COMPE
NSATI
ON DISCUSSION AND ANALYSIS
WD-40 Company’s Compensation Discussion and Analysis addresses the executive compensation philosophy and the processes and decisions of the Compensation Committee of the Company’s Board of Directors (the “Committee”) with respect to the compensation of the Company’s Named Executive Officers (the “NEOs”). For fiscal year 2017, the Company’s NEOs were:
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Garry O. Ridge, our Chief Executive Officer (“CEO”);
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Jay W. Rembolt, our Vice President, Finance, Treasurer and Chief Financial Officer (“CFO”);
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Michael L. Freeman, our
Chief Strategy Officer;
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William B. Noble,
our Managing Director, EMEA
; and
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Stanley A. Sewitch, our Vice President, Global Organization Development
.
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EXECUTIVE
SUMMARY
OF
EXECUTIVE
COMPENSATION DECISIONS
AND RESULTS
The compensation structure for the NEOs is comprised of three elements: base salary, retention-related equity compensation and performance-related cash and equity compensation.
Through the application of these elements, a significant portion of NEO realized compensation is directly tied to Company performance measured by increased earnings and total stockholder return (“TSR”). Performance-based compensation tied to earnings is based on earnings before interest, income taxes, depreciation
(in operating departments)
and amortization (“EBITDA”), not earnings per share.
Retention-related equity compensation includes restricted stock unit (“RSU”) awards that vest over a period of three years after grant
, subject to earlier vesting upon the effective date of retirement
under certain conditions
. Retention-related equity compensation features are also reflected in our performance-based market share unit (“MSU”) awards that may be earned over a market return-based vesting period of three years
, subject to pro-rata vesting at the end of the
applicable m
easurement period in the event of earlier retirement
under certain conditions
.
Performance-related compensation includes (i) an annual cash
payment
opportunity that is tied to current fiscal year financial results
(“Incentive Compensation”)
; (ii) MSU awards that are tied to a measure of TSR; and (iii) deferred performance unit (“DPU”) awards that are tied to current fiscal year financial results that exceed levels required for maximum payment of that portion of the cash Incentive Compensation opportunity that is tied to global EBITDA.
For purposes of measuring performance based on the Company’s EBITDA, the Company uses EBITDA before deduction of the stock-based compensation expense for vested DPU awards, if any, and excluding other non-operating income and expense amounts (“Adjusted EBITDA”).
The foregoing compensation structure elements are fully
described
later in this Compensation Discussion and Analysis.
In establishing the framework for overall NEO compensation and in assessing such compensation for each NEO in light of individual and overall Company performance, the Committee considers actual and target levels of compensation with reference to both short-term and long-term performance periods as well as labor market data and peer group executive compensation. The Committee seeks to align individual NEO performance incentives with both short-term and long-term Company objectives. The Committee reviews each of the principal elements of NEO compensation to determine the effectiveness of the established framework for NEO compensation based on measures of Company performance, specifically including regional and
global measures based on the Company’s
Adjusted
EBITDA, but also including relative Company performance as compared to the established peer group of companies and a comparable market index. Additionally, the Committee also considers the relative achievement of longer term strategic objectives as to which each NEO is accountable. Information regarding NEO strategic objectives is provided in the
Executive Officer Compensation Decisions
section below under the heading,
Base Salary: Process.
The Committee believes that a review of NEO compensation and relative company performance over multi-year periods demonstrates the effectiveness of the Company’s established framework for NEO compensation.
THREE YEAR
PERFORMANCE-BASED
COMPENSATION REVIEW
For fiscal year 2017, the Company’s overall financial performance was strong, but mixed, resulting in partial achievement of performance measure goals for regional and global Adjusted EBITDA under the Company’s Incentive Compensation program (the “Performance Incentive Program”) as described below. T
he maximum first level performance measure goals for the EMEA and Asia-Pacific regions were achieved, but the first level performance goal for the Americas region was not achieved. Due to the strong performance of the EMEA and Asia-Pacific segments, the maximum first level goal for global Adjusted EBITDA was achieved and approximately 47% of the second level goal for global Adjusted EBITDA was achieved.
As a result, each of the NEOs earned 74% of their Incentive Compensation opportunity for fiscal year 2017. For fiscal year 2016, the Company’s financial performance was strong. For fiscal year 2016, the maximum performance measure goals for regional and global
Adjusted EBITDA were achieved. As a result, each of the NEOs earned the maximum possible amount of Incentive Compensation for fiscal year 2016. The Company’s financial performance for fiscal year 2015, as measured against goals for regional and global Adjusted EBITDA, was mixed.
Maximum first level goals for the Americas and Asia-Pacific regions were achieved in fiscal year 2015, but minimum first level goals for EMEA were not achieved. The second level minimum goal for global Adjusted EBITDA was not achieved.
As a result, earned Incentive Compensation amounts for fiscal year 2015 for the
NEOs were at or near the target amounts (50% of the maximum earned Incentive Compensation opportunity) for all of those NEOs other than Mr. Noble and no Incentive Compensation was earned by Mr. Noble
.
For the three fiscal years ended August 31, 2017, th
e TSR for the Company’s shares exceeded,
by an absolute percentage point difference, the return for the Russell 2000 Index (the “Index”) by
33.32
%.
As a result, MSUs awarded to the NEOs in October 2014 provided vested shares of the Company’s common stock to the NEOs
at 200% of the target number of award shares.
For the three fiscal years ended August 31, 2016, the TSR for the Company’s shares exceeded, by an absolute percentage point difference, the return for the Index by 91.4%. As a result, MSUs awarded to the NEOs in October 2013 provided vested shares of t
he Company’s common stock to those
NEOs at the maximum amount of 200% of the target number of award shares. For the three fiscal years ended August 31, 2015, the TSR for the Company’s shares exceeded, by an absolute percentage point difference, the return for the Index by 27.5%. As a result, MSUs awarded to the NEOs in October 2012 also provided vested shares of the Company’s common stock to
those
NEOs at the maximum amount of 200% of the target number of award shares.
FISCAL YEAR 201
7
COMPENSATION
Compensation decisions for fiscal year 2017 were made in October 2016 based on individual and Company performance during fiscal year 2016 and a market survey conducted by the Committee’s compensation consultant.
The relative market percentile of total compensation for each of the NEOs
for fiscal year 2017
is
based on peer group data
which
is provided below under the heading
Overall Reasonableness of Compensation
.
The following is a summary of the decisions made by the Committee for NEO compensation for fiscal year 2017:
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For fiscal year 2017, base salaries for the NEOs
other than Mr.
Sewitch
were not increased. Base salaries for
the
NEOs were assessed in relation to labor market information. For fiscal year 2017, consideration was given to the appropriate relative mix of salary, annual Incentive Compensation and equity awards.
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Annual Incentive Compensation is awarded to the NEOs under the Company’s Performance Incentive Compensation Plan described below under the heading
Performance Incentive Program
. For purposes of the Performance Incentive Program, goals for regional and global
Adjusted
EBITDA were established at the beginning of the
fiscal
year. The Company’s performance as measured against these goals is described in detail below.
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In October 2016, the NEOs received annual RSU awards providing for the issuance of a total of
6,977
shares of the Company’s common stock to be earned by continued employment by the Company over a vesting period of three years
,
subject to earlier vesting upon the effective date of retirement
under certain conditions
.
These awards serve a retention purpose together with an incentive to maximize long term stockholder value through share price appreciation.
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In October 2016, the NEOs received MSU awards subject to performance vesting covering a target number of shares of the Company’s common stock equal to
6,977
shares. If the Company’s TSR over the three year vesting period matches the median return for the Index, the target number of shares of the Company’s common stock would be issued to the NEOs
.
T
he actual number of shares to be issued
to the NEOs
will be from 0% to 200% of the target number of shares depending upon the Company’s TSR as compared to the return for the Index.
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In October 2016, the NEOs received DPU awards that provided an opportunity to receive up to an aggregate maximum of 9,184 additional shares of the Company’s common stock upon termination of employment. The DPU awards provided for vesting as of the end of fiscal year 2017 if the Company were to achieve a level of global Adjusted EBITDA for the fiscal year in excess of the maximum goal for global Adjusted EBITDA established for the Performance Incentive Program
. Since the Company’s global Adjusted EBITDA for fiscal year 2017
did not exceed
the maximum goal for global EBITDA established for the Performance Incentive Program, the DPU awards for fiscal year 2017 did not vest and they have lapsed without value to the NEOs.
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RSU, MSU and DPU award amounts for fiscal year 2017 varied among the NEOs based on labor market compensation practices specific to the region of employment, relative achievement of individual performance measures and goals established for each NEO, as well as Company performance for fiscal year 2016 in areas over which each NEO had direct influence.
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The Company’s stockholders have provided advisory votes to approve executive compensation required by Section 14A of the Exchange Act (the “Say-on-Pay” votes) at the Company’s annual meeting of stockholders for fiscal years 2014, 2015 and 2016. In each instance,
at least 95% of the votes
cast in the Say-on-Pay votes approved the compensation of the NEOs as disclosed in the Compensation Discussion and Analysis section of the Company’s
P
roxy
S
tatements for those fiscal years and in the accompanying compensation tables and narrative disclosures. The Committee has considered the results of these advisory Say-on-Pay votes in its decision-making for executive compensation of the NEOs and has concluded that no significant changes in executive compensation decisions and policies are warranted.
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GOVERNANCE OF E
XECUTI
VE OFFICER COMPENSATION PROGRAM
The purpose of the Committee is to establish and administer the compensation arrangements for our CEO and the other executive officers of the Company, including the other NEOs, on behalf of the Board of Directors. The Committee is responsible for developing the Company’s overall executive compensation strategy, with support from management and the Committee’s independent compensation consulting firm. For fiscal year 2017 compensation decisions, the Committee’s compensation consulting firm was Board Advisory, LLC. The Committee also has responsibilities in connection with administration of the Company’s equity compensation plans.
The Committee operates pursuant to a Charter which outlines its responsibilities, including the Committee’s responsibilities with respect to performance reviews and approval of annual compensation arrangements for the NEOs. A copy of the Compensation Committee Charter can be found
on
WD-40 Company’s website at
https://www.wd40company.com/
,
under “Corporate Governance” within the “Investors” section.
PROCESS FOR EVALUATING EXECUTIVE OFFICER PERFORMANCE AND COMPENSATION
In accord with its Charter, the Committee works with the Company’s Human Resources function in carrying out its responsibilities.
Mr. Sewitch,
Vice President of Global Organization Development
,
is management’s liaison with the Committee. The Committee’s independent compensation consulting firm provides advice and information relating to executive compensation. For fiscal year 2017, the compensation consulting firm assisted the Committee in the evaluation of executive base salary, Incentive Compensation opportunities, equity incentive design and award levels, and the specific pay recommendation for our CEO. The Committee’s compensation consulting firm reports directly to the Committee and provides no additional services for management.
EXECUTIVE
COMPENSATION
PHILOSOPHY AND FRAMEWORK
COMPENSATION OBJECTIVES
The Company’s executive compensation program is designed to achieve five primary objectives:
1.
Attract, motivate, reward and retain high performing executives;
2.
Align the interests and compensation of executives with the value created for stockholders;
3.
Create a sense of motivation among executives to achieve both short- and long-term Company objectives;
4.
Create a direct, meaningful link between business and team performance and individual accomplishment and rewards; and
5.
Ensure our compensation programs are appropriately competitive in the relevant labor markets.
TARGET PAY POSITION/MIX OF PAY
The Company’s compensation program consists primarily of base salary, annual cash incentives, and long-term oriented equity awards. Each of these components is discussed in greater detail in the
Executive Officer Compensation Decisions
section below. The Committee has established a target for executive officer total compensation (defined as base salary, plus target Incentive Compensation, plus the grant date value of equity awards) at the median market level of compensation for each position (details on the use of peer group data to establish the median market level
are
provided below). Actual pay may vary, based on Company and/or individual performance, length of time within the position, and anticipated contribution. The Committee does not adhere to specific guidelines regarding the percentage of total compensation that should be represented by each compensation component, but monitors market competitiveness. A review of total compensation for each NEO relative to the target market percentile is provided in the
Executive Officer Compensation Decisions
section below under the heading,
Overall Reasonableness of Compensation.
The mix of pay for executive officers is intended to provide significant incentives to drive overall company performance an
d increased stockholder value.
The following charts show the relative portions of the maximum total compensation that the CEO and the other NEOs, respectively, are eligible to earn for fiscal year 2017 (“Total Compensation Opportunity”). For purposes of these charts, Salary and All Other Compensation amounts are as reported in the Summary Compensation Table
below
;
maximum possible
Stock Award (RSUs, MSUs and DPUs) amounts are as reported in the table in footnote
1 to the Summary Compensation Table; and
maximum
Non-Equity Incentive Plan Compensation (Incentive Compensation) amounts are as reported as the maximum amounts for such compensation in the Grants of Plan-Based Awards table
below
.
The Total Compensation Opportunity for the CEO and for all other NEOs in the aggregate is divided among elements of compensation that are considered at risk (MSUs, tied to longer term relative stockholder return, and Incentive Compensation and DPUs, tied to current
fiscal
year financial performance), and those elements that are not performance-based (Salary, All Other Compensation and RSUs). Approximately
66
%
of the CEO’s Total Compensation Opportunity for fiscal year 2017 was at risk
while approximately
55
%
,
in the aggregate
, of the Total Compensation Opportunity for fiscal year 2017 for all of the other NEOs was at risk
. As reported in more detail below, for fiscal year 2017,
each of
the
NEOs
earned
74
%
of
their
maximum Incentive Compensation
amounts
, maximum MSU award value
s
(for the MSU award granted in 2014), and
no
portion of
their
DPU award
s
.
COMPENSATION BENCHMARKING
For purposes of its fiscal year 2017 compensation decisions, the Committee examined the executive compensation practices of a peer group of nineteen companies to assess the competitiveness of the Company’s executive compensation. Peer group companies were selected from a list of U.S. headquartered companies having revenues and earnings reasonably comparable to the
Company and doing business in the specialty chemical industry or within specific consumer products categories.
In addition to the peer group data, the Committee considers surveys of general industry company data provided by Hay Group, a global management consulting firm and Kenexa, an IBM Company. These data sources are applied by the Committee to establish the market median level of compensation for each executive officer position.
The companies used in the peer group analysis for fiscal year 2017 compensation decisions were as follows:
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Aceto Corporation
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Landec Corporation
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American Vanguard Corporation
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National Presto Industries, Inc.
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Balchem Corporation
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Nutraceutical International Corporation
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Calgon Carbon Corporation
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Oil-Dri Corporation of America
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Cambrex Corporation
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Park Electrochemical Corp.
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Flotek Industries Inc.
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Prestige Brands Holdings, Inc.
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Hawkins, Inc.
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Quaker Chemical Corporation
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Innophos Holdings, Inc.
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Synutra International, Inc.
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Innospec Inc.
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USANA Health Sciences, Inc.
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Inter Parfums, Inc.
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EXECUTIVE
OFFICER
COMPENSATION DECISIONS
FOR FISCAL YEAR
2017
BASE SALARY: PROCESS
Base salaries for all executive officers, including the NEOs, are approved by the Committee effective for the beginning of each fiscal year. In setting base salaries, the Committee considers the salary range prepared by its compensation advisor based on each NEO’s job responsibilities and the market 50
th
percentile target pay position. Salary adjustments, if any, are based on factors such as individual performance, position, current pay relative to the market, future anticipated contribution and the Company-wide merit increase budget. Assessment of individual performance
follows a rigorous evaluation process, including self-evaluation and the establishment of annual goals for each executive officer and an assessment of the achievement thereof. Individual performance elements considered in this process included individual and Company performance goals and achievements in such areas as growth, innovation, leadership, earnings and customer relations for Mr. Ridge; governance and risk, compliance, forecasting and financial reporting for Mr. Rembolt;
leadership and
strategic planning
f
or Mr. Freeman; business unit performance, teamwork, execution and growth for M
r.
Noble
; and
organizational development, talent, leadership development and compensation systems
for Mr. Sewitch
.
BASE SALARY: FISCAL YEAR 201
7
In October 2016, the
Committee reviewed the market competitiveness of executive officer base salaries relative to peer group market data presented by the Committee’s compensation advisor.
Based on its review of the peer group market data, no increases in base salary
for fiscal year 2017
were approved by the Committee for any of the NEOs
, other than Mr. Sewitch
.
PERFORMANCE INCENTIVE PROGRAM
The Company uses its Performance Incentive Program to tie executive officer compensation to the Company’s financial performance. All Company employees participate in the same Performance Incentive Program as described below. The Performance Incentive Program is offered to the executive officers pursuant to the WD-40 Company Performance Incentive Compensation Plan most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders.
The Company’s stockholders are being asked to approve the WD-40 Company 2017 Performance Incentive Compensation Plan at this year’s Annual Meeting of Stockholders.
The Performance Incentive Program provides direct incentives to all Company employees, including executive officers, to affect regional financial performance and, for the Company as a whole, to promote sales at increasing levels of profitability. Specific performance measures tied to regional financial results are used in the Performance Incentive Program formulas as applied to each employee according to his or her particular area of responsibility.
For the NEOs, Incentive Compensation opportunity awards for fiscal year 2017 were based on pre-established goals for the following corporate performance measures: (i) the Company’s
Adjusted
EBITDA computed for each of the Company’s relevant
financial reporting segments (“Regional EBITDA”); and (ii)
Adjusted
EBITDA computed on a consolidated basis (“Global EBITDA”). The calculations of attainment of these performance measures for the NEOs are
substantially
the same as the calculations for all other employees for whom such performance measures were applicable.
The Co
mpany’s Incentive Compensation P
rogram, as applied to all of its employees, is designed with the intent to fund the Incentive Compensation payout to all employees, including the NEOs, from increased earnings over the prior fiscal year.
If the Company does not realize an increase in Global EBITDA over the prior year, it is possible that
M
r.
Noble will earn some Incentive Compensation because the performance measure for a portion of the Incentive Compensation opportunity payable to
him
is based on Regional EBITDA.
Depending upon actual performance results, the Incentive Compensation opportunities for fiscal year 2017 range from 0% up to 150% of base salary for Mr. Ridge, from 0% up to 100% of base salary for Messrs. Rembolt and Freeman,
and
from 0% up to 80% of base salary for M
ess
r
s
. Noble
and Sewitch
.
The maximum Incentive Compensation potential for employees under the Performance Incentive Program is referred to herein as the employee’s “Annual Opportunity.” For each of the NEOs, the Performance Incentive Program for fiscal year 2017 provided two performance measure levels (“Levels A and C”) for determination of earned Incentive Compensation; each level represented 50% of the Annual Opportunity. The Performance Incentive Program is consistently applied for all employees of the Company except that there are three performance measure levels (“Levels A, B and C”) for all employees other than the NEOs and certain other management employees. The maximum Incentive Compensation payout for M
r.
Noble required achievement of
a
specified segment goal for Regional EBITDA (Level A) and Company performance that equaled the maximum goal amount for Global EBITDA as described below (Level C). For Messrs. Ridge, Rembolt
,
Freeman
and Sewitch
(each of whom has global rather than regional responsibilities), the maximum Incentive Compensation payouts required achievement of specified goals for Global EBITDA for each of Levels A and C.
Only two of the three performance measure goals are applied for the NEOs and certain other management employees for purposes of calculating earned Incentive Compensation in order to provide an increased incentive to those employees to achieve the maximum level of Global EBITDA results for the benefit of stockholders. Level B performance measure goals for other employees are more directed to achievement of goals tied to areas over which they have more direct influence. For such other employees, Level A represented 50% of the Annual Opportunity, Level B represented 30% of the Annual Opportunity and Level C represented 20% of the Annual Opportunity.
Target and maximum payout amounts for each of the NEOs for the fiscal year 2017 Performance Incentive Program are disclosed below in the table under the heading,
Grants of Plan-Based Awards
-
Fiscal Year 2017
.
The table below sets forth the fiscal year 2017 Performance Incentive Program payout weightings and the minimum and maximum goals for the performance measures applicable to each of the NEOs. The minimum and maximum Level A goals for Regional and Global EBITDA were based on earnings before deduction of any Incentive Compensation amounts. The minimum and maximum Level C goals for Global EBITDA were based on earnings after deduction of an estimate of the maximum possible Incentive Compensation amounts for Levels A and B, but before deduction of Incentive Compensation amounts for Level C
.
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Level
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Performance Measure
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Garry O. Ridge
Jay
W.
Rembolt
Michael L. Freeman
Stanley A. Sewitch
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William B. Noble
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Minimum Goal
FY 2017
($ thousands)
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Maximum Goal
FY 2017
($ thousands)
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A
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Regional EBITDA (EMEA)
1
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N/A
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50%
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$ 33,597
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$ 36,322
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A
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Global EBITDA
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50%
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N/A
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$ 77,100
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$ 89,100
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C
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Global EBITDA
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50%
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50%
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$ 80,922
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$ 87,404
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1
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EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 201
7
of
$1.2678
per GBP
.
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The table below sets forth the actual fiscal year 2017 performance results and percentage achievement for each of the performance measures under the Performance Incentive Program formulas applicable to the NEOs. The actual Regional and Global
EBITDA Level A results were based on earnings before deduction of any Incentive Compensation amounts. The actual Global EBITDA Level C results were based on earnings after deduction of the actual Incentive Compensation amounts for Level A and B, but before deduction of the actual Incentive Compensation amounts for Level C
.
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Level
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Performance Measure
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Actual
FY 2017
($ thousands)
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% Achievement
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A
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Regional EBITDA (EMEA)
1
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$ 40,565
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100.0%
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A
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Global EBITDA
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$ 89,464
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100.0%
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C
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Global EBITDA
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$ 83,993
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47.4%
|
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1
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EMEA figures have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 201
7
of
$1.2678
per GBP
.
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Achievement of the maximum goals for Regional EBITDA and Global EBITDA
is
intended to be attainable through the concerted efforts of all management teams working in their own regions and areas of responsibility and for the Company as a whole.
Based on the Company’s fiscal year 2017 performance and the Committee’s certification of the relative attainment of each of the performance measures under the Performance Incentive Program, the payouts for our executive officers, including the NEOs, were calculated. On October
9
,
2017, the Committee approved payment of the following Incentive Compensation amounts to the NEOs for fiscal year 2017 performance:
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Executive Officer
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Title
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FY 2017
Annual
Opportunity
(As % of
Base Salary)
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FY 2017
Incentive Compensation
Paid ($)
|
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FY 2017
Actual Incentive Compensation
(As % of
Opportunity)
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Garry O. Ridge
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President and Chief Executive Officer
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150%
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$ 710,091
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74%
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Jay W. Rembolt
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Vice President, Finance, Treasurer
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100%
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$ 227,454
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74%
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and Chief Financial Officer
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Michael L. Freeman
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Chief Strategy Officer
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100%
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$ 245,081
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74%
|
William B. Noble
1
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Managing Director, EMEA
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80%
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$ 166,574
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74%
|
Stanley A. Sewitch
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Vice President, Global Organization
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80%
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$ 143,769
|
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74%
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Development
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1
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Mr. Noble’s Incentive Compensation amount has been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 2017 of
$1.2678
per GBP.
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As an example of the operation of the Performance Incentive Program,
Mr. Noble
’s
Incentive Compensation
payout for fiscal year 201
7
was computed as follows:
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Incentive
Compensation Annual
Opportunity =
80
%
X Eligible Earnings
($
282,5
60
)
=
$
226,
048
.
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·
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Level A (Regional EBITDA
(
EMEA
))
=
50
%
of
Annual
Opportunity = $
113,024
.
|
—
Level A
Incentive Compensation
= Level A Achievement
(
100
%)
X Level A
Annual
Opportunity =
$113,0
24
.
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·
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Level C (Global EBITDA) =
50
% of
Annual
Opportunity =
$
113,024
.
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—
Level C
Incentive Compensation
= Level C Achievement
(
47.
37
9
%)
X Level C
Annual
Opportunity =
$
53,5
50
.
Mr. Noble
’s
aggregate
Incentive Compensation
payout was the sum of the payouts under Levels A and C of the Performance Incentive Program, or
$
166,574
.
Equity Compensation
Equity compensation is a critical component of the Company’s efforts to attract and retain executives and key employees, encourage employee ownership in the Company, link pay with performance and align the interests of executive officers with those of stockholders. To provide appropriately directed incentives to our executive officers, the Committee has provided awards of time-vesting restricted stock unit (“RSU”) awards as well as performance-vesting market share unit (“MSU”) awards and deferred performance unit (“DPU”) awards. Equity awards for fiscal year 2017 were granted to the NEOs pursuant to the Company’s 2007 Stock Incentive Plan (the “Stock Incentive Plan”) approved by the stockholders at the 2007 Annual Meeting of Stockholders.
The Company’s MSU awards are tied to a measure of total stockholder return (“TSR”) that is determined by reference to a change in the value of the Company’s common stock with reinvestment of dividends. In October 2016, the Committee granted primary equity allocations of RSU and MSU awards for fiscal year 2017. The authorized awards were divided equally between the two types of awards for each NEO. MSU awards provide for vesting after a three year performance vesting period based on a comparison of the Company’s TSR against the Russell 2000 Index (the “Index”) as described in more detail below. In addition to the RSU and MSU awards, the NEOs also received DPU awards in October 2016. As compared to the retention and long term performance-based attributes of the RSU and MSU awards, the DPU awards provide an incentive reward for achieving Global EBITDA results for the fiscal year in excess of the amount of Global EBITDA required for maximum payout of Incentive Compensation under Level C of the Performance Incentive Program as described above. DPU awards provide for vesting at the end of the fiscal year for which they are granted. All RSU, MSU and DPU awards are subject to terms and conditions set forth in an applicable award agreement (the “Award Agreement”).
The principal attributes and benefits of the RSU, MSU and DPU awards for executive officers are as follows:
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·
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RSU awards provide for vesting in relatively equal portions over a period of three years from the grant date
, subject to earlier vesting upon the effective date of retirement
under certain conditions
.
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·
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|
MSU awards provide for performance-based vesting tied to the Company’s TSR over a performance measurement period of three fiscal years beginning with the fiscal year in which the awards are granted and ending on August 31
st
of the third year.
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|
·
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|
DPU awards provide for performance-based vesting tied to the Company’s Global EBITDA achievement for the current fiscal year in excess of the maximum goal for Global EBITDA under Level C of the Company’s Performance Incentive Program.
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·
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RSU and MSU awards provide for the issuance of shares of the Company’s common stock upon vesting.
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·
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Vested DPU awards provide for the issuance of shares of the Company’s common stock only upon termination of employment. Until issuance of the shares for vested DPU awards, the holders of the vested DPU awards are entitled to receive dividend equivalent payments with respect to their vested DPU awards, payable in cash as and when dividends are declared upon shares of the Company’s common stock.
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·
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A mix of RSU, MSU and DPU awards is appropriate as compared to RSU awards alone or other equity awards, such as stock options, for the following reasons: i) MSU awards granted annually provide a more direct performance-based incentive aligned directly with longer term stockholder interests; ii) RSU awards have a greater perceived value to recipients than stock options; iii) DPU awards offer a reward for exceeding the highest goal for near-term financial results for the Company; iv) RSU, MSU and DPU awards have a lower compensation expense impact on the Company’s reported financial results than stock options; v) RSU, MSU and DPU awards have less dilutive impact on a share count basis than stock options; and vi) the issuance of shares of the Company’s common stock upon vesting of RSUs and MSUs, and the deferred issuance of shares following vesting of DPU awards, encourages long-term stock ownership and facilitates the achievement of the Company’s stock ownership guidelines (as described below in the Other Compensation Policies section, under the heading,
Executive Officer Stock Ownership Guidelines
).
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The Board recognizes the potentially dilutive impact of equity awards. The Company’s equity award practices are designed to balance the impact of dilution and the Company’s need to remain competitive by recruiting, retaining and providing incentives for high-performing employees
.
Restricted Stock Unit Awards
RSU awards provide for the issuance of shares of the Company’s common stock to the award recipient upon vesting provided that the recipient remains employed with the Company through each vesting date except as noted below
with respect to vesting upon retirement
. Shares of the Company’s common stock equal to the portion of the RSU award that has vested are issued promptly upon the vesting date. RSU awards provide for vesting over a period of three years from the grant date. 34% of the RSU award will vest on the first vesting date and 33% of the RSU award will vest on each of the second and third vesting dates. The vesting date each year is the third business day following the Company’s public release of its annual earnings for the preceding fiscal year, but not later than November 15 of the vesting year.
RSU
Award Agreements provide that, for RSU
award recipients who retire from the Company after reaching age 65
,
or for RSU award recipients who retire from the Company after reaching age 55 and have been employed by the Company for at least 10 years, all RSUs will be vested upon the effective date of retirement and shares will be issued within 30 days after the effective date of retirement.
Payment of required withholding taxes due with respect to the vesting of the RSU awards, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a vested RSU award after withholding shares having a value as of the vesting date equal to the required tax withholding obligation.
Market Share Unit Awards
MSU awards provide for performance-based vesting over a performance measurement period of three fiscal years commencing with the fiscal year in which the MSU awards are granted (the “Measurement Period”). Except as noted below
with respect to vesting upon retirement,
the recipient must remain employed with the Company for vesting purposes until the date on which the Committee certifies achievement of the requisite performance provided for in the MSU Award Agreement. A number of shares of the Company’s common stock equal to an “Applicable Percentage” of the “Target Number” of shares covered by the MSU awards to the NEOs will be issued as of the “Settlement Date”. The Applicable Percentage is determined by reference to the performance vesting provisions of the MSU Award Agreements as described below. The Settlement Date for an MSU award is the third business day following the Company’s public release of its annual earnings for the third fiscal year of the Measurement Period.
MSU Award Agreements provide for monthly pro-rata vesting of MSUs as of the end of the Measurement Period in the event of the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or retirement after reaching age 55 with at least 10 years of employment
with the Company
. For purposes
of
calculating the
number of MSUs vested and the corresponding
number of shares to be issued as of the Settlement Date, the Target Number of shares covered by the MSU awards will be adjusted according to the pro-rata portion of the Measurement Period that has elapsed as of the effective date of termination of employment. The Committee may also exercise its discretion to provide for monthly pro-rata vesting of MSUs awarded to a recipient who resigns or is terminated by the Company for reasons other than good cause.
Payment of required withholding taxes due with respect to the settlement of an MSU award, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a vested MSU award after withholding shares having a value as of the Settlement Date equal to the required tax withholding obligation
.
The performance vesting provisions of MSU awards are based on relative TSR for the Company over the Measurement Period as compared to the total return (“Return”) for the Index as reported for total return (with dividends reinvested), as published by Russell Investments. For purposes of computing the relative TSR for the Company as compared to the Return for the Index, dividends paid with respect to the Shares will be treated as having been reinvested as of the ex-dividend date for each declared dividend. The Applicable Percentage of the Target Number of shares will be determined for each of the NEOs based on the absolute percentage point difference between the TSR for the Company as compared to the Return for the Index (the “Relative TSR”) as set forth in the table below:
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Relative TSR
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|
|
(absolute percentage point difference)
|
|
Applicable Percentage
|
> 20%
|
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200%
|
20%
|
|
200%
|
15%
|
|
175%
|
10%
|
|
150%
|
5%
|
|
125%
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Equal
|
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100%
|
-5%
|
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75%
|
-10%
|
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50%
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>-10%
|
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0%
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The Applicable Percentage will be determined on a straight line sliding scale from the minimum 50% Applicable Percentage achievement level to the maximum 200% Applicable Percentage achievement level. For purposes of determining the TSR for the Company and the Return for the Index, the beginning and ending values for each measure will be determined on an average basis over a period of all market trading days within the ninety (90) calendar days prior to the beginning of the fiscal year for the beginning of the Measurement Period and over a period of all market trading days within the ninety (90) calendar days prior to the end of the third fiscal year of the Measurement Period. For purposes of determining relative achievement, actual results are
to be rounded to the nearest tenth of one percent and rounded up from the midpoint. The number of MSU Shares to be issued on the Settlement Date is to be rounded to the nearest whole share and rounded upward from the midpoint.
In the event of a Change in Control (as defined in the Stock Incentive Plan), the Measurement Period will end as of the effective date of the Change in Control and the ending values for calculating the TSR for the Company and the Return for the Index will be determined based on the closing price of the Company’s common stock and the value of the Index, respectively, immediately prior to the effective date of the Change in Control. The Applicable Percentage will be applied to a proportionate amount of the Target Number of MSUs based on the portion of the Measurement Period elapsed as of the effective date of the Change in Control. The recipient NEO will receive RSUs for the portion of the Target Number of MSUs to which the Applicable Percentage is not applied. Those RSUs will time vest, subject to rights under the NEO’s Change of Control Severance Agreement, as of the Settlement Date.
Deferred Performance Unit Awards
DPU awards provide for performance-based vesting over a performance measurement period of the fiscal year in which the DPU awards are granted (the “Measurement Year”). The DPU awards provide for vesting of a number of DPUs equal to an “Applicable Percentage” of the “Maximum Number” of DPUs awarded to the NEOs following conclusion of the Meas
urement Year (“Vested DPUs”). Except as noted below
with respect to vesting upon retirement
, t
he recipient must remain employed with the Company for vesting purposes until August 31 of the Measurement Year.
Except as noted below as to non-residents of the United States
, the Vested DPUs must be held until termination of employment. Following termination of employment, each Vested DPU will be settled by issuance of one share of the Company’s common stock (a “DPU Share”). The Maximum Number of DPUs refers to the maximum number of DPU Shares that may be issued with respect to a DPU award upon full achievement of the applicable performance goal as described below. The Applicable Percentage is determined by reference to the performance vesting provisions of the DPU Award Agreement as described below. For NEOs who are not residents of the United States, the Compensation Committee has discretion to either defer settlement of each Vested DPU by issuance of a DPU Share following termination of employment or settle each Vested DPU in cash by immediate payment of an amount equal to the closing price of one share of the Company’s common stock as of the date of the Compensation Committee’s certification of achievement of the performance measure applied in determination of the Applicable Percentage.
Each Vested DPU that is not settled in cash will include the right to receive a dividend equivalent payment in an amount equal to the dividends declared with respect to the Company’s common stock for each Vested DPU. Such dividend equivalent payments are to be paid in cash as ordinary compensation income as and when common stock dividends are paid by the Company, provided, however, that the Company may elect to accumulate such dividend equivalent payments for later payment not less often than annually
.
DPU Award Agreements provide for monthly pro-rata vesting of DPUs as of the end of the Measurement Year in the event of the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or retirement after reaching age 55 with at least 10 years of employment
with the Company
. For purposes
of
calculating the number of Vested DPUs earned, the Maximum Number of
shares covered by the
DPU
awards
will be adjusted according to the pro-rata portion of the Measurement Year that has elapsed as of the effective date of termination of employment.
Vested DPUs not otherwise settled in cash will be settled by issuance of the DPU Shares as of 6 months following termination of employment (the “Settlement Date”). Payment of required withholding taxes due with respect to the settlement of a Vested DPU award, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a Vested DPU award after withholding shares having a value as of the Settlement Date equal to the required tax withholding obligation.
The performance vesting provisions of the DPUs are based on relative achievement within an established performance measure range of the Company’s EBITDA
(
before deduction of the stock-based compensation expense for the Vested DPUs
and excluding other non-operating income and expense amounts (“
Adjusted
Global EBITDA”
)
for the Measurement Year.
For fiscal year 2017, the performance vesting provisions for the DPUs were established as set forth in the table below
:
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Adjusted Global EBITDA
1
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|
Applicable Percentage
|
> $87,645,000
|
|
100%
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$87,645,000
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100%
|
$83,455,000
|
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5%
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< $83,455,000
|
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0%
|
$83,234,000*
|
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0%
|
* Implied zero percentage achievement level.
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1
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The calculation of
Adjusted
Global
EBITDA
for purposes of the performance vesting provisions of the DPUs
accounts for full payment of all Incentive Compensation earned for the fiscal year.
On the other hand, the maximum goal for Level C under the Performance Incentive Program set forth in the table on page
21
does not account for payment of any Level C Incentive Compensation.
As a result, the minimum amount included in the table above is less than the amount included in the table on page
21
as t
he maximum Level C goal for Global EBITDA.
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The Applicable Percentage will be determined on a straight line sliding scale from the implied zero percentage achievement level to the maximum 100% Applicable Percentage achievement level, but the Applicable Percentage shall not be less than 5%. For purposes of determining the Applicable Percentage, the calculated percentage is to be rounded to the nearest tenth of one percent and rounded upward from the midpoint. The number of Vested DPUs is to be rounded to the nearest whole unit and rounded upward from the midpoint
.
Equity Awards – Fiscal Year 201
7
For fiscal year 2017, equity awards to our executive officers were granted to satisfy goals for executive officer retention, to provide incentives for current and future performance, and to meet objectives for overall levels of compensation and pay mix. RSU, MSU and DPU awards were granted to the NEOs by the Committee in October 2016. All of the equity awards are set forth below in the table under the heading,
Grants of Plan-Based Awards - Fiscal Year 2017
. In establishing award levels for the NEOs for fiscal year 2017, the Committee placed emphasis on long-term retention goals and desired incentives for current and future contributions. The RSU and MSU awards to our CEO were, consistent with past practice, larger than the awards to the other NEOs in recognition of his higher level of responsibility for overall Company performance and based upon market data that supports a higher level of equity compensation for our CEO. The specific RSU award amounts and Target Number of shares covered by MSU awards were determined for each NEO based on an assessment of the NEO’s achievement of individual performance goals as well as Company performance for fiscal year 201
6
in areas over which the NEO had particular influence. The DPU award amounts were established by reference to each NEO’s Incentive Compensation opportunity
amount based on fiscal year 2016
base salary amounts and fiscal year 2017 maximum percentage opportunity for Incentive Compensation – the share equivalent value of the DPUs awarded to each NEO as of the date of grant equals 50% of the NEO’s maximum Incentive Compensation opportunity amount
.
Market Share Unit Award Vesting for
Three Fiscal Year
Performance
Achievement
On October
9
,
2017, the Committee certified achievement of the performance measure applicable to MSU awards granted to the NEOs in October 2014. The Committee certified the Company’s relative TSR as compared to the Return for the Index for the performance Measurement Period ended August 31, 2017 for purposes of calculating the vested number of shares of the Company’s common stock for those MSU awards. The relative TSR as compared to the Return for the Index (as an absolute percentage point difference) over the three fiscal year Measurement Period ending August 31, 2017 was
33.32
%.
As a result, based on the table above in the description of the MSU awards, the Applicable Percentage of the Target Number of shares underlying the MSU awards granted in October 2014 was
200
%
for each of the NEOs
.
The following table sets forth the Target Number and vested number of shares underlying the MSU awards granted to each NEO in October 2014
:
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Executive Officer
|
|
Target Number
|
|
Vested Shares
|
Garry O. Ridge
|
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4,765
|
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9,530
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Jay W. Rembolt
|
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1,099
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2,198
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Michael L. Freeman
|
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1,099
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2,198
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William B. Noble
|
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806
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1,612
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Stanley A. Sewitch
|
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806
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1,612
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|
|
Deferred Performance Unit Award Vesting for Fiscal Year 201
7
Performance Achievement
DPU awards granted to the NEOs for fiscal year 2017 lapsed without value to the NEOs. Vesting of the DPUs would have required a level of
Adjusted
Global EBITDA
equal to or greater than $83,455,000 (
the
minimum Adjusted
Global EBITDA goal
for DPU vesting
as set forth in the table on
the preceding
page
)
. Since
the
a
ctual
Adjusted
Global EBITDA for fiscal year 2017 was
less than
$8
3
,
455
,000
, the DPUs did not vest and they have lapsed.
BENEFITS AND PERQUISITES
As is the case with most Company employees, the NEOs are provided with standard health and welfare benefits, and, for the NEOs other than Mr. Noble, the opportunity to participate in the WD-40 Company Profit Sharing/401(k) Plan (the “Plan”). The Plan serves to provide our executive officers, including the eligible NEOs, with tax-advantaged retirement savings as an additional component of overall compensation. Employees have the right to invest the Company’s contributions to the Plan
in shares of the Company’s common stock
as an alternative to other investment choices available under the Plan. For Mr. Noble, the Company provides contributions to
a
local retirement program.
The Company maintains individual Supplemental Death Benefit Plan agreements with each of the NEOs other than
M
essrs
. Noble
and Sewitch
. The Company’s Supplemental Death Benefit Plan agreement obligations are funded by life insurance policies owned by the Company.
The Company also provides leased vehicles to its executive officers and private health insurance for Mr. Noble in excess of coverage available to other Company employees in the United Kingdom. The costs associated with the perquisites and other personal benefits provided to the NEOs are included in the Summary Compensation Table below and they are separately identified in the footnote disclosure of such perquisites and other personal benefits included with the Summary Compensation Table.
The Committee considers the cost of the foregoing health and welfare benefits and perquisites in connection with its approval of the total compensation for each of our NEOs. All such costs are considered appropriate in support of the Committee’s objective of attracting and retaining high quality executive officers because they are common forms of compensation for senior executives and are expected by such executives when they consider competing compensation packages
.
POST-EMPLOYMENT OBLIGATIONS
The Company has change of control severance agreements with each of the NEOs. The specific terms of the agreements are described in detail below under the heading,
Change of Control Severance Agreements
. In establishing the terms and conditions for the change of control severance agreements consideration was given to possible inclusion of severance compensation to be paid to the executive officers in the event of their termination of employment without cause (or for good reason) without regard to the existence of a change of control of the Company. No such provisions were included and severance compensation is payable only following a termination of employment without “cause” or for “good reason” within two years following a “change of control” of the Company (as the quoted terms are defined in the severance agreements).
The Committee believes that the change of control severance agreements help ensure the best interests of stockholders by fostering continuous employment of key management personnel. As is the case in many public companies, the possibility of an unsolicited change of control exists. The uncertainty among management that can arise from a possible change of control can result in the untimely departure or distraction of key executive officers. Reasonable change of control severance agreements reinforce continued attention and dedication of executive officers to their assigned duties and support the Committee’s objective of retaining high quality executives
.
OVERALL REASONABLENESS OF COMPENSATION
The Committee believes that the Company is achieving its compensation objectives and, in particular, rewards executive officers for driving operational success and stockholder value creation. Based on reviews of tally sheets and a “pay-for-performance” analysis by the Committee, and in light of the Company’s compensation objectives, the Committee and the Board of Directors believe that the pay mix and target pay position relative to market for each of the NEOs are reasonable and appropriate. The “pay-for-performance” analysis includes a review of the individual components of executive officer compensation that are tied to Company performance, as measured by identified
financial
performance metrics as well as the price of the Company’s common stock. In particular, the Committee reviews executive officer Incentive Compensation to determine whether it appropriately rewards achievement of specific
financial
performance
goals
and does not otherwise provide rewards in the absence of reasonable measures of individual and Company success. Similarly, with respect to equity awards, the Committee considers the effectiveness of such awards in providing a reasonable incentive to the executive officers to increase profits (as measured by Regional and Global EBITDA) and total stockholder return without inappropriately rewarding the executive officers if performance targets are not achieved over the long term.
The following table sets forth
the total compensation
for each of our NEOs (based on cash compensation received as base salary and earned Incentive Compensation, plus the value of equity awards
(
other than the DPUs
)
at their date of grant per share values) for fiscal year 2017, together with the relative market percentile for each NEO
:
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|
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|
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|
Executive Officer
|
|
Base Salary
|
|
Annual
Earned Incentive Compensation
|
|
Value of
Stock Awards
1
|
|
Total
Compensation
|
|
Present Value of Total Compensation Received as a Percentage of Market Median
|
|
Garry O. Ridge
|
|
$ 642,416
|
|
$ 710,091
|
|
$ 956,335
|
|
$ 2,308,842
|
|
114%
|
|
Jay W. Rembolt
|
|
$ 308,664
|
|
$ 227,454
|
|
$ 175,966
|
|
$ 712,084
|
|
110%
|
|
Michael L. Freeman
|
|
$ 332,585
|
|
$ 245,081
|
|
$ 175,966
|
|
$ 753,632
|
|
133%
|
|
William B. Noble
2
|
|
$ 282,560
|
|
$ 166,574
|
|
$ 110,710
|
|
$ 559,844
|
|
114%
|
|
Stanley A. Sewitch
|
|
$ 244,094
|
|
$ 143,769
|
|
$ 150,988
|
|
$ 538,851
|
|
102%
|
|
|
|
|
|
|
|
|
|
|
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|
1
|
|
For purposes of comparing total compensation for fiscal year 201
7
to market median compensation levels for each NEO, the Committee included the Value of
Stock Awards
(RSUs and MSUs)
based on the closing price of the Company’s common stock
on the grant date
for those awards. The grant date closing price was $112.51
.
MSUs are valued based on the
target number of shares
of the Company’s common stock to be issued upon achievement of the applicable performance measure.
Information concerning all of the Stock Awards
(including DPUs)
for fiscal year 201
7
is set forth below in the table under the heading,
Grants of Plan-Based Awards - Fiscal Year 201
7
.
|
|
2
|
|
Mr. Noble’s salary and
Incentive Compensation
amounts have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 201
7
of
$
1
.
2678
per GBP
.
|
For fiscal year 2017, total compensation for our NEOs was assessed by the Committee’s compensation consulting firm. As noted in the table above, total compensation for the NEOs ranged from
102
% to 133% of the market median compensation level for each position as determined by the Committee’s compensation consulting firm. The levels of compensation are considered by the Committee to be in line with target compensation levels for the NEOs in a year in which the Company’s EMEA region and global performance was strong. These market position comparisons are based on the blended analysis from the Committee’s compensation consultant which incorporates peer group proxy analysis and general industry survey data as discussed above under the heading,
Compensation Benchmarking
.
OTHER
COMPENSATION
POLICIES
EXCHANGE ACT RULE 10b5-1 TRADING PLANS AND INSIDER TRADING GUIDELINES
The Company maintains insider trading guidelines, including transaction pre-approval requirements, applicable to our officers and directors required to report changes in beneficial ownership under Section 16 of the Exchange Act as well as certain other employees who can be expected to have access to material non-public information concerning the Company. These insider trading guidelines also require pre-approval of all trading plans adopted pursuant to Rule 10b5-1 promulgated under the Exchange Act. To avoid the potential for abuse, the Company’s policy with respect to such trading plans is that, once adopted, trading plans are not subject to change or cancellation. Any such change or cancellation of an approved trading plan by an executive officer, director or employee covered by the Company’s insider trading guidelines in violation of the policy will result in the Company’s refusal to approve future trading plan requests for that person
.
EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES
The Board of Directors has approved guidelines for executive officer ownership of the Company’s common stock. The guidelines specify that each executive officer will be expected to attain, within a period of five years from the later of the date of election of the executive officer or the date of adoption of the guidelines, and to maintain thereafter, equity ownership in the Company valued at not less than one times his or her current base salary for executive officers other than our CEO and CFO, two times the current base salary for our CFO, and five times the current base salary for our CEO. Valuation for purposes of the guidelines is to be determined at the higher of cost or current fair market value for shares of the Company’s common stock held outright and shares underlying vested RSUs, MSUs and DPUs then held. Vested stock options are valued on a net after tax basis assuming a 45% marginal tax rate on the stock option value equal to the current market price for the Company’s common stock less the option exercise price.
The Board of Directors believes that the stock ownership guidelines serve to improve alignment of the interests of our executive officers and the Company’s stockholders. At the present time, all of the NEOs have exceeded the expected level of stock ownership.
As noted above under the heading
Equity Compensation,
the NEOs receive both time-vesting RSU awards and performance-based vesting MSU and DPU awards. As the RSU and MSU awards vest, shares of the Company’s common stock are issued to the NEOs and these shares may then be sold or retained, subject to the stock ownership guidelines described above. Vested DPU awards provide for deferred issuance of shares to the NEOs upon termination of employment. Outstanding unvested RSU and MSU awards held as of August 31, 2017 by the NEOs are set forth,
together with
outstanding
stock options granted for fiscal years prior to 2009
, in the table below under the heading,
Outstanding Equity Awards at 2017 Fiscal Year End
.
All of the NEOs hold Vested DPUs and each of the NEOs, other than
M
ess
r
s
.
Rembolt
and Sewitch
, holds vested RSU awards that must be retained until termination of employment as noted above in the footnotes to the tables under the heading,
Security Ownership of Directors and Executive Officers
.
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) limits the deductibility of compensation payable in any tax year to certain covered executive officers (generally limited to the NEOs, but presently excluding the CFO pursuant to current Treasury Department guidance). Section 162(m) of the Code generally provides that a publicly-held company cannot deduct compensation paid to its most highly paid executive officers to the extent that such compensation exceeds $1 million per officer per taxable year. Compensation that is “performance-based” within the meaning of the Code does not count toward the $1 million limit. Compensation paid in fiscal year 2017 to the NEOs pursuant to the WD-40 Company Performance Incentive Compensation Plan most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders is intended to qualify as “performance-based” compensation. In addition, vested shares under MSU awards and vested DPU awards are intended to qualify as “performance-based” compensation.
While the Compensation Committee attempts to maximize the deductibility of compensation paid to the NEOs, the Committee retains the flexibility necessary to provide total compensation in line with competitive practice, the Company’s compensation philosophy, and the interests of stockholders. Therefore, the Company may from time to time pay compensation to its executive officers that may not be deductible under Section 162(m)
.
ACCOUNTING CONSIDERATIONS
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options, restricted stock awards, and performance-based awards based on the grant date fair value of these awards. Depending upon the type of performance conditions applicable to performance-based awards, ASC Topic 718 may require the recording of compensation expense over the service period for the award (usually, the vesting period) based on the grant date value (such as for our MSUs) or compensation expense may be recorded based on the expected probability of vesting over the vesting period, subject to adjustment as such probability may vary from period to period (such as for our DPUs). This calculation is performed for accounting purposes and amounts reported in the compensation tables below are based on the compensation expense expected to be recorded over the vesting periods for the awards, determined as of the grant date for the awards. In the case of our MSUs, the grant date values fix the compensation expense to be recorded over the vesting period. These amounts are reported in the tables below even though our executive officers may realize more or less value from their awards depending upon the actual level of achievement of the applicable performance measure. In the case of our DPUs, no value is included in the Summary Compensation Table or in the table under the heading,
Grants of Plan-Based Awards – Fiscal Year 2017
, because ASC Topic 718 requires that we assess the probability of vesting of the DPUs as of the grant date. As of the grant date, we did not consider it probable that the DPUs would become vested even though it was possible that our executive officers would receive Vested DPUs as of the end of the fiscal year
.
COMPENSATION
COMMITTEE
REPORT
The Compensation Committee of WD-40 Company’s Board of Directors has reviewed and discussed with management of the Company the Compensation Discussion and Analysis included in this
P
roxy
S
tatement and the Company’s annual report on Form 10-K for the year ended
August 31, 201
7
, and, based upon that review and discussion, recommended to the board that it be so included.
Compensation Committee
Gregory A. Sandfort, Chair
Peter D. Bewley
Melissa Claassen
Mario L. Crivello
Linda A. Lang
Neal E. Schmale
SECTION 16(a) BENEFICIAL
OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of the Company’s stock, to file with the Securities Exchange Commission initial reports of stock ownership and reports of changes in stock ownership. Reporting persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file.
To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company during the last fiscal year and written representations that no other reports were required, all Section 16(a) requirements were complied with by all persons required to report with respect to the Company’s equity securities during the last fiscal year
.
EXECUTIVE COMPENSATION
None of our executive officers has an employment agreement or other arrangement, whether written or unwritten, providing for a term of employment or compensation for services rendered other than under specific plans or programs described herein.
For fiscal year 2017, our executive officers received a base salary amount.
B
ase salary amounts
for the NEOs
were established by the Compensation Committee of the Board of Directors at the beginning of the fiscal year. In addition, each employee of the Company, including each executive officer, may receive Incentive Compensation under a Performance Incentive Program established at the beginning of the fiscal year by the Company and, for our executive officers, by the Committee. A complete description of the Performance Incentive Program is provided in the Compensation Discussion and Analysis section of this
P
roxy
S
tatement under the heading,
Performance Incentive Program
. Information regarding the target and maximum potential Incentive Compensation payable under the Performance Incentive Program for fiscal year 2017 is provided below in the table under the heading,
Grants of Plan-Based Awards - Fiscal Year 2017
. The actual payouts under the Performance Incentive Program for fiscal year 2017 and further details regarding the program are provided in the Compensation Discussion and Analysis section of this
P
roxy
S
tatement. Our executive officers also received equity compensation in the form of RSUs, MSUs
and DPUs
, and other compensation benefits for services rendered in fiscal year 2017 as more fully described and reported in the Compensation Discussion and Analysis section of this
P
roxy
S
tatement and in the compensation tables below. As a relative share of reported total compensation for fiscal year 2017, annual salary and earned Incentive Compensation was
58%
of total compensation for our CEO and from
64%
to
70%
of total compensation for the other NEOs
.
SUMMARY COMPENSATION TABLE
The following table shows information for the three fiscal years ended August 31, 201
7
, August 31, 201
6
and August 31, 201
5
,
concerning the compensation of our CEO, our CFO and the three most highly compensated executive officers other than the CEO and CFO as of the end of fiscal year 201
7
(collectively, the “Named Executive Officers” or “NEOs
”):
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Name and Principal Position
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Year
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Salary
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|
Stock Awards
1
|
|
Non-Equity
Incentive Plan
Compensation
2
|
|
All Other
Compensation
3
|
|
Total
|
Garry O. Ridge
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2017
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$ 642,416
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$ 894,031
|
|
$ 710,091
|
|
$ 105,791
|
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$ 2,352,329
|
President and
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2016
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642,416
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998,645
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963,624
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99,946
|
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2,704,631
|
Chief Executive Officer
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2015
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642,416
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686,446
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261,407
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99,575
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1,689,844
|
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Jay W. Rembolt
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2017
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$ 308,664
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$ 164,502
|
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$ 227,454
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$ 88,153
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$ 788,773
|
Vice President, Finance,
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2016
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308,664
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|
205,470
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|
308,664
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|
81,601
|
|
904,399
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Treasurer and Chief Financial Officer
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2015
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308,664
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158,322
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75,360
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84,973
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627,319
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Michael L. Freeman
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2017
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$ 332,585
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$ 164,502
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$ 245,081
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$ 99,578
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$ 841,746
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Chief Strategy Officer
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2016
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332,585
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205,470
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332,585
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86,122
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956,762
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2015
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332,585
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158,322
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99,729
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87,269
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677,905
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William B. Noble
4
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2017
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$ 282,560
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$ 103,497
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$ 166,574
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$ 97,096
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$ 649,727
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Managing Director, EMEA
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2016
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323,145
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129,069
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258,516
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81,792
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792,522
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2015
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348,976
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116,113
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-
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121,861
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586,950
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Stanley A. Sewitch
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2017
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$ 244,094
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$ 141,152
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$ 143,769
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$ 72,894
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$ 601,909
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Vice President, Global Organization
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2016
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236,984
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176,085
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189,587
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70,274
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672,930
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Development
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2015
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236,984
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116,113
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48,158
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71,438
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472,693
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1
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Stock Awards other than DPUs for fiscal years 2017, 2016 and 2015 are reported at their grant date fair values. Grant date fair value assumptions and related information is set forth in Note
13
, Stock-based Compensation, to the Company’s financial statements included in the Company’s annual report on Form 10-K filed on
October
23
,
2017. Stock Awards consisting of MSUs awarded in fiscal years 2017, 2016 and 2015 are included based on the value of 100% of the target number of shares of the Company’s common stock to be issued upon achievement of the applicable performance measure.
Stock Awards consisting of DPUs awarded in fiscal years 2017, 2016 and 2015 are reported as having no value under applicable disclosure rules and ASC Topic 718 due to the lack of any expected probability of vesting of the DPUs as of the grant date, as discussed above in the Compensation Discussion and Analysis section under the heading,
Accounting Considerations
.
For achievement of the highest level of the applicable performance measure for the MSUs, NEOs
will receive 200% of the target number of shares. For achievement of the highest level of the applicable performance measure for the DPUs, NEOs would receive Vested DPUs covering the maximum number of shares reported for purposes of the table under the heading,
Grants of Plan-Based Awards – Fiscal Year 2017
and as described above in the Compensation Discussion and Analysis section under the heading,
Equity Compensation
.
|
SUMMARY COMPENSATION TABLE
(continued)
The following table sets forth the amounts that would have been included for the Stock Awards for fiscal years 2017, 2016 and 2015 for each of the NEOs if the grant date fair values for the MSUs had been based on the maximum number of shares to be received and if the value of the DPUs were included at their grant date fair values based on the maximum number of shares covered by the DPUs
:
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Executive Officer
|
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Year
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|
RSUs
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|
MSUs
(Maximum)
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DPUs
(Maximum)
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Total Stock Awards
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Garry O. Ridge
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2017
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$ 460,913
|
|
$ 866,235
|
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$ 476,883
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$ 1,804,031
|
|
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2016
|
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409,637
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1,178,016
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473,551
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2,061,204
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2015
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309,963
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752,965
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316,339
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1,379,267
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Jay W. Rembolt
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2017
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$ 84,808
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$ 159,387
|
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$ 152,766
|
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$ 396,961
|
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|
2016
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84,282
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|
242,376
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151,642
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478,300
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2015
|
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71,490
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|
173,664
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91,145
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336,299
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Michael L. Freeman
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2017
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$ 84,808
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$ 159,387
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$ 164,603
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$ 408,798
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2016
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84,282
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242,376
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163,460
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490,118
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2015
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71,490
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173,664
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98,283
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343,437
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William B. Noble
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2017
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$ 53,357
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$ 100,279
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$ 127,877
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$ 281,513
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2016
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52,943
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|
152,251
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137,178
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342,372
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2015
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52,431
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127,364
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108,577
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288,372
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Stanley A. Sewitch
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2017
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$ 72,770
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$ 136,763
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$ 93,806
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$ 303,339
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2016
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|
72,229
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|
207,713
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|
93,122
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373,064
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|
2015
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52,431
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127,364
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58,309
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|
238,104
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2
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Amounts reported as Non-Equity Incentive Plan Compensation represent
I
ncentive
Compensation
payouts under the Company’s Performance Incentive Program as described in the narrative preceding the Summary Compensation Table and in the Compensation Discussion and Analysis section of this
P
roxy
S
tatement. Threshold, target and maximum payouts for each of the NEOs for fiscal year 201
7
are set forth below in the table under the heading,
Grants of Plan-Based Awards - Fiscal Year 201
7
.
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3
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All Other Compensation for each of the NEOs includes the following items: (i) perquisites and benefits described below; (ii) employer profit sharing and matching contributions to the Company’s 401(k) Profit Sharing Plan for each NEO other than Mr. Noble, a U.K. employer retirement benefit contribution for Mr. Noble; (iii) dividend equivalent amounts paid to each NEO other than M
ess
r
s
. Rembolt and
Sewitch
with respect to RSUs held by those NEOs that are vested and that will not be settled in shares until termination of employment
and dividend equivalent amounts payable to each of the NEOs with respect to Vested DPUs
;
(iv) the value of supplemental life insurance benefits
received by the NEOs other than M
essrs. Noble and Sewitch
described below under the heading,
Supplemental Death Benefit Plans and Supplemental Insurance Benefits
;
and (v) a taxable payment in the amount of $
29,228
made to Mr. Noble in lieu of a retirement plan contribution under the U.K. retirement benefit program that would, if contributed to the retirement plan, result in adverse tax consequences to Mr. Noble. Perquisites and benefits received by each of the NEOs include group medical, dental, vision, wellness and other insurance benefits (“welfare benefit costs”) and vehicle allowance costs which include lease or depreciation expense, fuel, maintenance and insurance costs for each NEO other than Mr. Noble, and a cash allowance and fuel for Mr. Noble. For fiscal year 2017, the total employer 401(k) profit sharing and matching contributions for each NEO other than M
essrs.
Noble
and Sewitch
were
$44,167. For Mr. Sewitch, the employer 401(k) profit sharing and matching contributions were $39,750
. Mr. Noble’s employer retirement benefit contribution was $
36,024
. Dividend equivalent payments received
by
and/or payable
to
the NEOs
for
fiscal year 2017 were as follows: Mr. Ridge - $
12,948
;
Mr. Rembolt - $586;
Mr.
Freeman - $
8,136; Mr. Noble - $8,034
; and Mr. Sewitch - $359.
For fiscal year 2017, the value of supplemental
life
insurance benefits received by
Messrs. Ridge, Rembolt and Freeman
were as follows: Mr. Ridge -
$4,182; Mr. Rembolt - $
4,170
;
and
Mr. Freeman - $
3,462
.
For fiscal year 2017, the welfare benefit costs for each NEO were as follows: Mr. Ridge - $
28,546
; Mr. Rembolt - $
27,178
; Mr. Freeman - $
27,077
; Mr. Noble - $
9,306
; and Mr. Sewitch - $21,876
. For fiscal year 2017, the vehicle allowance costs for each NEO were as follows: Mr. Ridge - $
15,948
; Mr. Rembolt - $
12,052
; Mr. Freeman - $
16,736
; Mr. Noble - $
14,504
; and Mr. Sewitch - $10,909.
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4
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|
Mr. Noble’s Salary, Non-Equity Incentive Plan Compensation and All Other Compensation for each fiscal year have been converted from Great Britain pounds sterling (“GBP”) at average annual exchange rates for the year as follows: for fiscal year 2017 at $
1.2678
per GBP for fiscal year 2016 at $1.4499 per GBP, and for fiscal year 2015 at $1.5658 per GBP.
|
GRANTS OF PLAN-
BASED
AWARDS
-
FISCAL YEAR 201
7
In December
2007
, the Company’s stockholders
approved the WD-40 Company
2007
Stock Incentive Plan
to authorize the issuance of stock-based compensation awards to employees, directors and consultants. In addition to base salary and the Performance Incentive
Compensation
, for fiscal year 201
7
the executive officers were granted RSU
,
MSU
and DPU
awards under the
Company’ 2007
Stock Incentive Plan.
D
escription
s
of the RSU
, MSU and DPU
awards
are
provided above in the Compensation Discussion and Analysis
se
ction under the heading,
Equity Compensation.
Information concerning the grant of RSU
,
MSU
and DPU
awards to the NEOs is provided in the following Grants of Plan-Based Awards table. The table also contains information with respect to Performance Incentive Program opportunity awards for fiscal year 201
7
as described above in the Compensation Discussion and Analysis section under the heading,
Performance Incentive Program
. The table provides threshold, target and maximum payout information relating to the Company’s fiscal year 201
7
Performance Incentive Program.
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Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
1
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
2
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Name
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|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
All Other Stock Awards:
Number of Shares of Stock or Units
3
(#)
|
|
Grant Date Fair Value of Stock and Options Awards
4
($)
|
Garry O. Ridge
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|
10/11/2016
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$ 1
|
|
$ 481,812
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|
$ 963,624
|
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|
|
|
|
|
|
|
|
|
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|
10/11/2016 (MSU)
|
|
|
|
|
|
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2,125
|
|
4,250
|
|
8,500
|
|
|
|
$ 433,118
|
|
|
10/11/2016 (RSU)
|
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|
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|
|
|
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4,250
|
|
$ 460,913
|
|
|
10/11/2016 (DPU)
|
|
|
|
|
|
|
|
215
|
|
|
|
4,311
|
|
|
|
$ -
|
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|
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|
Jay W. Rembolt
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|
10/11/2016
|
|
$ 1
|
|
$ 154,332
|
|
$ 308,664
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2016 (MSU)
|
|
|
|
|
|
|
|
391
|
|
782
|
|
1,564
|
|
|
|
$ 79,694
|
|
|
10/11/2016 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782
|
|
$ 84,808
|
|
|
10/11/2016 (DPU)
|
|
|
|
|
|
|
|
69
|
|
|
|
1,381
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Michael L. Freeman
|
|
10/11/2016
|
|
$ 1
|
|
$ 166,293
|
|
$ 332,585
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2016 (MSU)
|
|
|
|
|
|
|
|
391
|
|
782
|
|
1,564
|
|
|
|
$ 79,694
|
|
|
10/11/2016 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782
|
|
$ 84,808
|
|
|
10/11/2016 (DPU)
|
|
|
|
|
|
|
|
74
|
|
|
|
1,488
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Noble
5
|
|
10/11/2016
|
|
$ 1
|
|
$ 113,024
|
|
$ 226,048
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2016 (MSU)
|
|
|
|
|
|
|
|
246
|
|
492
|
|
984
|
|
|
|
$ 50,140
|
|
|
10/11/2016 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
492
|
|
$ 53,357
|
|
|
10/11/2016 (DPU)
|
|
|
|
|
|
|
|
57
|
|
|
|
1,156
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Sewitch
|
|
10/11/2016
|
|
$ 1
|
|
$ 97,638
|
|
$ 195,275
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2016 (MSU)
|
|
|
|
|
|
|
|
335
|
|
671
|
|
1,342
|
|
|
|
$ 68,382
|
|
|
10/11/2016 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
671
|
|
$ 72,770
|
|
|
10/11/2016 (DPU)
|
|
|
|
|
|
|
|
42
|
|
|
|
848
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
1
|
|
The Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent Threshold, Target and Maximum payouts under the WD-40 Company
Performance Incentive Compensation Plan
for
Incentive Compensation
payable for fiscal year 201
7
performance. The Target amount represents fifty percent of the Maximum payout for each NEO. The Maximum amount represents the
Incentive Compensation
opportunity for each NEO that assumes full achievement of the performance measures for
L
evel
A
of the Performance Incentive Program (as more fully discussed above in the Compensation Discussion and Analysis section under the heading,
Performance Incentive Program
) and attainment by the Company of a level of Global EBITDA sufficient to maximize such payouts under
Level C of
the Performance Incentive
Program
.
|
|
2
|
|
The Estimated Future Payouts Under Equity Incentive Plan Awards represent the Threshold, Target and Maximum number of shares to be issued upon performance vesting of MSU and DPU awards as described in the Compensation Discussion and Analysis section under the heading,
Equity Compensation
. There is no applicable Target number of shares for DPU awards to be earned by the NEOs.
|
|
3
|
|
All Other Stock Awards represent RSUs described in the Compensation Discussion and Analysis section under the heading,
Equity Compensation
.
|
|
4
|
|
Information relating to the
amounts disclosed as the
Grant Date Fair Value of Stock Awards is included in footnote 1 to the Summary Compensation Table above.
|
|
5
|
|
The Target and Maximum amounts for Mr. Noble’s Estimated Future Payouts Under Non-Equity Incentive Plan Awards have been converted from Great Britain pounds sterling (“GBP”) at an average annual exchange rate for fiscal year 2017 of $
1.2678
per GBP.
|
OUTSTANDING EQUITY AWARDS
AT 201
7
FISCAL YEAR END
The following table provides detailed information concerning the une
xercised stock options and RSU
and
MSU awards that were not vested as of the end of the last fiscal year for each of the
NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
Option Exercise Price
($)
|
|
Option Expiration Date
|
|
Number of Shares or
Units of Stock That
Have Not
Vested
(#)
1
|
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
2
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
3
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
4
|
Garry O. Ridge
|
|
|
|
|
|
|
|
|
|
8,736
|
|
$ 951,787
|
|
26,866
|
|
$ 2,927,051
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
-
|
|
-
|
|
|
|
|
|
8,736
|
|
$ 951,787
|
|
26,866
|
|
$ 2,927,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay W. Rembolt
|
|
|
|
|
|
|
|
|
|
1,742
|
|
$ 189,791
|
|
5,580
|
|
$ 607,941
|
|
|
3,160
|
|
-
|
|
$ 36.03
|
|
10/16/17
|
|
|
|
|
|
|
|
|
Total
|
|
3,160
|
|
-
|
|
|
|
|
|
1,742
|
|
$ 189,791
|
|
5,580
|
|
$ 607,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Freeman
|
|
|
|
|
|
|
|
|
|
1,742
|
|
$ 189,791
|
|
5,580
|
|
$ 607,941
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
-
|
|
-
|
|
|
|
|
|
1,742
|
|
$ 189,791
|
|
5,580
|
|
$ 607,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Noble
|
|
|
|
|
|
|
|
|
|
1,133
|
|
$ 123,440
|
|
3,738
|
|
$ 407,255
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
-
|
|
-
|
|
|
|
|
|
1,133
|
|
$ 123,440
|
|
3,738
|
|
$ 407,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley A. Sewitch
|
|
|
|
|
|
|
|
|
|
1,450
|
|
$ 157,978
|
|
4,512
|
|
$ 491,582
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
-
|
|
-
|
|
|
|
|
|
1,450
|
|
$ 157,978
|
|
4,512
|
|
$ 491,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Represents RSU awards to the NEOs that were not vested as of the fiscal year end.
|
|
2
|
|
The Market Value of the RSU awards
that were not vested as of the
fiscal year end was
$
108.95
per unit, determined by reference to the closing price for the Company’s common stock as of
August 31, 201
7
.
|
|
3
|
|
Represents the
maximum
number of shares
to be issued with respect to MSU awards granted to the NEOs that were not vested as of the fiscal year end. The
maximum
number of shares to be issued with respect to MSU awards equals the number of shares to be issued with respect to the MSU
a
wards upon achievement of the
highest
le
vel of achievement for such MSU
awards as described above in the Compensation Discussion and Analysis section under the heading,
Equity Compensation
.
|
|
4
|
|
The Market Value of the
maximum
number of shares to be issued with respect to unvested MSU awards at fiscal year end was
$
108.95
per share, determined by reference to the closing price for the Company’s common stock as of
August 31, 201
7
.
|
OPTION
EXERCISES
AND STOCK VESTED
-
FISCAL YEAR 201
7
The following table sets forth the number of shares of the Company’s common stock acquired on exercise of stock options in the Company’s last fiscal year and the aggregate dollar value realized on exercise of such stock options for the NEOs. The table also sets forth the number of shares of the Company’s common stock acquired
upon the vesting of RSU
and
MSU
awards in the Company’s last fiscal year and the aggregate dollar value realized with respect to such vested RSU
and
MSU
awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Executive Officer
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on Exercise
1
($)
|
|
Number of Shares
Acquired on Vesting
2
(#)
|
|
|
Value Realized
on Vesting
3
($)
|
Garry O. Ridge
|
|
-
|
|
$
|
-
|
|
13,726
|
|
$
|
1,469,780
|
Jay W. Rembolt
|
|
3,000
|
|
$
|
221,910
|
|
3,333
|
|
$
|
356,898
|
Michael L. Freeman
|
|
-
|
|
$
|
-
|
|
3,333
|
|
$
|
356,898
|
William B. Noble
|
|
-
|
|
$
|
-
|
|
2,412
|
|
$
|
258,277
|
Stanley A. Sewitch
|
|
-
|
|
$
|
-
|
|
1,851
|
|
$
|
198,205
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
The Value Realized on Exercise is calculated by subtracting the aggregate exercise price for the shares of the Company’s common stock acquired upon exercise of the stock options from the fair market value price of such shares as of the date of exercise. The fair market value price of each share at exercise is determined by the actual trade price for the share if sold in a cashless exercise transaction, otherwise by the closing price as of the date of exercise.
|
|
2
|
|
The Number of Shares Acquired on Vesting for each NEO includes shares of the Company’s common stock issued upon vesting of RSU
and MSU
awards on
October
24
, 201
6
.
|
|
3
|
|
The Value Realized on Vesting for shares of the Company’s common stock issued on
October
24
, 201
6
is calculated based on the number of vested RSU
and MSU
awards multiplied by the closing price of
$107.08
for the Company’s common stock as
of that date
.
|
NONQUALIFIED DEFERRED COMPENSATION
– FISCAL YEAR
2017
The following table provides information concerning compensation received by the NEOs that is subject to deferral under applicable
RSU and DPU award
agreements
:
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Aggregate
Earnings
in Last FY
1
($)
|
|
Aggregate
Balance
at Last FYE
2
($)
|
Garry O. Ridge
|
|
$ (64,399)
|
|
$ 746,416
|
Jay W. Rembolt
|
|
$ (2,914)
|
|
$ 33,775
|
Michael L. Freeman
|
|
$ (40,467)
|
|
$ 469,030
|
William B. Noble
|
|
$ (39,959)
|
|
$ 463,146
|
Stanley A. Sewitch
|
|
$ (1,786)
|
|
$ 20,701
|
|
|
|
|
|
|
1
|
|
The Aggregate Earnings in
L
ast FY
represents the
decrease
in value from August 31, 2016 to August 31, 2017 of the shares underlying deferred settlement RSUs and Vested DPUs held by each NEO that will be settled in shares of the Company’s common stock following termination of employment as disclosed in footnotes to the table under the heading,
Security Ownership of Directors and Executive Officers
. The number of such deferred settlement RSUs and Vested DPUs for each NEO was multiplied by the difference in the closing price of the Company’s common stock on August 31, 2017 of
$
108.95
and August 31, 2016 of $118.35
, a decline in value of $9.40 per share
.
Amounts included as the Aggregate Earnings in Last FY are not otherwise included as compensation in the Summary Compensation Table for fiscal year 2017.
|
|
2
|
|
The Aggregate Balance at
L
ast
FYE
represents the value
as of August 31, 201
7
of the
deferred settlement RSUs and
Vested DPUs
as noted in the footnote above. The value for each
deferred settlement RSU and each
Vested DPU is based
on the closing price of the Company’s co
mmon stock as of August 31, 2017
in the amount of
$108.95
per share.
The underlying deferred settlement RSUs
and Vested DPUs
were included in prior disclosures for the NEOs to the extent that the NEOs were included in Summary Compensation Table disclosures for the years in which such awards were first granted to the NEOs.
|
SUPPLEMENTAL DEATH BENEFIT PLANS A
ND SUPPLEMENTAL INSURANCE BENEFITS
The Company maintains Supplemental Death Benefit Plans for the NEOs other than M
ess
r
s
. Noble
and Sewitch
. Under the death benefit plan agreements, the NEO’s designated beneficiary or estate, as applicable, will receive a death benefit equal to the NEO’s then current base salary in the event of his death prior to retirement from the Company. All of the NEOs are also eligible to receive life insurance benefits offered to all employees of the Company and, in the case of Mr. Noble, to all employees of the Company’s U.K. subsidiary.
The death benefits under the Supplemental Death Benefit Plans are not formally funded but the Company has purchased key man life insurance policies owned by the Company to cover its benefit obligations. Non-employee directors do not have death benefit plan agreements.
Based upon their fiscal year 201
7
base salaries, the supplemental death benefit to be provided to
the NEOs other than
M
ess
r
s
.
Noble
and Mr. Sewitch
as of the end of fiscal year 201
7
would have been as set forth in the following table
:
|
|
|
|
|
|
|
|
Executive Officer
|
|
Death Benefit
|
Garry O. Ridge
|
|
$
|
642,416
|
Jay W. Rembolt
|
|
$
|
308,664
|
Michael L. Freeman
|
|
$
|
332,585
|
William B. Noble
|
|
$
|
-
|
Stanley A. Sewitch
|
|
$
|
-
|
|
|
|
|
CHANGE OF
CONTROL SEVERANCE
AGREEMENTS
Each executive officer serves at the discretion of the Board of Directors. On February 14, 2006, the Company entered into Change of Control Severance Agreements (“Severance Agreements”) with each of the executive officers identified in the Summary Compensation Table above, with the exception of Messrs. Rembolt and
Sewitch
. On October 16, 2008, the Company entered into a Severance Agreement with Mr. Rembolt and
on
October 15, 2014, the Company entered into a Severance Agreement with Mr. Sewitch
. The Severance Agreements provide that each executive officer will receive certain severance benefits if his employment is terminated without “Cause” or if he resigns for “Good Reason”, as those terms are defined in the Severance Agreements, within two years after a “Change of Control” as defined in the Severance Agreements and summarized below. If the executive officer’s employment is terminated during the aforementioned two-year period by the Company without “Cause” or by the executive officer for “Good Reason”, the executive officer will be entitled to a lump sum payment (subject to limits provided by reference to Section 280G of the Internal Revenue Code which limits the deductibility of certain payments to executives upon a change in control) of twice the executive officer’s salary, calculated based on the greater of the executive officer’s then current annual salary or a five-year average, plus twice the executive officer’s earned Incentive Compensation, calculated based on the greater of the most recent annual earned Incentive Compensation or a five-year average. Further, any of the executive officer’s outstanding stock options and other equity incentive awards that are not then fully vested (with the exception of DPU awards), will be accelerated and vested in full following such termination of employment within such two-year period and the executive officer will be entitled to continuation of health and welfare benefits under the Company’s then existing benefit plans or equivalent benefits for a period of up to two years from the date of termination of employment. No employment rights or benefits other than the change of control severance benefits described in this paragraph are provided by the Severance Agreements.
For purposes of the Severance Agreements and subject to the express provisions and limitations contained therein, a “Change of Control” means a transaction or series of transactions by which a person or persons acting together acquire more than 30% of the Company’s outstanding shares; a change in a majority of the incumbent members of the Company’s Board of Directors as specified in the Severance Agreements, a reorganization, merger or consolidation as specified in the Severance Agreements or a sale of substantially all of the assets or complete liquidation of the Company. As specified more particularly in the Severance Agreements, a “Change of Control” does not include a reorganization, merger or consolidation or a sale or liquidation where a majority of the incumbent members of the Company’s Board of Directors continue in office and more than 60% of the successor company’s shares are owned by the Company’s pre-transaction stockholders.
The Severance Agreements have a term of two years, subject to automatic renewal for successive two year periods unless notice of non-renewal is provided by the Company’s Board of Directors not less than six months prior to the end of the current term. The term of the Severance Agreements will be automatically extended for a term of two years following any “Change of Control.”
The following table sets forth the estimated amounts payable to each of the NEOs pursuant to their respective Severance Agreements on the assumption that the employment of each NEO was terminated without “Cause” or otherwise for “Good Reason” effective as of the end of fiscal year 201
7
following a “Change of Control” as provided for in the Severance Agreements. The table also includes the value, as of the end of the fiscal year, of all RSU and MSU awards that were not vested as of the end of fiscal year 201
7
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Severance Pay
1
|
|
Welfare Benefits
2
|
|
Accelerated Vesting of
RSUs and MSUs
3
|
|
Total Change of
Control Severance
Benefits
|
Garry O. Ridge
|
|
$ 3,212,080
|
|
$ 51,186
|
|
$ 2,415,313
|
|
$ 5,678,579
|
Jay W. Rembolt
|
|
$ 1,234,656
|
|
$ 51,186
|
|
$ 493,762
|
|
$ 1,779,604
|
Michael L. Freeman
|
|
$ 1,330,340
|
|
$ 50,786
|
|
$ 493,762
|
|
$ 1,874,888
|
William B. Noble
|
|
$ 1,082,152
|
|
$ 10,276
|
|
$ 327,068
|
|
$ 1,419,496
|
Stanley A. Sewitch
|
|
$ 867,362
|
|
$ 41,112
|
|
$ 403,769
|
|
$ 1,312,243
|
|
|
|
|
|
|
|
|
|
|
1
|
|
For each NEO
,
Severance Pay includes two times the reported Salary for fiscal year 2017 plus two times the reported Non-Equity Incentive Plan Compensation for fiscal year 2016.
|
|
2
|
|
For each NEO, Welfare Benefits includes an estimate of
the Company’s cost to provide two
years of continuation coverage under the Company’s welfare benefit plans, which does not include life insurance or long-term disability insurance.
|
|
3
|
|
Acceleration of vesting of RSU and MSU awards is governed by applicable provisions of the Severance Agreements and the MSU Award Agreements.
The value included
for accelerated vesting of RSU
and MSU
awar
ds equals the value of the
RSU and MSU
awards that were not vested at
$
108.95
for each
RSU and MSU
based on the closing price for the Company’s commo
n stock as of
August
31, 201
7
. M
SUs are valued for this purpose based upon the Target Number of shares of the Company’s common stock to be issue
d with respect to the M
SUs as described above in the Compensation Discussion and Analysis section under the heading,
Equity Compensation
.
|
ITEM NO. 4
APPROVAL OF THE
WD-40 COMPANY
2017
PERFORMANCE INCENTIVE COMPENSATION PLAN
On June 24, 2008, the Board of Directors
first
adopted the WD-40 Performance Incentive Compensation Plan.
The plan, as amended and restated in 2012, was most recently approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders.
The Board of Directors is seeking stockholder approval of the
WD-40 Company 2017 Performance
Incentive
Compensation
Plan
(the “Incentive Plan”)
to allow
Incentive Compensation
paid under the Incentive Plan to qualify as deductible “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Incentive Plan will be effective as of September 1,
2018
and will continue in effect until August 31, 20
2
3
or until such time as it is extended by re-approval by the stockholders or otherwise terminated by the Compensation Committee (the “Committee”) of the Board of Directors.
Incentive Plan Summary
The following paragraphs provide a summary of the principal features of the Incentive Plan. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Incentive Plan, which is attached to this
P
roxy
S
tatement as Appendix A. Capitalized terms used herein and not defined shall have the same meanings as set forth in the Incentive Plan.
Purpose.
The purpose of the Incentive Plan is to enhance the Company’s ability to attract and retain highly qualified executives and provide such executives with additional financial incentives (referred to herein as “Awards”) to promote the success of the Company and its Subsidiaries. Awards granted under the Incentive Plan are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code.
Eligibility.
Participation in the Incentive Plan is limited to corporate officers of the Company selected by the Committee to participate in the Incentive Plan (collectively “Participants”). The Participants are intended to include any officer determined to be a “covered employee” of the Company within the meaning of Section 162(m) of the Code. Although the Incentive Plan is
intended to cover
such corporate officers, the Company maintains a Performance Incentive
P
rogram for the payment of
Incentive
C
ompensation to all Company employees on substantially the same terms are provided for in the Incentive Plan. The Incentive Plan is formalized to cover the corporate officer Participants and is being submitted to the stockholders for approval in order to qualify the Incentive Plan compensation paid to such Participants as deductible “performance-based compensation” within the meaning of Section 162(m) of the Code.
Administration.
The Incentive Plan will be administered by the Compensation Committee of the Board of Directors. Except as otherwise provided by the Board of Directors and subject to applicable laws, the Committee has the full and final authority in its discretion to establish rules and take all actions determined by the Committee to be necessary in the administration of the Incentive Plan, including, without limitation, interpreting the terms of the Incentive Plan and any related documents, rules, or regulations and deciding all questions of fact arising in their application. All decisions, determinations and interpretations of the Committee are final, binding and conclusive on all persons, including the Company, its Subsidiaries, its stockholders, the Participants and their estates and beneficiaries.
Awards.
Within 90 days after the commencement of each fiscal year, the Committee shall select the Participants to whom
Incentive
C
ompensation (an “Award”) may be paid under the Incentive Plan and establish in writing (i) an objective Performance Goal or Goals for each Participant for the fiscal year based on one or more Performance Measures; (ii) the Award amounts to be paid to each Participant to the extent the specified Performance Goal or Goals are achieved (the “Target Award”); and (i
ii
) establish the method by which the Target Award will be calculated.
Performance Measures.
The Performance Goals established by the Committee for Participants are based on the relative achievement of one or more Performance Measures. The following measures may be selected as Performance Measures: total shareholder return,
s
tock price, net customer sales, volume, gross profit, gross margin, operating profit, operating margin, management profit, earnings from continuing operations (including derivatives thereof before interest, taxes, depreciation and/or amortization), earnings per share from continuing operations, net operating profit after tax, net earnings, net earnings per share, brand contribution to earnings, return on assets, return on investment, return on equity, return on invested capital, cost of capital, average capital employed, cash value added, economic value added, cash flow, cash flow from operations, working capital, working capital as a percentage of net customer sales, asset growth, asset turnover, market share, customer satisfaction, and employee satisfaction
.
Performance Period.
The period for measurement of relative achievement of the Performance Goals under the Incentive Plan is the Company’s fiscal year and in order to receive the Target Award, a Participant must be employed by the Company or a Subsidiary on August 31 of the applicable fiscal year.
Maximum Award.
The maximum Award that may be paid to any Participant under the Incentive Plan for any fiscal year is
$2 million.
Committee Certification.
As soon as practicable after the end of each fiscal year, the Committee will determine the amount of the Awards to be paid to each Participant for the fiscal year based on the relative achievement of the Performance Goals established for each Participant. The Committee must certify such determination in writing.
Payment of Awards.
All Awards will be paid in cash. Awards shall be paid to Participants following the Committee’s certification no later than ninety (90) days after the close of the fiscal year.
Non-Transferability of Awards.
Unless otherwise determined by the Committee, an Award granted under the Incentive Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner by any Participant. During the lifetime of the Participant, payment of an Award shall only be made to such Participant. The Committee may, however, establish procedures necessary for a Participant to designate a beneficiary to whom any amounts would be payable in the event of the Participant’s death.
Amendment and Termination.
The Committee may at any time suspend, revise, amend or terminate the Incentive Plan, in whole or in part, provided, however, that no amendment that requires stockholder approval in order to maintain qualification of the Awards as performance-based compensation under Section 162(m) of the Code shall be made without such approval. If changes are made to Section 162(m) of the Code or the related regulations that permit greater flexibility with respect to any Award, the Committee may make adjustments to the Incentive Plan and/or Awards as it deems appropriate.
Benefits to Be Received Upon Stockholder Approval.
If the Incentive Plan is approved by the Company’s stockholders, it will be effective as of September 1,
2018
and Awards will be considered by the Committee for fiscal year
2019
. Therefore, future Awards
under the Incentive Plan, if approved,
cannot now be determined. The Company’s current Performance Incentive
P
rogram applicable to all Company employees, including the
NEOs
, is implemented
pursuant to the amended and restated Performance Incentive Compensation Plan approved by the stockholders at the Company’s 2012 Annual Meeting of Stockholders
.
The Company’s Performance Incentive
P
rogram is described in further detail
above
in the
Compensation Discussion
and
Analysis section
und
er the heading,
Performance Incentive Program
.
Information concerning Performance Incentive
Compensation
awards granted to the
NEOs
for fiscal year
2017
is set forth in the table above under the heading,
Grants of Plan-Based Awards
– Fiscal Year 2017
.
Federal Income Tax Consequences
The following is a brief summary of the material U.S. federal income tax consequences associated with Awards granted under the Incentive Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a Participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the Participant may reside.
Participants will recognize ordinary income equal to the amount of the Award received in the year of receipt. That income will be subject to applicable income and employment tax withholding by the Company. If and to the extent that the Incentive Plan payments satisfy the requirements of Section 162(m) of the Code and otherwise satisfy the requirements of deductibility under federal income tax law, the Company will receive a deduction for the amount constituting ordinary income to the Participant.
Vote Required and Board of Directors’ Recommendation
The affirmative vote of a majority of the shares of common stock represented and entitled to vote at the Annual Meeting is required to approve the Incentive Plan. The persons designated in the form of proxy accompanying this
P
roxy
S
tatement will vote your shares FOR approval unless you include instructions to the contrary.
The Board of Directors urges stockholders to vote
”FOR”
approval of the WD-40 Company
2017
Performance Incentive Compensation Plan.
AUDIT COMMITTEE REPORT
Each year the Board of Directors appoints an Audit Committee to fulfill regulatory requirements and to assist the Board in oversight of the Company’s financial reporting, internal control functions
, internal audit activities
and
audit process. Each member of the Audit Committee meets the independence requirements set by the Nasdaq Stock Market.
The responsibilities of the Audit Committee include the selection
,
appointment
and compensation
of an independent registered public accounting firm to be hired as the Company’s independent accountants. The Audit Committee is also responsible for recommending to the Board that the Company’s consolidated financial statements be included in its annual report on Form 10
‑
K.
With respect to the preparation and audit of the Company’s consolidated financial statements, management is responsible for the preparation of the financial statements; the establishment of accounting and financial reporting principles; the establishment of disclosure controls and procedures; the establishment of internal control over financial reporting; the evaluation of the effectiveness of both disclosure controls and procedures and internal control over financial reporting; and the evaluation of changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion as to whether the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
The Audit Committee has reviewed the consolidated financial statements of the Company for the fiscal year ended
August 31, 201
7
. The Audit Committee has discussed the preparation of the consolidated financial statements with management and with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, and the Audit Committee has met separately with PricewaterhouseCoopers LLP and with management to discuss issues relating to the preparation and audit of the financial statements.
For the fiscal year ended
August 31, 201
7
, management has completed the documentation, testing and evaluation of the Company’s system of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee has been kept apprised of management’s activities in the completion of such work and evaluation and the Audit Committee has provided oversight and advice with respect to the process undertaken by management. The Audit Committee will continue to oversee such work being undertaken by the Company for the fiscal year ending August 31, 201
8
.
The Audit Committee has taken the following steps in making its recommendation that the Company’s consolidated financial statements be included in its annual report on Form 10-K for the fiscal year ended
August 31, 201
7
:
1.
At regularly scheduled meetings of the Audit Committee, management and PricewaterhouseCoopers LLP provided periodic reports as to the work undertaken by the Company to complete the documentation, testing and evaluation of the Company’s system of internal control over financial reporting. Upon completion of such work and upon preparation of the Company’s consolidated financial statements for the
fiscal
year ended
August 31, 201
7
, the Audit Committee reviewed a report provided by management on the effectiveness of the Company’s internal control over financial reporting;
2.
The Audit Committee discussed with PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm for the fiscal year ended
August 31, 201
7
, those matters required to be discussed by Statement on Auditing Standards No. 61 and Public Company Accounting Oversight Board Auditing Standard No. 2, including information concerning the scope and results of the audit. These communications and discussions are intended to assist the Audit Committee in overseeing the financial reporting and disclosure process;
3.
The Audit Committee discussed with PricewaterhouseCoopers LLP its independence and received from PricewaterhouseCoopers LLP a letter concerning independence as required under applicable independence standards for auditors of public companies. This discussion and disclosure helped the Audit Committee in evaluating such independence;
4.
The Audit Committee reviewed and discussed with the Company’s management and PricewaterhouseCoopers LLP the Company’s audited consolidated balance sheet at
August 31, 201
7
, and the related consolidated statements of operations, of shareholders’ equity, of comprehensive income and of cash flows for the fiscal year ended
August 31, 201
7
; and
5.
The Audit Committee has reviewed PricewaterhouseCoopers LLP’s Report of Independent Registered Public Accounting Firm and Management’s Report on Internal Control over Financial Reporting included in the Company’s annual report on Form 10-K for the fiscal year ended
August 31, 201
7
.
Based on the reviews and discussions explained above, the Audit Committee recommended to the Board that the Company’s consolidated financial statements be included in its annual report on Form 10-K for its fiscal year ended
August 31, 201
7
. PricewaterhouseCoopers LLP has been selected to serve as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 201
8
.
Audit Committee
Daniel T. Carter, Chair
Peter D. Bewley
Eric P. Etchart
Daniel E. Pittard
Neal E. Schmale
IT
EM NO.
5
RA
T
IFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company to audit the consolidated financial statements of the Company for fiscal year
201
8
. Although ratification by stockholders is not required by law, the Audit Committee has determined that it is desirable to request ratification of this selection by the stockholders. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its stockholders. If the stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee may reconsider its selection.
A majority of the votes of the common stock present or represented at the meeting is required for approval. Broker non-votes will be voted in favor of approval. PricewaterhouseCoopers LLP acted as the Company’s independent registered public accounting firm during the past fiscal year and, unless the Audit Committee appoints new independent accountants, PricewaterhouseCoopers LLP will continue to act in such capacity during the current fiscal year. It is anticipated that a representative of PricewaterhouseCoopers LLP will attend the Annual Meeting of Stockholders, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit products and services provided by the independent registered public accounting firm. These products and services may include audit services, audit-related services, tax services, software and other products or services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent public accountants in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The possible effect on the independence of the public accountants is considered by the Audit Committee. There is no direct or indirect understanding or agreement that places a limit on current or future years’ audit fees or permissible non-audit product
s
and services.
AUDIT FEES
PricewaterhouseCoopers LLP has provided audit services to the Company for each of the past two fiscal years. Audit fees consist of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements, the review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements. The aggregate fees billed to the Company by PricewaterhouseCoopers LLP for audit services performed for the Company for the past two fiscal years were
$
935,112
for the year ended August 31, 201
7
and
$
998
,179
for the year ended August 31, 2016
.
AUDIT-RELATED FEES
Audit-related services consist of assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.”
Audit-related services billed to the Company by PricewaterhouseCoopers LLP were $
5,820
for the year ended August 31, 2017 and the fees were associated with discussions, review and testing of certain information related to the adoption of Accounting Standard Update No. 2014-09, “Revenue from Contracts with Customers”, which will be adopted by the Company in fiscal year 2019. Such fees billed to the Company by PricewaterhouseCoopers LLP were $10,047 for the year ended August 31, 2016 and the services provided were related to technical assistance in connection with the transition of the Company’s U.K. subsidiary to new U.K. generally accepted accounting principles (“GAAP”)
.
TAX FEES
Tax fees consist of tax compliance, tax advice, tax consulting or tax planning services provided by PricewaterhouseCoopers LLP to the Company. The aggregate fees billed to the Company by PricewaterhouseCoopers LLP
were
$
56,480
fo
r the year ended August 31, 2016
,
primarily in con
nection with
international tax planning
consulting services
.
No such fees were billed to the Company by PricewaterhouseCoopers LLP for the year-ended August 31, 2017.
ALL OTHER FEES
Other fees for services provided by PricewaterhouseCoopers LLP for fiscal years 201
7
and 201
6
consisted of fees for access provided by PricewaterhouseCoopers LLP to its online research reference materials. The aggregate fees billed to the Company by PricewaterhouseCoopers LLP for other services performed for the Company were
$
1,800
for
both
the year ended August 31, 201
7
and
the year ended
August 31, 201
6
.
STOCKH
OLD
ER PROPOSALS
Stockholder proposals must be received by the Company no sooner than June
5,
2018 and not later than July
5,
2018 to be included in the
P
roxy
S
tatement and form of proxy for the next annual meeting. Any proposal submitted outside of these dates will be considered untimely in order to be considered at the Company’s 201
8
Annual Meeting of Stockholders in accordance with the Company’s Bylaws.
By Order of the Board of Directors
Richard T. Clampitt
Corporate
Secretary
Dated:
November 2
, 2017
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OR FORMS OF
PROXY IN THE ENCLOSED ENVELOPE
.
APPE
NDIX A
WD-40 COMPANY
2017
PERFORMANCE INCENTIVE COMPENSATION PLAN
1.
Purpose.
The purpose of The WD-40 Company 2017 Performance Incentive Compensation Plan (the “Plan”) is to provide an incentive for corporate officers and to recognize and reward those officers. The Company’s executive officers are eligible to earn short-term incentive awards under this Plan.
2.
Definitions.
The following terms will have the following meaning for purposes of the Plan:
(a) “Award” means a bonus paid in Cash as provided for under Section 4(a) of the Plan.
(b) “Board” means the Board of Directors of the Company.
(c) “Code” means the Internal Revenue Code of 1986, as amended.
(d) “Committee” means the Compensation Committee of the Board, or such other Committee designated by the Board to administer the Plan provided that the Committee shall consist of two or more persons, each of whom is an “outside director” within the meaning of Section 162(m) of the Code.
(e) “Company” means WD-40 Company, a Delaware corporation.
(f) “Participant” means a corporate officer of the Company or a Subsidiary selected by the Committee to participate in the Plan.
(g) “Performance Measure” means the following measures of performance: total shareholder return, Stock price, net customer sales, volume, gross profit, gross margin, operating profit, operating margin, management profit, earnings from continuing operations (including derivatives thereof before interest, taxes, depreciation and/or amortization), earnings per share from continuing operations, net operating profit after tax, net earnings, net earnings per share, brand contribution to earnings, return on assets, return on investment, return on equity, return on invested capital, cost of capital, average capital employed, cash value added, economic value added, cash flow, cash flow from operations, working capital, working capital as a percentage of net customer sales, asset growth, asset turnover, market share, customer satisfaction, and employee satisfaction.
A Performance Measure may be applied by the Committee as a measure of the performance of any, all, or any combination of the following: the Company, a Subsidiary, an operating segment, a division or other reporting unit of the Company or a Subsidiary, or of one or more brands or product lines of the Company or a Subsidiary.
(h) “Performance Goal(s)” means the goal or goals established for a Participant by the Committee in accordance with Section 4(a).
(i) “Stock” means the Company’s $.001 par value common stock.
(j) “Subsidiary” means any corporation in which the Company, directly or indirectly, controls 50 percent or more of the total combined voting power of all classes of stock.
(k) “Target Award” means the maximum amount of the Award established for each Participant by the Committee in accordance with Section 4(a).
(l) “Year” means a fiscal year of the Company commencing on September 1.
3.
Term.
The Plan shall be effective for as of September 1, 2018 and shall continue until August 31, 2023 unless re-approved by the Company’s stockholders or unless amended or terminated pursuant to Section 9 hereof.
i
4.
Awards.
(a) Within 90 days after the beginning of each Year, the Committee will select Participants for the Year and establish in writing (i) an objective Performance Goal or Goals for each Participant for that Year based on one or more of the Performance Measures, (ii) the specific Award amounts that will be paid to each Participant to the extent his or her Performance Goal or Goals are achieved (the “Target Award”) and (iii) the method by which such amounts will be calculated. The Target Award may provide for payment of all or part of the Target Award in the case of retirement, death, disability or change of ownership of control of the Company or a Subsidiary during the Year, but only to the extent that the Target Award would otherwise be payable to the Participant based on the achievement of the Performance Goal(s) for the Participant for such Year.
(b) The maximum Award that may be paid to any Participant under the Plan for any Year will be $2 million.
(c) The Committee may reduce or eliminate, but may not increase, any Award calculated under the methodology established in accordance with subsection (a) in order to reflect additional considerations relating to performance.
(d) As soon as practicable following each Year while the Plan is in effect, the Committee shall determine and certify, for each Participant, the extent to which the Performance Goal or Goals have been met and the amount of the Award, if any, to be made. Awards will be paid to the Participants following such certification by the Committee and no later than ninety (90) days following the close of the Year with respect to which the Awards are made.
(e) The Company shall withhold from the payment of any Award hereunder any amount required to be withheld for taxes.
5.
Termination of Employment.
Except as may be specifically provided in an Award pursuant to Section 4(a), a Participant shall have no right to an Award under the Plan for any Year in which the Participant is not actively employed by the Company or its Subsidiaries on August 31 of such Year. In establishing Target Awards, the Committee may also provide that in the event a Participant is not employed by the Company or its Subsidiaries on the date on which the Committee certifies the amount of the Award, the Participant may forfeit his or her right to the Award to be paid under the Plan.
6.
Administration.
The Plan will be administered by the Committee. The Committee will have the authority to interpret the Plan, to prescribe rules relating to the Plan and to make all determinations necessary or advisable in administering the Plan. Decisions of the Committee with respect to the Plan will be final and conclusive.
7.
Unfunded Plan.
Awards under the Plan will be paid from the general assets of the Company, and the rights of Participants under the Plan will be only those of general unsecured creditors of the Company.
8.
Code Section 162(m).
It is the intent of the Company that all Awards under the Plan qualify as performance-based compensation for purposes of Code Section 162(m)(4)(C) so that the Company’s tax deduction for such Awards is not disallowed in whole or in part under Code Section 162(m). The Plan is to be applied and interpreted accordingly.
9.
Amendment or Termination of the Plan.
The Committee may from time to time suspend, revise, amend or terminate the Plan; provided that any such amendment or revision which requires approval of the Company’s stockholders in order to maintain the qualification of Awards as performance-based compensation pursuant to Code Section 162(m)(4)(C) shall not be made without such approval.
10.
Applicable Law.
The Plan will be governed by the laws of California.
11.
No Rights to Employment.
Nothing contained in the Plan shall give any person the right to be retained in the employment of the Company or any of its Subsidiaries. Subject to any employment agreement or other contract between the Company and a Participant, the Company reserves the right to terminate the employment of any Participant at any time for any reason notwithstanding the existence of the Plan.
12.
No Assignment.
Except as otherwise required by applicable law, any interest, benefit, payment, claim or right of any Participant under the Plan shall not be sold, transferred, assigned, pledged, encumbered or hypothecated by any Participant and shall not be subject in any manner to any claims of any creditor of any Participant or beneficiary, and any attempt to take any such action shall be null and void. During the lifetime of any Participant, payment of an Award shall only be made to such Participant. Notwithstanding the foregoing, the Committee may establish such procedures as it deems necessary for a Participant to designate a beneficiary to whom any amounts would be payable in the event of any Participant’s death.
13.
Stockholder Approval.
This Plan shall be approved by a vote of the stockholders of the Company at the 2017 Annual Meeting.
ii