Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 9, 2018, the Compensation Committee of the Company’s Board of Directors approved in principle the material terms of an Executive Leadership Incentive Plan (the “ELIP”), which is expected to provide for the grant of cash-settled performance units (“Performance Units”) and cash-settled stock appreciation rights (“SARs”) to participants in the ELIP. It is contemplated that each participant will be granted award opportunities representing a percentage of his or her base salary (the “Target LTI”). In the case of certain of the Company’s executive officers, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, the award will be divided 30% to SARs and 70% to Performance Units. For other participants, including the Company’s senior vice presidents, vice presidents and certain other employees, the award will be 100% in Performance Units. Performance Units will represent the right of the recipient thereof to
receive a cash payment based on the achievement by the Company of levels of EBITDA and return on invested capital (“ROIC”) during a two-year period. SARs granted under the ELIP, upon exercise after vesting, will entitle the holder to a cash payment in an amount equal to the excess of the market price of the Company’s common stock on the date of exercise over the exercise price of the SAR. The SARs will vest in equal annual installments on the first, second and third anniversary of the date of grant and have a five-year term.
For 2018, it is expected that the Target LTI for Shawn B. Pearson, President and Chief Executive Officer of the Company, will be 200% of his current annual base salary of $950,000 (or $1,900,000), the Target LTI for Anthony M. Puleo, Executive Vice President, Chief Financial Officer and Treasurer of the Company, will be 174% of his current annual base salary of $475,000 (or $825,000), and the Target LTI for David L. Pontius, Executive Vice President and Chief Operating Officer of the Company, will be 127% of his current annual base salary of $650,000 (or $825,000). It is expected that Messrs. Pearson, Puleo and Pontius will be granted Performance Units for 2018 pursuant to which they may receive cash payments as follows:
Executive Officer
|
Target Payout
|
Maximum Payout
|
Shawn B. Pearson
|
$1,330,000
|
$1,995,000
|
Anthony M. Puleo
|
$578,000
|
$867,000
|
David L. Pontius
|
$578,000
|
$867,000
|
Should performance levels achieved for EBITDA
and ROIC during the defined performance period not meet certain minimum thresholds, then no amounts will be earned under the Performance Units. Additionally, if EBITDA and ROIC goals are significantly excceded, it may be possible to achieve the maximum payout above.
While adoption of the ELIP and the grant of Performance Units described above is subject to the Compensation Committee’s review and approval of definitive plan documents, on March 9, 2018, the Compensation Committee approved grants of SARs for 2018 to certain of the Company’s officers, including Mr. Pearson, who was granted 185,276 SARs, and Messrs. Puleo and Pontius, each of whom was granted 80,449 SARs. Each of the SARs has an exercise price of $19.72, which was the closing price of the Company’s common stock on the New York Stock Exchange on March 8, 2018.
The intrinsic value of the SARs vesting on March 9, 2019 (equal to 1/3 of the March 9, 2018 grant) for a participant will be credited against amounts payable to such participant for 2018 under the Company’s previously disclosed cash incentive program. This program provided for the payment of cash awards based on the achievement of performance objectives related to the Company’s EBITDA and free cash flow. After 2018, the ELIP would replace the Company’s prior cash incentive programs and profit-sharing plans for its participants in the ELIP to the extent such programs and plans relate to annual, long-term incentive compensation.