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PROPOSAL 1 ELECTION OF DIRECTORS
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initially awarded to each Named Executive Officer. While the number of PSUs granted was based upon a target level, the actual number of PSUs actually earned may be as low as 0% if the Company
fails to meet the threshold performance level for both performance measures. Alternatively, the number of PSUs actually earned may be as high as 200% if the Company meets or exceeds the maximum performance level for both performance measures. The
dollar values allocated to stock options were converted to a number of stock options by using the Black-Scholes option pricing formula on the grant date.
In addition to the normal cycle grant discussed above, in connection with Mr. Woods appointment as President and Chief
Executive Officer effective January 1, 2021, the Committee increased Mr. Woods annualized long-term incentive award amount to $1,400,000. Accordingly, the Committee supplemented Mr. Woods initial fiscal 2021 grant with a
special incremental grant of equity awards on the first business day following the effectiveness of his appointment, with a grant date value of approximately $686,667, which resulted in the grant of 2,693 PSUs, 1,346 RSUs, and 4,709 stock options
based on the closing price of the Companys common stock on the supplemental grant date ($127.47 as of January 4, 2021). This special incremental grant ensured that Mr. Wood received fiscal 2021 long-term incentive awards in an
aggregate amount prorated to account for the four months of fiscal 2021 in which he served as Chief Operating Officer and the eight months of fiscal 2021 in which he served as President and Chief Executive Officer.
Similarly, in addition to the normal cycle grant and in connection with Mr. Obertos increased responsibilities as President
Irrigation and after considering Mr. Woods recommendation, the Committee supplemented Mr. Obertos initial fiscal 2021 grant with a special incremental grant of equity awards with a grant date value of approximately
$25,000, which resulted in the grant of 98 PSUs, 49 RSUs, and 171 stock options based on the closing price of the Companys common stock on the supplemental grant date ($127.47 as of January 4, 2021).
Under the terms of the individual award agreements, both the PSUs and RSUs awarded to Named Executive Officers for fiscal 2021 are
payable in common stock and provide the Named Executive Officers with special cash dividend equivalents which entitle them to receive any special cash dividend paid by the Company while the PSUs and RSUs are outstanding; provided, however, that any
special cash dividend equivalents will be converted into additional units and will not be payable until all applicable vesting and performance conditions have been met. No cash payment or dividend equivalent will be payable in connection with any
regular quarterly dividends. In addition, awards under the PSUs, RSUs and stock options are subject to certain anti-dilution adjustments in the event of a stock split, stock dividend, merger or other similar corporate transaction. The Committee has
adopted a policy regarding the timing of grants of PSUs, RSUs and stock options to employees which generally provides that such grants will be made on an annual basis during the first quarter or at the beginning of the second quarter of the fiscal
year and at least two business days after the Company has issued its full-year earnings release for the prior fiscal year.
The
specific terms of the PSU, RSU and stock option grants made to the Named Executive Officers for fiscal 2021 are as follows:
Performance Stock Unit (PSU) Awards. PSUs represent a right to receive a certain target number of shares of the Companys common stock at a specified time in the future if
certain performance objectives have been met during the specified performance period leading up to the payout of the PSU. PSUs are, therefore, designed to reward achievement of specific performance objectives over this period. Historically, the
Committee has awarded PSUs with a threshold payout of 50% of the target number and a maximum payout of 200% of the target number. In addition to requiring satisfaction of the applicable threshold performance levels, PSUs are only payable if the
recipient remains employed with the Company until payout occurs after the end of the performance period (or under certain circumstances involving a change in control, death or complete disability, as discussed in the Termination Payments
section below).
Each PSU awarded in fiscal 2021 has a three-year performance period running through the end of fiscal 2023
(i.e. August 31, 2023) with any earned PSUs cliff vesting on November 1, 2023. The Committee selected a three-year performance period because measuring performance over a long period would be less affected by cyclical variations in the
Companys business and one-time events. The Committee felt that a three-year period was commonly used by similar companies for this reason. The Committee chose total stockholder return relative to a
select peer group (Relative Total Stockholder Return) and return on invested capital (ROIC), each equally weighted, as the performance measures to be used to determine PSU payouts for the three-year performance period.
Starting in fiscal 2019, the Committee replaced operating income growth (Operating Income Growth) with Relative Total Stockholder Return, which is an important indicator of the Companys financial performance compared to the market
and which better aligns executive officers compensation with long-term value creation for stockholders. Also starting in fiscal 2017, the Committee replaced return
20