect to 2,759,957 shares, sole dispositive power with respect to 2,826,838 shares and shared dispositive power with respect to 26,900 shares. The Schedule 13G/A reported that all of the shares are beneficially owned by The Bank of New York Mellon Corporation and its direct or indirect subsidiaries in their various fiduciary capacities (including as an investment adviser or a broker or dealer).
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(4)
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Information is based on a Schedule 13G/A filed with
the SEC on February 9, 2017. In the Schedule 13G/A, Dimensional Fund Advisors LP reported that, as of December 31,
2016, it had sole voting power with respect to 1,949,276 shares and sole dispositive power with respect to 2,049,446
shares.
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Directors and Executive Officers
The following table
sets forth information regarding our common stock beneficially owned as of July 17, 2017 by (i) each director and nominee, (ii)
each of the named executive officers, and (iii) all current directors and executive officers as a group.
Name of Beneficial Owner
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Amount and Nature of Beneficial Ownership (1)
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Percent of Class (%)
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Walter J. Aspatore
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27,000(2)
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*
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Warren L. Batts
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76,000
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*
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Darren M. Dawson
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13,000
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*
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Donald W. Duda
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631,364(3)
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1.7
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Martha Goldberg Aronson
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6,000 (4)
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*
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Isabelle C. Goossen
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43,450
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*
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Christopher J. Hornung
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37,850
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*
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Paul G. Shelton
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42,850
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*
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Lawrence B. Skatoff
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39,350(5)
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*
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Timothy R. Glandon
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43,079(6)
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*
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John R. Hrudicka
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72,000(7)
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*
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Joseph E. Khoury
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240,600(8)
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*
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Theodore P. Kill
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211,830(9)
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*
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Douglas A. Koman
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119,792(10)
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*
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All current directors and executive officers as a group
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1,604,165(11)
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4.4
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*
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Percentage represents less than 1% of the total shares of common stock outstanding.
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(1)
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Beneficial ownership arises from sole voting and dispositive power unless otherwise indicated by footnote.
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(2)
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Includes 15,000 shares held jointly with Mr. Aspatore’s wife.
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(3)
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Includes 19,552 shares held jointly with Mr. Duda’s wife, options to purchase 40,000 shares of common stock exercisable within 60 days, 201,812 shares of vested restricted stock units for which common stock will be delivered to Mr. Duda at such time as the value of the award is deductible by us or Mr. Duda’s employment terminates, 100,000 shares of vested restricted stock units for which common stock will be delivered to Mr. Duda in the event of termination from Methode under any circumstance and 270,000 shares of performance-based restricted stock subject to forfeiture.
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(4)
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Shares are held in a trust pursuant to which Ms. Goldberg Aronson shares voting and investment power with her husband.
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(5)
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Shares are held in a trust pursuant to which Mr. Skatoff shares voting and investment power with his wife.
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(6)
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Includes options to purchase 12,000 shares of common stock exercisable within 60 days, 1,079 shares of common stock held in our 401(k) Plan and 30,000 shares of vested restricted stock units for which common stock will be delivered to Mr. Glandon in the event of termination from Methode under any circumstance.
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(7)
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Includes 72,000 shares of performance-based restricted stock subject to forfeiture.
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(8)
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Includes options to purchase 12,000 shares of common stock exercisable within 60 days, 30,000 shares of vested restricted stock units for which common stock will be delivered to Mr. Khoury in the event of termination from Methode under any circumstance and 135,000 shares of performance-based restricted stock subject to forfeiture.
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(9)
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Includes 34,830 shares held jointly with Mr. Kill’s wife, options to purchase 12,000 shares of common stock exercisable within 60 days, 30,000 shares of vested restricted stock units for which common stock will be delivered to Mr. Kill in the event of termination from Methode under any circumstance and 135,000 shares of performance-based restricted stock subject to forfeiture.
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(10)
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Includes 94,322 shares held jointly with Mr. Koman’s wife and 25,470 shares of performance-based restricted stock subject to forfeiture.
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(11)
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Includes 163,704 shares held jointly, 34,830 shares held in trust with voting and investment power shared with a spouse, options to purchase 76,000 shares of common stock exercisable within 60 days, 1,079 shares of common stock held in our 401(k) Plan, 391,812 shares of vested restricted stock units and 637,470 shares of performance-based restricted stock subject to forfeiture.
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PROPOSAL ONE
ELECTION OF DIRECTORS
A Board of eight
directors will be elected at the annual meeting. Each director will hold office until the next annual meeting of shareholders and
until his or her successor is elected and qualified. All of the nominees listed below currently serve as directors. All of the
nominees were recommended unanimously to our Board of Directors by our Nominating and Governance Committee and were nominated by
our Board of Directors. Mr. Batts will not be standing for re-election, and the Board expressed its great appreciation for all
of the contributions he has made over the years. The size of the Board will be reduced from nine directors to eight directors as
of the date of the annual meeting. If any of these nominees is not a candidate for election at the annual meeting, an event which
our Board of Directors does not anticipate, the proxies will be voted for a substitute nominee recommended to our Board of Directors
by our Nominating and Governance Committee and nominated by our Board of Directors.
OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE FOLLOWING NOMINEES.
Walter J. Aspatore, Chairman
Chairman Emeritus,
Amherst Partners, LLC
Director since 2008
Age 74
Mr. Aspatore has served as Chairman
Emeritus of Amherst Partners, LLC, a business consulting firm, since 2010. Prior thereto, Mr. Aspatore was Chairman of Amherst
Partners from 1994 through 2010. Mr. Aspatore has served as Chairman of our Board since 2012. Prior to co-founding Amherst Partners,
Mr. Aspatore served in various officer positions at diversified manufacturing and technology businesses, including Cross and Trecker
Corporation, the Warner and Swasey Company, Bendix Corporation and TRW Corporation. He also served as Vice Chairman and President
of Onset BIDCO, a venture capital and subordinated debt fund, from 1992 to 1994. Mr. Aspatore also serves as a director of Mackinac
Financial Corporation, a bank holding company. Mr. Aspatore’s consulting experience and service at various consulting, manufacturing
and technology businesses has resulted in continued contributions to the Board.
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Dr. Darren M. Dawson
Leroy C. and Aileen H. Paslay Dean,
College of Engineering,
Kansas State University
Director since 2004
Age 54
Dr. Dawson has served as the Dean of
the College of Engineering of Kansas State University since July, 2014. Prior thereto, Dr. Dawson served as a Professor in the
Electrical and Computer Engineering Department at Clemson University, where he held various professor positions since 1990. His
research interests include nonlinear control techniques for mechatronic systems, robotic manipulator systems and vision-based systems.
Dr. Dawson’s work has been recognized by several awards, including the Clemson University Centennial Professorship in 2000.
Dr. Dawson’s academic and technical background has provided the basis for continued contributions to the Board’s operations
and deliberations.
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Donald W. Duda
Chief Executive Officer and President,
Methode Electronics, Inc.
Director since 2001
Age 62
Mr. Duda has served as
our Chief Executive Officer since 2004 and our President since 2001. Mr. Duda joined us in 2000 and served as our Vice President
- Interconnect Products Group. Prior to joining Methode, Mr. Duda held several positions with Amphenol Corporation, a manufacturer
of electronic connectors, most recently as General Manager of its Fiber Optic Products Division from 1988 through 1998. Mr. Duda
has used his executive background and unique understanding of Methode to contribute to the Board.
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Martha Goldberg Aronson
Former Executive Vice President and President
of Global Healthcare
Ecolab, Inc.
Director since April 2016
Age 49
Ms. Goldberg Aronson served from 2012 to 2016
as Executive Vice President and President, Global Healthcare, at Ecolab, Inc., a specialty chemical company. From 2010 to 2012,
Ms. Goldberg Aronson was President, North America at Hill-Rom Holdings, Inc., a global medical technology company. Prior to Hill-Rom,
Ms. Goldberg Aronson spent 18 years at Medtronic, Inc., a medical technology provider, most recently serving as Senior Vice President
and Chief Talent Officer. Ms. Goldberg Aronson is currently a member of the Board of Directors of Cardiovascular Systems, Inc.,
Conmed Corporation and the Guthrie Theater. Ms. Goldberg Aronson served as a director of Hutchinson Technology, Inc. from 2010
through 2016. Based on her extensive leadership experience and experience in the global health care markets, Ms. Goldberg Aronson
has provided valuable insights to the Board.
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Isabelle C. Goossen
Retired Vice President and Chief Financial
Officer,
Chicago Symphony Orchestra Association
Director since 2004
Age 65
Ms. Goossen served as the Chief Financial
Officer for the Chicago Symphony Orchestra Association from March, 2011 thru March, 2017. Ms. Goossen served as the Vice President
for Finance and Administration for the Chicago Symphony Orchestra Association from 2001 thru March, 2017. From 1986 through 1999,
Ms. Goossen held several management positions with Premark International, Inc., a diversified consumer products company, most recently
as Vice President and Treasurer from 1996 through 1999. Ms. Goossen serves as a director of the Columbian Financial Group, the
parent company of Columbian Mutual Life Insurance and Columbian Life Insurance Company, each a life insurance company. In addition,
Ms. Goossen is a trustee of Knox College and a director of the Cook County Health Foundation. Ms. Goossen has used her financial
expertise and management background to make continued contributions to the Board.
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Christopher J. Hornung, Vice Chairman
Co-Founder,
Sturbridge Capital
Director since 2004
Age 65
Mr. Hornung co-founded
Sturbridge Capital, an investment fund, in 2011. Mr. Hornung served as Chairman of Doskocil Manufacturing Company Inc., doing
business as Petmate, a producer and distributor of pet products, from 2010 to May, 2017. Prior thereto, Mr. Hornung served as
Chief Executive Officer of Next Testing, Inc., a provider of comprehensive, sport-specific athletic testing programs, from January
2007 to November 2013. From February 2004 through December 2006, Mr. Hornung served as President of the Pacific Cycle Division
of Dorel Industries, Inc., a global consumer products company. Prior to the acquisition of Pacific Cycle by Dorel Industries Inc.,
Mr. Hornung served as the Chairman and Chief Executive Officer of Pacific Cycle. Mr. Hornung is a recipient of the Ernst &
Young Entrepreneur of the Year Award and serves on an advisory board of the University of Wisconsin School of Business. His executive
and entrepreneurial experience as well as his expertise regarding international sourcing and distribution has resulted in continued
contributions to the Board.
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Paul G. Shelton
Retired Vice President and Chief Financial
Officer,
FleetPride, Inc.
Director since 2004
Age 67
Mr. Shelton retired in
2003 as Vice President and Chief Financial Officer of FleetPride Inc., an independent heavy-duty truck parts distributor. From
1981 through 2001, Mr. Shelton served in various management positions at AMCOL International Corporation, a supplier of specialty
minerals and chemicals, most recently as Senior Vice President from 1994 through 2001 and Chief Financial Officer from 1984 through
2001. Mr. Shelton serves on two private company boards and was a former member of the board of directors of AMCOL International
Corporation and six private companies. Mr. Shelton has used his executive, financial and board experience to contribute to the
operations and deliberations of the Board.
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Lawrence B. Skatoff
Retired Executive Vice President and Chief
Financial Officer,
BorgWarner Inc.
Director since 2004
Age 77
Mr. Skatoff retired in
2001 as Executive Vice President and Chief Financial Officer of BorgWarner Inc., a manufacturer of highly engineered systems and
components for the automotive industry. Prior to joining BorgWarner Inc., Mr. Skatoff was Senior Vice President and Chief Financial
Officer of Premark International, Inc., a diversified consumer products company, from 1991 through 1999. Before joining Premark,
Mr. Skatoff was Vice President-Finance of Monsanto Company, a worldwide manufacturer of chemicals and pharmaceuticals. Mr. Skatoff’s
executive experience and financial background has led to continued contributions to the Board.
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PROPOSAL TWO
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee
of our Board of Directors is directly responsible for the appointment, termination, compensation, evaluation and oversight of our
independent registered public accounting firm. Our Audit Committee has selected Ernst & Young to serve as our independent registered
public accounting firm for the fiscal year ending April 28, 2018, subject to ratification of the selection by our shareholders.
Ernst & Young has served as our independent registered public accounting firm for many years and is considered to be well qualified.
Representatives
of Ernst & Young will be present at the annual meeting, will have the opportunity to make a statement and will be available
to respond to appropriate questions.
If our shareholders
do not ratify the selection of Ernst & Young, our Audit Committee will reconsider the selection. Even if the selection is ratified,
our Audit Committee may select a different independent registered public accounting firm at any time during the year if it determines
that a change would be in the best interests of Methode and our shareholders.
OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF OUR AUDIT COMMITTEE’S SELECTION OF ERNST & YOUNG AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
proposal
THREE
advisorY APPROVAL OF METHODE’S executive compensation
Section 14A of the
Securities Exchange Act of 1934 requires that we provide our shareholders with the opportunity to vote to approve, on a nonbinding,
advisory basis, the compensation of our named executive officers as disclosed in this proxy statement, commonly known as a “say-on-pay”
vote.
As described under
“Executive Compensation – Compensation Discussion and Analysis,” we seek to align the interests of our executives
with the interests of our shareholders and reward performance.
The advisory vote
on this resolution is not intended to address any specific element of compensation, but rather the overall compensation of our
named executive officers as disclosed in this proxy statement. The vote is advisory, which means that the vote is not binding on
Methode, our Board of Directors or our Compensation Committee. Although this vote is nonbinding, our Board of Directors and our
Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making decisions concerning
executive compensation.
Shareholders may
vote for or against the following resolution, or may abstain from voting. The affirmative vote of a majority of the shares present
or represented at the annual meeting and entitled to vote is required to approve the proposed resolution.
We ask our shareholders
to approve the following resolution:
“RESOLVED,
that the compensation of Methode’s named executive officers, as disclosed in Methode’s Proxy Statement for the 2017
Annual Meeting of Shareholders pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion
and Analysis, the Summary Compensation Table and the other related tables and disclosure, is hereby approved.”
Our
Board of Directors recommends a vote “FOR” the approval of the FOREGOING RESOLUTION.
PROPOSAL
FOUR
ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
Section 14A of the
Securities Exchange Act of 1934 provides that shareholders must be given the opportunity to vote, on a non-binding, advisory basis,
on how frequently the advisory vote on executive compensation should be presented to our shareholders, commonly known as “say-on-pay”
votes. Shareholders may indicate whether they would prefer that we conduct future “say-on-pay” votes once every one,
two or three years. Shareholders also may abstain from casting a vote on this proposal.
We are required
to hold an advisory vote regarding the frequency of “say-on-pay” votes every six years. The Company’s shareholders
were provided with the opportunity to vote on the frequency of “say-on-pay” votes in 2011. At such time, the shareholders
voted in favor of holding “say-on-pay” votes annually and the Board adopted this standard.
After consideration
of each alternative, the Board recommends that the advisory vote on executive compensation continue to be submitted to the shareholders
every year. Our Board of Directors has determined that an annual advisory vote on executive compensation will allow our shareholders
to provide timely input on Methode’s executive compensation philosophy, policies and practices as disclosed in the proxy
statement each year.
The proxy card provides
shareholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining).
Shareholders will not be voting to approve or disapprove the recommendation of the Board of Directors.
While this vote
is advisory and not binding on Methode, the Board and the Compensation Committee expect to consider the outcome of the vote, along
with other relevant information, in determining the frequency of future advisory votes on executive compensation. Notwithstanding
the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory
votes on a less frequent basis.
Our
Board of Directors recommends a vote for a one-year frequency of the advisory vote on executive compensation.
AUDIT COMMITTEE MATTERS
Report of the Audit Committee
The Audit Committee
oversees our financial reporting process on behalf of our Board of Directors. Our management has the primary responsibility for
the financial statements and the reporting process, including the system of internal controls. Our Board has determined that each
member of our Audit Committee meets the requirements as to independence, experience and expertise established by the New York Stock
Exchange. Our Board has designated Ms. Goossen, Mr. Shelton and Mr. Skatoff as audit committee financial experts as defined by
the SEC. In fulfilling its oversight responsibilities, our Audit Committee reviewed and discussed the audited financial statements
in the Annual Report on Form 10-K for the year ended April 29, 2017 with management, including a discussion of the quality, not
just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures
in the financial statements.
Our Audit Committee
reviewed and discussed with our independent registered public accounting firm, Ernst & Young, which is responsible for expressing
an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles, the firm’s
judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to
be discussed under the standards of the Public Company Accounting Oversight Board (United States).
The Committee has
received the written disclosures and the letter from Ernst & Young required by applicable requirements of the Public Company
Accounting Oversight Board regarding Ernst & Young’s communications with the Committee concerning independence, and has
discussed with Ernst & Young the firm’s independence from management and Methode and considered the compatibility of
nonaudit services with the firm’s independence.
Our Audit Committee
discussed with our internal auditors and Ernst & Young the overall scope and plans for their respective audits. Our Audit Committee
met with the internal auditors and Ernst & Young, with and without management present, to discuss the results of their examinations,
their evaluations of our internal controls, and the overall quality of our financial reporting. The Committee also discussed with
Ernst & Young the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees - Public
Company Accounting Oversight Board.
In reliance on the
reviews and discussions referred to above, the Committee recommended to our Board of Directors (and our Board has approved) that
the audited financial statements be included in the Annual Report on Form 10-K for the year ended April 29, 2017 filed with the
SEC.
AUDIT COMMITTEE
Isabelle
C. Goossen, Chair
Walter J.
Aspatore
Paul G. Shelton
Lawrence
B. Skatoff
Auditing and Related Fees
Our Audit Committee
engaged Ernst & Young to examine our consolidated financial statements for the fiscal year ended April 29, 2017. Fees paid
to Ernst & Young for services performed during the 2017 and 2016 fiscal years were as follows:
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Fiscal 2017
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Fiscal 2016
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Audit Fees (1)
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$2,589,140
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$1,960,702
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Tax Fees (2)
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$25,593
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$52,039
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All Other Fees
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--
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--
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Total
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$2,614,733
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$2,012,741
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(1)
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Audit fees represent aggregate fees billed for professional services rendered by Ernst & Young for the audit of our annual financial statements and review of our quarterly financial statements, audit services provided in connection with other statutory and regulatory filings, consultation with respect to various accounting and financial reporting matters and transaction advisory services.
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(2)
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Tax fees primarily include fees for consultations regarding intercompany transfer pricing.
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Pre-Approval Policy
Our Audit Committee
is responsible for reviewing and pre-approving all audit and non-audit services provided by Ernst & Young and shall not engage
Ernst & Young to perform non-audit services proscribed by law or regulation. In fiscal 2017, 100% of audit and non-audit services
were approved by the Audit Committee.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
This Compensation
Discussion and Analysis describes the key elements of our executive compensation program, including an analysis of compensation
awarded to, earned by or paid to our named executive officers in fiscal 2017. Our fiscal 2017 named executive officers included
Donald Duda, Chief Executive Officer; John R. Hrudicka, Chief Financial Officer; Joseph E. Khoury, Senior Vice President; Theodore
P. Kill, Vice President, Worldwide Automotive Sales and President of Dabir Surfaces; Timothy Glandon, Vice President; and Douglas
Koman, our retired Chief Financial Officer. In July 2016, Mr. Koman resigned as Chief Financial Officer and Mr. Hrudicka was hired
as our new Chief Financial Officer. Mr. Koman retired as an employee in September 2016.
Executive Summary
Our Compensation
Committee strives to provide compensation programs that align our executives’ interests with those of our shareholders and
appropriately reward our executives for performance against annual and multi-year objectives.
The key elements
of our fiscal 2017 compensation program for our named executive officers included the following:
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Salary
. In reviewing fiscal 2017 salaries for our named executive
officers, our Compensation Committee discussed retention issues, reviewed advice from its compensation consultant regarding market
practices and considered Mr. Duda’s recommendations for officers other than himself. The Compensation Committee also considered
other relevant factors, including the individual performance, skills and experience of each executive, internal pay equity issues,
and the Company’s performance. The Compensation Committee decided to increase the salary of each of Messrs. Duda, Khoury,
Kill and Koman by 3.0%. The Compensation Committee set Mr. Hrudicka’s salary in connection with hiring him as our Chief Financial
Officer.
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Annual Performance-Based Bonus
. After considering the guideline
benchmark target, executive performance, retention issues, internal pay equity, market conditions, the advice of our independent
compensation consultant and Mr. Duda’s recommendations for the other officers, the Compensation Committee made fiscal 2017
annual performance-based cash bonus awards. For Messrs. Duda, Hrudicka, Khoury and Koman, 70% of the target bonus was based on
an adjusted pre-tax income measure for the Company and 30% was based on sales objectives and/or individual objectives. For Mr.
Kill, 25% of the target bonus was based on the Company pre-tax income measure and 75% was based on performance measures related
to our Dabir Surface medical device products. The maximum amount payable with respect to the Company pre-tax income measure was
set at 200% of the amount payable at the target level of performance in order to align the award with competitive practice among
the peer group. Due to Mr. Koman’s retirement, he was entitled to a pro-rata payment of his annual bonus based on his retirement
date and the performance achieved with respect to the measures described below. In connection with his hiring, Mr. Hrudicka was
guaranteed a minimum bonus of $150,000 for fiscal 2017.
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Fiscal 2016 LTI Program
. Our five-year equity program consists
of a mix of 60% performance-based restricted stock awards (“RSAs”), at target performance, and 40% time-based restricted
stock units (“RSUs”). The Compensation Committee expects the Fiscal 2016 LTI Program to cover all long-term incentive
grants to the participants through the end of fiscal 2020 (i.e., five fiscal years). The number of RSAs earned will be based on
the achievement of established goals for the Company’s earnings before net interest, taxes, fixed asset depreciation and
intangible asset amortization (“EBITDA”) for fiscal 2020. The EBITDA performance goals under the Fiscal 2016 LTI Program
were designed to align with the Company’s targeted annual growth rate for EBITDA of 9% to 10% for the period. The RSUs are
subject to vesting based on continued service with no RSUs vesting prior to the end of fiscal 2018, subject to acceleration in
certain limited circumstances.
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Our executive compensation
program contains the following components and features that are designed to align the interests of our named executive officers
and shareholders.
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No excessive post-termination benefits
: Our executives do
not participate in pension plans or receive other post-retirement benefits, nor do they generally have employment or severance
agreements (other than in connection with a change of control).
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No “single trigger” change of control benefits
:
We maintain “double-trigger” change of control agreements, and the executives are only entitled to a severance payment
if an executive is terminated without cause or an executive terminates for good reason subsequent to a change of control. In addition,
awards under our Fiscal 2016 LTI Program do not automatically vest upon a change in control.
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No excise tax gross ups
: We do not provide for gross-up payments
for excise taxes our executive officers may incur in connection with a change of control.
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Robust performance-based incentives
: In general, a significant
amount of each of our named executive officer’s compensation is variable compensation and “at risk” for non-payment
if we fail or the executive fails to meet performance targets. Consistent with our pay-for-performance philosophy, approximately
56.5% of our Chief Executive Officer’s fiscal 2017 compensation is composed of performance-based compensation, consisting
of one-fifth of the grant date fair value of the fiscal 2016 performance-based RSAs (at target performance), and the annual performance-based
cash bonus.
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Disclosure of performance measures
: We disclose the performance
measures for the RSAs awarded pursuant to the Fiscal 2016 LTI Program and our fiscal 2017 performance-based annual bonuses in this
Compensation Discussion and Analysis.
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Equity compensation best practices
: Our 2014 Omnibus Incentive
Plan contains certain restrictions that reflect sound corporate governance principles, including the following:
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−
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dividends on performance-based stock awards and dividend equivalents
on performance-based stock unit awards are paid only to the extent the underlying awards vest; and
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−
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awards to employees are subject to the following minimum vesting
requirements: (i) stock options, performance-based restricted stock, restricted stock units or performance units − at least
one year; and (ii) time-based restricted stock, restricted stock units or performance units − at least three years, with
no more frequent than ratable vesting over the vesting period. The minimum vesting requirements are not applicable in the event
vesting is accelerated under certain circumstances such as death or disability, and the plan provides for an exception to the minimum
vesting requirement for up to ten percent (10%) of the number of shares authorized for issuance under the plan.
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Use of an independent compensation consultant
: The Compensation
Committee directly engages an independent compensation consultant to review the competitiveness and effectiveness of our executive
compensation program.
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Executive officer stock ownership requirements
: We require
all of our executive officers to hold substantial amounts of our common stock. Our Chief Executive Officer is expected to own stock
with a value at least equal to six (6) times his base salary. In addition, shares of common stock underlying the RSUs awarded under
the Fiscal 2011 LTI Program (described below) and the Fiscal 2016 LTI Program will not be delivered to the executive until the
earlier of the executive’s termination of employment or a change of control of Methode.
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Incentive “clawback” policy
: In the event we are
required to restate our financial statements due to material noncompliance, our Incentive Compensation Recoupment Policy requires
us to recover from our current or former executive officers certain amounts of incentive-based compensation paid within the prior
three years.
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Policy prohibiting hedging or pledging our stock
: Our Insider
Trading Policy prohibits our directors, executive officers and certain key employees from engaging in certain transactions involving
our common stock, including options trading, short sales, derivative transactions and hedging transactions. In addition, these
directors, executive officers and key employees are
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prohibited from holding our common
stock in a margin account or otherwise pledging our common stock as collateral for a loan.
Objectives
and Measurement Principles
Our executive compensation
program supports our objective of enhancing shareholder value through a competitive program that attracts and retains high-quality
talent and rewards executives for demonstrating strong leadership and delivering results. Our executive compensation program is
designed to:
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Provide executives with a competitive pay arrangement.
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Link short-term cash incentive pay to achievement of company objectives
for pre-tax income and new sales, and in certain cases, individual objectives.
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Link long-term equity incentives to achievement of EBITDA objectives,
as adjusted for certain acquisitions and divestitures.
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Align executive interests with shareholder interests by providing
for capital accumulation through awards of RSAs and RSUs and encourage significant ownership of our common stock by our executive
officers.
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Our Compensation Process
Our Overall Process.
Our Compensation Committee is comprised entirely of independent directors and meets as often as necessary to perform its duties.
In fiscal 2017, our Compensation Committee met five times. Our Compensation Committee typically meets with Donald Duda, our Chief
Executive Officer.
Our Compensation
Committee annually engages a compensation consultant to review the competitiveness and effectiveness of our executive compensation
program and annually reviews summaries of our named executive officers’ compensation. Our Compensation Committee also annually
reviews company performance relative to peers and survey data.
Our Chief Executive
Officer’s compensation is determined by our Compensation Committee. Management does not make recommendations to our Compensation
Committee regarding compensation elements with respect to Mr. Duda’s compensation. For named executive officers other than
Mr. Duda, compensation packages are developed and recommended by Mr. Duda, in consultation with the Chief Financial Officer, based
on guidelines provided by our Compensation Committee. Our Compensation Committee determines whether to approve these recommendations,
subject to any modifications that it may deem appropriate.
Role of Compensation
Consultant
. Since 2013, Frederic W. Cook & Co., Inc. (“FWC”) has provided independent executive compensation
consulting services to the Compensation Committee. FWC is retained by and reports to the Compensation Committee. During fiscal
2017, FWC provided the following services:
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assisted the Compensation Committee in evaluating the linkage between
pay and performance;
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assisted the Compensation Committee in developing a compensation
peer group to be used for evaluating compensation decisions;
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provided and reviewed market data and advised the Compensation Committee
on setting executive compensation and the competitiveness and reasonableness of the Company’s executive compensation program;
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reviewed and advised the Compensation Committee regarding the elements
of the Company’s executive compensation program, each as relative to the Company’s peers and survey data;
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advised the Compensation Committee on setting compensation for Mr.
Hrudicka, our new Chief Financial Officer;
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provided information regarding realizable pay in light of our Fiscal
2016 LTI Program; and
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reviewed and advised the Compensation Committee regarding regulatory,
governance, disclosure and other technical matters.
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The
Compensation Committee reviewed information provided by FWC addressing the independence of FWC and the representatives serving
the Committee. Based on this information, the Compensation Committee concluded that the work performed by FWC and its representatives
involved in the engagement did not raise any conflict of interest and that FWC and such representatives are independent from the
Company’s management.
Consideration
of 2016 Say-on-Pay Vote Results
. At our 2016 annual meeting, our shareholders approved our fiscal 2016 executive compensation,
with approximately 95% of voted shares cast in favor of the say-on-pay resolution. Our Compensation Committee considered the results
of the 2016 say-on-pay vote along with other factors when making executive compensation decisions.
Market Benchmarking and Positioning
of Fiscal 2017 Executive Compensation
We strive to provide
compensation opportunities that are market competitive. In order to assist the Compensation Committee in achieving this objective
for fiscal 2017, FWC was retained to conduct a review of our executive compensation peer group and benchmark our executive compensation
program using a custom peer group and third-party survey data. The Compensation Committee considers this benchmarking information
in reviewing each element of our compensation program.
After considering
the advice of FWC, the Compensation Committee approved using the fiscal 2016 peer group for fiscal 2017, subject to a few modifications.
One former peer company, Remy International, Inc., was eliminated since it had been acquired. Two new peer companies, AVX Corporation
and Multi-Fineline Electronix, Inc., were added. Each of the new peer companies satisfies the Compensation Committee’s criteria
for the peer group as summarized below.
The peer group used
for benchmarking purposes in fiscal 2017 was selected using the following criteria:
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Size as measured by revenue – we generally targeted companies
with revenue not less than half nor more than two times our annual revenue.
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Size as measured by market capitalization – we generally targeted
companies with market capitalization not less than one-third nor more than three times our market capitalization.
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Similar-type businesses – we generally targeted companies that
are multinational and engage in businesses with similar technology, products and markets.
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For compensation
decisions affecting fiscal 2017 compensation, the peer group included the following companies:
AVX Corporation
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IPG Photonics Corporation
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Rogers Corporation
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CTS Corporation
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Littelfuse, Inc.
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Standard Motor Products, Inc.
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Dorman Products, Inc.
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MTS Systems Corporation
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Stoneridge, Inc.
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Drew Industries, Incorporated
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Multi-Fineline Electronix, Inc.
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TTM Technologies, Inc.
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Franklin Electric Company, Inc.
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OSI Systems, Inc.
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Universal Electronics Inc.
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Gentherm Incorporated
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In benchmarking our compensation program for fiscal 2017, the Compensation Committee
reviewed information compiled by FWC from the following third-party executive pay surveys: (i) 2015 Mercer Executive Benchmark;
(ii) 2015 Aon Hewitt Total Compensation Management; (iii) 2015 Willis Towers Watson U.S. Compensation Data Bank; and (iv) 2015
Willis Towers Watson Top Management.
As a general policy,
we targeted fiscal 2017 executive officer total direct compensation (salary, annual cash bonus and long-term incentive compensation)
and each component thereof in the 50th to 75th percentile range of competitive practice, which aligned with the Company’s
relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making benchmarking determinations
for fiscal 2017 compensation, the Compensation Committee assumed that each executive would achieve the target level of performance
under all performance-based awards. In addition, in valuing the RSA and RSU awards outstanding under the Fiscal 2016 LTI
Program, the Compensation Committee
assumed each executive would achieve the target level of performance under the RSAs and included one-fifth of the grant date fair
value of these shares in these comparative calculations since the Fiscal 2016 LTI Program is intended to cover all long-term incentive
grants to the participants through fiscal 2020. For Mr. Hrudicka, one-fourth of the grant date fair value of these shares is included
due to his mid-cycle hiring date.
In setting each
compensation component for our executive officers, the Compensation Committee considered the competitive market data, together
with other relevant factors, including the individual performance and experience of each executive, retention issues, internal
pay equity and consistency issues, the Company’s performance, expected future contributions of each executive, historical
compensation levels, tenure and industry conditions. These and other factors may affect whether one or more of the compensation
components for any of our executive officers falls outside of the benchmark range. In addition, the total direct compensation,
annual cash bonus and long-term incentive compensation for one or more of our executive officers could be above or below this target
range depending on the amounts earned under the performance-based awards.
Consistent with
our pay-for-performance philosophy, our executive compensation program is generally structured so that a significant amount of
each of our named executive officers’ compensation is variable compensation and “at risk” for non-payment if
we fail, or the executive fails, to meet performance targets.
Components of Fiscal 2017 Compensation
Salary
. Our
Compensation Committee establishes salaries on an annual basis, taking into account the guideline benchmark target, levels of responsibility,
prior experience and breadth of knowledge, potential for advancement, recent promotions, past performance, internal equity issues
and external pay practices. In setting fiscal 2017 salary levels, the Compensation Committee reviewed advice from FWC regarding
market practices and considered Mr. Duda’s recommendations for officers other than himself.
After deliberation,
the Compensation Committee decided to increase the salary of each of Messrs. Duda, Khoury, Kill and Koman by 3.0%. The Compensation
Committee set Mr. Hrudicka’s salary in connection with hiring him as Chief Financial Officer. The Compensation Committee
maintained Mr. Glandon’s salary at the same level for fiscal 2017 as fiscal 2016.
Annual Performance-Based
Bonuses
. In July 2016, our Compensation Committee established fiscal 2017 annual performance-based cash bonus opportunities
for certain of our executive officers after considering the guideline benchmark target, the individual performance and experience
of each executive, retention issues, internal pay equity and industry conditions. The Compensation Committee reviewed advice from
FWC regarding market practices and considered Mr. Duda’s recommendations for officers other than himself. In setting the
performance measures, our Compensation Committee considered, among other matters, past performance, the fiscal 2017 operating budget,
Methode’s strategic plan, product development matters and general economic conditions. The Compensation Committee determined
that 70% of the target annual performance-based cash bonus for Messrs. Duda, Hrudicka, Khoury and Koman would be based on a Company
pre-tax income measure (as adjusted for acquisitions and related expenses and divestitures and related gains/losses and expenses)
and 30% would be based on sales objectives and/or individual objectives. For Mr. Kill, 25% of the target annual performance-based
cash bonus would be based on the Company pre-tax income measure and 75% would be based on performance measures related to our Dabir
Surface medical device products described below. The maximum amount payable with respect to the Company pre-tax income measure
was set at 200% of the amount payable at the target level of performance in order to align the award with competitive practice
among the peer group. Due to Mr. Koman’s retirement, he was entitled to a pro-rata payment of his annual bonus based on his
retirement date and the performance achieved with respect to the measures described below. In connection with his hiring, Mr. Hrudicka
was guaranteed a minimum bonus of $150,000 for fiscal 2017. The Compensation Committee did not provide for an annual performance-based
bonus opportunity for Mr. Glandon for fiscal 2017.
Set forth below
is an outline of the annual performance-based cash bonus awards for fiscal 2017 performance, including the maximum bonus, the relevant
performance measures and the bonus paid. As a result of Mr. Koman’s retirement, the amounts set forth below have been adjusted
pro rata based on his September retirement date.
Executive
|
Maximum Bonus
|
Performance Measures and Amounts Payable*
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Bonus Earned
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Donald W. Duda
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$1,217,383
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(1) Achieve consolidated pre-tax income
(as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million
(maximum), with $250,638, $501,276 and $1,002,551 payable at threshold, target and maximum, respectively. The Company achieved
consolidated pre-tax income of $117.3 million and Mr. Duda earned $740,709.
(2) Achieve $60.0 million in certain
new business annual sales with a minimum established pre-tax margin ($214,832 payable). The Company achieved annual sales of $74.0
million for such new business.
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$955,541
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John R. Hrudicka
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$504,900
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(1) Achieve consolidated pre-tax income
(as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million
(maximum), with $103,950, $207,900 and $415,800 payable at threshold, target and maximum, respectively. The Company achieved consolidated
pre-tax income of $117.3 million and Mr. Hrudicka earned $307,203.
(2) Implement changes to the ERP system
related to foreign currency conversions ($89,100 payable). This performance measure was achieved.
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$396,303
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Joseph E. Khoury
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$408,020
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(1) Achieve consolidated pre-tax income
(as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million
(maximum), with $84,004, $168,008 and $336,016 payable at threshold, target and maximum, respectively. The Company achieved consolidated
pre-tax income of $117.3 million and Mr. Khoury earned $248,257.
(2) Achieve $60.0 million in certain
new business annual sales with a minimum established pre-tax margin ($72,004 payable). The Company achieved annual sales of $74.0
million for such new business.
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$320,261
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Theodore P. Kill
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$263,210
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(1) Achieve consolidated pre-tax income
(as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million
(maximum), with $26,321, $52,642 and $105,284 payable at threshold, target and maximum, respectively. The Company achieved consolidated
pre-tax income of $117.3 million and Mr. Kill earned $77,786.
(2) Achieve $2.0 million in revenue from
our Dabir Surface medical device products ($78,963 payable). This performance measure was not met.
(3) Obtain a reimbursement code for our
Dabir Surface medical device products ($78,963 payable). This performance measure was not met due to the Company’s decision
to defer acceptance of the reimbursement code until a later year. After reviewing the basis for this decision, the Compensation
Committee determined that it would be appropriate to approve the payout for fiscal 2017 with the understanding that Mr. Kill would
not be eligible to be rewarded for the same performance in the future.
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$156,749
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Douglas A. Koman
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$175,788
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(1) Achieve consolidated pre-tax income
(as adjusted for business acquisitions or dispositions) of $104.0 million (threshold), $109.5 million (target) and $125.9 million
(maximum), with $36,250, $72,499 and $144,999 payable at threshold, target and maximum, respectively. The Company achieved consolidated
pre-tax income of $117.3 million and Mr. Koman earned $107,137.
(2) Implement changes to the ERP system
related to foreign currency conversions ($31,171 payable). This performance measure was achieved.
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$138,307
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* Payouts are interpolated for performance
falling between established performance objectives.
Other Benefits
and Perquisites
. Our U.S.-based executive officers are eligible to participate in all of our employee benefit plans, such as
medical, dental, vision, group life, disability and, as applicable, our 401(k) savings plan (with a company contribution equal
to three percent (3%) of salary, subject to certain limitations), in each case,
on the same basis as our other employees.
Our U.S.-based executive officers are also provided deferred compensation opportunities through a non-qualified Deferred Compensation
Plan. We have never contributed any amounts to the Deferred Compensation Plan on behalf of any of the named executive officers.
For a description of the Deferred Compensation Plan, please see “Executive Compensation — Nonqualified Deferred Compensation,”
below. In addition, a few perquisites are provided to the named executive officers. Perquisites include a company car allowance,
professional association dues and provision for an annual physical exam.
Change of Control
Arrangements
. We have entered into change of control agreements with all of our named executive officers, other than Mr. Khoury,
that provide certain benefits upon termination in connection with a change of control event, including Mr. Hrudicka upon his hiring
in fiscal 2017. As a Lebanese resident, Mr. Khoury is entitled to certain payments in the event of his termination under the Lebanese
Labor Laws. These change of control agreements are designed to promote stability and continuity of senior management if a change
of control event were to occur, both of which are in the best interest of Methode and our shareholders. Our executives are not
entitled to a gross-up payment for excise taxes under our change of control agreements. In addition, our change of control agreements
are “double trigger” whereby the executives are only entitled to a severance payment if an executive is terminated
without cause or an executive terminates for good reason subsequent to a change of control. Our change of control provisions for
the named executive officers are summarized below under “Executive Compensation − Potential Payments Upon Termination
or Change of Control.”
Fiscal 2016 Long-Term Incentive Program
During fiscal 2016,
our Compensation Committee adopted a five-year, long-term incentive program consisting of a mix of 60% performance-based RSAs,
at target performance, and 40% time-based RSUs (the “Fiscal 2016 LTI Program”). Mr. Hrudicka received an award under
the Fiscal 2016 LTI Program in fiscal 2017. The number of RSAs earned will vary based on performance relative to established goals
for threshold, target and maximum performance. Performance will be based on the Company’s earnings before net interest, taxes,
fixed asset depreciation and intangible asset amortization (“EBITDA”) for fiscal 2020, subject to certain adjustments,
including adjustments for certain acquisitions and divestitures. The RSUs are subject to a vesting period based on continued service
with no RSUs vesting prior to the end of fiscal 2018, subject to acceleration in certain limited circumstances. The Compensation
Committee intends for the Fiscal 2016 LTI Program to cover all long-term equity incentive grants to the participants through fiscal
2020.
A key consideration
of the Compensation Committee in developing the Fiscal 2016 LTI Program was the success of the prior five-year, long-term incentive
program which concluded as of the end of fiscal 2015 (the “Fiscal 2011 LTI Program”). The Fiscal 2011 LTI Program included
performance-based RSAs, performance-based tandem cash awards, RSUs and stock options. During the five-year period of the Fiscal
2011 LTI Program, revenues grew at an annualized rate of 18.5%, which supported annualized pre-tax profit growth and diluted earnings
per share growth of 73.0% and 47.5%, respectively. In addition, we realized strong annualized total shareholder return of 34.0%
during the period. During this period, our industry-leading performance reflected the introduction of numerous new products and
technologies, the benefits of selective licensing and other business arrangements, the expansion of lower-cost manufacturing facilities
and further vertical integration The Compensation Committee concluded that the Fiscal 2011 LTI Program succeeded in focusing our
executive officers on growing the Company and appropriately rewarded our executive officers for creating value for our shareholders.
The Compensation Committee intends
for the Fiscal 2016 LTI Program to continue creating value for our shareholders using a long-term program that aligns pay with
performance and includes a strong retention feature. In structuring the Fiscal 2016 LTI Program, the Compensation Committee considered
the advice of FWC, its independent executive compensation consultant, regarding market practices, award mix and size, possible
performance criteria and alternative program structures. The Compensation Committee also considered Mr. Duda’s recommendations
for officers other than himself.
The Compensation
Committee considered multiple approaches for the Fiscal 2016 LTI program, including the use of annual grants and alternative performance
periods. After careful review, the Compensation Committee determined that the five-year program is appropriate after considering
the success of the Fiscal 2011 LTI Program discussed above, as well as the lengthy sales and product development cycles and significant
upfront capital requirements for many of the Company’s products. The Compensation Committee believes the five-year term will
focus our executive officers on the Company’s long-term objectives and retain our top executive talent over the period.
The Fiscal 2016
LTI Program is comprised entirely of equity awards in order to directly align the interests of our executive officers with those
of our shareholders. The Compensation Committee believes that the award mix of 60% performance-based RSAs, at target performance,
and 40% time-vested RSUs supports the Company’s operating performance and retention objectives, respectively. Unlike the
Fiscal 2011 LTI Program, stock options and performance-based tandem cash awards are not components of the Fiscal 2016 LTI Program,
in part due to accounting considerations, including the high costs of stock options relative to historical grants. Instead, the
Compensation Committee elected to place greater emphasis on the performance-based RSAs, which are subject to forfeiture if the
performance goals are not met.
The Compensation
Committee applied adjusted EBITDA as the RSA performance metric because it is one of the primary operating metrics tracked by the
Company and its shareholders. The adjusted EBITDA performance goals set forth below align with the Company’s targeted 9%
to 10% annual growth rate for EBITDA for the period. The adjustments to EBITDA for acquisitions and divestitures are designed to
mitigate unintended windfalls to management for transactions and also to safeguard management from unintended penalties for shareholder-friendly
transactions that negatively impact the fiscal 2020 performance results.
In general, the Compensation Committee
targeted the Fiscal 2016 LTI Program awards in the 50th to 75th percentile range of competitive practice, which aligned with the
Company’s relative positioning in terms of revenues, net income and market capitalization versus its peer group. In making
these benchmarking determinations, the Compensation Committee assumed that each executive would achieve the target level of performance
under the RSAs and included one-fifth of the grant date fair value of these shares in these comparative calculations. For Mr. Hrudicka,
one-fourth of the grant date fair value of these shares was included due to his mid-cycle hiring date. In determining the size
of the award to each of our executive officers, the Compensation Committee also considered other relevant factors, including the
individual performance and experience of each executive, internal pay equity and consistency issues, expected future contributions
of each executive, historical compensation levels and tenure.
The table below
sets forth the number of target RSAs and RSUs awarded to Messrs. Duda, Hrudicka, Khoury, Kill and Koman (“Target Shares”).
Mr. Glandon did not receive an award under the Fiscal 2016 LTI Program.
Executive
|
Number of Shares
|
Target RSAs*
|
RSUs
|
Donald W. Duda
|
180,000
|
120,000
|
John R. Hrudicka
|
48,000
|
32,000
|
Joseph E. Khoury
|
90,000
|
60,000
|
Theodore P. Kill
|
90,000
|
60,000
|
Douglas A. Koman
|
60,000
|
40,000
|
* The number of
shares earned will depend on performance and may be up to 150% of this number.
Performance-Based
RSAs
. The number of RSAs earned will vary based on performance relative to established goals for threshold performance, target
performance and maximum performance. The executive will not earn any shares if threshold performance is not met. Performance will
be based on the Company’s EBITDA for fiscal 2020, subject to certain adjustments. All positive EBITDA from acquisitions that
close during the term of the program and that are not accretive in fiscal 2020 will be excluded. All positive EBITDA from acquisitions
that close during fiscal 2019 or fiscal 2020 that are accretive in fiscal 2020 shall be included for purposes of determining fiscal
2020 EBITDA up to the target level and shall be excluded for purposes of determining fiscal 2020 EBITDA above the target level.
For any divestitures approved by the Board during the period, the final four quarters of EBITDA from the divested business will
be included in fiscal 2020 EBITDA. The performance measures and corresponding percentages of the target shares earned are set forth
below.
Performance Measure
|
Fiscal 2020 Adjusted EBITDA
|
Percentage of Target RSAs Earned*
|
Threshold Performance
|
$198.9 million
|
50%
|
Target Performance
|
$221.0 million
|
100%
|
Maximum Performance
|
$243.1 million
|
150%
|
* Payouts are interpolated
for performance falling between established performance measures.
Dividends will not
be paid on the RSAs until the shares have been earned. At such time, the executive will be entitled to a dividend equivalent payment
based on the dividends declared during the restricted period and the number of shares earned.
In the event of
an executive’s death or disability, he will earn all of the Target Shares. In the event of an executive’s qualified
retirement, the executive will be eligible to earn a prorated number of shares based on the number of months during the 60-month
performance period that have elapsed prior to retirement and Methode’s fiscal 2020 adjusted EBITDA. In connection with Mr.
Koman’s retirement, he is eligible to earn 28.3% of his Target Shares at target performance. In the event of a change of
control in which the successor company does not assume the RSAs, the executive will earn a prorated number of the Target Shares
based on the number of months during the 60-month performance period that have elapsed prior to the change of control. If the successor
company assumes the RSAs and, if the executive is terminated without cause or resigns for good reason within a period of time after
the transaction (two years for Messrs. Duda and Hrudicka and one year for Messrs. Khoury and Kill), then the executive will earn
a prorated number of the Target Shares based on the number of months during the 60-month performance period that have elapsed prior
to termination of employment. The Compensation Committee believes these provisions regarding the treatment of the RSAs in the event
of death, disability, retirement or a change of control reflect fair and reasonable treatment under these scenarios based on current
governance best practices and competitive standards.
Time-Based RSUs
.
The RSUs are subject to a vesting period based on continued service, with 30% vesting at the end of fiscal 2018, 30% at the end
of fiscal 2019, and 40% vesting at the end of fiscal 2020. Following vesting, the delivery of the stock underlying the RSUs will
be deferred until the earlier of the executive’s termination of employment or a change of control. Dividend equivalents will
not be paid on the RSUs until the units have vested. Following vesting and until the delivery of the underlying common stock, each
executive will be entitled to a quarterly payment in an amount equal to the aggregate per share cash dividend paid during the quarter
multiplied by the number of vested RSUs held by the executive.
In the event of
an executive’s death or disability, all unvested RSUs will become immediately and fully vested. In the event of an executive’s
qualified retirement, a prorated number of RSUs will vest based on the months during the 60-month vesting period that have elapsed
prior to retirement
.
In connection with Mr. Koman’s retirement, 11,333 of his RSUs vested. In the event of a change
of control in which the successor company does not assume the RSUs, all unvested RSUs will become immediately and fully vested.
If the successor company assumes the RSUs and, if the executive is terminated without cause or resigns for good reason within a
period of time after the transaction (two years for Messrs. Duda and Hrudicka and one year for Messrs. Khoury and Kill), then all
unvested RSUs will become immediately and fully vested. The Compensation Committee believes these provisions regarding the treatment
of the RSUs in the event of death, disability, retirement or a change of control reflect fair and reasonable treatment under these
scenarios based on current governance best practices and competitive standards.
Significant Policies and Procedures
Stock Ownership
Policy
. Our Compensation Committee considers stock ownership by management to be an important means of linking management’s
interests with those of our shareholders. After considering the importance of stock ownership, our Compensation Committee maintains
stock ownership guidelines for our executive officers. The requirements are subject to a phase-in period in the event of a new
hire or a promotion. Our Chief Executive Officer is expected to own stock with a value at least equal to six (6) times his base
salary and all other executive officers are expected to own stock with a value at least equal to two (2) times their base salary.
Vested and unvested time-based RSUs are included in the calculation of stock ownership for purposes of these guidelines. The value
of each executive officer’s common stock holdings is determined as of the end of each fiscal year based on the average daily
closing price of Methode’s common stock for such fiscal year. All of our named executive officers were in compliance with
our stock ownership guidelines for fiscal 2017.
Insider Trading
Policy
. Our Insider Trading Policy prohibits our directors, executive officers and certain key employees from engaging in certain
transactions involving our common stock, including options trading, short sales, derivative transactions and hedging transactions.
In addition, these directors, executive officers and key employees are prohibited from holding our common stock in a margin account
or otherwise pledging our common stock as collateral for a loan.
Policy With Respect
to Deductibility of Compensation
. Section 162(m) of the Code generally denies corporate tax deductions for annual compensation
exceeding $1 million paid to certain employees (generally the
chief executive officer and the three
other most highly compensated executive officers of a public company, but excluding the chief financial officer), unless that compensation
qualifies as performance-based compensation under a shareholder approved plan and meets certain other technical requirements. While
it is the general intention of our Compensation Committee to maximize deductibility, our Compensation Committee seeks to make decisions
that are in the best interest of Methode and its shareholders, even if those decisions do not result in full deductibility under
Section 162(m).
Clawback Policy
.
In the event we are required to restate our financial statements due to material noncompliance, our Incentive Compensation Recoupment
Policy requires us to recover from our current or former executive officers certain amounts of incentive-based compensation paid
within the prior three years.
COMPENSATION COMMITTEE REPORT
Our Compensation
Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussion,
our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this
proxy statement.
|
COMPENSATION COMMITTEE
|
|
Martha Goldberg Aronson, Chair
|
|
Warren L. Batts
Darren M. Dawson
|
|
Isabelle C. Goossen
|
|
Paul G. Shelton
|
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table
sets forth certain summary information regarding the compensation awarded to, earned by or paid by us to, or for the account of,
our Chief Executive Officer, our Chief Financial Officer, our retired Chief Financial Officer and our three other most highly compensated
executive officers (the “named executive officers”) for the three fiscal years ended April 29, 2017.
Name and
Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus ($)(1)
|
Stock Awards
($) (2)
|
Option Awards
($) (2)
|
Non-Equity Incentive Plan
Compensation
($)
|
All Other
Compensation
($) (7)
|
Total
($)
|
|
|
|
|
RSAs(3)
|
RSUs(4)
|
|
Tandem Cash (5)
|
Annual
Bonus (6)
|
|
|
Donald W. Duda
President and Chief Executive Officer
|
2017
|
716,108
|
--
|
--
|
--
|
--
|
--
|
955,541
|
138,169
|
1,809,818
|
2016
|
695,588
|
--
|
6,080,400
|
4,053,600
|
--
|
--
|
572,102
|
311,114
|
11,712,805
|
2015
|
675,000
|
115,000
|
--
|
--
|
599,600
|
3,487,200
|
1,147,500
|
429,130
|
6,453,430
|
John R. Hrudicka
Chief Financial Officer and
Vice President,
Corporate Finance (8)
|
2017
|
346,154
|
--
|
1,675,200
|
1,116,800
|
--
|
--
|
396,303
|
12,481
|
3,546,938
|
|
|
|
|
|
|
|
|
|
|
Joseph E. Khoury
Senior Vice President (9)
|
2017
|
362,518
|
--
|
--
|
--
|
--
|
--
|
320,261
|
14,482
|
697,261
|
2016
|
359,600
|
--
|
3,040,200
|
2,026,800
|
--
|
--
|
184,127
|
90,221
|
5,700,948
|
2015
|
352,324
|
65,000
|
--
|
--
|
179,880
|
1,046,160
|
401,676
|
107,330
|
2,152,370
|
Theodore P. Kill, Vice President,
Worldwide Automotive Sales and
President of Dabir Surfaces
|
2017
|
316,720
|
--
|
--
|
--
|
--
|
--
|
156,749
|
37,760
|
511,229
|
2016
|
310,034
|
--
|
2,704,500
|
1,803,000
|
--
|
--
|
191,079
|
113,866
|
5,122,478
|
2015
|
295,000
|
65,000
|
--
|
--
|
179,880
|
1,046,160
|
230,100
|
123,880
|
1,940,020
|
Timothy R. Glandon
Vice President
|
2017
|
295,000
|
--
|
--
|
--
|
--
|
--
|
--
|
31,455
|
326,455
|
2016
|
295,000
|
--
|
--
|
--
|
--
|
--
|
--
|
103,952
|
398,952
|
2015
|
295,000
|
50,000
|
--
|
--
|
179,880
|
1,046,160
|
272,580
|
119,063
|
1,962,683
|
Douglas A. Koman
Retired Chief Financial Officer and
Vice President, Corporate Finance (8)
|
2017
|
197,363
|
--
|
--
|
--
|
--
|
--
|
138,307
|
13,258
|
348,928
|
2016
|
365,855
|
--
|
2,026,800
|
1,351,200
|
--
|
--
|
204,539
|
223,893
|
4,172,287
|
2015
|
355,000
|
90,000
|
--
|
--
|
239,840
|
1,394,880
|
362,165
|
148,817
|
2,590,702
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects discretionary cash bonuses awarded in early fiscal 2015 by the Compensation Committee in light of the Company’s strong fiscal 2014 performance.
|
(2)
|
Reflects the fair value at the date of grant. The value is calculated in accordance with Accounting Standards Codification Topic 718, Stock Compensation (“ASC 718”). Details of the assumptions used in valuing the awards are set forth in Note 4 to our audited financial statements included in our Annual Report on Form 10-K for such fiscal year.
|
(3)
|
These performance-based RSAs are eligible for vesting based on fiscal 2020 EBITDA relative to established goals for threshold, target and maximum performance. At the time of the grants, we deemed achievement of target performance probable, and therefore the grant date fair values reflected above were calculated on that basis. If, instead, the RSA amounts had been calculated assuming the Company would achieve maximum performance, the grant date fair values for these RSAs would have been as follows: Mr. Duda, $9,120,600; Mr. Hrudicka, $2,512,800; Mr. Khoury, $4,560,300; Mr. Kill, $4,056,750 and Mr. Koman, $3,040,200.
|
(4)
|
These RSUs are subject to a vesting period based on continued service, with 30% vesting at the end of fiscal 2018, 30% vesting at the end of fiscal 2019 and 40% vesting at the end of fiscal 2020. The RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode.
|
(5)
|
Reflects amounts paid under the performance-based Tandem Cash Awards under the Fiscal 2011 LTI Program.
|
(6)
|
Amounts reflect annual performance-based cash bonuses.
|
(7)
|
Amounts included in All Other Compensation reflect the following for fiscal 2017:
|
Executive
|
Vested
RSU Dividend Equivalents ($)
|
401(k) Contribution ($)
|
Life Insurance
($)
|
Car Allowance ($)
|
Executive Physical ($)
|
Gift Card ($)
|
Mr. Duda
|
112,826
|
7,950
|
3,564
|
9,600
|
4,179
|
50
|
Mr. Hrudicka
|
0
|
7,950
|
428
|
0
|
4,053
|
50
|
Mr. Khoury
|
10,800
|
0
|
0
|
0
|
3,682
|
0
|
Mr. Kill
|
10,800
|
7,950
|
3,048
|
12,000
|
3,912
|
50
|
Mr. Glandon
|
10,800
|
7,950
|
552
|
8,400
|
3,753
|
50
|
Mr. Koman
|
3,600
|
4,310
|
1,348
|
4,000
|
0
|
0
|
|
In addition, for Mr. Koman, includes payments of $5,417 pursuant to the Consulting Agreement described in footnote (8) below.
|
(8)
|
Effective as of July 25, 2016, Mr. Koman resigned as Chief Financial Officer and Mr. Hrudicka was hired and appointed to such office. Mr. Koman retired as an employee of the Company on September 15, 2016. On September 16, 2016, the Company and Mr. Koman entered into a Consulting Agreement pursuant to which Mr. Koman agreed to provide consulting services to the Company and was paid $250 per hour for such services. This Consulting Agreement terminated on July 28, 2017.
|
(9)
|
Mr. Khoury is a Lebanese resident and we paid
Mr. Khoury’s cash compensation in Euros. For purposes of the Summary Compensation Table, this cash compensation
was converted from Euros to U.S. Dollars using the average exchange rate of 1.3048 for fiscal 2015; 1.1085 for fiscal 2016; and
1.0926 for fiscal 2017.
|
Grants of Plan-Based
Awards
The following
table sets forth certain information regarding grants of plan-based awards to the named executive officers during the fiscal year
ended April 29, 2017.
Name
|
Grant
Date
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
|
Estimated Future Payouts Under Equity Incentive Plan Awards(2)
|
All Other Stock Awards: Number of Shares of Stock or Units(3)
|
Grant
Date Fair Value of Stock and Option Awards
($) (4)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
Donald W. Duda
|
7/12/2016
|
465,470
|
716,108
|
1,217,383
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
John R. Hrudicka
|
7/25/2016
|
193,050
|
297,000
|
504,900
|
24,000
|
48,000
|
72,000
|
32,000
|
2,792,000
|
|
|
|
|
|
|
|
|
|
Joseph E. Khoury
|
7/12/2016
|
156,008
|
240,012
|
408,020
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
Theodore P. Kill
|
7/12/2016
|
184,247
|
210,568
|
263,210
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
Timothy R. Glandon
|
7/12/2016
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
Douglas A.
|
7/12/2016
|
67,376
|
103,653
|
175,788
|
--
|
--
|
--
|
--
|
--
|
Koman
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects annual performance-based cash bonus awards pursuant to the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (the “2014 Plan”). The executive officers’ bonus amounts are based on achieving certain performance measures. For purposes of this table, for any award components that include only one level of performance, we have included such amount in each of the threshold, target and maximum columns. For Mr. Koman, the amounts set forth above have been adjusted pro rata based on his retirement date. Amounts earned in fiscal 2017 by the executive officers under this award are reported in “Compensation Discussion and Analysis” and in the column titled “Non-Equity Incentive Plan Compensation-Annual Bonus” in the “Summary Compensation Table.” Details regarding these awards, including the relevant performance measures, are set forth in “Compensation Discussion and Analysis.”
|
(2)
|
|
Reflects restricted stock awards granted pursuant to the 2014 Plan which are eligible for vesting based on the achievement of certain financial targets for fiscal 2020 EBITDA. The unvested restricted stock awards are not entitled to payment of dividends, provided that at the time the shares vest, the executive is entitled to a payment based on the dividends declared during the restricted period and the number of shares earned.
|
(3)
|
|
Reflects restricted stock units granted pursuant to the 2014 Plan. These restricted stock units vest 30% on each of April 28, 2018 and April 27, 2019 and 40% on May 2, 2020, provided that the named executive officer remains a Methode employee. The unvested restricted stock units are not entitled to payment of dividends until they vest. The restricted stock units are not eligible to be converted into common stock until a change in control or the executive officer leaves Methode.
|
(4)
|
|
Amounts represent the fair value as of the date of grant calculated in accordance with ASC 718. Details of the assumptions used in valuing these options are set forth in Note 4 to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 29, 2017.
|
Alternative Summary Compensation Table
As discussed in “Compensation
Discussion and Analysis-Fiscal 2016 Long-Term Incentive Program,” in fiscal 2016, our Compensation Committee adopted a five-year,
long-term equity incentive program consisting of a mix of 60% performance-based RSAs, at target performance, and 40% time-based
RSUs (the “Fiscal 2016 LTI Program”). Mr. Hrudicka received an award under the Fiscal 2016 LTI Program in fiscal 2017.
The number of RSAs earned will vary based on performance relative to established goals for threshold, target and maximum performance.
Performance will be based on the Company’s earnings before net interest, taxes, fixed asset depreciation and intangible asset
amortization (“EBITDA”) for fiscal 2020, subject to certain adjustments for acquisitions and divestitures. The RSUs
are subject to vesting based on continued service with no RSUs vesting prior to the end of fiscal 2018, subject to acceleration
in certain limited circumstances. The Compensation Committee intends for the Fiscal 2016 LTI Program to cover all long-term equity
incentive grants to the participants through fiscal 2020.
A key consideration
of the Compensation Committee in developing the Fiscal 2016 LTI Program was the success of the prior five-year, long-term incentive
program adopted in fiscal 2011 (the “Fiscal 2011 LTI Program”). The Fiscal 2011 LTI Program included performance-based
RSAs, performance-based tandem cash awards, RSUs and stock options. The vesting of the performance-based RSAs and tandem cash awards
were based on the achievement of internal enterprise value hurdles at the end of fiscal 2015. The time-based RSUs vested annually
through fiscal 2015. Stock options were granted annually from fiscal 2011 through fiscal 2015.
Under the SEC’s
proxy statement disclosure rules, the grant date fair value of the number of RSAs eligible for vesting at the target level of performance
and the total number of RSUs awarded under the Fiscal 2016 LTI Program has been reported in the Summary Compensation Table above
in fiscal 2016 for Messrs. Duda, Khoury, Kill and Koman and in fiscal 2017 for Mr. Hrudicka. The amounts earned pursuant to the
performance-based tandem cash awards under the Fiscal 2011 LTI Program have been reported in the Summary Compensation Table above
in fiscal 2015.
The Company is presenting
the following Alternative Summary Compensation Table in order to illustrate how the Compensation Committee views annualized total
compensation under the Fiscal 2016 LTI Program and the Fiscal 2011 LTI Program. The Compensation Committee believes that due to
the front-loaded nature of the RSA and RSU awards and the reporting of the total tandem cash award values in fiscal 2015, the compensation
amounts disclosed in the Summary Compensation Table for our named executive officers other than Mr. Hrudicka overstate compensation
attributable to fiscals 2015 and 2016 and understate compensation attributable to fiscal 2017. For Mr. Hrudicka, the Compensation
Committee believes that the compensation amounts disclosed in the Summary Compensation Table overstate his fiscal 2017 compensation.
The values in this
table differ from the values disclosed in the Summary Compensation Table on page 29 of this proxy statement in that the value of
the RSAs and the RSUs have been annualized equally over the respective five-year periods of the programs. For Mr. Hrudicka, the
value of the grants has been annualized over four years due to his mid-cycle hiring date. In addition, the amounts earned under
the tandem cash awards and reported entirely as fiscal 2015 compensation in the Summary Compensation Table have been annualized,
with one-fifth of the value reported in fiscal 2015. In both the Summary Compensation Table and the Alternative Summary Compensation
Table, the values for the RSA and RSU awards reflect grant date fair values calculated in accordance with the applicable accounting
rules. The Alternative Summary Compensation Table below has been revised as described and does not comply with SEC rules for the
Summary Compensation Table. Shareholders should not view this alternative table as a substitute for the Summary Compensation Table
on page 30 and should review this Alternative Summary Compensation Table together with the Summary Compensation Table and other
compensation tables contained herein that have been prepared in accordance with SEC rules.
Alternative Summary Compensation Table
Name and
Principal Position
|
Fiscal
Year
|
Salary ($)
|
Bonus ($) (1)
|
Annualized Value of
Stock Awards ($)(2)
|
Option Awards ($)(3)
|
Non-Equity Incentive Plan Compensation ($)
|
All
Other Compensation ($)(10)
|
Total ($)
|
|
|
|
|
RSAs
|
RSUs
|
|
Annualized Value of Tandem Cash (8)
|
Annual
Bonus (9)
|
|
|
Donald W. Duda
President and Chief Executive Officer
|
2017
|
716,108
|
--
|
1,216,080(4)
|
810,720(5)
|
--
|
--
|
948,700
|
138,169
|
3,836,618
|
2016
2015
|
695,598
675,000
|
--
115,000
|
1,216,080(4)
388,000(6)
|
810,720(5)
194,000(7)
|
--
599,600
|
--
697,440
|
572,102
1,147,500
|
311,114
429,130
|
3,605,614
4,245,670
|
John R. Hrudicka
Chief Financial Officer and Vice President,
Corporate Finance (11)
|
2017
|
346,154
|
--
|
418,800(4)
|
279,200(5)
|
--
|
--
|
396,303
|
12,481
|
1,452,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph E. Khoury
Senior Vice President (12)
|
2017
|
362,518
|
--
|
608,040(4)
|
405,360(5)
|
--
|
--
|
320,261
|
14,482
|
1,710,661
|
2016
2015
|
359,600
352,324
|
--
65,000
|
608,040(4)
116,400(6)
|
405,360(5)
58,200(7)
|
--
179,880
|
--
209,232
|
184,127
401,676
|
90,221
107,330
|
1,647,348
1,490,042
|
Theodore P. Kill
Vice President, Worldwide Automotive Sales and
President of Dabir Surfaces
|
2017
|
316,720
|
--
|
540,900(4)
|
360,600(5)
|
--
|
--
|
156,749
|
37,760
|
1,412,279
|
2016
|
310,034
|
--
|
540,900(4
|
360,600(5)
|
--
|
--
|
191,079
|
113,866
|
1,516,479
|
2015
|
295,000
|
65,000
|
116,400(6)
|
58,200(7)
|
179,880
|
209,232
|
230,100
|
123,880
|
1,277,692
|
Timothy R. Glandon
Vice President
|
2017
|
295,000
|
--
|
--
|
--
|
--
|
--
|
--
|
31,455
|
326,455
|
2016
2015
|
295,000
295,000
|
--
50,000
|
--
116,400(6)
|
--
58,200(7)
|
--
179,880
|
--
209,232
|
--
272,580
|
103,952
119,063
|
398,952
1,300,355
|
Douglas A. Koman
Retired Chief Financial Officer and
Vice President, Corporate Finance (11)
|
2017
|
197,363
|
--
|
405,360(4)
|
270,240(5)
|
--
|
--
|
138,307
|
13,258
|
1,024,528
|
2016
|
365,855
|
--
|
405,360(4)
|
270,240(5)
|
--
|
--
|
204,539
|
223,893
|
1,469,887
|
2015
|
355,000
|
90,000
|
155,200(6)
|
77,600(7)
|
239,840
|
278,976
|
362,165
|
148,817
|
1,707,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects discretionary cash bonuses awarded in early fiscal 2015 by the Compensation Committee in light of the Company’s strong fiscal 2014 performance.
|
|
|
(2)
|
Reflects the annualized fair value at the date of grant. See footnotes (2), (3) and (4) of the Summary Compensation Table for additional information.
|
|
|
(3)
|
Reflects the fair value at the date of grant. See footnote (2) to the Summary Compensation Table for additional information.
|
|
|
(4)
|
These performance-based RSAs are eligible for vesting based on fiscal 2020 EBITDA relative to established goals for threshold, target and maximum performance. The grant date fair values reflected above were calculated assuming the achievement of the target level of performance.
|
|
|
(5)
|
These RSUs are subject to vesting based on continued service, with 30% vesting at the end of fiscal 2018, 30% vesting at the end of fiscal 2019 and 40% vesting at the end of fiscal 2020. The RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode.
|
|
|
(6)
|
These performance-based RSAs vested based on fiscal 2015 internal enterprise value relative to established goals for threshold and target performance.
|
|
|
(7)
|
These RSUs vested 20% each year on the last day of Methode’s fiscal year from fiscal 2011 through fiscal 2015. The vested RSUs are not eligible to be converted into common stock until a change of control or the executive officer leaves Methode.
|
|
|
(8)
|
Reflects the annualized amounts paid under the performance-based tandem cash awards under the Fiscal 2011 LTI Program.
|
|
|
(9)
|
Amounts reflect annual performance-based cash bonuses.
|
|
|
(10)
|
See
footnote (7) of the Summary Compensation Table for information regarding the amounts included in All Other Compensation.
|
|
|
(11)
|
See
footnote (8) of the Summary Compensation Table for information regarding the hiring of Mr. Hrudicka and Mr. Koman’s
retirement.
|
|
|
(12)
|
Mr.
Khoury is a Lebanese resident and we paid Mr. Khoury’s cash compensation in Euros. For purposes of the Alternative
Summary Compensation Table, this cash compensation was converted from Euros to U.S. Dollars. See footnote (9) of
the Summary Compensation Table for information regarding the exchange rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Equity Awards at Fiscal
Year-End
The following table
sets forth certain information regarding the outstanding equity awards of the named executive officers at April 29, 2017.
Name
|
Option Awards
|
Stock Awards
|
Number of Securities Underlying Unexercised
Options
(#)
Exercisable
|
Number of Securities Underlying Unexercised
Options
(#)
Unexercisable
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)(2)
|
Market Value of Share of Units of Stock That Have Not Vested ($)(3)
|
Equity Incentive Plan Awards: Numbers of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(4)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($)(3)
|
Donald W. Duda
|
26,667
|
13,333
|
(1)
|
37.01
|
7/7/2024
|
120,000
|
5,346,000
|
270,000
|
12,028,500
|
John R. Hrudicka
|
--
|
--
|
|
--
|
--
|
32,000
|
1,425,600
|
72,000
|
3,207,600
|
Joseph E. Khoury
|
8,000
|
4,000
|
(1)
|
37.01
|
7/7/2024
|
60,000
|
2,673,000
|
135,000
|
6,014,250
|
Theodore P. Kill
|
--
|
--
|
|
--
|
--
|
60,000
|
2,673,000
|
135,000
|
6,014,250
|
Timothy R. Glandon
|
8,000
|
4,000
|
(1)
|
37.01
|
7/7/2024
|
--
|
--
|
--
|
--
|
Douglas A. Koman
|
--
|
--
|
|
--
|
--
|
--
|
--
|
25,499
|
1,135,980
|
(1)
|
These options were granted July 7, 2014. One-third of these options vest on each of the first, second and third anniversaries of the grant date.
|
(2)
|
These RSUs are subject to vesting based on continued service, with 30% vesting at the end of fiscal 2018, 30% vesting at the end of fiscal 2019 and 40% vesting at the end of fiscal 2020.
|
(3)
|
Calculated based on the closing price of the Company’s common stock on April 28, 2017 of $44.55 per share.
|
(4)
|
These performance-based restricted stock awards are eligible for vesting based on the achievement of certain financial targets for fiscal 2020 EBITDA.
|
Option Exercises and Stock Vested
The following table
sets forth certain information regarding option exercises by the named executive officers and the vesting of restricted stock units
during fiscal 2017.
Name
|
Option Awards
|
Stock Awards
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise
($) (1)
|
Number of Shares Acquired on Vesting (#) (2)
|
Value Realized on Vesting
($) (3)
|
Donald W. Duda
|
40,000
|
841,938
|
--
|
--
|
John R. Hrudicka
|
--
|
--
|
--
|
--
|
Joseph E. Khoury
|
16,000
|
429,609
|
--
|
--
|
Theodore P. Kill
|
12,000
|
226,452
|
--
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--
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Timothy R. Glandon
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12,000
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236,381
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--
|
--
|
Douglas A. Koman
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42,666
|
615,230
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11,333
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393,255
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(1)
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|
Calculated based on market value of Methode’s common stock at the time of exercise, minus the exercise cost.
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(2)
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Reflects RSUs awarded pursuant to our Fiscal 2016 LTI Program. These shares vested in connection with Mr. Koman’s retirement in September 2016.
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(3)
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Calculated based on the closing price of Methode’s common stock on September 15, 2016 of $34.70 per share.
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Nonqualified Deferred Compensation
The following table
sets forth certain information regarding deferred compensation with respect to the named executive officers for fiscal 2017.
Name
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Executive Contributions in Last Fiscal Year
($) (1)
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Registrant Contributions in Last Fiscal
Year
($)
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Aggregate Earnings in Last
Fiscal Year
($)
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Aggregate Withdrawals/ Distributions
($) (2)
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Aggregate Balance at Last Fiscal Year-End
($)
|
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Donald W. Duda
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0
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0
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90
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0
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31,071
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John R. Hrudicka
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0
|
0
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0
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0
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0
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Joseph E. Khoury
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0
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0
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0
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0
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0
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Theodore P. Kill
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29,450
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0
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143,874
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0
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1,203,393
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Timothy R. Glandon
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0
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0
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60,473
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(122,408)
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423,416
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Douglas A. Koman
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0
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0
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255,479
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(143,295)
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1,431,539
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(1)
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All executive contributions were reported as compensation in the “Summary Compensation Table” under the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns, depending on the source of the executive contribution.
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(2)
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Reflects distributions in accordance with the terms of each executive’s deferral election.
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The Methode Electronics,
Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) allows a select group of management
and highly compensated employees to defer up to 75% of their annual base salary, 100% of their annual bonus, and/or 100% of their
tandem cash award, if applicable, with an aggregate minimum deferral of $3,000. The minimum period of deferral is three years.
Participants are immediately 100% vested.
In addition to employee-directed
deferrals, we may make contributions to the Deferred Compensation Plan to make up for limits applicable under our qualified plans
and may make additional discretionary contributions as well. Participants vest in company contributions in accordance with the
schedule set forth in the applicable agreement or plan governing such contributions. We made no contributions to the Deferred Compensation
Plan in fiscal 2017.
Participants may
elect from a list of certain mutual funds to determine any amounts credited or debited from their accounts, although we are under
no obligation to invest the deferred amounts in any specified fund. This list is made available to all participants and account
balances are credited or debited based on the current market rates for these funds. Participants may reallocate account balances
and/or future deferrals on a daily basis.
Participants are
entitled to receive a distribution from their account balances at the earlier of the end of the elected deferral period or retirement,
disability, termination of employment or a change of control. Accounts are distributed in a lump sum or, in certain circumstances,
in installments over a period of up to 15 years. Participants can also petition the Compensation Committee to receive a full or
partial payout from the Deferred Compensation Plan in the event of an unforeseeable financial emergency.
Potential Payments
Upon Termination or a Change of Control
In the event our
named executive officers are terminated or Methode undergoes a change of control, our named executive officers are entitled to
certain payments under their change of control agreements, our stock plans and certain other benefit plans.
The following table
summarizes payments payable to our named executive officers upon a change in control or the executive’s death, disability
or qualified retirement under our outstanding equity and cash bonus awards.
Type of Award
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Termination Scenario
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Change in Control
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Death or Disability
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Qualified Retirement(1)
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Annual Performance-Based Cash Bonus
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If the successor company does not assume the award, or if the successor company assumes the award and the executive is terminated without cause or resigns for good reason prior to payment, the executive will be entitled to the bonus payable assuming achievement of the target level of performance.
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Entitled to the bonus payable assuming achievement of the target level of performance.
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Eligible to earn a prorated bonus based on the number of months elapsed since the start of the fiscal year and the actual performance achieved as of the end of such fiscal year.
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Restricted Stock Units
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If the successor company does not assume the RSUs, or if the successor company assumes the RSUs and the executive is terminated without cause or resigns for good reason within a period of time after the transaction (two years for Messrs. Duda and Hrudicka and one year for Messrs. Khoury and Kill), all unvested RSUs will become immediately and fully vested.
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All unvested RSUs will become immediately and fully vested.
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A prorated number of RSUs will vest based on the months elapsed since May 3, 2015.
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Restricted Stock Awards
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If the successor company does not assume
the RSAs, or if the successor company assumes the RSAs and the executive is terminated without cause or resigns for good reason
within a period of time after the transaction (two years for Messrs. Duda and Hrudicka and one year for Messrs. Khoury and Kill),
the executive will earn a prorated number of the RSAs eligible for vesting assuming the achievement of the target level of performance
based on the number of months elapsed since May 3, 2015.
In either case, the executive is also
entitled to a payment based on the dividends declared during the restricted period and the number of shares vested.
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The number of RSAs eligible for vesting
assuming the achievement of the target level of performance will become immediately and fully vested.
The executive is also entitled to a payment
based on the dividends declared during the restricted period and the number of shares vested.
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Eligible to earn a prorated number of
shares based on the number of months elapsed since May 3, 2015 and Methode’s fiscal 2020 adjusted EBITDA.
The executive is also entitled to a payment
based on the dividends declared during the restricted period and the number of shares vested.
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Stock Options
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Immediate vesting of outstanding option awards.
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Immediate vesting of all outstanding option awards.
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Immediate vesting of all outstanding option awards.
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(1)
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An executive’s qualified retirement occurs at or after age 65, or after age 55 with our consent.
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Messrs. Duda, Hrudicka,
Kill and Glandon are parties to change of control agreements with the Company. Mr. Khoury is not a party to a change of control
agreement. Pursuant to these change of control agreements, if within two years of a change of control or during a period pending
a change of control, we terminate the executive’s employment without good cause or the executive voluntarily terminates his
employment for good reason, the executive is entitled to the following:
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a lump sum payment in an amount equal to three times (two times in
the case of Messrs. Hrudicka, Kill and Glandon) the executive’s annual salary;
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a lump sum payment equal to three times (two times in the case of
Messrs. Hrudicka, Kill and Glandon) the lesser of: (a) the executive’s target bonus amount for the fiscal year in which executive’s
employment termination occurs, or (b) the bonus the executive earned in the prior fiscal year; and
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continued participation in our welfare benefit plans for three years
(two years in the case of Messrs. Hrudicka, Kill and Glandon) or until the executive becomes covered under other welfare benefit
plans providing substantially similar benefits.
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The following table
shows the potential amounts payable to our currently serving named executive officers upon termination or a change of control of
Methode. The information shown for Mr. Koman reflects the compensation received in connection with his qualified retirement in
September 2016. The amounts shown assume that such termination was effective as of April 28, 2017 (the last trading day of our
2017 fiscal year), and reflect the price of our common stock on such date ($44.55) and reflects awards outstanding and unvested
on such date. The table below does not reflect amounts payable to our named executive officers pursuant to plans or arrangements
that are available generally to salaried employees, such as payments under the 401(k) Plan, the life insurance plan, the disability
insurance plan and the vacation pay policy, payment of accrued base salary and accrued bonuses and, in the case of Mr. Khoury,
payments under the Lebanese Labor Laws. In addition, the table does not reflect the distribution of each officer’s account
balance in our Deferred Compensation Plan or the delivery of common stock underlying outstanding vested restricted stock units.
For purposes of this table, we have assumed that our Compensation Committee has elected to accelerate all awards in each instance
in which acceleration is subject to the discretion of our Compensation Committee.
Name
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Termination Scenario
(on 4/28/17)
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Salary and Bonus Severance
($)
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Payment of Annual Performance-Based Bonus
($)
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Vesting of Option Awards
($)
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Vesting of RSUs ($)
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Vesting of RSAs ($)(1)
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Health and Welfare Benefits
($) (2)
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Donald W. Duda
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Upon Change of Control (3)
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--
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716,108
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100,533
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5,346,000
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8,132,400
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--
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Resignation for Good Reason/Termination Without Cause Following Change of Control (4)
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4,296,648
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--
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--
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--
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--
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71,021
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Death or Disability
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--
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716,108
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100,533
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5,346,000
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8,132,400
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--
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Qualified Retirement
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--
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716,108
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100,533
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2,138,400
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3,363,120
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--
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John R. Hrudicka
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Upon Change of Control (3)
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--
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297,000
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--
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1,425,600
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2,151,360
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--
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Resignation for Good Reason/Termination Without Cause Following Change of Control (4)
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1,929,462
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--
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--
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--
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--
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71,021
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Death or Disability
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--
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297,000
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--
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1,425,600
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2,151,360
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--
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Qualified Retirement
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--
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297,000
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--
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570,240
|
547,560
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--
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Joseph E. Khoury
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Upon Change of Control (3)
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--
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240,012
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30,160
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2,673,000
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4,066,200
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--
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Resignation for Good Reason/ Termination Without Cause Following Change of Control
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--
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--
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--
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--
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--
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--
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Death or Disability
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--
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240,012
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30,160
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2,673,000
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4,066,200
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--
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Qualified Retirement
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--
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240,012
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30,160
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1,069,200
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1,681,560
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--
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Theodore P. Kill
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Upon Change of Control (3)
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--
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210,568
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--
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2,673,000
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4,066,200
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--
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Resignation for Good Reason/ Termination Without Cause Following Change of Control (4)
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1,054,576
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--
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--
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--
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--
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15,480
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Death or Disability
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--
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210,568
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--
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2,673,000
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4,066,200
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--
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Qualified Retirement
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--
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210,568
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--
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1,069,200
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1,681,560
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--
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Timothy R. Glandon
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Upon Change of Control (3)
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--
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--
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30,160
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--
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--
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--
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Resignation for Good Reason/ Termination Without Cause Following Change of Control (4)
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590,000
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--
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--
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--
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--
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47,347
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Death, Disability
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--
|
--
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30,160
|
--
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--
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--
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Qualified Retirement
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--
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--
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30,160
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--
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--
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--
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Douglas A. Koman
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Qualified Retirement
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--
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138,307
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26,894
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393,255
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794,047
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--
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(1)
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For purposes of this table, we have assumed that the target performance level will be achieved with respect to the RSAs. Amounts include an amount equal to the cash dividends declared during the period from the date of grant thru April 28, 2017, multiplied by the number of RSAs vested
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(2)
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Reflects the estimated lump-sum present value of all future premiums which will be paid on behalf of the executive under our health and welfare benefit plans.
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(3)
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Includes amounts payable where the successor company assumed an award and then terminated an executive without cause or the executive resigned with good reason.
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(4)
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These amounts are in addition to amounts payable under the preceding row “Upon Change of Control.”
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OTHER INFORMATION
Section 16(a) Beneficial Ownership
Reporting Compliance
Under the securities
laws, our directors and executive officers are required to report their initial ownership of our common stock and any subsequent
changes in that ownership to the SEC. Specific due dates for these reports have been established and we are required to disclose
in this proxy statement if a director or executive officer filed a late report. During fiscal 2017, all such reports were timely
filed. In making these disclosures, we have relied solely on written representations of our directors and executive officers and
copies of the reports filed with the SEC.
Availability
of Annual Report
Methode
is providing its Annual Report to shareholders who receive this proxy statement. Methode will provide copies of the Annual Report
to brokers, dealers, banks, voting trustees and their nominees for the benefit of their beneficial owners of record. Additional
copies of this proxy statement, the Annual Report and Methode’s Annual Report on Form 10-K for the fiscal year ended
April 29, 2017 are available, without charge, upon written request to Methode Electronics, Inc., 7401 West Wilson Avenue, Chicago,
Illinois 60706, Attention: Chief Financial Officer. You may also review Methode’s SEC filings by visiting our website at
www.methode.com
.
Shareholder Proposals and Director
Nominations
If you wish to submit
a shareholder proposal for inclusion in our proxy materials for our 2018 Annual Meeting, our Corporate Secretary must receive your
proposal no later than April 3, 2018. Your proposal must be in writing and must comply with the proxy rules of the SEC.
Our advance notice
by-law provisions require that any shareholder proposal or director nomination to be presented from the floor of our 2018 Annual
Meeting must be received by our Corporate Secretary not later than the 60th day nor earlier than the 90th day prior to September
14, 2018 (the first anniversary of the preceding year’s annual meeting). If the date of our 2018 Annual Meeting is more than
30 days before or more than 60 days after September 14, 2018, shareholder proposals must be delivered no earlier than the 90th
day prior to such annual meeting date and not later than the later of the 60th day prior to such annual meeting date or the 10th
day following our public announcement of the meeting date for such annual meeting. Any shareholder proposal must be, under
law, an appropriate subject for shareholder action in order to be brought before the meeting. In addition, in order to present
a shareholder proposal or nominate a director at our 2018 Annual Meeting, the shareholder must satisfy certain other requirements
set forth in our Amended and Restated By-Laws. Shareholder proposals and director nominations should be directed to the Corporate
Secretary of Methode Electronics, Inc. at 7401 West Wilson Avenue, Chicago, Illinois 60706.
Other Matters
Neither our Board
of Directors nor management knows of any other business that will be presented at the annual meeting. Should any other business
properly come before the annual meeting, the persons named in the proxy will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
Walter J. Aspatore
Chairman
Chicago, Illinois
August 1, 2017
METHODE
ELECTRONICS, INC.
7401 WEST WILSON AVENUE
CHICAGO, IL 60706-4548
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VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions for electronic delivery of information up until 11:59 P.M. Eastern Time the
day before the annual 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.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
Methode
Electronics, Inc. encourages you to take advantage of convenient ways to vote these shares. If voting by proxy, you may grant
a proxy by mail, or choose one of the two methods described below. Your telephone or Internet proxy authorizes the named proxies
to vote these shares in the same manner as if you marked, signed, and returned your proxy card. To grant your proxy by telephone
or Internet, read the annual meeting proxy statement and then follow these easy steps:
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 annual meeting
date. Have your proxy card in hand when you call and then follow the simple instructions the vote voice provides you.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP
THIS PORTION FOR YOUR RECORDS
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DETACH AND
RETURN THIS PORTION ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The
Board of Directors recommends you vote FOR the following:
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1.
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Election
of Directors
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Nominees
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For
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Against
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Abstain
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1a.
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Walter J. Aspatore
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☐
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☐
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☐
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The Board
of Directors recommends you vote FOR proposals 2 and 3.
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For
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Against
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Abstain
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1b.
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Darren M. Dawson
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☐
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☐
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☐
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2
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The
ratification of the Audit Committee's selection of Ernst & Young LLP to serve as our independent registered public accounting
firm for the fiscal year ending April 28, 2018.
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☐
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☐
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☐
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1c.
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Donald W. Duda
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☐
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☐
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☐
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1d.
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Martha Goldberg Aronson
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☐
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☐
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☐
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1e.
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Isabelle C. Goossen
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☐
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☐
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☐
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3
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The
advisory approval of Methode's named executive officer compensation.
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☐
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☐
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☐
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1f.
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Christopher J. Hornung
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☐
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☐
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☐
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1g.
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Paul G. Shelton
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☐
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☐
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☐
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The
Board of Directors recommends you vote 1 YEAR on the following proposal:
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1
year
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2
years
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3
years
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Abstain
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1h.
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Lawrence B. Skatoff
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☐
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☐
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☐
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4
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To recommend,
by non-binding vote, the frequency of advisory votes on named executive officer compensation.
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☐
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☐
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☐
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☐
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NOTE:
Such other business as may properly come before the meeting or any adjournment thereof.
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Please sign
exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please
sign in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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0000341962_1
R1.0.1.15
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Annual Report
are available at
www.proxyvote.com
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METHODE
ELECTRONICS, INC.
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This
proxy is solicited by the Board of Directors
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Annual Meeting of
the Shareholders
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The undersigned hereby
appoints Walter J. Aspatore, Donald W. Duda and John R. Hrudicka, and each of them, with full power of substitution, as proxies
to vote all shares of Methode Electronics, Inc. common stock which the undersigned is entitled to vote at the Annual Meeting
of Methode Electronics, Inc. to be held on Thursday, September 14, 2017 at 11:00 a.m., Central Daylight Time, at Methode's
corporate offices at 7401 West Wilson Avenue, Chicago, Illinois 60706, and at any adjournment or postponement thereof.
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This proxy when
properly signed will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION IS PROVIDED, THIS
PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS. If other business is presented at the Annual Meeting, this proxy
shall be voted in accordance with the best judgment of the persons named as proxies above.
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Continued
and to be signed on reverse side
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0000341962_2 R1.0.1.15
Methode Electronics (NYSE:MEI)
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From Mar 2024 to Apr 2024
Methode Electronics (NYSE:MEI)
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From Apr 2023 to Apr 2024