The restricted stock and restricted stock units vest as follows:
Option Exercises and Stock Vested for Fiscal 2020
Each of the stock prices set forth below was the closing price of the Company’s common stock on the NYSE on the date the restrictions lapsed and the shares vested.
Pension Benefits Table for Fiscal 2020
Pension Benefits
The Company’s pension plan, The Modine Manufacturing Company Pension Plan (the “Salaried Pension Plan”), is frozen. Participants in the Salaried Pension Plan no longer earn additional credited service (effective April 1, 2006) and changes in
salary for a participant are not considered in determining pension benefits (effective December 31, 2007). The Salaried Pension Plan was formerly a part of competitive compensation for manufacturing companies such as Modine. The Salaried
Pension Plan was frozen consistent with contemporary benefit practices.
The NEOs who were employed by the Company on or before December 31, 2003 participate on the same basis as other salaried employees in the non-contributory Salaried Pension Plan. Mr. Burke, Ms. Stein and Mr. Casterton do not (and in the case
of Mr. Appel, did not) participate in the Salaried Pension Plan because they joined the Company after December 31, 2003.
Retirement benefits are based upon an employee’s earnings for the five highest consecutive calendar years of the last ten calendar years preceding retirement (provided that salary after the plan was frozen is not considered) and on years of
service (provided that service after the plan was frozen is not considered). Applicable earnings include salary, bonus, and any amount deferred under the 401(k) Retirement Plan. A minimum of five years of service was required for the benefits
to vest. The principal benefit under the Salaried Pension Plan is a lifetime monthly benefit for the joint lives of a participant and his or her spouse based on the employee’s earnings and period of employment. The pension benefit is not
subject to offset against Social Security benefits. Employees may retire with unreduced early retirement benefits at age 62 or may be eligible for deferred or other early retirement benefits depending on their age and years of service. In
addition, an employee may elect to receive a lump-sum pension benefit if, upon retirement, the sum of the employee’s age plus years of eligible service with the Company equals at least 85. Furthermore, if employed on and before March 31, 2001,
an employee who reaches age 62 and who has accumulated thirty or more years of eligible service may request that the accrued benefit be paid immediately in a lump-sum amount, even if he or she elects not to retire at that time. Payment pursuant
to the Salaried Pension Plan may be limited by regulation based upon the funded status of the plan.
Pension benefits under the Salaried Pension Plan are subject to possible limitations imposed by the Code. To the extent that an individual employee’s retirement benefit exceeds these limits, the excess will be paid pursuant to the SERP from
general operating funds of the Company.
Nonqualified Deferred Compensation Table for Fiscal
2020
Nonqualified Deferred Compensation
The Deferred Compensation Plan is a nonqualified plan. All of the NEOs currently employed by Modine are eligible to participate in the Deferred Compensation Plan. The Deferred Compensation Plan allows an employee to defer salary in an amount
that exceeds the statutory limitations applicable to the 401(k) Retirement Plan. For the 2019 calendar year, an employee could generally contribute no more than $19,000 to the 401(k) Retirement Plan. The Deferred Compensation Plan allows a
highly compensated employee to defer up to ten percent of base salary. Salary deferred pursuant to the Deferred Compensation Plan is an asset of the Company. The sums deferred do not earn a preferential rate of return. Company contributions
are also made to the Deferred Compensation Plan in an amount equal to the Company match and profit sharing contributions that would otherwise have been contributed to the 401(k) Retirement Plan but for the statutory limits. All of the NEOs who
participate in the Deferred Compensation Plan were fully vested in the Company contributions as of March 31, 2020. Payments out of the Deferred Compensation Plan are not made until termination of service or retirement.
The investment alternatives available to the NEOs under the Deferred Compensation Plan are selected by the Company and are generally the same as the alternatives available under the 401(k) Retirement Plan, but may be changed from time to
time. The NEOs are permitted to change their investment elections at any time on a prospective basis. The table below shows the funds available under the plan and their annual rate of return for the fiscal year ended March 31, 2020.
POTENTIAL POST-EMPLOYMENT
PAYMENTS
The Company has certain obligations to its NEOs upon a termination of employment as a result of agreements with such officers or other plans, arrangements or policies that benefit the officers.
Mr. Burke and Mr. Wollenberg are the only NEOs who have an agreement with the Company governing the terms of their employment. Pursuant to the employment agreement that was entered into with Mr. Burke in 2007 and amended in 2008, Mr. Burke
agreed to serve as an executive officer of the Company and devote his full time to the performance of his duties. Mr. Burke’s employment agreement automatically and continuously extends daily, unless either party gives written notice of
termination to the other party, in which case the term would be 36 months beginning on the date such notice was received. The Company is permitted to terminate the executive’s employment agreement for “Good Cause” and the executive is permitted
to terminate the employment agreement for “Good Reason,” as those terms are defined in the agreement and described below. The Company will continue to perform its obligations under such agreement. In the event of termination for Good Cause, the
Company is not contractually obligated to pay benefits under the agreement to the executive. In the event of the disability of Mr. Burke during the term of his employment agreement, he would receive base salary and bonus continuation at a level
of 100 percent for the first 12 months and 60 percent for up to an additional 24 months, but in no event beyond the remainder of the term. He may also receive disability benefits under the Company’s group long-term disability plan; provided,
however, that such benefits would offset the amounts described above.
Pursuant to the employment retention agreement that was entered into with Mr. Wollenberg in fiscal 2020, Mr. Wollenberg agreed to continue his employment with the Company as lead of the Project Dakota Program Management Office (the “Project”)
until the date that is one hundred eighty (180) days after the closing of the sale of the business or assets of the Project (the “Project Completion Date”). Under the agreement, the Company is permitted to terminate Mr. Wollenberg’s employment
prior to the Project Completion Date “for cause” (as defined under such agreement) at any time or without cause upon at least one hundred eighty (180) days’ notice. Mr. Wollenberg is permitted to voluntarily terminate prior to the Project
Completion Date following at least sixty (60) days’ notice to the Company. Further, Mr. Wollenberg’s employment retention agreement and employment will end upon the Project Completion Date, unless Mr. Wollenberg is offered and accepts a
subsequent position with the Company. In the event Mr. Wollenberg does accept an offered position beginning after the Project Completion Date, Mr. Wollenberg will receive fifty-two (52) weeks of salary, payable in a lump sum, as a retention
benefit.
The following sets forth the amount of payments to each NEO in the event of a termination of employment as a result of voluntary termination, retirement (including early retirement), death, disability, termination for Good Cause, and
involuntary termination (including termination without Good Cause or for Good Reason).
Voluntary Termination. An NEO may terminate his/her employment with the Company at any time. In general, upon the individual’s voluntary termination:
Retirement and Early Retirement. No NEOs were eligible for retirement on March 31, 2020. In general, upon the executive’s full or early retirement:
Death. In general, upon the death of an NEO:
Disability. If a total and permanent disability causes the termination of Mr. Burke’s employment, then:
If a total and permanent disability causes the termination of employment of an NEO, other than Mr. Burke, then for such NEO:
Termination for Good Cause or For Cause. The Company may terminate Mr. Burke’s employment for Good Cause under the terms of his employment agreement and, thereby, terminate any obligation to Mr. Burke
under his employment agreement. The Company may terminate Mr. Wollenberg’s employment for cause under the terms of his employment retention agreement and, thereby, terminate any obligation to Mr. Wollenberg under his employment retention
agreement. A termination for “Good Cause” or “for cause” generally means a termination for theft, dishonesty, fraud, violation of certain provisions of the employment agreement or employment retention agreement, or a serious violation of law.
The other NEOs without an employment agreement may be terminated by the Company for cause at any time, and are not entitled to receive any severance payments or benefits upon such termination. On the NEO’s termination date, generally, all
unvested stock options, Retention Restricted Awards and long-term incentive awards would be forfeited and all benefits and perquisites would cease. The NEO, if a participant in the Salaried Pension Plan, the SERP or the Nonqualified Deferred
Compensation Plan, would be entitled to a distribution of his/her vested benefits under those plans.
Termination without Good Cause, without Cause, or for Good Reason. If the Company terminates Mr. Burke’s employment and the termination is not for Good Cause or if Mr. Burke terminates employment with
the Company for Good Reason (“Good Reason” means at least one of the following events has occurred without the consent of the affected executive: a material diminution in the executive’s base salary; a material decrease in the executive’s
authority, duties or responsibilities or those of the supervisor to whom the executive reports; a material diminution in the budget over which the executive has authority; a material change in the geographic location at which the executive must
perform services; or any other action or inaction that constitutes a material breach of the terms of the executive’s employment agreement), the Company is obligated to:
In no event would Mr. Burke receive the benefits described above if (i) he discloses confidential information of the Company in violation of his employment agreement and such disclosure results in a demonstrably material injury to the Company,
or (ii) he engages in Competition with the Company, as that term is defined in his employment agreement.
If the Company terminates the employment of Mr. Wollenberg without cause prior to the Project Completion Date or if Mr. Wollenberg’s employment ends with the Company upon the Project Completion Date, the Company is obligated to:
In no event would Mr. Wollenberg receive the benefits described above unless he executes and does not revoke a release of claims against any and all liability in favor of the Company.
The Company is generally required to provide Mr. Wollenberg one hundred eighty (180) days’ notice prior to the date his employment is terminated by the Company without cause; provided, however, Mr. Wollenberg’s employment may be ended sooner
than the expiration of such notice period. In such event, the Company will be obligated to pay Mr. Wollenberg any salary that would have become due during the notice period. This amount is in addition to any severance benefits.
If the Company involuntarily terminates the employment of Mr. Lucareli, Mr. Bowser, Ms. Stein, or Mr. Casterton without cause, these NEOs would receive benefits under the Severance Plan for members of the Executive Council. Under the
Severance Plan, each of the NEOs would receive his or her annual base salary at the time of termination in installment payments over the course of one year following termination and would be eligible to elect Company-paid COBRA continuation
coverage for one year following termination. The NEOs are required to release the Company from any and all liability in order to be eligible for benefits under the Severance Plan. Mr. Appel was eligible for these benefits under the Severance
Plan while employed with the Company.
POTENTIAL CHANGE IN CONTROL PAYMENTS
AND BENEFITS
Generally, awards granted under the Incentive Plans accelerate vesting in the event of an involuntary termination of employment within one year following a Change in Control unless specified otherwise in the applicable award agreement. A
Change in Control, as generally defined in the Incentive Plans, will be deemed to take place on the occurrence of any of the following events: (i) a merger or consolidation of the Company with one or more other corporations as a result of which
the holders of the outstanding capital stock of the Company entitled to vote in elections of directors (“Voting Power”) of the Company immediately prior to such merger or consolidation hold less than 50 percent of the Voting Power of the
surviving or resulting corporation; (ii) a transfer of 30 percent of the Voting Power, or a substantial portion of the property, of the Company other than to an entity of which the Company owns at least 50 percent of the Voting Power; or (iii)
during any period of 24 months, the persons who at the beginning of such 24-month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company. Pursuant to the award
agreements for performance stock awards granted in fiscal 2018, 2019, and 2020, upon an involuntary termination of employment within one year following a Change in Control, the NEO is entitled to accelerated vesting on a pro rata basis, where
performance is assumed to be at the Target level and the proration is based on the period worked during the performance period.
Mr. Burke’s employment agreement contains separate Change in Control provisions. The definition of Change in Control generally has the same meaning as in the Incentive Plan described above. If at any time during the 24 months after a Change
in Control occurs Mr. Burke’s employment were terminated without “Good Cause”, or if Mr. Burke were to terminate the agreement for any reason during the same time period, the Company is obligated to:
The Company has also entered into a Change in Control Agreement and Termination Agreement with Mr. Lucareli, Mr. Bowser and certain other key employees. The definition of Change in Control generally has the same meaning as in the Incentive
Plan described above and the definitions of Good Cause and Good Reason generally have the same meanings as in Mr. Burke’s employment agreement described above. For Mr. Lucareli and Mr. Bowser, in the event of a Change in Control, if employment
of the employee is terminated by the Company for any reason other than Good Cause, or terminated by the employee for Good Reason within 24 months after the Change in Control occurs, or for any reason during the 13th month after the Change in
Control, the Company is obligated to provide the same benefits as described above for Mr. Burke with the exception that the Company would pay to the employee an amount equal to two times the greater of (i) the sum of his then current base salary
and Target bonus, or (ii) his five year average base salary and actual bonus, continue to provide coverage under applicable welfare plans (or the equivalent) for a period of two years, and pay a Supplemental Defined Contribution Benefit for a
period of two years.
As described in the Compensation Discussion and Analysis section of the Company’s fiscal 2011 proxy statement, the ONC Committee determined that no substantive changes would be made to any of the
existing Employment or Change in Control and Termination Agreements that have been in place with the Company’s employees prior to 2009. At the same time, the ONC Committee determined that any future agreements with employees which provide for
benefits upon a change in control will not provide for excise tax gross ups and any benefits following a change in control under such future agreements would only be payable upon the employee’s involuntary termination other than for Good Cause or
the employee’s voluntary termination for Good Reason.
Mr. Appel, Ms. Stein and Mr. Casterton all joined the Executive Council at such a time that the Change in Control provisions of the Severance Plan govern (or governed, in the case of Mr. Appel) the benefits each would be eligible to receive
following a Change in Control. The definition of Change in Control under the Severance Plan generally has the same meaning as in the Incentive Plan described above and the definition of Good Reason generally has the same meaning as in Mr.
Burke’s employment agreement described above. In the event of a Change in Control, the Severance Plan provides that if employment is terminated by the Company for any reason other than Cause, or terminated by the NEO for Good Reason within 12
months after the Change in Control occurs, the Company is obligated to provide the following benefits to the terminated NEO: (i) a payment equal to two (2) times her/his annual base salary at the time of termination, (ii) a payment equal to two
(2) times the NEO’s target award under the MIP for the fiscal year in progress at the time of her/his termination, and (iii) eighteen (18) months of Company-paid COBRA continuation coverage if the NEO elects such coverage. “Cause” is defined
under the Severance Plan to include the following: (a) engagement in an act of dishonesty constituting a felony that results or is intended to result directly or indirectly in gain or personal enrichment at the expense of Modine; (b) disclosure
of confidential information of Modine that results in a demonstrable injury to Modine; or (c) engagement in a willful and continued failure to perform substantially one’s duties on behalf of Modine or to comply with Modine’s Code of Ethics and
Business Conduct.
Mr. Wollenberg’s employment retention agreement supersedes all prior agreements and awards providing benefits upon a Change in Control. Under his employment retention agreement, Mr. Wollenberg is not entitled to any enhanced benefits upon a
Change in Control or involuntary termination in connection therewith.
The below table sets forth the potential payments upon termination of employment or change in control for each of the NEOs (other than Mr. Appel) For purposes of the calculations, it is assumed that Company matching contributions to the
401(k) Retirement Plan and Deferred Compensation Plan would be 4.5 percent of base salary for future calendar years.
Mr. Appel is not included in the table below because he ceased employment with Modine effective September 26, 2019. Upon termination of his employment, Mr. Appel became eligible to receive benefits in accordance with the Severance Plan as
follows:
Additionally, the Company agreed to arrange an executive outplacement program for Mr. Appel, which cost $6,400.
Potential Payments Upon Termination of Employment or Change in Control Table
As a result of the rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing disclosure regarding the relationship of the annual total compensation of our employees and the annual
total compensation of Mr. Burke as the Company’s Chief Executive Officer. The CEO Pay Ratio included in this information is a reasonable estimate calculated in accordance with Item 402(u) of Regulation S-K.
When we calculated our median employee in fiscal 2018, we used a measurement date of March 31, 2018, our fiscal year end, as of which date we employed, in total, approximately 12,000 individuals worldwide. In determining the employee
population from which we identified the median employee, we excluded the approximately 197 employees located in India and approximately 84 employees located in Serbia.
For each of the employees in our employee population, total annual compensation was calculated by compiling total wages, which included base salary, plus any overtime, shift premiums and cash allowances, actually paid to each member of our
workforce (including full-time, part-time, seasonal and temporary employees), other than our CEO. When identifying the median employee, consistent with Item 402(u) of Regulation S-K, we included adjustments for annualizing the pay for any
full-time and part-time employees who were employed by us for only part of the year.
The individual who was our median employee for our fiscal 2020 calculation continues to be employed by us in the same role, and we have used that individual as the median employee for the calculations. There have been no material changes to
our aggregate employee population or our employee compensation arrangements since last year, and we believe the continued selection of this individual as our median employee does not result in a material change to our pay ratio disclosure. The
identified median employee is a Tubing, Setup and Operator based in our Grenada, Mississippi facility.
Based on the foregoing, the median of the annual total compensation of the Company’s employees (other than Mr. Burke) was approximately $31,740 for fiscal 2020. Mr. Burke’s total annual compensation, as reflected in the Summary Compensation
Table, was $3,801,565. This yields a CEO Pay Ratio of 1:120.
ITEM 2 – APPROVAL OF THE MODINE MANUFACTURING COMPANY 2020 INCENTIVE COMPENSATION PLAN
The Board of Directors is proposing to adopt a new incentive plan, the Modine Manufacturing Company 2020 Incentive Compensation Plan (the “2020 Plan”), subject to shareholder approval. The Company is adopting the 2020 Plan in order to do the
following:
The following is a summary description of the material terms of the 2020 Plan. Please read the 2020 Plan (attached as Appendix B) to understand all the terms of the plan.
In reaching the determination regarding the number of shares available for issuance under the 2020 Plan, the Committee considered reasonable projections of future equity grants under the 2020 Plan, the potential dilutive impacts of any equity
grants to shareholders, and the anticipated duration of the shares available under the 2020 Plan.
The following chart shows, after giving effect to (a) all grants and vestings of restricted or performance stock, and (b) all options exercised, in each case on or before March 31, 2020, all of the
active plans of the Company, the number of shares to be issued upon the exercise of outstanding options for each plan, the number of shares of restricted stock or restricted stock unit awards outstanding for each plan, the number of shares of
stock that are reserved for issuance under all existing performance stock awards if such awards were to pay out at the Target level and the number of shares remaining available for future issuance under each plan.
Purpose
The 2020 Plan is intended to replace the 2017 Incentive Plan. In the event the shareholders approve the 2020 Plan, the 2017 Incentive Plan would be immediately closed for future awards, and would remain open for the sole purpose of fulfilling
awards previously granted under the 2017 Incentive Plan, including the issuance of shares upon exercise of any stock options or the vesting of certain other awards granted thereunder.
The 2020 Plan is intended to provide incentives that will attract and retain the best available non-employee directors and employees for the Company and any subsidiaries that now exist or are hereafter organized or acquired by the Company,
provide additional incentives to such persons, and promote the success and growth of the Company. These purposes may be achieved through the grant of options to purchase common stock of the Company, stock appreciation rights (“SARs”), restricted
stock awards, unrestricted stock, restricted stock unit awards, performance stock awards and phantom stock awards, as described below.
The Company is focused on rewarding performance. The compensation paid to the NEOs and others participating in the Company’s incentive plans is weighted so that compensation increases with the improvement in performance of the Company.
Please see the Compensation Discussion and Analysis section above for additional information about the Company’s objectives for compensation.
Shareholder approval of the 2020 Plan will enable the Company to, among other objectives, grant options that, if so desired, will qualify as “incentive stock options” under Section 422 of the Code. Shareholder approval of the 2020 Plan is
also a condition to the listing on the NYSE of the shares of common stock issuable under the 2020 Plan.
Key Features of 2020 Plan
Key features of the 2020 Plan include:
Performance Goals Under 2020 Plan
The 2020 Plan permits the ONC Committee to set performance goals with respect to any grants thereunder. Awards subject to performance goals can relate to one or more criteria and can be measured on an absolute basis or in terms of growth or
reduction. In addition, the ONC Committee may determine the achievement of any performance goals with or without regard to any of the following events that may occur during the performance period applicable to a performance-based award: (a)
asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) the
effect of events that are unusual in nature or infrequently occurring; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses, each as set forth by the ONC Committee generally at the time of the grant. For awards subject to
performance goals, the ONC Committee retains the discretion to adjust awards downward.
Administration
The 2020 Plan will be administered by the ONC Committee, except that grants of awards to non-employee directors will be made by the entire Board. The ONC Committee has the authority to interpret the 2020 Plan, and the decision of the ONC
Committee on any questions concerning the interpretation of the 2020 Plan will be final and conclusive. Subject to the provisions of the 2020 Plan, the ONC Committee has full and final authority to designate the persons to whom awards will be
granted; grant awards in such form and amount as the ONC Committee determines; impose limitations, restrictions and conditions upon any award as the ONC Committee deems appropriate; waive, in whole or in part, any limitations, restrictions or
conditions imposed upon an award as the ONC Committee deems appropriate; and modify, extend or renew any award previously granted. However, the ONC Committee does not have the authority to reprice awards without shareholder approval.
No Repricing
Without shareholder approval, the Company may not (i) change the terms of an option or SAR to lower its purchase or grant price, (ii) take any other action that is treated as a "repricing" under generally accepted accounting principles, or
(iii) repurchase for cash or cancel an option or SAR at a time when its purchase or grant price is greater than the fair market value of the underlying stock in exchange for another Award (including an Option or SAR) unless the cancellation and
exchange occurs in connection with certain recapitalization events, as described in the 2020 Plan.
Eligibility
Any non-employee director or employee of the Company or any subsidiary of the Company is eligible to participate in the 2020 Plan. As of May 29, 2020, the Company had nine non-employee directors and the Company and its subsidiaries had
approximately 11,300 employees, including 10 executive officers.
Non-Employee Director Grant Limitation
Under the 2020 Plan, a non-employee director may not receive common stock awards with an aggregate grant date fair value in excess of $300,000 in any fiscal year.
Stock Option Awards
Stock options will consist of incentive and nonqualified stock options to purchase shares of the Company’s common stock. The ONC Committee will, among other things, establish the number of shares subject to the option, the time or times at
which options may be exercised and whether all of the options may be exercisable at one time or in increments over time. The option exercise price will not be less than 100 percent of the fair market value of the stock on the date of the grant.
Unless otherwise provided by the Committee and reflected in the applicable award agreement, all options shall vest over a four-year period, with 25 percent of the options granted in an individual award agreement vesting on each annual anniversary
after the date of the grant. A stock option may be exercised in whole at any time or in part from time to time; provided, however, that no option will be exercisable in whole or in part more than ten years from the date of grant.
Stock Appreciation Rights
The ONC Committee may also grant SARs which represent the right to receive an amount of cash or shares of Company common stock based on appreciation in the fair market value of shares of the common stock over a base price. The grant price of
the SARs may not be less than 100% of the fair market value of the stock on the date of grant.
Performance Stock Awards
The ONC Committee may grant stock awards based upon the achievement of performance goals. If determined by the ONC at the time of grant, performance stock awards may be settled in cash in an amount equal to the fair market value of the shares
at the time of settlement that the participant is entitled to receive. The ONC Committee also establishes the award period, the threshold, target and maximum performance levels, and the number of shares payable at various performance levels from
the threshold to the maximum. In order to receive payment, a grantee must generally remain employed by the Company to the end of the award period. The ONC Committee may impose additional conditions on a grantee’s entitlement to receive a
performance stock award.
Restricted Stock Awards
The ONC Committee or the Board, as applicable, has broad discretionary authority to set the terms of awards of restricted stock under the 2020 Plan and may grant unrestricted awards as well. Participants will receive all dividends on, and
will have all voting rights with respect to, such shares; provided, however, any such dividends shall accrue and be paid at the time such shares vest. The ONC Committee may condition the grant of restricted stock upon the attainment of
performance goals. Unless otherwise provided by the Committee and reflected in the applicable award agreement, all restricted stock awards shall vest over a four-year period, with 25% of the restricted stock granted in an individual award
agreement vesting on each annual anniversary after the date of the grant.
Restricted Stock Unit Awards
The ONC Committee may grant restricted stock units that entitle a grantee to receive one share of common stock for each restricted stock unit if the vesting conditions are satisfied. If determined by the ONC Committee at the time of grant,
restricted stock units may be settled in cash in an amount equal to the fair market value of the shares at the time of settlement that the participant is entitled to receive. The ONC Committee may condition the grant of restricted stock units
upon the attainment of performance goals.
Phantom Stock Awards
The ONC Committee may grant phantom stock awards that entitle a grantee to receive cash payments based upon the closing market price of the Company’s common stock if predetermined conditions are satisfied. The ONC Committee may condition the
grant of a phantom stock award upon the attainment of the performance goals.
Shares Available
If the 2020 Plan is approved, there will be 2,890,000 shares authorized and available for issuance under the 2020 Plan, all of which may be granted as incentive stock options. Shares subject to Awards that are canceled, terminated or lapse
for any reason become available again for award under the 2020 Plan. Any Award or portion thereof that is settled in cash is not counted against the shares available. Finally, the number of shares for any Award used to satisfy tax withholding
for an Award under the 2020 Plan shall be counted against the shares available. The 2020 Plan provides that all stock awards will count as one share against the number of shares available under the 2020 Plan.
Adjustments and Change in Control
If any stock dividend is declared upon the common stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the common stock, resulting in a split or combination or exchange of shares,
the ONC Committee will make or provide for an adjustment in the number of and class of shares that may be delivered under the 2020 Plan, and in the number and class of and/or price of shares subject to outstanding awards, as it may, in its
discretion, deem to be equitable.
Assuming the assumption of awards by a successor, unless a particular award agreement provides otherwise, upon the involuntary termination of a participant’s employment without “cause” (as defined in the 2020 Plan) within the one-year
following a “change in control” of the Company (as defined in the 2020 Plan), all unvested awards that are not subject to a performance goal shall become fully vested and exercisable. Similarly, unless a particular award agreement provides
otherwise, for awards subject to a performance goal, upon a “change in control,” the performance criteria applicable to such award, other than time-based service vesting criteria, shall be deemed to be satisfied at the Target level. In the event
of an involuntary termination of such participant’s employment without “cause” within the one-year period following a “change in control,” the time-based service vesting criteria shall also be waived and the award shall become vested.
Term
The 2020 Plan will expire on July 23, 2030.
Amendment
The Board may, from time to time, amend, modify, suspend or terminate the 2020 Plan; provided, however, that no such action may impair, without the grantee’s consent, any award previously granted under the 2020 Plan, or be made without
shareholder approval where such approval would be required as a condition of compliance with the Code or other applicable laws or regulatory requirements. Absent shareholder approval, and with limited exceptions identified in the 2020 Plan,
neither the ONC Committee nor the Board will have any authority, with or without the consent of a grantee, to reduce the exercise price of outstanding options or SARs or cancel outstanding options or SARs in exchange for another award including
an option or SAR with an exercise price that is less than the exercise price of the original options or SARs, except in the event of a corporate event involving the Company, as authorized under the 2020 Plan. As stated in the “No Repricing” discussion above, the Company also may not repurchase for cash an underwater option or SAR.
Federal Income Tax Consequences Relating to the 2020 Plan
The following is a brief summary of the Company’s understanding of the principal federal income tax consequences of grants made under the 2020 Plan based upon the applicable provisions of the Code in effect on the date hereof.
Nonqualified Stock Options and Stock Appreciation Rights. A participant will not recognize taxable income upon the grant of a nonqualified stock option or SAR. Upon
exercise, the participant will recognize ordinary income equal to the amount by which the fair market value of the shares on the exercise date exceeds the exercise or grant price. In the case of stock options or stock-settled SARs, upon the
subsequent sale of the acquired shares, any additional gain or loss will be a capital gain or loss, and a long-term gain or loss if the shares have been held for more than one year.
Incentive Stock Options. A participant will not recognize taxable income when an incentive stock option is granted or exercised. However, the excess of the fair market value
of the covered shares over the exercise price on the date of exercise is an item of tax preference for alternative minimum tax purposes. If the participant exercises the option and holds the acquired shares for more than two years following the
date of option grant and more than one year after the date of exercise, the difference between the sale price and exercise price will be taxed as long-term capital gain or loss. If the participant sells the acquired shares before the end of the
two-year and one-year holding periods, he or she generally will recognize ordinary income at the time of sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.
Any additional gain will be a capital gain and a long-term gain if the shares have been held for more than one year.
Restricted Stock, Restricted Stock Units, Performance Stock and Phantom Stock. A participant will not recognize taxable income upon the grant of restricted stock, restricted
stock units, performance stock or phantom stock. Instead, the participant will recognize ordinary income at the time of vesting equal to the fair market value of the shares (or cash) received minus any amounts the participant paid. Any
subsequent gain or loss will be a capital gain or loss, and a long-term gain or loss if the shares have been held for more than one year. For restricted stock only, the participant may instead elect to be taxed at the time of grant. If the
participant makes such an election, the one year long-term capital gains holding period begins on the date of grant.
Tax Effect for the Company. The Company generally will receive a deduction for any ordinary income recognized with respect to an award, except to the extent limited by
Section 162(m) of the Code.
The foregoing is not to be considered as tax advice to any person who may be a participant, and any such persons are advised to consult his or her own tax counsel. The foregoing is intended to be a general discussion and does not cover all
aspects of an individual’s unique tax situation.
New Plan Benefits
We cannot determine how many eligible employees and non‑employee directors will participate in the plan in the future. Therefore, it is not possible to determine with certainty the dollar value or number of shares of our common stock that will
be issued under the 2020 Plan. The following table sets forth the awards granted under the 2017 Incentive Plan during Fiscal 2020 to (i) each of our named executive
officers, (ii) all executive officers as a group, (iii) all non-employee directors as a group, and (iv) all employees other than executive officers as a group.
Market Value
On March 31, 2020, the closing sales price of the common stock on the NYSE was $3.25 per share.
Equity Compensation Plan Information
Each of Modine’s equity compensation plans, listed below, has been approved by shareholders:
The following table sets forth required information about equity compensation plans as of March 31, 2020:
The Board of Directors unanimously recommends a vote “FOR” the approval of the Modine Manufacturing Company 2020 Incentive Compensation Plan.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of a majority of the votes cast thereon, provided a quorum is present. Because broker non−votes are not considered votes cast, they will have no effect on the vote. In accordance with
the rules of the NYSE, abstentions will be counted as votes cast for purposes of this proposal, giving them the effect of votes cast against the proposal.
ITEM 3
– ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
As required pursuant to Section 14A of the Exchange Act, the Company annually seeks the advisory vote of its shareholders on its executive compensation program and asks that you support the compensation of the Company’s NEOs as disclosed in
the Compensation Discussion and Analysis section and accompanying tables contained in this proxy statement.
The ONC Committee and the Company are committed to paying for performance and ensuring that the executive compensation plans of the Company drive value. This commitment is reflected in the Company’s executive compensation program, which is
designed to balance short- and long-term considerations while rewarding management in a way that reflects the Company’s performance over time.
This proposal, commonly known as a “Say on Pay” proposal, gives you the opportunity to indicate your support or lack of support for the Company’s fiscal 2020 pay practices and programs for the NEOs through the following resolution:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and
narrative discussion is hereby APPROVED.
This vote is not for or against a particular item of compensation but rather is with regard to the executive compensation program, as a whole, for the NEOs. This shareholder vote is advisory and is, therefore, not binding on the Board of
Directors. The Board of Directors will, however, take the outcome of this vote into account when determining NEO compensation for future years.
The Board of Directors recommends a vote “FOR” approval of the compensation of the Company’s NEOs.
Vote Required for Approval
Approval of the advisory vote supporting the Company’s executive compensation policies and procedures for its NEOs requires the affirmative vote of a majority of the votes cast thereon, provided a quorum is present. Because abstentions and
broker non-votes are not considered votes cast, they will have no effect on the vote.
ITEM 4
- RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2021 to audit the consolidated financial statements of the
Company. Before the Audit Committee selected PwC, it carefully considered the qualifications of the firm, including their performance in prior years and their reputation for integrity and for competence in the fields of accounting and auditing.
Services provided to the Company and its subsidiaries by PwC in fiscal 2020 and fiscal 2019 are described under Independent Auditor’s Fees for Fiscal 2020 and 2019 below.
If the shareholders do not ratify the appointment of PwC, the selection of our independent registered public accounting firm will be reconsidered by the Audit Committee. If, prior to the annual meeting, PwC declines to act or its engagement
is otherwise discontinued by the Audit Committee, the Audit Committee will appoint another independent registered public accounting firm whose engagement for any period subsequent to the meeting will be subject to ratification by the shareholders
at the 2020 Annual Meeting of Shareholders.
Representatives of PwC are expected to be present at the 2020 Annual Meeting of Shareholders. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
INDEPENDENT AUDITOR’S FEES FOR FISCAL 2020 AND 2019
The following table represents fees for professional audit services rendered by PwC for the audit of the Company’s consolidated financial statements for the fiscal years ended March 31, 2020 and March 31, 2019, and fees billed for other
services rendered by PwC during those periods.
Pre-Approval Policy
The Audit Committee pre-approves all audit services and permitted non-audit services, including all fees and terms, to be performed for the Company by its independent registered public accounting firm. Alternatively, the Audit Committee may
form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. Non-audit services are reviewed and pre-approved by project at the beginning of each fiscal year. Descriptions of each project are provided to the Audit
Committee. Any additional non-audit services contemplated by the Company after the beginning of the fiscal year are submitted to the Audit Committee for pre-approval prior to engaging the independent registered public accounting firm to perform
any services. The Audit Committee is routinely informed as to the non-audit services actually provided by the independent registered public accounting firm pursuant to the pre-approved projects. All of the fees paid to the independent
registered public accounting firm in the fiscal year ended March 31, 2020 and fiscal year ended March 31, 2019 were approved in advance by the Audit Committee.
The Board of Directors recommends a vote “FOR” ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal, provided a quorum is present. Because abstentions and broker non-votes are not considered votes cast, they will not have an effect on the
vote.
REPORT OF THE AUDIT
COMMITTEE
The Audit Committee of the Board of Directors consists of five members, each of whom has been determined by the Board to be sufficiently experienced, financially literate and independent in accordance with the applicable NYSE listing
standards. Mr. Cooley, the Chair of the Audit Committee, and Mr. Ashleman qualify as audit committee financial experts within the meaning of the SEC rules.
The Audit Committee operates under a written charter adopted by the Board of Directors. Under its charter, the Audit Committee’s purpose is to assist the Board of Directors in overseeing:
The Audit Committee is responsible for appointing and overseeing the work of the Company’s independent registered public accounting firm for the purpose of preparing and issuing an audit report and performing related work, and for discussing
with the independent registered public accounting firm appropriate staffing and compensation. It is also the responsibility of the Audit Committee to ensure the rotation of the lead audit partner having primary responsibility for the audit and
the audit partner responsible for reviewing the audit as required by law, or more frequently if the Audit Committee may deem necessary.
In determining whether to reappoint PwC as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company for the fiscal year ending March 31, 2021, the Audit Committee considered the
qualifications of the firm, including their performance in prior years and their reputation for integrity and for competence in the fields of accounting and auditing. Members of the Audit Committee prepared written evaluations of PwC, and the
evaluations were considered as part of the reappointment process, along with additional input from members of executive management and the head of the Company’s Internal Audit department regarding their views of and experiences with PwC in its
capacity as the Company’s independent registered public accounting firm.
The Audit Committee discussed and approved PwC’s compensation for its work as the Company’s independent registered public accounting firm based on a number of factors. These factors included the review of a fee proposal presented by PwC
describing the background of the relationship, the proposed scope of audit, and circumstances distinguishing PwC’s work in fiscal 2020 from its proposed fiscal 2021 role. The Audit Committee also received input from management regarding its work
experience with the PwC audit team and the reasonableness and market competitiveness of PwC’s fee proposal.
In addition, the Audit Committee is charged under its charter with a wide range of responsibilities and authority, including, among others:
The Audit Committee met eight times during the fiscal year ended March 31, 2020. The Audit Committee has an appropriate number of meetings to ensure that it devotes appropriate attention to all of its responsibilities. The Audit Committee’s
meetings include, whenever appropriate, executive sessions with the Company’s independent registered public accounting firm and with the Company’s internal auditors and compliance personnel, in each case without any other member of the Company’s
management being present.
In overseeing the preparation of the Company’s financial statements, the Audit Committee met with both management and the Company’s independent registered public accounting firm to review and discuss all financial statements, including the
Company’s audited financial statements, prior to their issuance, and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting
principles. The Audit Committee has discussed with PwC the matters required to be discussed by the applicable requirements of the PCAOB and the SEC.
With respect to the Company’s independent registered public accounting firm, the Audit Committee, among other things, discussed with PwC matters relating to its independence, after receiving the written disclosures and the letter from PwC
required by the applicable requirements of the PCAOB.
On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March
31, 2020, for filing with the SEC.
In performing all of the functions described above, the Audit Committee acts only in an oversight capacity. The Audit Committee completes its review of the matters described above prior to the public announcements of financial results. In
its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for the Company’s financial statements and its report on the effectiveness of the Company’s internal
control over financial reporting, and of the Company’s independent registered public accounting firm, who, in their report, express an opinion on the Company’s annual financial statements and on the effectiveness of the Company’s internal control
over financial reporting.
THE AUDIT COMMITTEE
Charles P. Cooley, Chair
Eric D. Ashleman
David G. Bills
Christopher W. Patterson
Christine Y. Yan
DELINQUENT SECTION
16(a) REPORTS
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and certain persons who beneficially own more than 10 percent of a registered class of the Company’s equity securities to file reports of ownership and
changes in ownership of equity securities of Modine and derivative securities of Modine with the SEC. Those “reporting persons” are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of those filings and other information furnished by the reporting persons, we believe that all of the Company’s reporting persons complied during the fiscal year ended March 31, 2020 with the
reporting requirements of Section 16(a) of the Exchange Act, except that due to an administrative error in each case, one late Form 4 was filed on behalf of each of Messrs. Anderson, Ashleman, Bills, Cooley, Garimella, Moore and Patterson, Ms.
Williams, and Ms. Yan, and one Form 4 filed on behalf of Mr. Burke underreported certain equity awards granted to Mr. Burke.
The Board of Directors is not aware of any other matters that will be presented for action at the 2020 Annual Meeting of Shareholders. Should any additional matters properly come before the meeting, the persons named in the proxy will vote on
those matters in accordance with their best judgment.
The foregoing notice and Proxy Statement are sent by order of the Board of Directors.
June 23, 2020
The Company will provide to any shareholder, without charge, upon written request of such shareholder, a copy of the Company’s Form 10-K (without exhibits). Such requests should be addressed to: Vice President,
Treasurer and Investor Relations, Modine Manufacturing Company, 1500 DeKoven Avenue, Racine, Wisconsin, 53403-2552. A copy of the Company’s Form 10-K is available on our website, www.modine.com.
Modine Manufacturing Company
ANNUAL MEETING OF SHAREHOLDERS
Rules of Conduct
In order to conduct an orderly and constructive meeting of shareholders in a manner that is fair to the interests of all shareholders, and give all shareholders present a reasonable opportunity to be heard, the 2020 Annual Meeting of
Shareholders will be conducted in accordance with the following rules and procedures:
MODINE MANUFACTURING COMPANY
2020 INCENTIVE COMPENSATION PLAN
1.01 Purpose. The Modine Manufacturing Company 2020 Incentive Compensation Plan (the "Plan") is intended to provide incentives that will (a) attract and retain the best available (i) non-employee
directors of Modine Manufacturing Company (the “Company”) and (ii) employees of the Company or any Subsidiary that now exists or hereafter is organized or acquired by the Company, (b) provide additional incentive to such persons and (c) promote
the success and growth of the Company. These purposes may be achieved through the grant of options to purchase Common Stock, the grant of Stock Appreciation Rights, the grant of Restricted Stock Awards, the grant of Restricted Stock Units, the
grant of Performance Stock Awards, the grant of Unrestricted Common Stock Awards, and the grant of Phantom Stock Awards, as described below.
1.02 Effective Date. The effective date of the Plan is July 23, 2020 (the “Effective Date”), subject to the approval of the shareholders of the Company at the 2020 Annual Meeting of Shareholders.
II. DEFINITIONS.
2.01 "Affiliate" or "Associate" shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934, as it may be amended from time to time.
2.02 “Award” means an Incentive Stock Option, Non-Qualified Stock Option, Stock Appreciation Right, Restricted Stock Award, unrestricted Common Stock Award, Restricted Stock Unit Award, Performance Stock
Award, or Phantom Stock Award, as appropriate.
2.03 “Award Agreement” means the agreement between the Company and the Grantee specifying the terms and conditions as described thereunder.
2.04 “Board” means the Board of Directors of the Company.
2.05 “Cause” shall be deemed to exist if, and only if: (a) Grantee engages in an act of dishonesty constituting a felony that results or is intended to result directly or indirectly in gain or personal
enrichment at the expense of the Company; (b) Grantee discloses confidential information of the Company that results in a demonstrable material injury to the Company; or (c) Grantee has engaged in a willful and continued failure to perform
substantially the Grantee’s duties on behalf of the Company.
2.06 “Change in Control” shall be deemed to take place on the occurrence of any of the following events: (a) the consummation of (i) a merger or consolidation of the Company with one or more other
corporations as a result of which the holders of the outstanding capital stock of the Company entitled to vote in elections of directors (the “Voting Power”) of the Company immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 50% of the Voting Power of the surviving or resulting corporation, or (ii) a transfer of 30% of the Voting Power, or a majority of the Company's consolidated
assets, other than to an entity of which the Company owns at least 50% of the Voting Power; or (b) the date upon which individuals, who as of the Effective Date, constitute the Board (as of such date, the “Incumbent Board”) cease for any reason
to constitute at least a majority of such Board; provided however, that any person becoming a director subsequent to the Effective Date whose appointment or nomination for election by the shareholders of the Company was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest which was (or, if threatened, would have been) subject to Exchange Act Rule 14a-12(c).
2.07 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.
2.08 “Committee” means the committee described in Article IV or the person or persons to whom the committee has delegated its power and responsibilities under Article IV.
2.09 “Common Stock” or “Stock” means the common stock of the Company having a par value of $0.625 per share.
2.10 “Company” means Modine Manufacturing Company, a Wisconsin corporation.
2.11 “Fair Market Value” means, as of any date of determination, (a) the closing sale price of a share of Stock on the New York Stock Exchange (or on such other recognized market or quotation system on
which the trading prices of Stock are traded or quoted at the relevant time), or (b) if no such sale shall have been made on that day, on the last preceding day on which there was such a sale. If such Stock is not then listed or quoted as
referenced above, Fair Market Value shall be an amount determined in good faith by the Committee.
2.12 “Grant Date” means the date on which an Award is deemed granted, which shall be the date on which the Committee authorizes the Award or such later date as the Committee shall determine in its sole
discretion.
2.13 “Grantee” means an individual who has been granted an Award.
2.14 “Incentive Stock Option” or “ISO” means an option that is intended to meet the requirements of Section 422 of the Code and regulations thereunder.
2.15 “Non-Qualified Stock Option” or “NSO” means an option other than an Incentive Stock Option.
2.16 “Option” means an Incentive Stock Option or Non-Qualified Stock Option, as appropriate.
2.17 “Performance Goal” means a performance goal established by the Committee at the time of the grant of an Award that is based on the attainment of goals relating to one or more business criteria
measured on an absolute basis or in terms of growth or reduction or relative to a designated comparison group. The Committee may determine the achievement of any Performance Goals with or without regard to any of the following events that occurs
during the performance period applicable to an Award subject to a Performance Goal: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions
affecting reported results; (d) any reorganization and restructuring programs; (e) the effect of events that are unusual in nature or infrequently occurring; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses, each as set
forth by the Committee at the time of the grant and as specified in the Award Agreement. The Committee shall retain the discretion to adjust Awards that are subject to a Performance Goal downward, either on a formula or discretionary basis or
any combination, as the Committee determines.
2.18 “Performance Stock Award” means an Award under Article IX of the Plan, that is conditioned upon the satisfaction of one or more pre-established Performance Goals.
2.19 “Phantom Stock Award” means the right to receive in cash the Fair Market Value of a share of Common Stock under Article X of the Plan.
2.20 “Plan” means the Modine Manufacturing Company 2020 Incentive Compensation Plan as set forth herein, as it may be amended from time to time.
2.21 “Restricted Stock Award” means a restricted stock award under Article VII of the Plan.
2.22 “Restricted Stock Unit Award” means a restricted stock unit award under Article VIII of the Plan.
2.23 “Stock Appreciation Right” or “SAR” means the right to receive cash or shares of Common Stock based upon the excess of the Fair Market Value of one share of Common Stock on the date the SAR is
exercised over the grant price (which shall be not less than the Fair Market Value of a share of Common Stock on the Grant Date), as further described in Article VI of the Plan.
2.24 “Subsidiary” means any corporation in which the Company or another entity qualifying as a Subsidiary within this definition owns 50% or more of the total combined voting power of all classes of
stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company or another entity qualifying as a Subsidiary within this definition owns 50% or more of the combined equity thereof.
2.25 “Unrestricted Common Stock Award” means an award of Common Stock made without vesting restrictions in accordance with Section 7.05, below.
III. SHARES SUBJECT TO AWARD.
3.01 Share Limit. Subject to adjustment as provided in Section 3.02 below, the number of shares of Common Stock of the Company that may be issued under the Plan shall not exceed Two Million Eight
Hundred Ninety Thousand (2,890,000) shares (the "Share Limit"). Shares issued under the Plan may come from authorized but unissued shares, from treasury shares held by the Company, from shares purchased by the Company or an independent agent in
the open market for such purpose, or from any combination of the foregoing. The Share Limit shall be subject to the following rules and adjustments:
3.02 Changes in Common Stock. If any stock dividend is declared upon the Common Stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the
Common Stock, resulting in a split or combination or exchange of shares, the Committee shall make or provide for such adjustment in the number of and class of shares that may be delivered under the Plan, and in the number and class of and/or
price of shares subject to outstanding Awards as it may, in its discretion, deem to be equitable.
IV. ADMINISTRATION.
4.01 Administration by the Committee. For purposes of the power to grant Awards to non-employee directors, the Committee shall consist of the entire Board; provided,
however, that discretionary Awards to non-employee directors will be administered by the entire Board but without the participation of any members who at the time are not independent under the rules of the New York Stock Exchange. For other Plan
purposes, the Plan shall be administered by a committee designated by the Board to administer the Plan and shall be the Officer Nomination and Compensation Committee of the Board. The Committee shall be constituted to permit the Plan to comply
with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended or any successor rule. A majority of the members of the Committee shall constitute a quorum. The approval of such a quorum, expressed by a vote at a meeting
held either in person or by conference telephone call, or the unanimous consent of all members in writing without a meeting, shall constitute the action of the Committee and shall be valid and effective for all purposes of the Plan.
4.02 Committee Powers. The Committee is empowered to adopt such rules, regulations and procedures and take such other action as it shall deem necessary or proper for the administration of the Plan. The
Committee shall also have authority to interpret the Plan, and the decision of the Committee on any questions concerning the interpretation of the Plan shall be final and conclusive. The Committee may consult with counsel, who may be counsel for
the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. Subject to the provisions of the Plan, the Committee shall have full and final authority to:
4.03 No Repricing. Repricing of Options or SARs shall not be permitted without shareholder approval. For this purpose, a "repricing" means any of the following (or any other action that has the same
effect as any of the following): (A) changing the terms of an Option or SAR to lower its purchase or grant price; (B) any other action that is treated as a "repricing" under generally accepted accounting principles; and (C) repurchasing for cash
or canceling an Option or SAR at a time when its purchase or grant price is greater than the Fair Market Value of the underlying stock in exchange for another Award (including an Option or SAR), unless the cancellation and exchange occurs in
connection with an event set forth in Section 3.02. Such cancellation and exchange would be considered a "repricing" regardless of whether it is treated as a "repricing" under generally accepted accounting principles and regardless of whether it
is voluntary on the part of the Grantee.
4.04 Delegation by Committee. The Committee may delegate all or any part of its responsibilities and powers to any executive officer or officers of the Company selected by it. Any such delegation may be
revoked by the Board or by the Committee at any time.
V. STOCK OPTIONS.
5.01 Granting of Stock Options. Options may be granted to non-employee directors of the Company and to officers and key employees of the Company and any of its Subsidiaries. In selecting the
individuals to whom Options shall be granted, as well as in determining the number of Options granted, the Committee shall take into consideration such factors as it deems relevant pursuant to accomplishing the purposes of the Plan. A Grantee
may, if he or she is otherwise eligible, be granted an additional Option or Options if the Committee shall so determine. Option grants under the Plan shall be evidenced by an Award Agreement in such form and containing such provisions as are
consistent with the Plan as the Committee shall from time to time approve.
5.02 Type of Option. At the time each Option is granted, the Committee shall designate the Option as an Incentive Stock Option or a Non-Qualified Stock Option. Any Option designated as an Incentive
Stock Option shall comply with the requirements of Section 422 of the Code, including the requirement that incentive stock options may only be granted to individuals who are employed by the Company, a parent or a Subsidiary corporation of the
Company. If required by applicable tax rules regarding a particular grant, to the extent that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares with respect to which an Incentive Stock
Option grant under this Plan (when aggregated, if appropriate, with shares subject to other Incentive Stock Option grants made before said grant under this Plan or another plan maintained by the Company or any ISO Group member (as defined in
Section 422 of the Code)) is exercisable for the first time by an optionee during any calendar year exceeds $100,000 (or such other limit as is prescribed by the Code), such option grant shall be treated as a grant of Non-Qualified Stock Options
pursuant to Code Section 422(d).
5.03 Option Terms. Each option grant Award Agreement shall specify the number of Incentive Stock Options and/or Non-Qualified Stock Options being granted; one option shall be deemed granted for each
share of Common Stock. In addition, each option grant Award Agreement shall specify the exercisability and/or vesting schedule of such options, if any. Except as otherwise provided by the Committee, the Option shall vest over a four-year
period, with 25% of the Option vesting on each annual anniversary after the Grant Date. No Option shall be exercisable in whole or in part more than ten years from the Grant Date.
5.04 Purchase Price. The purchase price for a share subject to an Option shall not be less than 100% of the Fair Market Value of the share on the date the Option is granted, provided, however, the
purchase price of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of such share on the date the Option is granted if the Grantee then owns (after the application of the family and other attribution rules of Section
424(d) or any successor rule of the Code) more than 10% of the total combined voting power of all classes of stock of the Company. The purchase price of the Common Stock covered by each Option shall be subject to adjustment as provided in
Articles III and XI hereof.
5.05 Method of Exercise. An Option that has become exercisable may be exercised from time to time by written notice to the Company stating the number of shares being purchased and accompanied by the
payment in full of the purchase price for such shares. The purchase price may be paid by any of the following methods: (a) by cash, (b) to the extent permitted under the particular grant Award Agreement, by transferring to the Company shares of
stock of the Company at their Fair Market Value as of the date of exercise of the Option ("Delivered Stock"), (c) a combination of cash and Delivered Stock, or (d) such other forms or means which the Committee shall determine in its discretion
and in such manner as is consistent with the Plan's purpose and applicable law. Notwithstanding the foregoing, the Company may arrange for or cooperate in permitting broker-assisted cashless exercise procedures.
5.06 Shareholder Rights. A Grantee shall not, by reason of any Options granted hereunder, have any rights of a shareholder of the Company with respect to the shares covered by Options until shares of
Stock have been issued. No dividends or dividend equivalents shall be paid with respect to Options.
VI. STOCK APPRECIATION RIGHTS.
6.01 Granting of SARs. The Committee may, in its discretion, grant SARs to non-employee directors of the Company and to officers and key employees of the Company and any of its Subsidiaries. SARs may
be granted with respect to Options granted concurrently (tandem SARs) or on a standalone basis (standalone SARs).
6.02 SAR Terms. Each SAR grant shall be evidenced by an Award Agreement that shall specify the number of SARs granted, the grant price (which shall be not less than the Fair Market Value of a share of
Common Stock on the Grant Date), the term of the SAR, and such other provisions as the Committee shall determine. Except as otherwise provided by the Committee, the SAR shall vest over a four-year period, with 25% of the SAR vesting on each
annual anniversary after the Grant Date. No SAR shall be exercisable in whole or in part more than ten years from the Grant Date.
6.03 Method of Exercise. An SAR that has become exercisable may be exercised by written notice to the Company stating the number of SARs being exercised.
6.04 Payment upon Exercise. Upon the exercise of SARs, the Grantee shall be entitled to receive an amount determined by multiplying (a) the difference obtained by subtracting the grant price from the
Fair Market Value of a share of Common Stock on the date of exercise, by (b) the number of SARs exercised. At the discretion of the Committee, the payment upon the exercise of the SARs may be in cash, in shares of Common Stock of equivalent
value (valued at the Fair Market Value of the Common Stock on the date of exercise), or in some combination thereof. The aggregate number of available shares under Section 3.01 shall not be affected by any cash payments, but for the avoidance of
doubt, SARs shall be counted against the individual annual limitation on Awards granted in Section 3.01.
6.05 Shareholder Rights. A Grantee shall not, by reason of any SARs granted hereunder, have any rights of a shareholder of the Company with respect to the shares covered by SARs until shares of Stock
have been issued. No dividends or dividend equivalents shall be paid with respect to SARs.
VII. RESTRICTED STOCK AWARDS AND UNRESTRICTED COMMON STOCK AWARDS.
7.01 Administration. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the eligible persons to whom and the time
or times at which grants of Restricted Stock will be made, the number of shares of restricted Common Stock to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards.
The Committee may condition the grant of Restricted Stock upon the attainment of Performance Goals. The Committee may also condition the grant of Restricted Stock upon such other conditions, restrictions and contingencies as the Committee may
determine. The provisions of Restricted Stock Awards need not be the same with respect to each recipient.
7.02 Registration. Any Restricted Stock Award granted hereunder may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Restricted Stock, such certificate shall be registered in the name of the Grantee and shall bear an appropriate legend (as determined by
the Committee) referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the event such Restricted Stock is issued in book-entry form, the depository and the Company’s transfer agent shall be provided with notice
referring to the terms, conditions and restrictions applicable to such Restricted Stock, together with such stop-transfer instructions as the Committee deems appropriate.
7.03 Terms and Conditions. Restricted Stock Awards shall be subject to the following terms and conditions:
7.04 Rights as Shareholder. A Grantee receiving a Restricted Stock Award shall have the rights of a shareholder of the Company with respect to the right to vote
the shares. All dividends payable with respect to a Restricted Stock Award shall be subject to vesting on the same terms of such Restricted Stock Award and will vest and be paid to a Grantee, only if, when, and to the extent that, such
Restricted Stock Award vests. Unless otherwise determined by the Committee, cash dividends shall be paid in cash and dividends payable in stock shall be paid in the form of additional Restricted Stock.
7.05 Unrestricted Common Stock Awards. The Committee or the Board may grant Unrestricted Common Stock Awards to non-employee directors of the Company. Except as otherwise provided at the time of grant,
shares of Common Stock subject to an Unrestricted Common Stock Award shall not be subject to the terms and conditions set forth in Section 7.03 above.
VIII. RESTRICTED STOCK UNIT AWARDS.
8.01 Administration. Restricted Stock Unit Awards entitle a Grantee to receive either one share of Common Stock or an amount in cash equal to the Fair Market Value of one share of Common Stock on the
date of settlement for each Restricted Stock Unit if the vesting conditions are satisfied. The Committee shall determine the Grantees to whom and the time or times at which Restricted Stock Unit Awards will be made, the number of Restricted
Stock Units to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The provisions of Restricted Stock Unit Awards need not be the same with respect to each
recipient.
8.02 Terms and Conditions. Restricted Stock Unit Awards shall be subject to the following terms and conditions:
8.03 Rights as Shareholder. A Grantee receiving a Restricted Stock Unit Award shall not be deemed the holder of any shares covered by the Award, or have any
rights as a shareholder with respect thereto, until such shares are issued to him/her at the time set forth in the Applicable Award Agreement. Notwithstanding the foregoing, the Committee shall have the right, but not the obligation, to grant
Restricted Stock Unit Awards which pay dividend equivalents to the Grantee in the form of cash payments or additional Restricted Stock Units, as specified in the applicable Award Agreement; provided, however, all dividend equivalents payable with
respect to a Restricted Stock Unit Award shall be subject to vesting on the same terms of the such Restricted Stock Unit Award and will vest and be paid to a Grantee, only if and when, and to the extent that, such Restricted Stock Unit Award
vests and is settled.
IX. PERFORMANCE STOCK AWARDS.
9.01 Administration. Performance Stock Awards entitle a Grantee to receive shares of Common Stock or an amount in cash equal to the Fair Market Value of the shares of Common Stock on the date of
settlement if predetermined conditions are satisfied. The Committee shall determine the eligible employees to whom and the time or times at which Performance Stock Awards will be made, the number of shares to be awarded, the time or times within
which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the Performance Stock Award upon the attainment of Performance Goals and also upon such other conditions, restrictions
and contingencies as the Committee may determine. The provisions of Performance Stock Awards need not be the same with respect to each recipient.
9.02 Terms and Conditions. Performance Stock Awards shall be subject to the following terms and conditions:
9.03 Rights as Shareholder. A Grantee receiving a Performance Stock Award shall not be deemed the holder of any shares covered by the Award, or have any rights
as a shareholder with respect thereto, until such shares are issued to him/her following the lapse of the applicable restrictions, if any. No dividends or dividend equivalents shall be paid with respect to Performance Stock Awards prior to the
time such shares are issued.
X. PHANTOM STOCK AWARDS.
10.01 Administration. Phantom Stock Awards entitle a Grantee to receive cash payments based upon the Fair Market Value of shares of Common Stock if predetermined conditions are satisfied. The Committee
shall determine the eligible employees to whom and the time or times at which Phantom Stock Awards will be made, the number of shares to be covered by the Award, the time or times within which such Awards may be subject to forfeiture and any
other terms and conditions of the Awards. The Committee may condition the grant of a Phantom Stock Award upon the attainment of Performance Goals and also upon such other conditions, restrictions and contingencies as the Committee may
determine. The provisions of Phantom Stock Awards need not be the same with respect to each recipient.
10.02 Terms and Conditions. Phantom Stock Awards shall be subject to the following terms and conditions:
10.03 Rights as Shareholder. A Grantee receiving a Phantom Stock Award shall not be deemed the holder of any shares covered by the Award, or have any rights as a
shareholder with respect thereto. The Committee shall have the right, but not the obligation, to grant Phantom Stock Awards which pay dividend equivalents to the Grantee in the form of cash payments or additional Phantom Stock, as specified in
the applicable Award Agreement; provided, however, all dividend equivalents payable with respect to a Phantom Stock Award shall be subject to vesting on the same terms of the such Phantom Stock Award and will vest and be paid to a Grantee, only
if and when, and to the extent that, such Phantom Stock Award vests and is settled.
XI. EFFECT OF CORPORATE TRANSACTIONS.
11.01 Merger, Consolidation or Reorganization. In the event of a merger, consolidation or reorganization with another corporation in which the Company is not the surviving corporation, or a merger,
consolidation or reorganization involving the Company in which the Common Stock ceases to be publicly traded, the Committee shall, subject to the approval of the Board, or the board of directors of any corporation assuming the obligations of the
Company hereunder, take action regarding each outstanding and unexercised Award pursuant to either clause (a) or (b) below:
11.02 Change in Control. Notwithstanding any provision in this Plan to the contrary, unless the particular Award Agreement provides otherwise or except where a Grantee’s entitlement to an Award is subject
to a Performance Goal, upon a Grantee’s involuntary termination of employment or service without Cause within one year following a Change in Control, all Awards (including those that are assumed or were substituted or converted in accordance with
Section 11.01(a)) will become fully vested, and, for Options and SARs, immediately exercisable. In the case of an Award under which a Grantee’s entitlement to the Award is subject to the achievement of a Performance Goal, unless the particular
Award Agreement provides otherwise, upon the occurrence of a Change in Control, the Grantee shall be deemed to have satisfied the Performance Goal at the target level of performance and such Award shall continue to vest based on the time-based
service vesting criteria, if any, to which the Award is subject. For Awards described in the preceding sentence that are assumed or maintained by the acquiring or surviving company following a Change in Control, unless the particular Award
Agreement provides otherwise, upon a Grantee’s involuntary termination of employment or service without Cause within one year following a Change in Control, the time-based service vesting criteria shall be deemed satisfied at the time of such
termination.
XII. MISCELLANEOUS.
12.01
Withholding.
The Company shall have the power and the right to deduct or withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Grantee’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan.
With respect to withholding required upon the exercise of
Options or SARs, upon the lapse of restrictions on Restricted Stock or the payment of Restricted Stock Units or Performance Stock, Grantees may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold
shares having a Fair Market Value on the date the tax is to be determined equal to an amount not exceeding the maximum statutory total tax that could be imposed on the transaction.
12.02 No Employment or Retention Agreement Intended. Neither the establishment of, nor the awarding of Awards under this Plan shall be construed to create a contract of employment or service between any
Grantee and the Company or its Subsidiaries; it does not give any Grantee the right to continued service in any capacity with the Company or its Subsidiaries or limit in any way the right of the Company or its Subsidiaries to discharge any
Grantee at any time and without notice, with or without Cause, or to any benefits not specifically provided by this Plan, or in any manner modify the Company’s right to establish, modify, amend or terminate any profit sharing or retirement plans.
12.03 Non-transferability of Awards. Any Award granted hereunder shall, by its terms, be non-transferable by a Grantee other than by will or the laws of descent and shall be exercisable during the
Grantee’s lifetime solely by the Grantee or the Grantee’s duly appointed guardian or personal representative. Notwithstanding the foregoing, the Committee may permit a Grantee to transfer a Non-Qualified Stock Option or SAR to a family member or
a trust or partnership for the benefit of a family member, in accordance with rules established by the Committee.
12.04 Forfeiture of Awards or Amounts Paid Under the Plan. The Company shall have the power and the
right to require any Grantee to forfeit and return to the Company any Award made to the Grantee or proceeds realized thereon pursuant to this Plan consistent with any recoupment policy maintained by the Company under applicable law, as such
policy is amended from time to time.
12.05 Securities Laws. No shares of Common Stock will be issued or transferred pursuant to an Award unless and until all then-applicable requirements imposed by Federal and state securities and other
laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the shares of Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the
grant or exercise of an Award, the Company may require the Grantee to take any reasonable action to meet such requirements. The Committee may impose such conditions on any shares of Common Stock issuable under the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable
to such shares. The Committee may also require the Grantee to represent and warrant at the time of issuance or transfer that the shares of Common Stock are being acquired only for investment purposes and without any current intention to sell or
distribute such shares.
12.06 Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, any outstanding Awards previously granted under this Plan shall be deemed canceled.
12.07 Controlling Law. The law of the State of Wisconsin, except its law with respect to choice of law, shall be controlling in all matters relating to the Plan.
12.08 Termination and Amendment of the Plan. The Plan will expire ten (10) years after the Effective Date, solely with respect to the granting of Incentive Stock Options or such later
date as may be permitted by the Code for Incentive Stock Options. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall (a) impair without the Grantee’s consent any Award
previously granted under the Plan or (b) be made without shareholder approval where such approval would be required as a condition of compliance with the Code or other applicable laws or regulatory requirements. Absent shareholder approval,
neither the Committee nor the Board shall have any authority, with or without the consent of a Grantee, to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARs in exchange for another Award including an
Option or SAR with an exercise price that is less than the exercise price of the original Options or SARs, except in the event of a corporate event involving the Company, as authorized under Section 3.02 or 11.01 of the Plan.
Notice
of Meeting
and Proxy
Statement