DEFINITIVE PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
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[ ] Preliminary proxy statement |
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Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)) |
[X] Definitive proxy statement |
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[ ] Definitive additional materials |
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[ ] Soliciting material pursuant to Rule 14a-12 |
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ESCO TECHNOLOGIES INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
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Check box if any part of the fee is offset as provided by Exchange
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NOTICE OF
THE ANNUAL MEETING OF
THE STOCKHOLDERS OF
ESCO TECHNOLOGIES INC.
St. Louis, Missouri
December 22, 2010
TO THE STOCKHOLDERS OF
ESCO TECHNOLOGIES INC.:
The Annual Meeting of the Stockholders of ESCO Technologies Inc.
will be held at the Companys headquarters located at 9900A
Clayton Road, St. Louis County, Missouri 63124 on Thursday,
February 3, 2011, commencing at 9:30 A.M. central
time, at which meeting only holders of record of the
Companys common stock at the close of business on
December 3, 2010 will be entitled to vote, for the
following purposes:
1. To elect as directors the three nominees named in the
attached proxy statement, to serve for a term expiring in 2014;
2. To vote on a proposal to ratify the Companys
appointment of KPMG LLP as the Companys independent
registered public accounting firm for the fiscal year ending
September 30, 2011;
3. To cast an advisory vote on executive compensation;
4. To cast an advisory vote to determine the frequency of
future advisory votes on executive compensation; and
5. To transact such other and further business, if any, as
lawfully may be brought before the meeting and any adjournment
or postponement thereof.
The Company has mailed to Stockholders a separate notice (dated
December 22, 2010) of Internet availability of the
proxy materials containing instructions on how to access the
proxy materials and vote electronically via the Internet, by
phone, by mail or in person. A paper or
e-mail copy
of the proxy materials may be requested using one of the methods
described in that separate notice.
ESCO TECHNOLOGIES INC.
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BY
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Chairman, Chief Executive
Officer and President
Secretary
Even though you may plan to attend the meeting in person,
please vote electronically via the Internet or by telephone
(toll-free 1-866-265-2401), or, if you requested paper or
e-mail
copies of the proxy materials, please complete, sign, date and
return the proxy card.
TABLE OF CONTENTS
ESCO
TECHNOLOGIES INC.
9900A
Clayton Road, St. Louis, Missouri 63124
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS TO BE HELD
FEBRUARY 3, 2011
This proxy statement is furnished to the holders of all of the
issued and outstanding shares of common stock (the Common
Shares) of ESCO Technologies Inc. (the
Company) in connection with the solicitation of
proxies for use in connection with the Annual Meeting of the
Stockholders to be held February 3, 2011, and all
adjournments thereof, for the purposes set forth in the
accompanying Notice of the Annual Meeting of the Stockholders.
Such holders are hereinafter referred to as the
Stockholders. The Company is first providing access
to these proxy materials, including the form of proxy, to
Stockholders on or about December 22, 2010.
Whether or not you expect to be present in person at the
meeting, please submit your vote in advance using one of the
voting methods described in the separate notice sent to all
Stockholders and dated December 22, 2010. In voting, you
have several choices:
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You may vote on each proposal, in which case the Common Shares
will be voted in accordance with your choices.
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You may, when appropriate, indicate a preference to abstain on
any proposal, which will have the effect described in
VOTING on page 34.
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You may return a properly executed proxy form without indicating
your preferences, in which case the proxies will vote the Common
Shares as follows: (1) FOR election of the directors
nominated by the Board of Directors, (2) FOR the proposal
to ratify the Companys appointment of KPMG LLP as the
Companys independent registered public accounting firm for
the fiscal year ending September 30, 2011, (3) FOR the
advisory approval of the executive compensation as disclosed in
this proxy statement, (4) FOR every three years on
Proposal 4; and (5) in the proxy holders
discretion on such other business as may properly come before
the meeting.
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Any person giving such proxy has the right to revoke it at any
time before it is voted by giving written notice of revocation
to the Secretary of the Company, by duly executing and
delivering a proxy bearing a later date, or by attending the
Annual Meeting and casting a contrary vote in person.
The close of business on December 3, 2010 was fixed as the
record date for the determination of the Stockholders entitled
to vote at the Annual Meeting of the Stockholders. As of the
record date, 26,554,161 Common Shares were outstanding and
entitled to be voted at such meeting. The Stockholders will be
entitled to cast one vote for each Common Share held of record
on the record date. There is no cumulative voting with respect
to the election of directors.
A copy of the Companys Annual Report to Stockholders for
the fiscal year ended September 30, 2010 is available for
review at www.escotechnologies.com.
The solicitation of this proxy is made by the Board of Directors
of the Company. The solicitation will be by mail and via the
Internet, and the expense thereof will be paid by the Company.
Proxies may also be solicited by telephone,
e-mail or
telefax by directors, officers or regular employees of the
Company.
2
I. ELECTION
OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR
election of L.W. Solley, J.D. Woods and G.E. Muenster, the
three nominees for Directors listed below.
Nominees
and Continuing Directors
The Companys Bylaws provide that the number of directors
shall not be less than three nor greater than ten, and shall be
determined from time to time by majority vote of the Board of
Directors. In accordance with the Bylaws, the Board of Directors
has fixed the number of directors at seven. Currently, there is
a total of six directors. The Board of Directors has determined,
based on the recommendation of the Nominating and Corporate
Governance Committee, that G.E. Muenster, the Companys
Executive Vice-President and Chief Financial Officer, be
nominated for election as an additional director. The Board is
divided into three classes, with the terms of office of each
class ending in successive years. Three directors of the Company
are nominated to be elected for terms expiring at the Annual
Meeting in 2014, or until their respective successors have been
elected and have qualified. Certain information with respect to
the nominees for election as directors proposed by the Board of
Directors and the other directors whose terms of office as
directors will continue after the Annual Meeting is set forth
below, including directorships held by each nominee at other
public companies during the last five years and information
regarding each nominees specific experience,
qualifications, attributes and skills that has led the Board to
conclude that such nominee should serve as a Director. Should
any one or more of the nominees be unable or unwilling to serve
(which is not expected), the proxies (except proxies marked to
the contrary) will be voted for such other person or persons as
the Board of Directors of the Company may recommend. Proxies
cannot be voted for more than three nominees.
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Name, Age, Principal Occupation or
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Served as
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Position, Other Directorships
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Director Since
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NOMINEES FOR TERMS ENDING IN 2014
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L.W. Solley, 68
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1999
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Principal Occupation: Retired Executive Vice
President, Emerson Electric Co.
Business Experience: Mr. Solley served as
Executive Vice President of Emerson Electric Co., a technology
and engineering provider of network power, process management,
industrial automation, climate technologies, and appliance and
tool solutions with more than 250 domestic and international
manufacturing locations. He was responsible for product line
acquisitions, their worldwide integration into the core business
units of Emerson and for development of new international
manufacturing facilities. Previously Mr. Solley served as
Chairman, President and Chief Executive Officer of Fisher
Controls International Inc. Prior to becoming Chairman,
President and Chief Executive Officer of Fisher Controls, he
held a number of other positions including Vice President
Strategic Planning, Vice President Marketing and Sales, and
Group Vice President. Fisher Controls was acquired by Emerson
Electric in 1992.
Public Company Directorships: Currently,
Mr. Solley serves on the Board of the Company.
Other Experience and Education: Prior to his
positions at Emerson Electric and Fisher Controls,
Mr. Solley held a number of engineering and manufacturing
positions within Monsanto Agricultural Chemical Company. He
received a Bachelor of Science in Chemical Engineering from
Louisiana Tech University and engaged in post graduate studies
at Loyola University in New Orleans and Institut Européen
dAdministration des Affaires (INSEAD) in Fountainbleu,
France. He has also served as President and Chairman of the
Valve Manufacturers Association.
Reasons for Board
Membership: Mr. Solleys experience in
acquisitions, international executive management, strategic
planning and in sales and marketing with Emerson Electric and
Fisher Controls, both large, complex, multinational
corporations, as well as his engineering and domestic and
foreign manufacturing experience has enabled him to provide
valuable insight to Board deliberations and valuable guidance to
the Company.
Principal Occupation: Chairman Emeritus and
retired Chairman of the Board, President and Chief Executive
Officer, Baker Hughes Incorporated.
3
Business Experience: Mr. Woods served as
Chief Executive Officer of Baker Hughes, a leading supplier of
oilfield equipment and services from April 1987 until January
1997, and from January 1989 until January 1997 also served as
Chairman.
Public Company Directorships: Currently,
Mr. Woods serves on the Boards of: the Company; Foster
Wheeler AG, a global engineering and construction contractor and
power equipment supplier where he serves as a member of the
Compensation, and Nominating and Governance Committees; and
Complete Production Services, Inc., a leading oilfield service
provider where he serves as a member of the Audit, Compensation,
and Nominating and Governance Committees. Previously,
Mr. Woods served as a member of the Board of Directors of
National Oilwell Varco, OMI Corporation, USEC Inc. and Cap Rock
Communications, Inc.
Other Experience: Mr. Woods is the past
Chairman of the Petroleum Equipment Suppliers Association and
past Chairman of the National Ocean Industries Association. He
served as Chairman of the Greater Houston YMCA and serves as a
director of the University of Texas Health Science Center in
Houston, Texas, and as a trustee of the Boys and Girls Club of
America. Mr. Woods received a Bachelors degree in
Finance from California State University, Fullerton, and was
awarded an honorary Doctorate degree by the University in 2006.
Reasons for Board
Membership: Mr. Woods experience in
governance issues at public companies and in managing a large
multi-national company brings to the Board of Directors valuable
insights into the areas of managing growth and acquisitions and
divestures.
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G.E. Muenster, 51
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Nominee
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Principal Occupation: Executive Vice President
and Chief Financial Officer of the Company.
Business Experience: Mr. Muenster has
served in a number of senior financial management positions with
increasing responsibilities over the past 20 years with the
Company before becoming Vice President and Chief Financial
Officer in 2003 and Executive Vice President and Chief Financial
Officer in 2008.
Public Company Directorships: None, pending
election to the Companys Board.
Education: Mr. Muenster received a
Bachelor of Science degree in Accounting from St. Louis
University. In addition, Mr. Muenster holds a Certified
Public Accountant (CPA) license from the State of Missouri.
Other Experience: Prior to joining the
Company, Mr. Muenster was employed by one of the
worlds largest international certified public accounting
firms, KPMG LLP. In this role, Mr. Muenster served as
Client Manager, auditing and providing financial, accounting and
Securities and Exchange Commission (SEC) compliance services to
several of St. Louis largest publicly-traded global
manufacturing companies, including Emerson Electric Co.
Reasons for Board
Membership: Mr. Muensters broad range
of financial and operational responsibilities with the Company
and his long service make him uniquely qualified to provide the
Board of Directors with valuable insights into the Company,
helping to identify its strengths and weaknesses, and
identifying and directing key managers and other critical
employees.
TO CONTINUE
IN OFFICE UNTIL 2013
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V.L. Richey, Jr., 52
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2002
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Principal Occupation: Chairman, Chief
Executive Officer and President of the Company.
Business Experience: Mr. Richey joined
the Company in 1990 and has served in a number of positions
including Vice President Sales and Marketing for one of the
Companys divisions; corporate Vice President
Administration; Vice President responsible for the
Companys Communications and Test segments; and President
and Chief Operating Officer prior to becoming Chairman of the
Board of Directors and Chief Executive Officer in 2003.
Public Company Directorships: Currently,
Mr. Richey serves on the Board of the Company and Nordson
Corp., a leader in precision dispensing equipment for applying
industrial liquid and powder coatings, adhesives, and sealants
to numerous consumer and industrial products during
manufacturing operations, where he serves as a member of the
Audit and Finance Committee.
Other Experience and Education: Prior to
joining the Company, Mr. Richey was employed by Emerson
Electric Co. as Assistant to the President, Electronics and
Space Division, and served in the United States Army as a
4
Military Intelligence Officer. Mr. Richey has a Bachelor of
Arts degree from Western Kentucky University and a Masters in
Business Administration degree from Washington University in
St. Louis, Missouri.
Reasons for Board
Membership. Mr. Richeys broad range of
ever-increasing responsibilities with the Company and his long
service make him uniquely qualified to provide the Board of
Directors with valuable insights into the Company, its strengths
and weaknesses and its employees.
Principal Occupation: Retired Vice President
and Chief Financial Officer, Stereotaxis, Inc.
Business Experience: Mr. Stolze served as
Vice President and Chief Financial Officer, Stereotaxis, Inc., a
manufacturer of medical instruments, from May, 2004 until his
retirement in December, 2009. Previously, Mr. Stolze served
as Executive Vice President and Chief Financial Officer, MEMC
Electronic Materials Inc. and prior thereto as Audit Partner for
KPMG LLP.
Public Company Directorships: Currently,
Mr. Stolze serves on the Board of the Company.
Other Experience and
Education: Mr. Stolze is a member of the
Board of Directors and Chairman of the Audit Committee, ISTO
Technologies, Inc., an orthobiologics company; member of the
Board of Trustees and member of the Facilities and Real Estate
Committee, Maryville University, St. Louis, Missouri.
Mr. Stolze received a Bachelor of Science degree in
Mechanical Engineering from the University of Notre Dame and a
Masters in Business Administration degree from the University of
Michigan. He holds a CPA license from the State of Missouri.
Reasons for Board
Membership: Mr. Stolzes experience in
the accounting profession as well as his experience in corporate
finance and treasury matters and domestic and foreign
manufacturing has enabled Mr. Stolze to provide valuable
advice and direction. As Chairman of the Audit and Finance
Committee of the Companys Board of Directors and its
designated financial expert, Mr. Stolze adds significant
value to the Companys goals of maintaining a strong
balance sheet and fulfilling its financial reporting
obligations, accurately and transparently.
TO CONTINUE
IN OFFICE UNTIL 2012
Principal Occupation: Retired Chief Executive
Officer, Instron Corporation.
Business Experience: Mr. McConnell served
as President and Chief Executive Officer of Instron Corporation,
a leading supplier of scientific instruments, from 1990 until
his retirement in 2002. Prior to joining Instron,
Mr. McConnell served as the President and Chief Executive
Officer of Emerson Electric Co. Automatic Switch Division,
President and Chief Operating Officer of Rosemount Division of
Emerson Electric Co. and as Group Vice President of Emerson
Electric Co.
Public Company
Directorships: Mr. McConnell currently
serves on the Board of the Company and Warren Resources, Inc.,
an independent energy company engaged in the exploration and
development of domestic onshore oil and natural gas reserves,
where he serves as a member of the Audit Committee.
Mr. McConnell previously served as a member of the Board of
Directors of Duracraft Corporation where he was a member of the
Audit and Compensation Committees.
Other Experience and
Education: Mr. McConnell served on the
regional advisory board of BayBanks, Inc. and the Parents
Advisory Board of Bucknell University. Mr. McConnell earned
a Bachelor of Arts degree from the University of Texas at Austin
in mathematics and physics in 1964.
Reasons for Board
Membership. Mr. McConnell brings to the
Board of Directors significant experience in the areas of
acquisitions and divestures, international manufacturing and
distribution, application-specific software programs, and
domestic and international technology transfer transactions, all
of which have enabled him to provide valuable advice and
direction to the Company in those areas.
Principal Occupation: Chairman, BW Capital
Corporation.
5
Business Experience: Mr. Trauscht
currently serves as Chairman of BW Capital Corporation, a
private investment company. He formerly served as Chairman,
President, and Chief Executive Officer, Borg Warner Corporation;
President, Langevin Company; and President, Scientific
Management Corp.
Public Company
Directorships: Mr. Trauscht currently serves
on the Boards of the Company and Scorpio Tankers Inc., a
world-wide provider of marine transportation of petroleum
products where he serves as Lead Director, Chairman of the
Governance and Compensation committees and a member of the Audit
Committee. Mr. Trauscht previously served on the Board of
Directors of a number of publicly-traded companies, including
Baker Hughes Inc.; Borg Warner Corporation; Blue Bird
Corporation; Cordant Technologies Inc.; Wynn International Inc.;
IES Corporation; IMO Industries Inc.; and OMI Corporation
as well as serving as Chairman of a number of Board Committees,
including Compensation, Finance, Governance and Audit.
Other Experience: Mr. Trauscht currently
serves on the Board of Directors of Bourns Inc., a manufacturer
and supplier of sophisticated electronic components, and
previously served on the Board of Directors of Global Motor
Sports Group Inc. Mr. Trauscht has served as Trustee of a
number of civic, professional and charitable organizations
including the Oak Brook, Illinois School District; Illinois
Literacy Foundation; and the Museum of Science and Industry in
Chicago, Illinois.
Reasons for Board
Membership: Mr. Trauschts service as
Chief Executive Officer of Borg Warner Corporation as well as
his extensive experience as a Board Member and Committee Chair
at a number of publicly-held companies has enabled him to
provide valuable advice and direction to the Company in all
areas, particularly those involving corporate governance,
acquisitions, divestitures and capital spending. His background
and experience makes Mr. Trauscht uniquely qualified to
discharge his duties as the Companys Lead Director.
Each of the nominees and continuing directors has had the same
principal occupation as stated in the preceding table during the
past five years, except as follows:
Mr. Muenster was Vice President and Controller of the
Company from February 1999 to February 2003, and Vice President
and Chief Financial Officer from February 2003 to February 2006,
and from February 2006 to February 2008, he was Senior Vice
President and Chief Financial Officer. Since February 2008, he
has been Executive Vice President and Chief Financial Officer of
the Company.
Since April 2003, Mr. Richey has been Chairman and Chief
Executive Officer of the Company. Since September 30, 2006,
he has also been President.
From May 2004 until December, 2009, Mr. Stolze was Vice
President and Chief Financial Officer of Stereotaxis, Inc.
Board of
Directors and Committees
The Board of Directors has determined that none of the
non-management directors has any relationship with the Company
other than in his capacity as a director and stockholder, and,
as a result, such directors are determined to be independent
under the standards of the New York Stock Exchange. The
non-management directors are J.M. McConnell, L.W. Solley, J.M.
Stolze, D.C. Trauscht and J.D. Woods.
There were four meetings of the Board of Directors during fiscal
2010. All of the incumbent directors attended at least 75% of
the meetings of the Board and committees on which they served.
The Companys policy requires the attendance of all
directors at the Annual Meeting of Stockholders, except for
absences due to causes beyond the reasonable control of the
director. Each of the six directors in office at the time of the
2010 Annual Meeting attended that meeting.
The many responsibilities and the substantial time commitment of
being a director of a public company require that the Company
provide adequate incentives for the directors continued
performance by paying compensation commensurate with the
directors expertise and duties. Directors who are
employees of the Company do not receive any compensation for
service as directors. The non-management directors are
compensated based upon their respective levels of Board
participation and responsibilities, including service on Board
committees. Compensation paid in fiscal 2010 to non-management
directors was as follows: annual cash retainer
$30,000 (increased to $32,500 for fiscal 2011); additional
annual cash retainer for Lead Director $15,000
(increased to $25,000 for fiscal 2011 to reflect the increase in
the responsibility and time commitment associated with this
role); annual fee for Board meetings $4,800; annual
cash retainer for Chairman of Audit and Finance
Committee $7,000;
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annual cash retainer for Chairmen of Human Resources and
Compensation and Nominating and Corporate Governance
Committees $5,000; annual fee for meetings of Audit
and Finance Committee and Human Resources and Compensation
Committee $4,800; and annual fee for meetings of
Nominating and Corporate Governance Committee
$6,000. The above-mentioned cash retainers and fees are paid in
January of each year. Also, each non-management director
receives a retainer of 800 Common Shares per quarter.
Under the Companys Directors Extended Compensation
Plan, a Plan for non-management directors who began Board
service prior to April 2001, each director currently on the
Board who has served as a non-management director for at least
five years will, after the later of termination of services as a
director or reaching age 65, receive for life an annual
benefit equal to a percentage of the fiscal year 2001 annual
cash retainer for directors of $20,000. Such percentage ranges
from 50% to 100% based upon years of service as a director. In
the event of death of a retired director who is eligible under
this plan, 50% of the benefit will be paid to the surviving
spouse for life. On or after retirement, if the eligible
director so elects, the actuarial equivalent of the benefit may
be received in a single lump sum. Certain of the eligible
directors have elected to receive this lump sum distribution at
the time of retirement, in compliance with section 409(a)
of the Internal Revenue Code.
Directors may elect to defer receipt of all of their cash
compensation
and/or all
of their quarterly stock retainer. If elected, the deferred
amounts are credited to the directors deferred
compensation account in stock equivalents. Deferred amounts will
be distributed in Common Shares or cash at such future dates as
specified by the director unless distribution is accelerated in
certain circumstances, including a change in control of the
Company. The stock portion which has been deferred may only be
distributed in Common Shares.
Directors are subject to stock ownership guidelines. Under these
guidelines, each independent director is expected to accumulate
shares having a total cash value equal to five times the annual
cash retainer. These shares must be accumulated within five
years of guideline adoption or appointment to the Board. All
directors are in compliance with the guidelines.
7
DIRECTOR
COMPENSATION
The following table sets forth the compensation of the
Companys non-management directors for fiscal 2010.
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Change in
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Pension
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Fees
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Value and
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Earned
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Non-Equity
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Nonqualified
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or Paid
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Stock
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Option
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Incentive Plan
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Deferred
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in Cash
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Awards
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Awards
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Compensation
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Compensation
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All Other
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Total
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Name
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($)
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($)(1)
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($)
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($)
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Earnings ($)(2)
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Compensation ($)
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($)
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J.M. McConnell
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$
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45,600
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(3)
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$
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105,144
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$
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3,892
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$
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154,636
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L.W. Solley
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45,600
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(4)
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105,144
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4,572
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155,316
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J.M. Stolze
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46,600
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(5)
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105,144
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5,653
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157,397
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D.C. Trauscht
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70,400
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(6)
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105,144
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0
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175,544
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J.D. Woods
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44,600
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(7)
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105,144
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15,657
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165,401
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(1) |
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Dollar amounts represent the aggregate grant date fair values
and are based on the market value of the stock on the date of
each quarterly award of 800 shares under the Compensation
Plan for Non-Employee Directors. The amounts reflect the actual
dollar amounts recognized for financial statement reporting
purposes for fiscal 2010 calculated in accordance with FASB ASC
Topic 718. |
|
|
|
|
|
|
|
|
|
Date of Award
|
|
Shares
|
|
Share Price
|
|
October 1, 2009
|
|
|
800
|
|
|
$
|
37.64
|
|
January 2, 2010
|
|
|
800
|
|
|
|
36.69
|
|
April 1, 2010
|
|
|
800
|
|
|
|
31.97
|
|
July 1, 2010
|
|
|
800
|
|
|
|
25.13
|
|
|
|
|
(2) |
|
Represents the change in actuarial present value of the
accumulated benefits under the Companys Directors Extended
Compensation Plan from September 30, 2009 to
September 30, 2010. Non-management directors who began
service prior to April 2001 are eligible to participate in the
plan after at least five years of Board service. The plan pays
benefits as a percentage of $20,000 at time of retirement based
on completed years of Board service. The percentage is 50% for
five years of Board service and increases by 10% for each
additional year of service to 100% for ten or more years of
Board service. Benefits are paid quarterly, commencing the later
of the directors 65th birthday or retirement. In the event
of death, 50% of the annual benefit is payable to the surviving
spouse for the life of the spouse. The change in pension value
shown above includes the effect of changes in actuarial
assumptions from year to year. Pension values increased due to
the effect of changes in actuarial assumptions. The increase in
pension value due to assumption changes for
Messrs. McConnell, Solley, Stolze, Trauscht and Woods was
$9,714, $10,234, $11,063, $6,161 and $10,582, respectively.
Pursuant to applicable regulations, the amounts in the table do
not include a negative amount of $582 for D.C. Trauscht relating
to change in pension value. |
|
(3) |
|
Represents: annual cash retainer $30,000, board
meeting fees $4,800, committee meeting
fees $10,800. |
|
(4) |
|
Represents: annual cash retainer $30,000, board
meeting fees $4,800, committee meeting
fees $10,800. |
|
(5) |
|
Represents: annual cash retainer $30,000, board
meeting fees $4,800, committee meeting
fees $4,800, committee chairman fee
$7,000. |
|
(6) |
|
Represents: annual cash retainer $30,000, lead
director fee $15,000, board meeting fees
$4,800, committee meeting fees $15,600, committee
chairman fee $5,000. |
|
(7) |
|
Represents: annual cash retainer $30,000, board
meeting fees $4,800, committee meeting
fees $4,800, committee chairman fee
$5,000. |
CORPORATE
GOVERNANCE
The Board of Directors has adopted corporate governance
guidelines and a code of business conduct and ethics applicable
to all of the Companys directors, officers and employees.
Additionally, the Board of Directors has adopted a code of
ethics for senior financial officers applicable to the
Companys Chief Executive Officer, Chief
8
Financial Officer, Chief Accounting Officer, Controller and
persons performing similar duties. These documents are posted on
the Companys web site: www.escotechnologies.com. A
copy of each of the corporate governance guidelines, the code of
business conduct and ethics and the code of ethics for senior
financial officers is also available in print to any Stockholder
who requests it.
Mr. Trauscht, the Companys Lead Director, presides at
meetings of the non-management directors (each of whom is deemed
independent), which normally occur in conjunction with each
Board meeting. Parties desiring to communicate concerns
regarding the Company to the non-management Directors may direct
correspondence to the Lead Director of the Board at the
following address: Mr. D.C. Trauscht, Lead Director, ESCO
Technologies Board of Directors, ESCO Technologies Inc., 9900A
Clayton Road, St. Louis, MO
63124-1186.
Parties who wish to communicate with a particular director or
non-management directors as a group may write to such
director(s) at ESCO Technologies Inc., 9900A Clayton Road,
St. Louis, MO
63124-1186,
Attn: Secretary. All such letters will be forwarded promptly to
the relevant director(s).
The
Boards Role In Risk Oversight and Board Leadership
Structure
The Companys management is responsible for the
day-to-day
management of the Companys risks. Management has adopted a
comprehensive, ongoing enterprise risk management process that
it uses to identify and assess Company risks. The risks
management has identified are in four general areas: Financial
and Reporting; Legal and Compliance; Operational; and Strategic.
Periodically, management advises the Board and the appropriate
Board Committee of the risks identified; managements
assessment of those risks at the business unit and corporate
levels; its plans for the management of these identified risks
or the mitigation of their effects; and the results of the
implementation of those plans. While the Board as a whole has
responsibility for and is involved in the oversight of
managements risk management processes and controls, some
of the identified risks are given further review by the Board
Committee most closely associated with the identified risks. For
example, the Audit and Finance Committee provides additional
review of the risks in the areas of accounting, liquidity,
credit and tax. Similarly, the Human Resource and Compensation
Committee provides additional review of risks in the area of
compensation and benefits and human resource planning. The
Nominating and Corporate Governance Committee devotes additional
time to the review of risks associated with corporate
governance, ethics and legal issues.
The Boards leadership structure, discussed below, with the
combined positions of Chairman of the Board and Chief Executive
Officer, enables that one person, who has intimate knowledge of
managements
day-to-day
risk management processes and controls, to ensure that the
directors receive all of the information necessary to discharge
their oversight role responsibly.
In adopting the Companys Corporate Governance Guidelines,
the Board of Directors established the policy that the position
of Chief Executive Officer and Chairman of the Board of
Directors be held by the same person. Based upon its most
current review of that policy, the Board of Directors continues
to believe that it has served the Company well. V. L.
Richey, Jr. has been and continues to be Chairman of the
Board and Chief Executive Officer. The Board believes that
Mr. Richey is a strong leader at both the Company and the
Board levels, and believes that the Chief Executive Officer, who
has primary responsibility for managing the
day-to-day
operations of the Company, is also well positioned to provide
Board leadership that is aligned with the Stockholders
interests and the needs of the Company. Furthermore, the Board
believes that having one person serving as Chairman of the Board
and Chief Executive Officer enables the Company to speak with
one voice, and reduces the chance of confusion about leadership
roles and responsibilities.
At the same time, the Board is also very cognizant of its
oversight responsibilities, and has in place structural
safeguards that serve to preserve the Boards independent
oversight of management. Currently all of the directors, with
the exception of Mr. Richey, are independent (as defined by
the applicable listing standards of the New York Stock Exchange)
and are highly qualified and experienced. If elected by the
Stockholders, Mr. Muenster, the Companys Chief
Financial Officer and Executive Vice President, will join the
Board as only the second management director, with a significant
majority of directors remaining independent. Additionally, each
member of the Audit and Finance, Human Resources and
Compensation, and Nominating and Corporate Governance Committees
is an independent director. Further, the Board has appointed
Mr. Trauscht as Lead Director. The Lead Director chairs all
meetings of the independent directors; provides input to the
Chairman regarding the content of the agendas for meetings of
the Board; advises the Chairman of the quality, quantity and
timeliness of the information required by the Board to
effectively and responsibly perform its oversight duties; and
acts as liaison
9
between the Board and the Chairman on sensitive issues. The
Board believes that these safeguards have been and are effective
in preserving the Boards independent oversight of
management.
Related
Person Transactions and Procedures
The Company reviews relationships and transactions in which the
Company and Related Persons are participants to determine
whether such Related Persons have a direct or indirect material
interest. Related Persons include the Companys directors,
director nominees, executive officers, 5% or more Stockholders
or their immediate family members. The Company has developed and
implemented processes and controls to obtain information from
Related Persons about Related Person Transactions and for the
purpose of determining, based on the facts and circumstances,
whether a Related Person has a direct or indirect material
interest in the transaction. As required under SEC rules,
transactions that are determined to be directly or indirectly
material to a Related Person are disclosed in this proxy
statement.
Pursuant to these processes, all directors and executive
officers annually complete, sign and submit a Directors
and Officers Questionnaire and a Conflict of Interest
Questionnaire that are designed to identify Related Person
Transactions and both actual and potential conflicts of
interest. Additionally, 5% or more Stockholders are requested to
respond to certain questions designed to identify direct or
indirect material interests by such 5% or more Stockholder in
any transactions with the Company. The Companys written
policy on Related Person Transactions requires prompt notice to
the General Counsel by a Related Person of any material interest
that such Related Person may have in a proposed transaction with
the Company. If the Chairman of the Corporate Governance and
Nominating Committee determines that a conflict exists, after
notice from the General Counsel, the Committee will review the
material facts of the proposed transaction and determine whether
to approve or disapprove such transaction. The Committee will
consider whether the transaction with the Related Person is on
terms no less favorable than terms generally available to an
unaffiliated third-party under the same or similar
circumstances. If advance Committee approval is not feasible or
is not obtained, review of the transaction will occur after the
fact, and the Committee shall be empowered to approve, ratify,
amend, rescind or terminate the transaction.
COMMITTEES
The members of the Board of Directors are appointed to various
committees. The standing committees of the Board are: the
Executive Committee, the Audit and Finance Committee, the Human
Resources and Compensation Committee and the Nominating and
Corporate Governance Committee. Each of these committees
operates under a written charter adopted by the Board of
Directors.
The Executive Committees function is to exercise the full
authority of the Board of Directors between Board meetings,
except that the Executive Committee may not take certain
specified actions which the Board of Directors has reserved for
action by the whole Board. The Committee held three meetings in
fiscal 2010. Mr. Richey (Chairman) and Mr. Trauscht
are the members of the Committee.
The Audit and Finance Committees functions generally are
to assist oversight by the Board of Directors of the
Companys financial reporting process, the Companys
compliance with legal and regulatory requirements, the
independent registered public accounting firms (the
accounting firm) qualifications and independence,
and the performance of the Companys internal audit
function and the accounting firm. These functions include the
responsibility to appoint, retain and oversee the accounting
firm and its performance of the annual audit; to annually
evaluate the qualifications, independence and prior performance
of the accounting firm; to review the scope of the accounting
firms work and approve its annual audit fees and any
non-audit service fees; to review the Companys internal
controls with the accounting firm and the internal audit
executive; to review with the accounting firm any problems it
may have encountered during the annual audit; to discuss
10-K and
10-Q reports
with management and the accounting firm before filing; to review
and discuss earnings press releases; to discuss with management
major financial risk exposures; to review the annual plan and
associated resource allocation of the internal audit function;
to review the Companys reports to Stockholders with
management and the accounting firm, and to receive certain
assurances from management; and to prepare a report as required
by the SEC to be included in the annual proxy statement. Each
member of the Committee is an independent director, as defined
in the applicable listing standards of the New York Stock
Exchange. The Board of Directors has determined that
Mr. Stolze, the Chairman of the Audit and Finance
Committee, is an audit committee financial expert within the
meaning of Item 407(d)(5)(ii) of
Regulation S-K
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), and is independent
10
within the meaning of the applicable listing standards of the
New York Stock Exchange. The Committee met four times in fiscal
2010. Mr. Stolze (Chairman), Mr. McConnell and
Mr. Trauscht are the members of the Committee. The
Committees charter is posted on the Companys web
site: www.escotechnologies.com under the Corporate
Governance link and is available in print to any Stockholder who
requests it.
The Human Resources and Compensation Committees functions
generally are to review and approve corporate goals and
objectives relevant to compensation of the Chief Executive
Officer; to evaluate the Chief Executive Officers
performance in light of these goals and objectives; to determine
and approve the Chief Executive Officers compensation
level based upon the evaluation; to review and approve the
compensation of officers and other key executives, incentive
compensation plans, equity-based plans and other compensation
plans; to review and approve material changes to benefit
programs, including new programs; to review the performance,
development, and succession planning for the Company management;
to assure that executive officers and other senior executives of
the Company are compensated in a manner consistent with the
strategy of the Company and competitive practice; to review and
discuss with management the Companys Compensation
Discussion and Analysis (CD&A) and recommend
its inclusion in the annual proxy statement and
Form 10-K
for filing with the SEC; and to oversee the Charitable
Contributions Program. Each member of the Committee is an
independent director, as defined in the applicable listing
standards of the New York Stock Exchange. The Committee met five
times in fiscal 2010. Mr. Woods (Chairman), Mr. Solley
and Mr. Trauscht are the members of the Committee. The
Committees charter is posted on the Companys web
site: www.escotechnologies.com under the Corporate
Governance link and is available in print to any Stockholder who
requests it.
The Nominating and Corporate Governance Committees
functions generally are to identify and recommend approval of
individuals qualified to become Board members; to recommend
director nominees for selection to the Board; to review the
composition of the Board committees; to develop and recommend to
the Board effective corporate governance guidelines; to review
the Companys corporate governance and compliance programs;
to oversee the Companys ethics programs; to review
conflicts of interest involving related persons, including
oversight and administration of the Related Party Transactions
policy; and to lead the Board in its annual review of the
Boards performance. The Committee will consider candidates
for election as directors recommended by Stockholders and
evaluate such individuals in the same manner as other candidates
proposed to the Committee. All candidates must meet the legal,
regulatory and exchange requirements applicable to members of
the Board of Directors. The Committee has not established other
specific minimum qualifications that must be met by a candidate
in order to be considered for nomination by the Committee, but
requires that candidates have varied business and professional
backgrounds; be persons of the highest integrity; possess sound
business judgment and possess such other skills and experience
as will enable the Board to act in the long-term interests of
the Stockholders. Additionally, the Committee may establish and
utilize such other specific membership criteria as the Committee
deems appropriate from time to time in light of the Boards
need of specific skills and experience. Although the Committee
does not have a formal policy on diversity, the Committee seeks
the most qualified candidates without regard to race, color,
national origin, gender, religion, disability or sexual
orientation. The Committee may identify new candidates for
nomination based on recommendations from Company management,
employees, non-management directors, third party search firms,
Stockholders and other third parties. Consideration of a new
candidate typically involves the Committees review of
information pertaining to such candidate and a series of
internal discussions, and may proceed to interviews with the
candidate. New candidates are evaluated based on the
above-described criteria in light of the specific needs of the
Board and the Company at the time. Incumbent directors whose
terms are set to expire are evaluated based on the
above-described criteria, as well as a review of their overall
past performance on the Board of Directors. The Committee has
the authority to engage third party search firms to identify
candidates, but did not do so in fiscal 2010.
Stockholders who wish to recommend director candidates for the
next Annual Meeting of Stockholders should notify the Committee
no later than August 31, 2011. Submissions are to be
addressed to the Nominating and Corporate Governance Committee,
c/o the
Companys Corporate Secretary, Alyson S. Barclay, at ESCO
Technologies Inc., 9900A Clayton Road, St. Louis, MO
63124-1186,
which submissions will then be forwarded to the Committee. The
Committee is not obligated to nominate any such individual for
election. No such Stockholder candidates have been received by
the Company for this Annual Meeting. Each member of the
Committee is an independent director, as defined in the
applicable listing standards of the New York Stock Exchange. The
Committee met five times in fiscal 2010. Mr. Trauscht
(Chairman), Mr. McConnell and Mr. Solley are the
11
members of the Committee. The Committees charter is posted
on the Companys web site: www.escotechnologies.com
under the Corporate Governance link and is available in print to
any Stockholder who requests it.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2010, the members of the Human Resources and
Compensation Committee were L.W. Solley, D.C. Trauscht and J.D.
Woods. None of the foregoing (i) was during fiscal 2010 an
officer or employee of the Company; (ii) was formerly an
officer of the Company; or (iii) had any relationship
requiring disclosure by the Company under any paragraph of
Item 404 of
Regulation S-K.
Report of
the Audit and Finance Committee
The Audit and Finance Committee (the Committee)
oversees and monitors the Companys financial reporting
process on behalf of the Board of Directors. Management has the
primary responsibility for the financial statements and the
reporting process, including the Companys system of
internal controls. In fulfilling its oversight responsibilities,
the Committee reviewed and discussed with management the audited
financial statements to be included in the Annual Report on
Form 10-K
for the year ended September 30, 2010, including a
discussion of the quality and the acceptability of the
Companys financial reporting practices and the internal
controls over financial reporting.
The Committee reviewed with the independent registered public
accounting firm (the accounting firm), which is
responsible for expressing an opinion on the conformity of those
audited financial statements with accounting principles
generally accepted in the United States of America, its
judgments as to the quality and the acceptability of the
Companys financial reporting and such other matters as are
required to be discussed with the Committee under auditing
standards generally accepted in the United States of America. In
addition, the Committee discussed with the accounting firm its
independence from management and the Company, including the
impact of any non-audit-related services provided to the Company
and the matters in the accounting firms written
disclosures and the letter required by the applicable
requirements of the Public Company Accounting Oversight Board
(PCAOB) received by the Company regarding the
accounting firms communications with the Committee
concerning independence. The Committee also discussed with the
accounting firm the matters required to be discussed by the
statement on Auditing Standards No. 61, as amended, as
adopted by the PCAOB.
Further, the Committee discussed with the Companys
internal audit executive and the accounting firm the overall
scope and plans for their respective audits. The Committee meets
periodically with the internal audit executive and the
accounting firm, with and without management present, to discuss
the results of the examinations, their evaluations of the
Companys internal controls (including internal controls
over financial reporting), and the overall quality of the
Companys financial reporting.
In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board of Directors that the
audited financial statements be included in the Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010 for filing
with the SEC. The Committee also evaluated and reappointed KPMG
LLP as the Companys independent registered public
accounting firm for fiscal 2011.
The Audit and Finance Committee
J.M. McConnell
D.C. Trauscht
12
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The Human Resources and Compensation Committee (the
Committee) is responsible for determining the
compensation of the Chief Executive Officer, other senior
officers and key executives of the Company.
Compensation
Objectives
The Committees objective is to develop and maintain
compensation packages most likely to attract, retain, motivate,
and reward the Companys executive officers and other
senior officers and key executives. Compensation programs are
designed to be consistent with those of other companies engaged
in similar industries
and/or of
similar size with which the Company is likely to compete for
talent to enable the Company to employ and retain a high-quality
management team. The Committee seeks to use performance based
compensation to maximize the alignment of executive compensation
with the long-term interests of Stockholders.
Executive
Summary
The Companys compensation program is designed to reward
positive fiscal performance. The bonus program is tied to key
strategic targets and is designed to reward strong performance.
Payouts are higher in times of good performance and lower when
targets are not achieved. The stock-based long-term incentive
program helps align the interests of our executives and
Stockholders by ensuring our executives are also Stockholders.
Further, under the performance-accelerated restricted stock
(PARS) awards program, one of the Companys
long-term incentive programs, shares may not be earned until
3.5 years after the initial award which contributes to our
goal of executive retention. As these awards are tied to stock
price this also serves as an incentive to drive strong Company
performance. The Companys strong fiscal year 2010
financial performance, as reflected by the best fourth quarter
performance in the Companys history, was led by the
executive team. The Committee believes the fiscal 2010 results
reflect the success of the Companys compensation program
in incentivizing its executive team.
Compensation
Summary
The Committee offers its executive officers a compensation
package that includes:
|
|
|
|
|
A competitive base salary;
|
|
|
|
An annual at-risk cash bonus opportunity based on key
performance measures;
|
|
|
|
Long-term equity incentive compensation (LTI) based
on Company stock performance and retention factors;
|
|
|
|
Protection in the form of change of control arrangements through
a Severance Plan and employment agreements; and
|
|
|
|
Appropriate and reasonable perquisites.
|
The Committee sets compensation levels based on the skills,
experience and achievements of each executive officer, taking
into account market checking described below and the
compensation recommendations by the Chief Executive Officer,
except with respect to his own position. The Committee also
considers tally sheets which provide, for each executive
officer, a recap of each principal element of compensation as
well as benefits, perquisites, outstanding equity awards and
stock ownership or potential ownership. The tally sheets also
reflect the incremental compensation as a result of various
termination scenarios and each element of pay or benefits
impacted. The Committee retains the discretion to adjust all
elements of compensation as it deems appropriate, subject to the
requirements of Stockholder approved plans.
Compensation
Consultant and Market Checking
The Committee is authorized by its charter to employ independent
compensation and other consultants. Every other year, the
Committee has engaged Towers Watson, a nationally recognized
compensation consulting firm (Compensation
Consultant), to assist the Committee in evaluating
executive compensation. A consultant was not engaged for fiscal
year 2010.
An unrelated branch of Towers Perrin has historically been
engaged to perform actuarial services for the Company. In
calendar 2010 the compensation division of Towers Watson was
spun-off into a new Company Pay
13
Governance. The Compensation Consultant periodically attends the
Committee meetings at the Committees request and provides
information, research and analysis pertaining to executive
compensation as requested by the Committee, including updates on
market trends, survey data and analysis for market review.
In September 2008, the Compensation Consultant prepared a report
which the Committee and management used for their fiscal 2009
market review. This report was also used for the fiscal 2010
review. In the years in which the Compensation Consultant is not
engaged, such as in fiscal year 2010, the Company ages the prior
years data from the manufacturing surveys included in the
Consultants report (by applying a multiplier to the
Consultants prior year survey data consistent with the
average market increase for executives in the prior year), and
collects pertinent information from peer proxy filings, such as
base salary. The Company applied an upward adjustment of 3% to
the manufacturing peer data for fiscal year 2010. For fiscal
2010, the consultants 2008 peer survey data was updated to
reflect the changes in the peer companies identified in the
Companys 2009 Annual Report. The updated report included
market data from two separate groups of companies, the
Peer Survey Companies and Manufacturing Survey
Companies, as set forth below:
1. A comparative group of eight peer companies was selected
on the basis of industry type, and within each industry, closest
comparable size in the utility solutions, test and filtration
industries, identified in the Companys 2009 Annual Report
to Stockholders as the 2009 Peer Group. The eight
peer companies (Peer Survey Companies) included:
|
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|
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|
Utility Solutions Group:
|
|
Itron, Inc.
Comverge, Inc.
|
|
Badger Meter, Inc.
Echelon Corporation
|
|
Roper Industries Inc.
|
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Test:
|
|
LeCroy Corporation
|
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Filtration/Fluid Flow:
|
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Pall Corporation
|
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Clarcor, Inc.
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|
2. A combination of two surveys of general manufacturing
companies, adjusted to the Companys relative size
(Manufacturing Survey Companies), was also reviewed
by the Committee. This second group is included to ensure that
comparisons are made with competitors, as well as manufacturing
companies of a size similar to the Company. The Durable Goods
Manufacturing Survey had 289 participating companies and the
Manufacturing Industry Companies Survey had 119 participating
companies for the executive officer positions. Please see
Appendix A for a list of these Manufacturing Survey
Companies.
For each of the Companys executive officer positions a
review of each principal element of compensation (base salary,
cash bonus and LTI), as well as total cash compensation (base
salary and cash bonus), and target total direct compensation
(target cash compensation and LTI) is made against an annual
median market rate determined based on the average of these two
groups. For fiscal 2010, the Company utilized the 50th
percentiles for the Peer Survey Companies in determining the
average market rates. For fiscal 2010, the
50th and
75th
percentiles were averaged for the Manufacturing Survey Companies
due to the Companys relative business complexity. The 2008
survey reflected that the Companys executive
officers total pay mix is closely aligned with that of the
Manufacturing Survey Companies. However since the Peer Survey
Companies provide significantly larger LTI awards they were not
directly comparable.
Each principal element of compensation is reviewed independently
against the market rates. Relative Company performance is also
periodically compared to the then-current peer group to test the
overall reasonableness of pay for performance for years in which
the Compensation Consultant is engaged.
The September 2008 report included a review of the internal pay
relationships between the CEO and other executive officers and a
comparison of the pay relationship between like officers in
similar sized manufacturing companies. The report reflected that
the CEOs pay is well aligned with the other executive
officers of the Company and is in line with the pay
relationships at the manufacturing companies group. Accordingly,
the Committee determined that no changes to the compensation
practices were warranted for fiscal 2010.
Principal
Elements of Compensation
The principal elements of compensation (base salary, cash bonus
and LTI) for the executive officers are shown in the Summary
Compensation Table on page 21.
14
The Committee considers the survey data described above as a
frame of reference in making its determinations. The
Committees decisions are not formulized, and the Committee
exercises considerable judgment and discretion in making them.
Annual Base Salaries Base salaries are
designed to attract, retain, motivate and reward competent,
qualified, experienced executives to operate the business. The
Company emphasizes performance-based compensation for the
executive officers. Historically, the executive officers
salaries have been targeted to the median of the annual market
rates, as adjusted for the relative value of the jobs within the
Company to those in the comparison companies. At the discretion
of the Committee, with input by the CEO, executive officers with
significant experience and responsibility who consistently
demonstrate exemplary performance may be paid more than the
market rates set for their positions, while less experienced
executive officers may be paid salaries less than the market
rates.
Fiscal 2010 base salaries for the executive officers were set by
the Committee at the beginning of the fiscal year. The salaries
were set based on the Committees review of current salary
levels and target total cash compensation (base salary and cash
bonus) compared to the established annual market rates and took
into account, for the CEO, fiscal 2009 individual and Company
performance and for the other executive officers, a subjective
evaluation of the executives fiscal 2009 performance with
input of the CEO.
In considering fiscal 2009 Company performance for the
CEOs base salary determination, the Committee took into
account the Companys financial and operating performance,
including:
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Consolidated Net Sales increased $5.5 million in 2009 in
spite of a very challenging global economy.
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Net Sales at Aclara RF increased $48.8 million, or
46.7 percent in 2009 driven by significant increases in Gas
AMI shipments to Pacific Gas & Electric.
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Earnings per share from continuing operations increased in 2009
to $1.86 from $1.81 per share.
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|
The Company recorded entered orders of $634 million in
2009, resulting in a
book-to-bill
ratio greater than 1.0 in a challenging global environment.
|
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Net cash provided by operating activities was
$77.6 million, representing an all-time historical high.
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As a result of strong cash flow, net debt outstanding was paid
down to $130.6 million, resulting in a favorable leverage
ratio of 1.86x.
|
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Aclara successfully developed and launched several new products
related to Smart Grid applications.
|
|
|
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Management successfully implemented contingency plans across the
Company to generate significant cost savings to mitigate the
impact of the global economic slowdown.
|
Based on the contributions to the Companys performance
described above, their individual contributions in their
respective areas of expertise, and the market rates, the
Committee approved a 2010 increase in base salary for the
Executive VP and CFO and the Senior VP and General Counsel.
Target total cash compensation (base salary and cash bonus) for
2010 was above the market median rate for the Executive VP and
CFO and just below the market median rate for the Senior VP and
General Counsel. Data from the Manufacturing Survey Companies,
however, indicated that total cash compensation for the Senior
VP and General Counsel was at the market median rate. The
Company concluded that due to the small sample size of the Peer
Survey Companies, its data was not reflective of the market.
Cash Bonus The Committee uses annual
performance-based cash bonuses to compensate the executive
officers. The Committee establishes performance targets for
executive officers, using financial, operational and individual
goals linking compensation to overall Company performance. The
executive officers individual goals are determined by each
officer and submitted to the CEO for his review, except with
respect to his goals which are evaluated and approved by the
Lead Director.
For the executive officers, the Company operated two short-term
cash bonus plans in fiscal 2010: (i) the Incentive
Compensation Plan for Executive Officers (ICP); and
(ii) the Performance Compensation Plan (PCP).
These at-risk plans closely link the executive officers
pay to the Companys financial results and provide for
compensation variability through reduced payments in times of
poor performance and higher compensation in times of strong
performance. The ICP is a Section 162(m) stockholder
approved plan with a fixed target
15
and a range. The PCP also has a fixed target and a range, but
allows for Committee discretion in determining actual bonus
payouts.
The target short-term bonuses are divided equally between the
two plans for the executive officers. The plans are divided
equally to provide a balance between the ongoing Stockholder
value proposition (measured by earnings per share) and the
Companys goal to annually evaluate and focus senior
managers on other strategic measures such as cash flow. The
target percentage of total cash compensation represented by the
ICP and PCP is based on the level of the position, with targets
for fiscal 2010 as follows:
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Cash Bonus Fiscal 2010
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Target ICP
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Target PCP
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Base %
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Bonus %
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% of
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% of
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Base
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Total
|
|
Bonus
|
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Total
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Total
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Total
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Salary
|
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Cash
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Target
|
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Cash
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Cash
|
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Cash
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|
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($)
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Comp.
|
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($)
|
|
Comp.
|
|
($)
|
|
Comp.
|
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($)
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|
Comp.
|
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Chairman & CEO
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$
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712,000
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60
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%
|
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$
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477,000
|
|
|
|
40
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%
|
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$
|
238,500
|
|
|
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20
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%
|
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$
|
238,500
|
|
|
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20
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%
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EVP & CFO
|
|
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475,000
|
|
|
|
65
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%
|
|
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255,000
|
|
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35
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%
|
|
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127,500
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|
|
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17.5
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%
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|
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127,500
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|
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17.5
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%
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SVP & General Counsel
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|
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269,000
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70
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%
|
|
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115,000
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30
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%
|
|
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57,500
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|
|
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15
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%
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|
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57,500
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15
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%
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The higher at-risk target percentage for the CEO as compared to
the other executive officers is based on the Companys
at-risk philosophy, and his role as CEO of the Company. Likewise
the CFOs position has a higher percentage as compared to
the Senior VP and General Counsel, based on his
responsibilities. Typically near the beginning of each fiscal
year, the Committee determines the evaluation criteria, sets
performance targets and approves the minimum and maximum
multipliers which will be applied to the targets to determine
payments under both plans. The Committee approves the
performance targets after reviewing the Companys business
plans and determining the key short-term business metrics on
which the Companys senior management should focus on most
in order to drive results. Because of the broad responsibilities
of the executive officers, their targets are tied to
Company-wide measures.
In determining the fiscal 2010 combined ICP and PCP bonus target
for the CEO, the Committee considered the actual total cash
compensation of the CEO compared to the market rate and the
bonus target percentage for this position, in conjunction with
the increase in base salary.
During the first quarter of fiscal 2010, the Committee agreed to
measure 50% of the bonus target (the ICP bonus) against the
earnings per share target (defined below), and measure the other
50% of the bonus target (the PCP bonus) against (i) the
achievement of the cash flow target (defined below) (weighted at
35%); and (ii) the execution of individual objectives
(weighted at 15%), which were established by the Committee in
consultation with the Lead Director at the beginning of fiscal
2010.
The fiscal 2008 report of the Compensation Consultant, updated
as described above, reflected that the Companys short-term
bonus target percentages (ICP and PCP combined targets) were
generally in line with the market median levels for the
Manufacturing Survey Companies. The Peer Survey Companies had a
larger portion of total direct compensation allocated to
long-term incentives, hence their cash compensation percentages
were lower.
For the fiscal 2010 short term cash bonus plans (the ICP and
PCP), the Committee approved the following targets and
evaluation matrices:
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ICP Earnings Per Share
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Target
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EPS
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$
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1.43
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$
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1.48
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$
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1.53
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|
|
$
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1.58
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|
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$
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1.63
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|
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$
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1.68
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|
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$
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1.73
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|
|
$
|
1.78
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|
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$
|
1.83
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|
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$
|
1.88
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|
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$
|
1.93
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Centerpoint
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Multipliers
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0.20
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0.36
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0.52
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0.68
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0.84
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1.00
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1.20
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1.40
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1.60
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1.80
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2.00
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PCP Cash Flow (dollars in millions)
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|
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Target
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Cash Flow
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$
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64.5
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$
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66.0
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|
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$
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67.5
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|
|
$
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69.0
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$
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70.5
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$
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72.0
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$
|
73.5
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$
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75.0
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|
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$
|
76.5
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$
|
78.0
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|
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$
|
79.5
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Centerpoint
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Multipliers
|
|
|
0.20
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|
|
|
0.36
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|
|
0.52
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0.68
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0.84
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|
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1.00
|
|
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1.20
|
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|
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1.40
|
|
|
|
1.60
|
|
|
|
1.80
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|
|
|
2.00
|
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16
The targets in these matrices were determined at the beginning
of the fiscal year on the basis of subsidiary projections with
senior management review. The Committee also considered the
uncertainty of the economy at the time the targets were
established.
For the ICP, the Committee approved the use of earnings per
share as the evaluation criterion. The centerpoint was the
earnings per share target of $1.68. The maximum of the range was
a 15% improvement over the target. This was deemed to be
significantly challenging in the current economic environment.
The steps above the target multiplier of 1.0 increased by .20
for each step above target; below the target multiplier, the
steps decreased at a rate of .16 for each step. The higher
multiplier above target was reflective of the difficulty in
achieving such increased earnings per share and was rewarded
accordingly. The matrix provided for a payment equal to 1.0
times the target if the earnings per share target of $1.68 was
achieved. At the end of the year, the actual earnings per share
was $1.68, which was the target. This resulted in a multiplier
of 1.0 being applied to the ICP target bonus.
For the PCP, the Committee approved two criteria. One was cash
flow (weighted @ 70%) with a target of $72 million (the
cash flow target), which is the centerpoint of the cash flow
range. Cash flow is defined as cash generated from operations at
the subsidiary level excluding corporate cash activity (debt and
interest payments, acquisitions and divestitures, tax payments,
pension contributions, stock option exercises and corporate
general administrative expenses). This measure is considered a
non-GAAP financial measure. The second criterion was individual
objectives (weighted @ 30%) measured against subjective
strategic management objectives. For the cash flow matrix, there
was a decrease of .16 in the applied multiplier for each step
below the 1.0 target multiplier. On the upside, there was an
increase of .20 in the multiplier for each step above the target
multiplier. At the end of the year, the actual cash flow was
$87.1 million. This resulted in a multiplier of 2.0 being
applied to the portion of the PCP bonus associated with the cash
flow target for the determination of the PCP bonus payment. This
was the top step on the matrix.
The FY 2010 individual performance objectives of the executive
officers were approved by the Chairman and CEO except with
respect to his own, which were approved by the Lead Director.
Specific objectives were assigned weightings based on their
importance by each executive officer and then evaluated on a
subjective basis at the end of the year by each Executive
Officer and then the Chairman and CEO. The objectives are
focused on key short-term strategic factors, such as operational
matters, legal matters, acquisitions, divestitures, cost savings
and other issues. The Lead Director evaluated the CEOs
objectives. The objectives were deemed to be significantly
challenging for the individuals and necessary for the continuing
success of the company. The individual multiplier for the
individual performance targets ranged from 0 to 1.0 times the
target cash compensation based on the subjective evaluation of
objective attainment. The actual score for the CEO for fiscal
2010 for his individual objectives was .1395, and the score for
the other non-executive officers was .15. This resulted in a
multiplier of .93 for the CEO and 1.0 for the other executive
officers being applied to the portion of the PCP associated with
the individual objectives
Long-Term Equity Incentive
Compensation The Committee historically has
granted LTI in the form of performance-accelerated restricted
shares (PARS)
and/or stock
options. Based principally on sensitivity to Stockholder
concerns with stock option dilution and as it did in fiscal
2009, in fiscal 2010 the Committee allocated the full LTI
compensation to PARS. PARS are distributed in shares of stock
and typically have a performance period of five years.
Generally, the PARS award may be distributed no earlier than
3.5 years after the award, if the target stock price is
achieved. The Committee believes that the Companys
performance will reflect the contributions of management within
the 3.5 year timeframe. If the target stock price is not
achieved, the PARS award will be distributed at the end of the
performance period, if the employee is still employed. The value
of PARS fluctuates directly with changes in the price of stock,
which ties executives interests directly to those of
Stockholders. For executive officers, these awards also contain
a two-year non-compete period after the expiration of the
earning period of the awards, which provides additional
Stockholder protection. Until such shares are earned and
distributed, executive officers are not eligible to receive
dividends.
In line with the Companys pay for performance philosophy,
the Committee determined the total amount of LTI to grant to
each executive officer based on its review of the value of such
LTI awards for similar executive level positions, taking into
consideration the annual market rate and then subjectively
adjusting based on the Committees assessment of the
relative value and performance of each individual or, in the
case of the CEO, the Companys fiscal 2009 financial
performance, the relative Stockholder return and the market rate
value of similar incentive awards to CEOs. In October 2009, the
Committee granted the executive officers equity awards in the
form of PARS with an
17
October 2011 September 2014 performance period. The
historic target LTI is generally one times total target cash
compensation for the CEO and approximately 75% of total cash
compensation for the Executive VP and CFO and 60% of total cash
compensation for the Senior VP and General Counsel. The LTI
targets were established by the Committee utilizing its
assessment of the market data. For fiscal 2010, in line with
other cost-cutting measures made across the Company, the CEO
recommended that these amounts be decreased from their historic
target levels. The Peer Survey Companies are significantly
larger than the Company, as are their LTI awards, hence the
Committee looked at both the Manufacturing Survey Companies and
the Peer Survey Companies and made adjustments based on the
Companys size. The award to the CEO was below the
Committees target of one times the CEOs annual total
cash compensation and fell below the median market rate.
Likewise, the LTI awards for the Executive VP and CFO and the
Senior VP and General Counsel also fell below the median market
rate.
The 2010 fiscal year awards set the stock price target at $45.00
for the acceleration of the full PARS awards, which was
approximately 18% over the then-current share price of $38.16,
and for acceleration of 50% of the PARS awards the stock price
target was set at $42.00. This increase in the stock price
targets was viewed as meaningful and challenging. No portion of
these awards may be earned prior to fiscal 2011.
Total Compensation On the basis of the
changes outlined above, target total compensation for fiscal
year 2010 was set at levels generally equivalent to fiscal year
2009 target total compensation for each executive officer.
The Company does not believe that any risks arising from its
compensation policies and practices are reasonably likely to
have a material adverse effect on the Company. Any such risk is
mitigated by the multiple elements of our compensation programs,
including base salary, annual bonus programs, and equity awards
which are earned over multiple years. The structure of our
senior management short term cash bonus plans, which are based
on targets at each subsidiary, encourages decision-making that
is in the best long-term interests of the Company and our
Stockholders.
Equity Grant Procedures The Company
does not coordinate stock option or PARS grants with the release
of material, non-public information. Company-wide equity grants,
including equity grants to executive officers, are generally
awarded on the date of the October or November Committee meeting
when other compensation decisions are made. During the year,
equity awards are made to new hires, promoted employees or in
other special circumstances, generally on the first trading day
of the month after hire or the date of the next Committee
meeting. Since October 5, 2006, the exercise price of each
of the stock option grants has been the market closing price on
the grant date. Previously, the Company utilized the average of
the high and low prices on the date of grant to determine the
stock option grant price. The Committee previously delegated to
the Chairman and CEO the authority to grant stock option awards
to key employees (other than executive officers) subject to
certain limitations.
Other
Compensation Elements
Perquisites The Company also provides
limited perquisites to the executive officers which have
historically included country club membership, annual physical,
financial planning and an auto allowance. The Committee annually
reviews the types and value of the perquisites provided to the
executive officers as part of its overall review of executive
compensation. The Committee has determined the perquisites paid
in fiscal 2010 to be reasonable.
Stock Ownership Guidelines The
Committee has established stock ownership guidelines for the CEO
and the other executive officers. The guidelines currently set
the minimum level of ownership at five times total cash
compensation (base salary and annual cash bonus target) for the
CEO and three times total cash compensation for the other
executive officers. Newly appointed executive officers are
expected to be in compliance with the ownership guidelines
within five years of their appointments. Unexercised stock
options and unvested PARS are not included in determining the
ownership amounts. All executive officers were in compliance at
the end of fiscal 2010.
Retirement Benefits Like other
employees of the Company, executive officers are eligible for
retirement benefits provided through a matched defined
contribution program. The CEO and other executive officers are
also eligible for a frozen benefit under the defined benefit
retirement program, and the CEO and Senior VP and General
Counsel are eligible for a frozen benefit under the supplemental
executive retirement plan (the SERP). These plans
were frozen in December of 2003 for all Company employees. The
Companys decision to end the accrual of benefits under the
defined benefit retirement program is consistent with the
compensation programs lack of emphasis on risk-free or
safety-net
pay.
18
Severance Plan Severance provisions in
the event of a change of control benefit a company in the event
of a change of control or a potential change of control by
allowing executives who are parties to such arrangements to
focus on continuing business operations and the success of a
potential business combination rather than seeking alternative
employment, thereby providing stability to a corporation during
a potentially uncertain period. Accordingly, the Committee
decided that it was in the Companys best interest to adopt
a Severance Plan, effective in 1995, which prescribes the
compensation and benefits to be provided in the event of a
change of control to certain executives, including the CEO and
the other executive officers. The Companys change of
control arrangements were designed to provide executives with
severance payments and certain other benefits in the event that
their employment is terminated in connection with a change of
control transaction. The Severance Plan provides severance
benefits only if there is both (1) a change of control of
the Company and (2) the employees employment is
terminated by the Company (or any successor) without cause or if
the employee terminates his or her employment for good reason,
in each case within 36 months following a change of control.
If triggered, the executive will be entitled to all accrued, but
unpaid compensation, a cash bonus for the year of separation and
benefits and a lump sum cash payment, which is designed to
replicate the cash compensation (base salary and bonus), plus
certain benefits, that the executive would have received had he
or she remained employed for two years. The determination of the
appropriate level of payments and benefits to be provided in the
event of a change of control termination involved consideration
of a number of factors. The compensation levels were determined
based on a survey of the Companys peers at the time the
Severance Plan was adopted by the Company. The Committee
considered that a high-level executive, who is more likely to
lose his or her job in connection with a change of control than
other employees, may require more time than other employees in
order to secure an appropriate new position, and, unless that
executive was provided with change of control benefits, he or
she may be motivated to start a job search early if a change of
control is possible, to the detriment of the Company. Thus, the
existence of the Severance Plan provides an incentive for the
executive to remain with the Company until a change of control
occurs. In addition, since payments are not provided under the
Severance Plan unless there has been a change of control and a
qualifying termination of employment, an acquirer who may wish
to retain the Companys management team during or after a
transition period will have the opportunity to do so.
In addition, pursuant to the Companys LTI plans, in the
event of a change of control, stock option vesting is
accelerated to the date of the change of control and earned PARS
are distributed at that date. The balance of the PARS are
distributed at the end of the fiscal year in which a change of
control occurs if the executive is still employed by the Company
(or any successor); provided, however, if the executive is
involuntarily terminated for reasons other than cause or if the
executive terminated his or her employment for good reason, the
balance of PARS will be distributed to the executive upon
termination of employment.
Employment Agreements for the CEO and Executive
Officers The Company has employment
agreements (the Agreements) with each of the
executive officers. These Agreements exclude separations due to
a change of control or termination for cause, and provide for
the payment of severance under a predetermined separation
agreement, thereby providing for a more amicable separation in
circumstances where a business change is warranted. The
Agreements automatically renew at the end of each one-year term
unless either party gives notice of non-renewal at least
180 days prior to expiration of the then-current term. The
Agreements provide for payment of an annual base salary, subject
to review for increase at the discretion of the Committee,
participation in the Companys PCP and ICP bonus plans, and
eligibility for participation in the Companys LTI plans
and benefit plans and programs applicable to senior executives,
and continuance of certain perquisites. For a specified period
of time after a termination, the Agreements prohibit the
executive officers from soliciting Company employees or
disclosing confidential information. The Agreements also require
that the executive officers provide limited consulting services
on an as-requested basis following termination. The specifics
regarding the cash compensation and benefits provided in the
event of a qualifying separation are outlined in the Employment
Agreements section on page 25.
The Committee periodically assesses the reasonableness of the
Agreements to consider whether any changes are appropriate.
Limit on Deductibility of Certain
Compensation Federal income tax law prohibits
publicly held companies, such as the Company, from deducting
certain compensation paid to an executive officer that exceeds
$1 million during the tax year. To the extent that
compensation is based upon the attainment of performance goals
set by the
19
Committee pursuant to plans approved by the Stockholders, the
compensation is not included in the limit. The Committee
intends, to the extent feasible and where it believes it is in
the best interests of the Company and its Stockholders, to
attempt to qualify executive compensation as tax deductible
where it does not adversely affect the Committees
development and execution of effective compensation plans. For
example, to enable certain bonuses and long-term compensation to
be deductible, the Committee makes these awards under incentive
plans approved by Stockholders as much as possible. While the
Committee is limited in its ability to make discretionary bonus
payments under the ICP, there are no such limitations under the
PCP. Gains on stock option exercises may be deductible if
granted under a Stockholder approved plan since they are tied to
the performance of the Companys stock price. Salaries and
other compensation not tied to Company performance are not
deductible to the extent they exceed the $1 million limit.
Compensation Recovery Policy The
Companys Code of Business Conduct and Ethics reaffirms the
importance of high standards of business ethics. Adherence to
these standards by all employees is the best way to ensure
compliance and secure public confidence and support. All
employees are responsible for their actions and for conducting
themselves with integrity. Any failure on the part of any
employee to meet any of the standards embodied in this Code will
be subject to disciplinary action, including potential dismissal.
In 2010 the Company adopted a Compensation Recovery Policy that
provides that when appropriate, and in accordance with
applicable law, the Company may recover any Recoverable
Compensation received during a prescribed period of up to
three years if an executive or other senior officer of the
Company or any of its affiliates:
1) Engaged in intentional misconduct resulting in a
financial restatement or in any increase in his or her incentive
or equity income, or
2) Engaged in activity that competes with the Company or
its affiliated companies in violation of any non-compete
agreements entered into by such employee, or
3) Solicits customers or hires or assists anyone else in
soliciting or hiring employees of the Company or its affiliates
after termination of employment or engages in the unauthorized
disclosure or use of the Companys confidential information
resulting in harm to the Company or its affiliates, in any case
in violation of agreements entered into by such employee
prohibiting such actions.
Recoverable Compensation is defined to include: any
equity and incentive compensation received, exercised, earned or
distributed to or by an executive or senior officer, including
amounts and shares under any equity or compensation plan or
employment agreement.
The Company has previously included recoupment, non-compete and
clawback provisions in PARS and stock option agreements for
certain participants. Where not previously included, the above
provisions will be added to all new risk-based compensation
awards. This policy does not prevent the Company from taking
other actions as appropriate, if warranted, based on the
misconduct outlined above.
COMPENSATION
COMMITTEE REPORT
The Human Resources and Compensation Committee has reviewed and
discussed with management the Companys disclosures under
Compensation Discussion and Analysis beginning on
page 13 of this proxy statement.
Based on such review and discussion, the Committee recommended
to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement and incorporated by
reference in the Companys annual report on
Form 10-K
for the fiscal year ended September 30, 2010 for filing
with the SEC.
The Human Resources and
Compensation Committee
J.D. Woods, Chairman
L.W. Solley
D.C. Trauscht
20
Summary
Compensation Table
The following table contains information concerning compensation
for fiscal 2010 for all services rendered in all capacities to
the Company and its subsidiaries of the executive officers
serving at September 30, 2010.
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Change in
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Pension Value &
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Non-Equity
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Nonqualified
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Incentive
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Deferred
|
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All
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Stock
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Option
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Plan
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Compensation
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Other
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Name and
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Fiscal
|
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Salary
|
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Bonus
|
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Awards
|
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Awards
|
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Compensation
|
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Earnings
|
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Compensation
|
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Total
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Principal Position
|
|
Year
|
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$
|
|
$(1)
|
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($)(2)
|
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($)
|
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($)(3)
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($)(4)
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($)(5)
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$
|
|
V.L. Richey, Jr.
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2010
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|
|
$
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712,000
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|
|
$
|
0
|
|
|
$
|
1,070,006
|
|
|
$
|
0
|
|
|
$
|
638,942
|
|
|
$
|
56,729
|
|
|
$
|
80,775
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|
|
$
|
2,558,452
|
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Chairman, Chief
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2009
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|
|
675,000
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|
|
0
|
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1,124,999
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|
|
0
|
|
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486,000
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116,905
|
|
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78,417
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|
|
|
2,481,321
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Executive Officer & President
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2008
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615,000
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|
|
|
0
|
|
|
|
1,020,042
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|
|
|
0
|
|
|
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550,800
|
|
|
|
0
|
|
|
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74,268
|
|
|
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2,260,110
|
|
G.E. Muenster
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2010
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475,000
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|
0
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|
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439,985
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|
|
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0
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344,250
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27,887
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|
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39,606
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|
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1,326,728
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Executive Vice
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2009
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450,000
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60,000
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519,929
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|
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|
0
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|
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271,950
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57,164
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52,916
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1,411,959
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President & Chief Financial Officer
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2008
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398,524
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0
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500,371
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|
|
0
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|
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278,000
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|
0
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40,179
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1,217,074
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A.S. Barclay
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2010
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269,000
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0
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191,983
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0
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155,250
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36,520
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|
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53,376
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706,129
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Senior Vice President,
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2009
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253,000
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40,000
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216,981
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0
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120,990
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75,251
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51,213
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757,435
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Secretary, and General Counsel
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2008
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235,000
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0
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200,107
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0
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139,000
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|
|
0
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48,815
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622,922
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|
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|
|
(1) |
|
Represents the one-time discretionary cash awards earned under
the Companys Performance Compensation Plan discussed under
the caption Cash Bonus in the Compensation
Discussion and Analysis. |
|
(2) |
|
Represents aggregate grant date fair values for
performance-accelerated restricted stock awards computed based
upon the assumptions discussed in Note 11 of the
Companys financial statements in its fiscal year 2010
Annual Report on
Form 10-K,
in accordance with FASB ASC Topic 718. Such amounts do not
correspond to the actual value that will be realized by the
executive officers. See footnote (2) to the Grants of
Plan-Based Awards table on page 22 of this proxy
statement for additional information concerning the valuation of
the awards. |
|
(3) |
|
Reflects the cash awards earned under the Companys
Incentive Compensation Plan for Executive Officers and the
Performance Compensation Plan, except for discretionary amounts,
discussed under the caption Cash Bonus in the
Compensation Discussion and Analysis. |
|
(4) |
|
Represents the change in actuarial present value of the
accumulated benefits under the Companys Retirement Plan
and Supplemental Executive Retirement Plan from September 30 to
September 30 in each fiscal year. The change in pension value
includes the effect of changes in actuarial assumptions from
year to year. The increase in pension value from 2009 to 2010
due to assumption changes for Messrs. Richey and Muenster
and Ms. Barclay was $37,867, $19,290 and $25,063,
respectively. There were no non-qualified deferred compensation
earnings. |
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(5) |
|
Comprised of the amounts provided in the table below: |
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Defined
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Employee
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Contribution
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Stock
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Savings Plan
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Purchase Plan
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Fiscal
|
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Tax
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Company
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Company
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Name and Principal Position
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Year
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Perquisites(a)
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Grossups(b)
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Contributions
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Contributions
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Total
|
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V.L. Richey, Jr.
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2010
|
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$
|
37,378
|
|
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$
|
9,660
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$
|
9,800
|
|
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$
|
23,937
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80,775
|
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Chairman, Chief Executive
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2009
|
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|
|
35,191
|
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8,942
|
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|
|
9,800
|
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|
|
24,484
|
|
|
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78,417
|
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Officer & President
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2008
|
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|
|
37,001
|
|
|
|
9,281
|
|
|
|
9,200
|
|
|
|
18,786
|
|
|
|
74,268
|
|
G.E. Muenster
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|
2010
|
|
|
$
|
26,495
|
|
|
$
|
8,369
|
|
|
$
|
0
|
|
|
$
|
4,742
|
|
|
|
39,606
|
|
Executive Vice President &
|
|
|
2009
|
|
|
|
27,202
|
|
|
|
21,219
|
|
|
|
0
|
|
|
|
4,495
|
|
|
|
52,916
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
30,555
|
|
|
|
5,666
|
|
|
|
0
|
|
|
|
3,958
|
|
|
|
40,179
|
|
A.S. Barclay
|
|
|
2010
|
|
|
$
|
32,800
|
|
|
$
|
6,872
|
|
|
$
|
10,268
|
|
|
$
|
3,436
|
|
|
|
53,376
|
|
Senior Vice President,
|
|
|
2009
|
|
|
|
32,785
|
|
|
|
7,097
|
|
|
|
9,726
|
|
|
|
1,605
|
|
|
|
51,213
|
|
Secretary, and General
Counsel
|
|
|
2008
|
|
|
|
32,489
|
|
|
|
6,095
|
|
|
|
9,292
|
|
|
|
939
|
|
|
|
48,815
|
|
|
|
|
(a) |
|
Comprised of car allowance, financial planning, and Company cost
related to the personal use of clubs. |
|
(b) |
|
Represents tax
gross-up for
taxable club fees. |
21
GRANTS OF
PLAN-BASED AWARDS
The following table provides information for fiscal 2010 for the
executive officers regarding grants under the Incentive
Compensation Plan for Executive Officers, the 2001 Stock
Incentive Plan and the 2004 Incentive Compensation Plan.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Options
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards:
|
|
Exercise
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Number of
|
|
or Base
|
|
Fair Value
|
|
|
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Securities
|
|
Price
|
|
of Stock
|
|
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
Shares of
|
|
Underlying
|
|
of Option
|
|
and Option
|
Named Executive
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Stock
|
|
Options
|
|
Awards
|
|
Awards
|
Officer
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)(2)
|
|
(#)
|
|
($/Sh)
|
|
($)(3)
|
|
V.L. Richey, Jr.
|
|
|
10/01/09
|
|
|
|
95,400
|
|
|
|
477,000
|
|
|
|
882,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,040
|
|
|
|
|
|
|
|
|
|
|
|
1,070,006
|
|
G.E. Muenster
|
|
|
10/01/09
|
|
|
|
51,000
|
|
|
|
255,000
|
|
|
|
471,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,530
|
|
|
|
|
|
|
|
|
|
|
|
439,985
|
|
A.S. Barclay
|
|
|
10/01/09
|
|
|
|
23,000
|
|
|
|
115,000
|
|
|
|
212,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,031
|
|
|
|
|
|
|
|
|
|
|
|
191,983
|
|
|
|
|
(1) |
|
Represent fiscal 2010 threshold, target and maximum
opportunities under the Companys annual Incentive
Compensation Plan for Executive Officers (ICP) and
the Performance Compensation Plan (PCP). See
Compensation Discussion and Analysis. |
|
(2) |
|
Represent performance-accelerated restricted shares
(PARS) that will vest if the executive officer
continues in the employment of the Company through the
employment service period ending on September 30, 2014.
However, 50% and 100% of these shares may be earned earlier,
between October 1, 2011 and September 30, 2014, if
stock price targets of $42.00 and $45.00, respectively, are met,
and will vest on March 31 following the end of the fiscal year
in which the target is achieved if the executive officer is
still in the employ of the Company. However no shares may be
distributed earlier than 3.5 years after the award.
Achievement of target levels is determined based on the average
stock price over a period of thirty consecutive trading days.
All awards provide for acceleration of vesting in the event of a
change in control of the Company. Dividends will not be paid
prior to the vesting and distribution of the shares. See
Compensation Discussion and Analysis. |
|
(3) |
|
Based upon the fair market value for PARS of $38.16 per share at
the time of the awards. |
22
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information as of the end of fiscal
2010 for the executive officers regarding outstanding awards of
unexercised stock options and unvested performance-accelerated
restricted stock.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards(1)
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares
|
|
Shares or
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
or Units of
|
|
Units of
|
|
|
|
|
Options:
|
|
Options:
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Stock
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
That Have
|
Named Executive Officer
|
|
Grant Date
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
Vested (#)
|
|
Not Vested ($)
|
|
V.L. Richey, Jr.
|
|
|
10/17/01
|
|
|
|
28,000
|
|
|
|
|
|
|
$
|
12.64
|
|
|
|
10/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
08/05/02
|
|
|
|
60,000
|
|
|
|
|
|
|
$
|
14.52
|
|
|
|
08/05/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
11/09/05
|
|
|
|
15,050
|
|
|
|
|
|
|
$
|
42.99
|
|
|
|
11/09/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
18,200
|
|
|
|
|
|
|
$
|
45.81
|
|
|
|
10/05/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,200
|
(2)
|
|
|
605,332
|
|
|
|
|
11/09/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,450
|
(3)
|
|
|
912,987
|
|
|
|
|
10/08/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,968
|
(4)
|
|
|
996,736
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,040
|
(5)
|
|
|
932,610
|
|
G.E. Muenster
|
|
|
10/17/01
|
|
|
|
9,576
|
|
|
|
|
|
|
$
|
12.64
|
|
|
|
10/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
08/05/02
|
|
|
|
9,946
|
|
|
|
|
|
|
$
|
14.52
|
|
|
|
08/05/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
11/09/05
|
|
|
|
4,500
|
|
|
|
|
|
|
$
|
42.99
|
|
|
|
11/09/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
5,050
|
|
|
|
|
|
|
$
|
45.81
|
|
|
|
10/05/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,050
|
(2)
|
|
|
167,963
|
|
|
|
|
11/09/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,075
|
(3)
|
|
|
268,575
|
|
|
|
|
02/06/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,350
|
(6)
|
|
|
177,941
|
|
|
|
|
10/08/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,850
|
(4)
|
|
|
460,651
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,530
|
(5)
|
|
|
383,488
|
|
A.S. Barclay
|
|
|
10/17/01
|
|
|
|
16,000
|
|
|
|
|
|
|
$
|
12.64
|
|
|
|
10/17/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
08/05/02
|
|
|
|
13,000
|
|
|
|
|
|
|
$
|
14.52
|
|
|
|
08/05/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
11/09/05
|
|
|
|
3,400
|
|
|
|
|
|
|
$
|
42.99
|
|
|
|
11/09/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
3,450
|
|
|
|
|
|
|
$
|
45.81
|
|
|
|
10/05/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
10/05/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,450
|
(2)
|
|
|
114,747
|
|
|
|
|
11/09/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,385
|
(3)
|
|
|
179,105
|
|
|
|
|
10/08/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,780
|
(4)
|
|
|
192,243
|
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,031
|
(5)
|
|
|
167,331
|
|
|
|
|
(1) |
|
Achievement of target levels is determined based on the average
stock price over a period of thirty consecutive trading days.
All awards provide for acceleration of vesting in the event of a
change in control of the Company. Dividends will not be paid
prior to the vesting and distribution of the shares. |
|
(2) |
|
Shares of performance-accelerated restricted stock granted
10/05/06 will vest if the executive officer continues in the
employment of the Company through September 30, 2011.
Earlier vesting of 50% and 100% of the stock awards may be
achieved if stock price targets of $59 and $63, respectively,
are achieved between October 1, 2008 and September 30,
2011. These shares will vest and be distributed on March 31 of
the year following the end of the fiscal year in which the
target is achieved. |
|
(3) |
|
Shares of performance-accelerated restricted stock granted
11/09/07 will vest if the executive officer continues in the
employment of the Company through September 30, 2012.
Earlier vesting of 50% and 100% of the stock awards may be
achieved if stock price targets of $45 and $48, respectively,
are achieved between October 1, 2009 and September 30,
2012. These shares will vest and be distributed on March 31 of
the year following the end of the fiscal year in which the
target is achieved. |
|
(4) |
|
Shares of performance-accelerated restricted stock granted
10/08/08 will vest if the executive officer continues in the
employment of the Company through September 30, 2013.
Earlier vesting of 50% and 100% of the stock awards may be
achieved if stock price targets of $48.40 and $51.75,
respectively, are achieved between October 1, 2010 and
September 30, 2013. These shares will vest and be
distributed on March 31 of the year following the end of the
fiscal year in which the target is achieved. |
23
|
|
|
(5) |
|
Shares of performance-accelerated restricted stock granted
10/08/09 will vest if the executive officer continues in the
employment of the Company through September 30, 2014.
Earlier vesting of 50% and 100% of the stock awards may be
achieved if stock price targets of $42 and $45, respectively,
are achieved between October 1, 2011 and September 30,
2014. These shares will vest and be distributed on March 31 of
the year following the end of the fiscal year in which the
target is achieved. |
|
(6) |
|
Shares of performance-accelerated restricted stock granted
02/06/08 will vest if the executive officer continues in the
employment of the Company through September 30, 2012.
Earlier vesting of 50% and 100% of the stock awards may be
achieved if stock price targets of $45 and $48, respectively,
are achieved between October 1, 2009 and September 30,
2012. These shares will vest and be distributed on March 31 of
the year following the end of the fiscal year in which the
target is achieved. |
OPTION
EXERCISES AND STOCK VESTED
The following table sets forth information for the executive
officers regarding, in the aggregate, stock options exercised
and performance-accelerated restricted stock vesting during
fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Value
|
|
|
Number of
|
|
|
Value
|
|
|
|
Shares
|
|
|
Realized
|
|
|
Shares
|
|
|
Realized
|
|
|
|
Acquired on
|
|
|
Upon
|
|
|
Acquired on
|
|
|
on
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
Named Executive Officer
|
|
(#)
|
|
|
($)(1)
|
|
|
(#)
|
|
|
($)(2)
|
|
|
V.L. Richey, Jr.
|
|
|
12,000
|
|
|
$
|
205,680
|
|
|
|
15,050
|
|
|
$
|
500,563
|
|
G.E. Muenster
|
|
|
12,000
|
|
|
|
277,440
|
|
|
|
4,500
|
|
|
|
149,670
|
|
A.S. Barclay
|
|
|
9,216
|
|
|
|
148,931
|
|
|
|
3,400
|
|
|
|
113,084
|
|
|
|
|
(1) |
|
Represents the difference between the exercise price and the
fair market value of Company common stock on the date of
exercise. |
|
(2) |
|
Represents fair value on vesting date of September 30, 2010
for performance-accelerated restricted stock. |
PENSION
BENEFITS
At the time of the 1990 spin-off of the Company by Emerson
Electric Co. (Emerson), the Company established a
Retirement Plan (the Retirement Plan) in which the
Companys executive officers as well as other covered
employees participate. Prior to the 1990 spin-off, the executive
officers (other than Mr. Muenster, who was not then an
employee) participated in one of the pension plans of Emerson or
its subsidiaries. The Retirement Plan is substantially identical
to the Emerson Retirement Plan at the time of the 1990 spin-off
(the Emerson Retirement Plan). Under the Retirement
Plan, a participant will be credited with his service under the
Emerson Retirement Plan, but his benefit accrued under the
Retirement Plan will be offset by his benefit accrued under the
Emerson Retirement Plan as of September 30, 1990. Benefits
under the Retirement Plan may be reduced under certain maximum
provisions of the Internal Revenue Code. In 1993, the Company
adopted a Supplemental Executive Retirement Plan (the
SERP) which provides that where any such reductions
occur, the Company will pay a retirement supplement to certain
executives including the executive officers (other than
Mr. Muenster). The SERP was designed to maintain total
retirement benefits at the formula level of the Retirement Plan.
Effective December 31, 2003, both the Retirement Plan and
the SERP were frozen with no increase in benefits accruing to
participants.
These plans provide for fixed retirement benefits based on the
participants credited years of service, five-year average
compensation (the highest average annual cash compensation
during any five consecutive years through 2003), and applicable
Social Security covered compensation calculated as of
December 31, 2003, the effective date of the freezing of
the plans. Under the current law, the benefits amounts will not
be subject to any reduction for Social Security or other offset
amounts.
Effective January 1, 2004, the Company modified its
existing Employee Savings Investment Plan (an employee benefit
plan under section 401(k) of the Internal Revenue Code
which is available to substantially all United States employees
including the executive officers), through the addition of a
Company cash match at a rate of 100% of employee contributions
up to 3% of the employees eligible compensation, and 50%
of employee
24
contributions which are in excess of such 3%, up to 5% of the
employees eligible compensation, subject to Internal
Revenue Code limits. The amounts contributed in fiscal years
2008, 2009 and 2010 by the Company to the executive officers are
listed in footnote (5) of the Summary Compensation Table
under the heading Defined Contribution Savings Plan
Company Contributions.
The amounts reported in the table below represent the present
value of the accumulated benefit at September 30, 2010 for
the executive officers under each plan based upon the
assumptions described in footnote (1).
PENSION
BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present Value of
|
|
|
|
|
|
|
Years
|
|
Accumulated
|
|
Payments
|
|
|
|
|
Credited
|
|
Benefit
|
|
During Last
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
($)(1)
|
|
Fiscal Year ($)
|
|
V.L. Richey, Jr.
|
|
Retirement Plan
|
|
|
18
|
|
|
$
|
283,052
|
|
|
$
|
0
|
|
|
|
SERP
|
|
|
18
|
|
|
|
116,625
|
|
|
|
0
|
|
G.E. Muenster
|
|
Retirement Plan
|
|
|
13
|
|
|
|
184,201
|
|
|
|
0
|
|
|
|
SERP
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
A.S. Barclay
|
|
Retirement Plan
|
|
|
16
|
|
|
|
231,886
|
|
|
|
0
|
|
|
|
SERP
|
|
|
16
|
|
|
|
12,946
|
|
|
|
0
|
|
|
|
|
(1) |
|
The accumulated benefit was frozen as of December 31, 2003.
The present value has been calculated assuming that the
executive officers will remain in service until age 65, the
age at which retirement may occur without any reduction in
benefits, and that the benefit is payable on the basis of a
single life annuity with 60 months certain payment option.
Except for the assumption that the executives remain in service
and retire at age 65, the present value is based on the
assumptions as described in Note 12 to the financial
statements in the Companys Annual Report for the fiscal
year ended September 30, 2010. Specifically, the interest
assumption is 5.0% and the post-retirement mortality assumption
is based on the 2010 IRS Static Post Retirement mortality table
reflecting projections to 2017 using Scale AA. |
EMPLOYMENT
AGREEMENTS
The Company entered into employment agreements effective on or
about November 1, 1999 with Messrs. Richey and
Muenster and Ms. Barclay. These employment agreements were
amended to extend until November 2, 2004, and were further
amended on May 5, 2004 to provide for automatic renewal
after November 2, 2004 for subsequent one year periods
unless a six month notice of non-renewal is given by the Company
or the executive. In addition, the employment agreements were
again amended effective December 31, 2007 to change
(i) the compensation and benefits the executive would
receive in the event of a termination by the Company other than
for cause, as described below, and (ii) the definition of
Good Reason in the context of the compensation and
benefits the executive would receive if the executive terminated
his or her employment for Good Reason, as described below.
The employment agreements provide for a base salary of not less
than the executives fiscal year 1999 base salaries, as
increased in accordance with the Companys compensation
policy, and an annual bonus in accordance with the Performance
Compensation Plan and the Incentive Compensation Plan. These
executives are also entitled to participate in any stock
options, restricted stock or performance shares awards and other
compensation as the Companys Human Resources and
Compensation Committee shall determine. They are also entitled
to participate in all employee benefit programs of the Company
applicable to senior executives, and the Company will continue
to provide certain perquisites, including financial planning, an
automobile allowance and club membership.
The Company has the right to terminate the employment of the
executive officers at any time upon thirty days notice for cause
or without cause, and these executives have the right to resign
at any time upon thirty days notice. Cause is defined in the
agreements as an executives willful failure to perform his
or her duties, disability or incapacity extending for nine
consecutive months, willful misconduct, conviction of a felony,
breach of any material provision of the employment agreement, or
a determination by the Board that the executive committed fraud,
embezzlement, theft or misappropriation against the Company. If
an executives employment is terminated by the Company
other than for cause, or if an executive terminates his
employment following certain actions by the
25
Company (i.e. for Good Reason), such as materially
failing to comply with the agreement, materially reducing the
executives responsibilities or requiring the executive to
relocate, the executive will be entitled to receive certain
compensation and benefits. In the case of such a termination,
the executive officers will receive for two years: (i) at
their election, their base salary and bonus (calculated to be no
less than the annual percentage of base salary under the bonus
plans for the last fiscal year prior to termination) in either a
lump sum on the regularly scheduled payroll date coinciding with
or immediately preceding March 15 of the calendar year following
the calendar year of termination, or in equal biweekly
installments up until the regularly scheduled payroll date
coinciding with or immediately preceding March 15 of the year
following termination, at which time any balance will be paid in
a lump sum, (ii) immediate vesting of outstanding stock
options and immediate vesting and payout of earned
performance-accelerated restricted shares, and
(iii) continuation of certain employee benefits and
perquisites. If an executives employment is terminated in
connection with a Change in Control (as defined), the executive
will not receive the foregoing benefits, and will receive
instead the benefits payable under the Companys Severance
Plan.
The employment agreements prohibit the executives from
disclosing confidential information or trade secrets concerning
the Company, and for a specific period from soliciting employees
of the Company and from soliciting customers or distributors of
the Company.
SEVERANCE
PLAN
The Company has established a Severance Plan (the
Plan) covering the executive officers. Under the
Plan, following an occurrence of a Change in Control, each of
the executive officers will be entitled to be employed by the
Company for a three year employment period during which he or
she will: (i) be paid a minimum base salary equal to his or
her base salary prior to the Change in Control, and a minimum
annual bonus based on the average of his or her bonuses during
the last five preceding fiscal years, disregarding the highest
and lowest such years, and (ii) continue to receive the
employee benefits to which he or she was entitled prior to the
Change in Control. During this employment period, if the
executive officers employment is terminated by the Company
other than for cause, death or disability, or the executive
officer terminates his or her employment for Good Reason
following certain actions by the Company, such as materially
failing to comply with the provisions of the Plan, a material
diminution in his or her authority, duties or responsibilities
or base salary, or requiring him or her to relocate, he or she
will be entitled to receive, among other things, a cash lump sum
equal to the aggregate of: (i) any unpaid current base
salary; (ii) any unpaid deferred compensation; (iii) a
bonus calculated by multiplying the average of the past five
years bonus percentages (ratio of annual bonus to annual base
salary), disregarding the highest and lowest percentages, times
the base salary earned from the start of the fiscal year in
which the termination occurred to the date of the termination;
and (iv) an amount calculated by multiplying two times the
sum of (x) the current annual base salary and (y) such
annual base salary multiplied by the average of the past five
years bonus percentages (ratio of annual bonus to annual
base salary), disregarding the highest and lowest percentages.
In addition, he or she will receive the continuation of his or
her employee benefits for two years. A Change in Control is
defined to include (1) an acquisition of beneficial
ownership of at least 20% of the common stock or voting power of
the Company, (2) a change in the majority of Board members
except as a result of the election of directors approved by the
Board of Directors, or (3) a merger, reorganization or
similar type of transaction after which there is a greater than
a 50% change in beneficial ownership of the common stock of the
Company. The Company may amend the Plan, but no amendment
adverse to the rights of the executive officers will be
effective unless notice thereof has been given by the Company to
the affected executive officer(s) at least one year prior to the
occurrence of a Change in Control.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The information and tables below reflect the compensation and
benefits to be provided to the executive officers of the Company
in the event of a termination of employment at, following, or in
connection with a change in control or other termination of
employment. The tables reflect the additional compensation and
benefits to be provided to the executive officer because of such
termination of employment. The amounts shown assume that such
termination was effective as of the close of business on
September 30, 2010, the end of the Companys last
fiscal year. The actual amounts to be paid would be determinable
only at the time of the actual termination of employment.
26
PAYMENTS/BENEFITS
FOLLOWING A CHANGE IN CONTROL
Under the Severance Plan described above, assuming that
subsequent to a Change in Control, the termination of the
employment of the executive officer by the Company other than
for cause, death or disability or by the executive officer for
Good Reason occurred on September 30, 2010, the executive
officer would be entitled to a lump sum payment as defined in
the description of the Severance Plan above. The executive
officer also would be entitled to the continuation for two years
of all medical, disability, dental, life insurance, club
membership, financial planning and automobile benefits as
favorable as those to which he or she was entitled on the date
of termination, or reimbursement for the cost thereof. In
addition, the executive officers stock options would vest
and become exercisable and his or her earned and unearned shares
of performance-accelerated restricted stock would vest and be
distributed, as provided in the award agreements.
PAYMENTS/BENEFITS
UPON DEATH OR DISABILITY
The Company has employment agreements with each of the executive
officers which are described above. Assuming the executive
officers employment was terminated because of death or
disability, under the employment agreement he or she (or his or
her beneficiaries) would receive benefits under the
Companys disability plan or the Companys life
insurance plans, as applicable. In addition, the executive
officers vested stock options would remain exercisable for
three months in the case of death and for one year in the case
of disability.
PAYMENTS/BENEFITS
UPON TERMINATION BY THE EMPLOYEE WITH GOOD REASON OR BY THE
COMPANY WITHOUT CAUSE
Assuming the executive officer terminated his or her employment
for Good Reason following certain actions by the Company or the
Company terminated his or her employment for reasons other than
cause, death or disability, prior to a Change in Control, under
the employment agreement the Company would continue to pay his
or her base salary and bonus for two years following
termination; however, each executive officer could elect to
receive these payments in lump sums on or about March 15 of the
calendar year following the calendar year in which the
termination occurs. Further, certain benefits would continue
after such termination. In addition, the executive
officers outstanding stock options would vest and become
exercisable and his or her earned but unvested shares of
performance-accelerated restricted stock would vest and be
distributed. These payments and benefits would be conditioned
upon the executive officer not soliciting employees, customers
or distributors of the Company for a specified period. In
addition, the executive officer would be required to execute the
Companys standard severance agreement and release.
PAYMENTS
UPON TERMINATION BY THE EMPLOYEE WITHOUT GOOD
REASON
Assuming the executive officer terminated his or her employment
without Good Reason, he or she would not be entitled to payment
of continued compensation or benefits. The Human Resources and
Compensation Committee of the Board of Directors could agree, in
its discretion, to permit the executive officer to exercise his
or her vested stock options for three months after such
termination.
PAYMENTS
UPON TERMINATION BY THE COMPANY WITH CAUSE
Assuming the executive officers employment was terminated
by the Company with cause, under the employment agreement the
executive officer would not be entitled to payment of continued
compensation or benefits. The Human Resources and Compensation
Committee of the Board of Directors could agree, in its
discretion, to permit the executive officer to exercise his or
her vested stock options for three months after such termination.
27
Incremental
Compensation in the Event of Termination as a Result of the
Following Events:
Victor
L. Richey, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee w/ Good
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason or by
|
|
|
Employee
|
|
|
Termination
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
Employer
|
|
|
Without
|
|
|
by Employer
|
|
Pay Element
|
|
Control(1)
|
|
|
Death
|
|
|
Disability
|
|
|
Without Cause
|
|
|
Good Reason
|
|
|
With Cause
|
|
|
Cash Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,424,000
|
(2)
|
|
$
|
0
|
|
|
$
|
0
|
|
Bonus
|
|
$
|
513,352
|
(3)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
954,000
|
(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
Severance Payment
|
|
$
|
2,450,704
|
(5)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Compensation
|
|
$
|
2,964,056
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,378,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Stock and Option Award Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Perf Accelerated Restricted Stock(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Earned
|
|
$
|
500,563
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
500,563
|
|
|
$
|
0
|
|
|
$
|
0
|
|
- Unearned (accelerated)
|
|
$
|
3,447,665
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Awards
|
|
$
|
3,948,228
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
500,563
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Direct Compensation
|
|
$
|
6,912,284
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,878,563
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Benefits(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad-Based Benefits
|
|
$
|
28,639
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,857
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Retirement Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other Executive Benefits/Perquisites
|
|
$
|
92,520
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
98,583
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$
|
121,159
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,440
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Incremental Pay
|
|
$
|
7,033,443
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,979,003
|
|
|
$
|
0
|
|
|
$
|
0
|
|
28
G. E.
Muenster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee w/ Good
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason or by
|
|
|
Employee
|
|
|
Termination
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
Employer
|
|
|
Without
|
|
|
by Employer
|
|
Pay Element
|
|
Control(1)
|
|
|
Death
|
|
|
Disability
|
|
|
Without Cause
|
|
|
Good Reason
|
|
|
With Cause
|
|
|
Cash Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
950,000
|
(2)
|
|
$
|
0
|
|
|
$
|
0
|
|
Bonus
|
|
$
|
274,075
|
(3)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
510,000
|
(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
Severance Payment
|
|
$
|
1,498,150
|
(5)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Compensation
|
|
$
|
1,772,225
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,460,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Stock and Option Award Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Perf Accelerated Restricted Stock(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Earned
|
|
$
|
149,670
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
149,670
|
|
|
$
|
0
|
|
|
$
|
0
|
|
- Unearned (accelerated)
|
|
$
|
1,458,617
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Awards
|
|
$
|
1,608,287
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
149,670
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Direct Compensation
|
|
$
|
3,380,512
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,609,670
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Benefits(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad-Based Benefits
|
|
$
|
34,531
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,429
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Retirement Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other Executive Benefits/Perquisites
|
|
$
|
76,738
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
86,103
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$
|
111,269
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
89,532
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Incremental Pay
|
|
$
|
3,491,781
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,699,202
|
|
|
$
|
0
|
|
|
$
|
0
|
|
29
Alyson
S. Barclay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee w/ Good
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason or by
|
|
|
Employee
|
|
|
Termination
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
Employer
|
|
|
Without
|
|
|
by Employer
|
|
Pay Element
|
|
Control(1)
|
|
|
Death
|
|
|
Disability
|
|
|
Without Cause
|
|
|
Good Reason
|
|
|
With Cause
|
|
|
Cash Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
538,000
|
(2)
|
|
$
|
0
|
|
|
$
|
0
|
|
Bonus
|
|
$
|
136,383
|
(3)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
230,000
|
(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
Severance Payment
|
|
$
|
810,766
|
(5)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Compensation
|
|
$
|
947,149
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
768,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Stock and Option Award Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Perf Accelerated Restricted Stock(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Earned
|
|
$
|
113,084
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
113,084
|
|
|
$
|
0
|
|
|
$
|
0
|
|
- Unearned (accelerated)
|
|
$
|
653,426
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Awards
|
|
$
|
766,510
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
113,084
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Direct Compensation
|
|
$
|
1,713,659
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
881,084
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Benefits(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad-Based Benefits
|
|
$
|
42,485
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Retirement Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other Executive Benefits/Perquisites
|
|
$
|
73,744
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
82,710
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$
|
116,229
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
87,710
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total Incremental Pay
|
|
$
|
1,829,888
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
968,794
|
|
|
$
|
0
|
|
|
$
|
0
|
|
FOOTNOTES TO ABOVE THREE TABLES
|
|
|
(1) |
|
Upon a Change in Control, the executive officer would be subject
to a reduction in compensation if the reduction would create a
more favorable net-after-tax benefit under the Internal Revenue
Code section 4999 golden parachute excise tax.
Based on the calculations under section 4999 as applied to
the amounts shown in the table, the executive officer would not
be subject to this excise tax and no reduction in benefits would
be necessary. For purposes of these calculations, it was assumed
that all vested stock options would be cashed out by the
acquiring entity. |
|
(2) |
|
As calculated under the terms of the executive officers
employment agreement. The amount shown represents the annual
base salary in effect at September 30, 2010 multiplied by
two. |
|
(3) |
|
As calculated under the terms of the Severance Plan
(page 26, clause (iii) hereof). The amount shown is in
lieu of any annual bonus for fiscal 2010 which would have
otherwise been paid except for the termination. |
|
(4) |
|
As calculated under the terms of the executive officers
employment agreement. The amount shown represents the annual
cash bonus target percentage of total cash compensation for
fiscal 2010 multiplied by two. |
|
(5) |
|
As calculated under the terms of the Severance Plan
(page 26, clause (iv) hereof). |
|
(6) |
|
No unvested stock options would become vested. |
|
(7) |
|
Represents earned and unearned shares that would be accelerated
and distributed, based on the closing market price of $33.26 of
the Companys common stock on September 30, 2010. |
|
(8) |
|
The amounts shown represent the projected benefit cost to
continue benefits in accordance with the executive
officers employment agreement and the provisions of the
Severance Plan. Included in the Total Benefits are auto, club,
financial planning, broad-based benefits (health insurance and
disability premiums) and club tax
gross-up. In
addition, an estimated outplacement fee of $15,000 is included. |
30
Security
Ownership of Directors and Executive Officers
The following table sets forth certain information with respect
to the number of Common Shares beneficially owned by the
directors and executive officers of the Company as of
December 3, 2010. Except as otherwise noted, each person
has sole voting and investment power as to his or her shares.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent of
|
|
|
Common Shares
|
|
Outstanding
|
Name of Beneficial Owner
|
|
Beneficially Owned(1)
|
|
Common Shares
|
|
A.S. Barclay
|
|
|
114,468
|
|
|
|
(2
|
)
|
J.M. McConnell
|
|
|
18,740
|
(3)
|
|
|
(2
|
)
|
G.E. Muenster
|
|
|
160,603
|
|
|
|
(2
|
)
|
V.L. Richey, Jr.
|
|
|
343,812
|
|
|
|
1.3
|
%
|
L.W. Solley
|
|
|
20,550
|
|
|
|
(2
|
)
|
J.M. Stolze
|
|
|
32,600
|
(4)
|
|
|
(2
|
)
|
D.C. Trauscht
|
|
|
23,600
|
|
|
|
(2
|
)
|
J.D. Woods
|
|
|
19,825
|
|
|
|
(2
|
)
|
All directors and executive officers as a group (8 persons)
|
|
|
734,198
|
|
|
|
2.7
|
%
|
|
|
|
(1) |
|
Includes the following Common Shares covered by employee stock
options which the individual has the right to acquire within
60 days after December 3, 2010: Ms. Barclay
35,850, Mr. Muenster 29,072, Mr. Richey 121,250, and
all directors and executive officers as a group 186,172. |
|
(2) |
|
The percentage of total outstanding Common Shares beneficially
owned by this individual does not exceed 1%. |
|
(3) |
|
Includes 2,060 stock equivalents credited to
Mr. McConnells deferred compensation account under
the Compensation Plan for Non-Management Directors. |
|
(4) |
|
Includes 17,400 stock equivalents credited to
Mr. Stolzes deferred compensation account under the
Compensation Plan for Non-Management Directors. |
Security
Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect
to each person known by the Company as of October 15, 2010
to beneficially own more than five percent of the outstanding
Common Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent
|
|
|
Name and Address of
|
|
Common Shares
|
|
of Outstanding
|
|
|
Beneficial Owner
|
|
Beneficially Owned
|
|
Common Shares
|
|
BlackRock, Inc.
40 East 52nd
New York, NY 10022
|
|
|
3,819,673
|
(1)
|
|
|
14.4
|
%
|
Columbia Wanger Asset Management, L.P.
227 West Monroe, Suite 3000
Chicago, IL 60606
|
|
|
3,493,500
|
(2)
|
|
|
13.2
|
%
|
Waddell & Reed Financial, Inc., et al
6300 Lamar Ave.
Overland Park, KS 66202
|
|
|
3,057,564
|
(3)
|
|
|
11.5
|
%
|
The Bank of New York Mellon Corporation
One Wall Street,
31st
Floor
New York, NY 10286
|
|
|
2,694,335
|
(4)
|
|
|
10.2
|
%
|
|
|
|
(1) |
|
Based on information as of December 31, 2009 contained in
Schedule 13G filed with the SEC by BlackRock Inc., which
holds sole voting and dispositive powers for the
3,819,673 shares. |
|
(2) |
|
Based on information provided by Columbia Wanger Asset
Management, L.P. (CWAM), the investment advisor to
the following registered owners: Columbia Acorn Fund,
2,200,000 shares; Columbia Acorn USA, 587,000 shares
(Columbia Acorn Trust owns 2,787,000 shares); Wanger USA,
297,300 shares; Wanger US Smaller Companies, a portfolio of
Wanger Investment Company PLC, 29,500 shares; Fairfax
County Employees Retirement, 26,000 shares; Fleet
Bank Pension, 19,500 shares; V.P.-Columbia Wanger US |
31
|
|
|
|
|
Equities, 178,000 shares; Oregon State Treasury,
145,000 shares; Optimum Small-Mid Cap Growth,
11,200 shares. CWAM and its general partner, WAM
Acquisition G.P., hold shared voting power and dispositive power
with the registered owners as to the 3,493,500 shares. |
|
(3) |
|
Based on information provided by Waddell & Reed
Financial, Inc., which holds sole voting and dispositive powers
for the 3,057,564 shares. |
|
(4) |
|
Based on information as of December 31, 2009 in
Schedule 13G filed with the SEC by The Bank of New York
Mellon Corporation, which holds sole voting power for
2,458,491 shares, shared voting power for
174,764 shares, and sole dispositive power for
2,694,335 shares. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys directors and executive officers and
persons who own beneficially more than ten percent of any class
of equity security of the Company to file with the SEC initial
reports of such ownership and reports of changes in such
ownership. Officers, directors and such beneficial owners are
required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Companys
knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no
other reports were required, during the fiscal year ended
September 30, 2010, all Section 16(a) reports
applicable to its officers, directors and greater than ten
percent beneficial owners were timely filed.
II. PROPOSAL TO
RATIFY COMPANYS APPOINTMENT OF KPMG LLP
AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR
2011
The Board of Directors unanimously recommends a vote FOR the
appointment of KPMG LLP as independent registered public
accounting firm for the fiscal year ending September 30,
2011.
The Audit and Finance Committee has appointed KPMG LLP, an
independent registered public accounting firm, as independent
public accountants of the Company for the fiscal year ending
September 30, 2011.
KPMG LLP or its predecessor firms have served as the independent
public accountants of the Company since its incorporation in
1990. A representative of KPMG LLP is expected to be present at
the 2011 Annual Meeting with the opportunity to make a statement
and respond to appropriate questions from Stockholders.
Although this appointment is not required to be submitted to a
vote of Stockholders, the Board of Directors believes it is
appropriate to request that the Stockholders ratify the
appointment of KPMG LLP as the independent registered public
accounting firm of the Company for the fiscal year ending
September 30, 2011. If the Stockholders do not ratify this
appointment, the Audit and Finance Committee will investigate
the reasons for Stockholder rejection and will reconsider the
appointment.
III. INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
SERVICES AND FEES
The Audit and Finance Committee (the Committee) has
adopted pre-approval policies and procedures requiring that the
Committee pre-approve all audit and non-audit services to be
provided by the Companys independent registered public
accounting firm. In accordance with this policy, the Committee
has pre-approved and has set specific quarterly limitations on
fees for the following categories of services: general
accounting and SEC consultation, compliance with pertinent
legislation, general taxation matters and tax returns. Services
which have not received specific pre-approval by the Committee
must receive such approval prior to the rendering of the
services.
The following fees were paid to KPMG LLP for services rendered
for each of the last two fiscal years:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Audit Fees
|
|
$
|
995,000
|
|
|
$
|
985,000
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
|
|
|
|
2,000
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
Total KPMG LLP Fees Paid
|
|
$
|
995,000
|
|
|
$
|
987,000
|
|
32
Audit Fees primarily represent amounts paid for the audit of the
Companys annual financial statements, reviews of SEC
Forms 10-Q
and 10-K, or
services that are normally provided in connection with statutory
and regulatory filings or engagements for those fiscal years,
including expressing an opinion on the Companys internal
control over financial reporting.
Audit-Related Fees represent amounts paid for services for
acquisition due diligence and other assurance and related
services that are reasonably related to the performance of the
audit or review of financial statements, but which are not
included under Audit Fees above.
Tax Fees represent amounts paid for tax compliance, tax advice
and tax planning services.
In the process of the appointment of KPMG LLP as the
Companys independent registered public accounting firm for
the fiscal year ending September 30, 2011, the Committee
has determined that the non-audit services provided by KPMG LLP
are compatible with maintaining the independence of KPMG LLP.
IV. ADVISORY
VOTE ON EXECUTIVE COMPENSATION
The Board of Directors unanimously recommends a vote FOR the
approval of the executive compensation as disclosed in this
proxy statement.
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (Dodd-Frank Act) enables
Stockholders to vote, on an advisory (non-binding) basis, to
approve the compensation of the executive officers as described
in this proxy statement (commonly referred to as
Say-on-Pay),
and advise on whether the frequency of the
Say-on-Pay
vote should occur every one, two or three years.
As described in detail under the heading Executive
Compensation Compensation Discussion and
Analysis, the Companys executive compensation
programs are designed to attract, motivate, and retain the named
executive officers, who are critical to the Companys
success. Under these programs, the named executive officers are
rewarded for the achievement of specific annual, long- term
corporate and strategic goals and the realization of increased
Stockholder value. Please read the Compensation Discussion
and Analysis beginning on page 13 for additional
details about the executive compensation programs, including
information about the fiscal year 2010 compensation of the named
executive officers.
The Human Resources and Compensation Committee reviews the
compensation programs for the named executive officers to ensure
they achieve the desired goals of aligning the Companys
executive compensation structure with Stockholders
interests and current market practices. For example, as a result
of its review process, in fiscal year 2010, the Committee
changed the Companys executive compensation practices by
adopting a clawback policy to allow the Board of
Directors to recoup any excess incentive compensation paid to a
named executive officer if the financial results on which the
awards were based are materially restated due to intentional
misconduct of the executive officer which results in a financial
restatement.
The Company provides a significant part of executive
compensation in at-risk annual performance-based cash bonus
opportunities, closely linking pay to the Companys
financial results and providing for variability through lower
compensation in times of poor performance and higher
compensation in times of strong performance. In fiscal 2010, the
performance measures utilized were earnings per share and cash
flow.
The Company also provides a significant part of executive
compensation in long-term equity incentives in the form of
performance-accelerated restricted shares, which are based on
the Companys stock performance and cannot be distributed
earlier than 3.5 years after the award.
The Company is asking Stockholders to indicate their support for
the named executive officer compensation as described in this
proxy statement. This vote is not intended to address any
specific item of compensation, but rather the overall
compensation of the named executive officers as described in
this proxy statement.
The Board of Directors strongly endorses the Companys
executive compensation program and recommends that Stockholders
vote in favor of the following resolution:
RESOLVED, that the Companys stockholders approve, on
an advisory basis, the compensation of the named executive
officers as disclosed in the Companys Proxy Statement for
the Annual Meeting of Stockholders to be held on
February 3, 2011 pursuant to the executive compensation
disclosure rules of
33
the Securities and Exchange Commission, including the
Compensation Discussion and Analysis, the Summary Compensation
Table and the other related tables and narrative
disclosure.
This
Say-on-Pay
vote is advisory, and therefore is not binding on the Company,
the Committee or the Board of Directors. The Board of Directors
and the Committee value the opinions of the Stockholders, and,
to the extent there is any significant vote against the named
executive officer compensation, the Company will consider the
Stockholders concerns, and the Committee will evaluate
whether any actions are necessary to address those concerns.
V. ADVISORY
VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE
COMPENSATION
The Board of Directors unanimously recommends a vote to
conduct an advisory vote on executive compensation every THREE
YEARS.
As mentioned above, the Dodd-Frank Act provides that the Company
include in this proxy statement a separate, non-binding
Stockholder vote to advise on whether the
Say-on-Pay
vote should occur every one, two or three years. Stockholders
have the option to vote for any one of the three options, or to
abstain on the matter.
The Board of Directors has determined that an advisory vote on
executive compensation every three years is the best approach
for the Company based on a number of considerations, including
the following:
|
|
|
|
|
The Companys program emphasizes long-term performance. For
example, as discussed in the Compensation Discussion and
Analysis, long-term incentive compensation in the form of
performance-accelerated restricted shares (PARS)
represents a significant part of the total compensation for the
named executive officers. The Company typically awards PARS
every year, and distribution of shares is based on a five-year
performance period. A vote held every three years would be more
consistent with, and provide better input on, such long-term
compensation;
|
|
|
|
An advisory vote every three years would give the Board of
Directors sufficient time to thoughtfully consider the results
of the vote and to implement any desired changes to executive
compensation policies and procedures; and
|
|
|
|
A three-year cycle would provide investors sufficient time to
evaluate the effectiveness of the short- and long-term
compensation strategies and related business outcomes of the
Company.
|
Although this vote is non-binding, the Board of Directors will
carefully consider the outcome of the vote when making future
decisions about the Companys executive compensation
policies and procedures. The Stockholders also have the
opportunity to provide additional feedback on important matters
involving executive compensation even in years when
Say-on-Pay
votes do not occur. For example, the rules of the New York Stock
Exchange require the Company to seek Stockholder approval for
new employee equity compensation plans and material revisions
thereto. As discussed under Corporate Governance on
page 8, the Company provides Stockholders an opportunity to
communicate directly with the Board, including on issues
relating to executive compensation.
VI. VOTING
The affirmative vote of the holders of a majority of the Common
Shares entitled to vote which are present in person or
represented by proxy at the 2011 Annual Meeting is required to
elect directors, to ratify the Companys appointment of the
independent registered public accounting firm for fiscal 2011,
to approve the Companys executive compensation, and to act
on any other matters properly brought before the meeting.
Because the vote on the frequency of future advisory votes on
executive compensation is advisory and has three alternatives,
there is no standard for determining which frequency has been
adopted by the Stockholders. Common Shares
represented by proxies which are marked withhold
authority with respect to the election of any one or more
nominees for election as directors, proxies which are marked
Abstain on the proposal to ratify the appointment of
the independent registered public accounting firm or on the
proposal to approve the Companys executive compensation,
and proxies which are marked to deny discretionary authority on
other matters will be counted for the purpose of determining the
number of shares represented by proxy at the meeting. Such
proxies will thus have the same effect as if the Common Shares
represented thereby were voted against nominee or nominees,
against such proposal to ratify the appointment of the
independent registered public accounting firm, against the
proposal to approve the Companys executive compensation
and against such other matters, respectively. Common Shares not
voted on one or more but
34
less than all such matters on proxies returned by brokers will
be treated as not represented at the meeting as to such matter
or matters. Proxies marked or voted abstain on the
proposal regarding the frequency of future advisory votes on
executive compensation will not be counted as a vote for any of
the three options, and the Board of Directors shall determine
the impact of such votes.
The Company knows of no other matters to come before the
meeting. If any other matters properly come before the meeting,
the proxies solicited hereby will be voted on such matters in
accordance with the judgment of the persons voting such proxies.
VII. STOCKHOLDER
PROPOSALS
Proposals of Stockholders intended to be presented at the 2012
Annual Meeting must be received by the Company by
August 24, 2011 for inclusion in the Companys proxy
statement and form of proxy relating to that meeting. Upon
receipt of any such proposal, the Company will determine whether
or not to include such proposal in the proxy statement and form
of proxy in accordance with regulations governing the
solicitation of proxies.
In order for a Stockholder to nominate a candidate for director,
under the Companys Articles of Incorporation, timely
notice of the nomination must be given to the Company in advance
of the meeting. Ordinarily, such notice must be given not less
than 60 nor more than 90 days before the meeting (but if
the Company gives less than 50 days notice or prior public
disclosure of the date of the meeting, then the Stockholder must
give such notice within ten days after notice of the meeting is
mailed or other public disclosure of the meeting is made,
whichever occurs first). The Stockholder filing the notice of
nomination must describe various matters regarding the nominee,
including such information as name, address, occupation and
shares held.
In order for a Stockholder to bring other business before a
Stockholder meeting, timely notice must be given to the Company
within the time limits described in the paragraph immediately
above. Such notice must include a description of the proposed
business, the reasons therefor and other specified matters. The
Board may reject any such proposals that are not made in
accordance with these procedures or that are not a proper
subject for Stockholder action in accordance with the provisions
of applicable law. These requirements are separate from and in
addition to the requirements a Stockholder must meet to have a
proposal included in the Companys proxy statement. The
foregoing time limits also apply in determining whether notice
is timely for purposes of rules adopted by the SEC relating to
the exercise of discretionary voting authority.
In each case, the notice must be given to the Secretary of the
Company, whose address is 9900A Clayton Road, St. Louis, MO
63124-1186.
Any Stockholder desiring a copy of the Companys Articles
of Incorporation or Bylaws will be furnished one without charge
upon written request to the Secretary.
35
Appendix A
Durable
Goods Manufacturing
3M CO
ABB Inc
ADTRAN Incorporated
Advanced Measurement Technology, Inc
ADVANCED MICRO DEVICES
AGCO CORP
Aisin Automotive
AK STEEL HOLDING CORP
Alfa Laval Inc
ALLEGHENY TECHNOLOGIES IN
AMERICAN AXLE & MFG HOLDI
American Standard Companies
Ames True Temper
AMPHENOL CORP
ANH Refractories Company
ANIXTER INTL INC
APPLIED MATERIALS INC
ARGO-TECH Corporation
ARROW ELECTRONICS INC
AVERY DENNISON CORP
B Braun Medical Inc
Babcock & Wilcox Company
BALL CORP
Basler Electric Company
BAXTER INTERNATIONAL IN
Beacon Industrial Group
BECKMAN COULTER INC
BENCHMARK ELECTRONICS INC
BLACK & DECKER CORP
BLUELINX HOLDINGS INC
BOEING CO
Bombardier Transportation
BORGWARNER INC
BOSTON SCIENTIFIC CORP
BROADCOM CORP
Brunswick New Technologies
Bucyrus International Inc
BUNGE LTD
Butler Manufacturing Company
Camcraft
Carpenter Technology Corp
Castle Rock Industries
CATERPILLAR INC
CEMEX Inc
Chaparrol Steel Company
CHICAGO BRIDGE & IRON CO
Clopay Corporation
Cobra Electronics Corporation
CommScope Inc
COOPER INDUSTRIES LTD
CooperVision
Copeland Corporation
CORNING INC
CRANE CO
Crown Cork & Seal
Culligan International Company
Cummins Inc
D-M-E Company
Dal-Tile Inc
DANAHER CORP
Dayton Superior Corp
DELPHI CORP
Denso Manufacturing MI Inc
Diebold Incorporated
Donaldson Company Inc
E-Z-EM Inc
EATON CORP
Edwards Lifesciences
Electrolux Homecare of N.A.
EMC CORP/MA
Emerson Electric
EnPro Industries Inc
Ergotron Inc
ESCO Corporation
ESCO Technologies
Esterline Technologies Corp
Etnyre International Ltd
Evraz Oregon Steel Mills
FCI USA Inc
FEDERAL-MOGUL CORP
Fiskars Brands Inc
Fleetwood Group
Florida Production Engineering
FLOWSERVE CORP
FMC Technologies Inc
Foldcraft Company
FORD MOTOR CO
Fortune Brands
FURNITURE BRANDS INTL INC
G. Loomis Inc
GATEWAY INC
GENERAL CABLE CORP/DE
GENERAL ELECTRIC CO
GENERAL MOTORS CORP
GENUINE PARTS CO
George Fisher Signet Inc
Gerdau Ameristeel
GKN North America Services Inc
Global Power Technology Inc
GOODRICH CORP
Graco Inc
Harley Davidson Inc
Harman International
Harsco Corporation
HASBRO INC
Hendrickson International
Herman Miller Inc
Hill Phoenix
Hilti Inc
Hitachi
HNI Corporation
Holden Industries
HONEYWELL INTERNATIONAL
Hu-Friedy Manufacturing Co Inc
HUBBELL INC -CL B
Hunter Douglas Inc
Hunter Industries Incorporated
Hutchinson Technology Inc
ILLINOIS TOOL WORKS
INGRAM MICRO INC
INTEL CORP
International Truck & Engine
INTL BUSINESS MACHINES
Invensys Controls
ITT CORP
James Hardie Bldg Products
JARDEN CORP
John Crane Inc
JSJ Corporation
JUNIPER NETWORKS INC
Kason Corporation
Keihin Indiana Precision Tech
Keystone Powdered Metal Co
Kinetico Inc
Komatsu America Corp
Krueger International
Kyocera America Inc
L-3 COMMUNICATIONS HLDG
LA Aluminum Casting Company
Lab Volt System
Lantech.com
A-1
Leggett & Platt Inc
Lehigh Cement Co
LENNOX INTERNATIONAL INC
LEXMARK INTL INC -CL A
Life Fitness
LITHIA MOTORS INC -CL A
LOCKHEED MARTIN CORP
Louisiana Pacific
Lozier Corporation
Lutron Electronics
Magna Donnelly Corporation
Malco Products Inc
MANITOWOC CO
Mannington Mills Inc
MARTIN MARIETTA MATERIALS
MASCO CORP
MATTEL INC
Maverick Tube Corporation
Maxon Furniture Inc
McKesson Medical-Surgical
McNaughton-McKay Electric Co
Merit Medical Systems
Micro Motion Inc
Milltronics
Milwaukee Electric Tool Corp
Mine Safety Appliances Company
Mizuno USA Inc
Molex Inc
MOTOROLA INC
MTD Products Inc
MTS Systems Corporation
MUELLER INDUSTRIES
NACCO INDUSTRIES -CL A
Nordson Corporation
NORTEL NETWORKS CORP
NORTHROP GRUMMAN CORP
NSK Corporation
NTN Bearing Corp of America
NUCOR CORP
Orbital Science Corporation
OWENS & MINOR INC
PACCAR INC
PACKAGING CORP OF AMERICA
PACTIV CORP
Panduit Corporation
Parts Now LLC
PENTAIR INC
Pergo Inc
PGT Industries
Ping Inc
PITNEY BOWES INC
Plexus Corp
Plymouth Tube
Polaroid Corporation
Preformed Line Products Co
Prestolite Wire Corporation
QSC Audio Products Inc
Rainin Instrument LLC
RAYTHEON CO
REA Magnet Wire Company Inc
Recon Optical Inc
RELIANCE STEEL & ALUMIN
Ricoh Electronics Inc
Rimage Corporation
Rite Hite Corporation
Robert Bosch Corporation
Robert Bosch Tool Corporation
RUSH ENTERPRISES INC
S&C Electric Company
Safilo USA
Sakura Finetek USA Inc
SANDISK CORP
Sauer-Danfoss Inc
SCHEIN HENRY INC
Schneider Electric NA
Sealy Inc
Seamen Corporation
Seco Tools Inc
Senco Products Inc
Sentry Group
SEQUA CORP -CL A
Sharp Electronics Corporation
SILGAN HOLDINGS INC
SJE-Rhombus
SMITH (A O) CORP
SNAP-ON INC
SPANSION INC
SPIRIT AEROSYSTEMS HOLDIN
Springs Window Fashions Div
SPX CORP
SRAM
ST JUDE MEDICAL INC
STANLEY WORKS
STEEL DYNAMICS INC
STERIS
Stryker Corporation
Subaru of Indiana Automotive
SUPERIOR ESSEX INC
Synthes
T D Williamson Inc
Teleflex
TELLABS INC
TENNECO INC
TEREX CORP
Texas Industries Inc
TEXAS INSTRUMENTS INC
TEXTRON INC
The Colman Group Inc
The Lamson & Sessions
The Longaberger Company
The Nordam Group
The Raymond Corporation
The Toro Company (acct# 159732)
The Woodbridge Group
Thermadyne Holdings
THERMO FISHER SCIENTIFIC
TIMET
TIMKEN CO
Tower Automotive
Tremco Inc
TRMI Inc
TRW AUTOMOTIVE HOLDINGS
Tyco Electronics
Union Tank Car Company
UNITED STATES STEEL COR
UNITED TECHNOLOGIES COR
UNIVERSAL FOREST PRODS IN
Universal Instruments Corp
Universal Well Site Solutions
USG Corporation
Venturedyne Ltd
Vetco Gray Inc
Viasystems Group Inc
VISTEON CORP
VULCAN MATERIALS CO
VWR Corporation
W C Bradley Company
W L Gore & Associates
Watlow Electric
WESCO INTL INC
WEYERHAEUSER CO
Whirlpool Corporation
World Kitchen Inc
Worthington Industries
XEROX CORP
XL CAPITAL LTD
YSI
ZIMMER HOLDINGS INC
A-2
MANUFACTURING
INDUSTRY COMPANIES
Advanced Medical Optics
Agilent Technologies
Alliant Techsystems
Ameron
AMETEK
A.O. Smith
Armstrong World Industries
Arrow Electronics
A.T. Cross
AT&T
Autodesk
Automatic Data Processing
Ball
Beckman Coulter
Bio-Rad Laboratories
Blyth
Boeing
Boston Scientific
Brady
Cameron International
Cardinal Health
Caterpillar
Charter Communications
Chesapeake
Colgate-Palmolive
Corning
Covidien
Crown Castle
CSC
Cubic
Curtiss-Wright
Dentsply
Donaldson
Eastman Kodak
Eaton
EDS
Embarq
EMC
Emerson
Fortune Brands
Furniture Brands International
General Dynamics
Global Crossing
Goodrich
Goodyear Tire & Rubber
Greif
Harman International
Industries
Harris
Hasbro
Herman Miller
Hewlett-Packard
HNI
Hologic
Honeywell
IBM
IDEX
ITT Corporate
Kimberly-Clark
KLA-Tencor
Leggett and Platt
Lenovo
Level 3 Communications
Lockheed Martin
L-3 Communications
Masco
Mattel
McKesson
MeadWestvaco
Medtronic
Metavante Technologies
MetroPCS Communications
Motorola
Mueller Water Products
NCR
NIKE
Northrop Grumman
Omnova Solutions
Owens-Illinois
Parker Hannifin
PerkinElmer
Pitney Bowes
Plexus
Polymer Group
Procter & Gamble
QUALCOMM
Qwest Communications
Raytheon
Revlon
Reynolds American
Rockwell Automation
Rockwell Collins
Seagate Technology
Sealed Air
Sherwin-Williams
Sonoco Products
Spirit AeroSystems
Sprint Nextel
Steelcase
Tellabs
Teradata
Terex
Textron
Thomas & Betts
3M
Timken
Toro
Tupperware
Tyco Electronics
Ulticom
Unifi
Unisys
United States Cellular
United Technologies
USG
Verizon
Virgin Mobile USA
Whirlpool
Xerox
Zimmer Holdings
A-3
|
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x
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PLEASE MARK VOTES
AS IN THIS EXAMPLE
|
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REVOCABLE PROXY
ESCO TECHNOLOGIES INC.
|
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The undersigned, as holder of record of the common stock of ESCO TECHNOLOGIES INC. (the
Company), does hereby appoint M. J. Mainer and A. S. Barclay, or either of them, the true and
lawful attorneys in fact, agents and proxies of the undersigned to represent the undersigned at the
Annual Meeting of Stockholders of the Company, to be held on February 3, 2011, commencing at 9:30
A.M., St. Louis time, at the Companys headquarters located at 9900A Clayton Road, St. Louis
County, Missouri 63124 and at any and all adjournments of such meeting, and to vote all the shares
of common stock of the Company standing on the register of the Companys stock transfer agent in
the name of the undersigned as follows, and in their discretion on such other business as may
properly come before the meeting:
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Please be sure to date and sign
this proxy card in the box below. |
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Sign above |
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For All |
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hold |
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Except |
1. |
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Election of Directors of all nominees listed
(except as marked to the contrary below): |
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o |
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o |
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o |
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L. W. SOLLEY |
J. D. WOODS |
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G. E. MUENSTER |
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INSTRUCTION: To withhold authority to vote for any individual nominee, mark For
All Except and write that nominees name in the
space provided below. |
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2. |
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Ratification of Companys Appointment of
KPMG LLP as Independent Registered
Public Accounting Firm for Fiscal Year
Ending September 30, 2011. |
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For
o |
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Against
o |
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Abstain
o |
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3. |
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An advisory vote to approve the executive compensation
disclosed in the accompanying proxy statement.
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For
o |
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Against
o |
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Abstain
o |
4. |
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An advisory vote on the frequency of future
advisory votes on executive compensation.
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1 Year
o |
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2 Years
o |
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3 Years
o |
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Abstain
o |
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1,
2, AND 3 AND FOR 3 YEAR FREQUENCY ON PROPOSAL 4.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges access to the Notice of the Annual Meeting and
accompanying Proxy Statement dated December 22, 2010, and 2010 Annual Report to Stockholders.
The proxies will vote your common stock in the manner directed herein by the undersigned
Stockholder.
If no direction is made, this proxy will be voted FOR Proposals 1, 2 and 3 and for a 3 Year
frequency on Proposal 4.
Please sign exactly as your name appears on this form. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such. If signing on
behalf of a corporation, please sign in full corporate name by President or other
authorized officer. If signing on behalf of a partnership, please sign in partnership name
by authorized person.
Detach above card, sign,
date and mail in postage paid envelope provided.
ESCO TECHNOLOGIES INC.
PLEASE ACT PROMPTLY
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
December 22, 2010
Dear Stockholder:
The Annual Meeting of Stockholders of ESCO Technologies Inc. will be held at the Companys
headquarters located at 9900A Clayton Road, St. Louis County, Missouri 63124 at 9:30 A.M., St.
Louis time, on Thursday, February 3, 2011.
It is important that your shares are represented at this meeting. Whether or not you plan to
attend the meeting, please review the enclosed proxy materials, complete the attached proxy form
above, and return it promptly in the envelope provided.
Thank you.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
5157/5158/5159