Item 11.
|
Executive Compensation.
|
COMPENSATION DISCUSSION AND
ANALYSIS
IMPACT OF MERGER AGREEMENT
On January 12, 2014, the Company entered into an Agreement and Plan of Merger (as amended as of March 11, 2019, the Merger Agreement), with
Suntory Holdings Limited, a Japanese corporation (Suntory Holdings), and SUS Merger Sub Limited, a Delaware corporation and a wholly-owned subsidiary of Suntory Holdings (Merger Sub). Subject to the terms and conditions of
the Merger Agreement, Merger Sub will be merged into Beam (the Merger), with Beam surviving the Merger as a wholly-owned subsidiary of Suntory Holdings. The Merger Agreement provides for the treatment of outstanding equity awards,
including those grants made in 2013. Specifically, upon the closing of the transaction contemplated by the Merger Agreement, (1) each outstanding stock option will vest in full; (2) each Restricted Stock Unit (RSU) Award will vest in
full; and (3) each performance award will vest on a pro-rated basis and the applicable performance goal(s) will be deemed to have been satisfied at 100% of the target level of performance. For more information, please refer to Treatment of
Equity Awards on page 4 of our definitive proxy statement on Schedule 14A filed with the SEC on February 19, 2014.
EXECUTIVE SUMMARY
This Compensation Discussion and Analysis (CD&A) describes our executive pay philosophy, the process we use to establish executive pay and the
pay program applicable to our named executive officers (NEOs) during 2013. The Compensation and Benefits Committee of the Board (the Compensation Committee) administers our executive pay program. This CD&A provides
information regarding the compensation and benefits provided to the following NEOs:
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|
|
Name
|
|
Title
|
Matthew J. Shattock
|
|
President and Chief Executive Officer (CEO)
|
Robert F. Probst
|
|
Senior Vice President and Chief Financial Officer (CFO)
|
William A. Newlands
|
|
Senior Vice President and President, North America
|
Philip Baldock
|
|
Former Senior Vice President and President, Asia-Pacific/South America
|
Albert Baladi
|
|
Senior Vice President and President, Europe/Middle East/Africa
|
2013 Business Highlights
Beam Inc. in 2013 extended its track record of delivering profitable growth and further strengthened its position as a leader in the global spirits industry.
The Company has long believed in a pay-for-performance approach to compensation. The Companys financial results, performance against targets, and
achievement of strategic goals were important considerations for the Compensation Committee as it made compensation decisions in 2013. Beam Inc. evaluates overall Company performance and geographic performance for the following segments: North
America; Europe, Middle East and Africa (EMEA); and Asia Pacific and South America (APSA).
|
|
|
In 2013, the Company continued to execute its disciplined growth strategy that relies on Creating Famous Brands, Building Winning Markets and Fueling Our Growth.
|
|
|
|
Net sales reached a record in 2013, increasing 4% to $2.55 billion (excluding excise taxes).
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|
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|
The Companys primary growth drivers were premium whiskeys led by Jim Beam, Makers Mark, Canadian Club, Knob Creek, Basil Haydens and Laphroaig a full-year of results for Pinnacle Vodka
(acquired in 2012), and innovative new products.
|
|
|
|
Geographically, comparable sales growth was led by market outperformance in North America (+5%) and EMEA (+6%), partly offset by lower sales in APSA (-9%), the companys smallest segment.*
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|
|
|
Beam delivered growth in earnings per share before charges/gains that exceeded the Companys long-term target of high-single-digit growth. Diluted earnings per share before charges/gains increased 10% to $2.63.* On
a GAAP basis, diluted earnings per share were off 11% at $2.24, reflecting net charges related to items including early extinguishment of debt and a non-cash impairment of a tradename in Spain.
|
8
|
|
|
Beam generated free cash flow of $332 million, above the companys updated 2013 target of $275-325 million.*
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|
The Company continued its strong stewardship of capital and maintained a strong balance sheet. During the year, Beam increased the dividend 10% and refinanced a portion of its long-term debt. Return on invested capital
was 7% and was 23% excluding intangibles.*
|
|
|
|
Beam Inc.s stock, including dividends, returned 13% from January 1, 2013 to December 31, 2013.
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*
|
Reconciliations for non-GAAP measures to the most closely comparable GAAP measures are presented in Appendix A to this report, along with a description of the methodology used to determine such non-GAAP measures.
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|
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|
Beam entered 2014 with momentum in the marketplace and confidence in its prospects to deliver sustainable, profitable long-term growth.
|
Pay-for-Performance in 2013
The Compensation Committee
and the Company strive to create a pay-for-performance culture. The compensation actions for 2013 reflected the Companys commitment to this performance-based culture, as described below:
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|
More than 60% of each NEOs target total compensation is at risk incentive pay, and approximately 85% of the CEOs target total compensation is at risk incentive pay.
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|
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Each NEO participated in the Beam Executive Incentive Plan, which annually awards incentive compensation based on pre-established performance goals relating to net sales, operating income and free cash flow.
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|
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|
Each NEO received 2013 long-term incentive grants of a combination of the following: performance share awards, stock options and restricted stock units.
|
Summary of Executive Compensation Practices
To assure
that our executive pay practices emphasize and drive our business model, align executive interests with those of stockholders and appropriately balance governance, oversight and risk management, our Compensation Committee, composed entirely of
independent directors, has adopted the following corporate governance practices that are supportive of our executive compensation objectives and philosophies.
What We Do
|
ü
|
|
Pay for performance with appropriate caps on incentive plans
|
|
ü
|
|
Target compensation around the 50
th
percentile of our peer group
|
|
ü
|
|
Design our compensation practices to avoid excessive risk
|
|
ü
|
|
Use an independent compensation consultant that provides no other services to the Company
|
|
ü
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|
Require our executives to maintain a significant ownership interest in the Companys stock
|
|
ü
|
|
Maintain a clawback policy that allows the Company to recoup incentive payments in the event of certain financial restatements
|
|
ü
|
|
Require a double trigger in the event of a change in control for cash severance and for most equity to be accelerated
|
What We Dont Do
|
û
|
|
We dont allow executives to hedge their exposure to ownership of, or interest in, Company stock
|
|
û
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|
We dont allow executives to pledge shares of Company stock to secure debts or other obligations
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|
û
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|
We dont pay dividends or dividend equivalents on unearned performance shares
|
|
û
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|
We dont reprice stock options
|
|
û
|
|
We dont pay an excise tax gross up on severance benefits
|
9
COMPENSATION PHILOSOPHY
Key Objectives
The Compensation Committee has established
the following objectives that apply to the Companys executive pay program:
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|
|
Objective
|
|
Rationale
|
Align the interests of management with those of the Companys stockholders
|
|
To assure that management takes both an immediate and long-term approach to the Company, the Company employs a combination of short-term and long-term incentive programs, which the Compensation Committee believes align the interests
of executives with those of stockholders. The Companys Stock Ownership Guidelines also reinforce the alignment of executive interests with those of the Company and its stockholders.
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|
|
Maintain a total rewards strategy that supports the Companys overall business strategy
|
|
The total rewards strategy encourages a cooperative approach to developing innovative business solutions, while aligning employee behavior with the Companys priorities and values.
|
|
|
Reinforce the pay-for-performance culture at the Company
|
|
Pay-for-performance is a key principle in our compensation philosophy; it is not only important that NEOs and key executives exemplify the pay-for-performance culture, but that their actions, both individually and collectively, as
key business leaders, are reinforced through the attainment of positive business outcomes.
|
|
|
Attract, retain and motivate superior executive talent through competitive salary and total compensation
|
|
In order to outperform our competitors in all areas, we believe we need to regularly evaluate, improve and innovate, and therefore must be able to continuously attract, retain and motivate key talent.
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|
|
Provide incentive compensation that promotes desired behavior without encouraging excessive risk
|
|
We recognize the importance of sustained performance, but we do not encourage or tolerate behavior that would result in excessive risk to the Company. Our plans and programs are designed to encourage innovation and entrepreneurial
thinking and behavior in a manner that does not put the Company at unnecessary risk.
|
Guiding Principles
The
Compensation Committee has further developed the following principles that it believes support the objectives outlined above:
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|
|
Principle
|
|
Rationale
|
An independent compensation committee should establish and review total executive pay
|
|
Our pay-for-performance culture requires ongoing measurement of business and individual performance against goals. Therefore, it is important to assure through independent assessment and critical review that executive pay plans and
arrangements align individual and Company performance with the stated objectives of the Company.
|
|
|
Compensation should be competitive with our peers, and allow flexibility to attract key personnel while reflecting the global nature of our workforce
|
|
To attract the highest caliber talent, it is important that we provide a total compensation package that not only allows the Company to maintain its current workforce, but also attract and retain other key personnel.
|
|
|
Incentive compensation should align with and help reinforce business strategy and objectives and the Companys desired culture, and incentivize desired behavior
|
|
Incentive compensation is a key component in our pay-for-performance culture. Short-term and long-term incentive compensation directly connects individual compensation with the attainment of the Companys financial and
strategic goals, including sales, operating income, earnings per share performance and value creation for stockholders.
|
10
|
|
|
A significant portion of executive pay should be equity-based
|
|
To increase the executives focus on the Companys long-term performance, align their interests with those of our stockholders and create an ownership culture, it is important that a significant portion of executive pay be
at-risk in the form of equity-based compensation.
|
|
|
Stock ownership guidelines should be followed
|
|
To foster an ownership mentality and, specifically, to further align the economic interests of key executives with those of our stockholders, it is important that such executives hold a meaningful level of the Companys stock
throughout their tenure with the Company.
|
PROCESS FOR ESTABLISHING EXECUTIVE PAY
Roles in the Executive Pay Process
Beam maintains a
rigorous executive pay process. The following identifies the various parties that participated in the Companys 2013 executive pay review and approval process and describes the role of each party in the process.
Board of Directors
The Board annually reviews the
CEOs performance with respect to specified performance goals established by the Board and consults with the Compensation Committee with respect to appropriate CEO compensation.
Compensation Committee
The Compensation Committee
establishes total target compensation and short-term and long-term incentive plan goals for the CEO in consultation with independent members of the Board and reports CEO compensation to the Board in executive session.
The Compensation Committee works with the CEO and reviews his evaluation of the performance of his direct reports as well as the performance evaluation for
other executive officers. The committee approves compensation actions for such officers (with the input of the CEO) and administers employee compensation and benefit programs delegated to the Compensation Committee as reflected in its charter,
including approval of performance goals under annual incentive plans equity program design, and grant levels.
When establishing executive pay, the
Compensation Committee reviews tally sheets that include data on individual items of compensation and each executives current and historical total compensation package. The review considers compensation currently payable, benefits and
perquisites, as well as contingent compensation, including incentive compensation and compensation payable only if certain circumstances occur, such as involuntary termination of employment without cause or certain terminations of employment
following a change in control.
CEO
The CEO
evaluates each of his direct reports performance and reports to the Compensation Committee on the performance of each direct report and each executive officer. He also recommends prospective compensation actions to the Compensation Committee
with respect to the direct reports and other executive officers.
While the Compensation Committee and/or the Board may request that the CEO participate
in meetings and provide information that it deems helpful in reviewing and establishing executive compensation, under no circumstances does the CEO participate in the Compensation Committees review and establishment of CEO compensation.
Independent Compensation Consultant
The Compensation
Committee retains Meridian Compensation Partners, LLC (Meridian) as its independent compensation consultant. Meridian provides advice and recommendations to the Compensation Committee regarding the amount and form of executive pay.
Meridian regularly communicated with the Compensation Committee during 2013 and participated in seven Compensation Committee meetings during 2013 and related executive sessions. Meridian provides advice and guidance to the Compensation Committee,
including market-competitive data that assists the committee in evaluating and establishing executive pay.
11
To assure Meridians ongoing independence, Meridian is prohibited from providing other services to the
Company or its management. The Compensation Committee assessed Meridians independence against the six independence factors adopted by the SEC, including whether Meridian had any actual or potential conflicts of interest. In addition, the
Compensation Committee reviewed Meridians terms of engagement and its compensation and performance during 2013 and determined that Meridian had no relationship with any of the Companys executive officers. Based on this review and
assessment, the Compensation Committee concluded that Meridian was and continues to remain independent.
Peer Group Companies
The Compensation Committee, with Meridians advice and assistance, reviews current compensation against compensation of similarly situated public
companies and direct competitors (the Peer Group). The Compensation Committee works with Meridian to review the Companys Peer Group selection criteria and ultimately the Peer Group selected. The Compensation Committee, considering
the advice of Meridian, regularly reviews the Peer Group to assure that the Peer Group reflects what the Compensation Committee believes to be an accurate representation of market comparators. The Compensation Committee considers revenue, market
capitalization, relative financial and stock performance, industry, market segment, international footprint, competitors for executive talent and whether the company is a direct competitor of the Company, among other factors, when reviewing and
establishing the Peer Group. After careful review and consideration, the Compensation Committee provides final approval of the Peer Group.
The following
is the Peer Group used by the Company to establish compensation for executives for the fiscal year ended December 31, 2013:
|
|
|
Brown-Forman Corporation
|
|
H.J. Heinz Co.
|
Campbell Soup Co.
|
|
The Hershey Co.
|
Constellation Brands, Inc.
|
|
Hormel Foods Co.
|
Dean Foods Co.
|
|
Lorillard Co.
|
Del Monte Foods Co.
|
|
McCormick & Co. Inc.
|
Diageo plc
|
|
Molson Coors Brewing Co.
|
Dr. Pepper Snapple Group Inc.
|
|
Monster Beverage Corp.
|
Flowers Foods, Inc.
|
|
Ralcorp Holdings Inc.
|
Green Mountain Coffee Roasters Inc.
|
|
Reynolds America Inc.
|
|
|
The J.M. Smucker Co.
|
Benchmarking
The
Compensation Committee annually benchmarks individual executive pay and the overall executive pay program design against the Peer Group.
The Compensation
Committee targets total compensation within the competitive range of the 50
th
percentile of Peer Group compensation, based on size-adjusted market data. While the Compensation Committee
generally aims to provide compensation within the targeted range, factors unique to a particular executive, including his or her employment situation or special skills, employment location, experience and performance may affect the executives
base salary and total compensation either positively or negatively compared to the targeted range. The Compensation Committee considers the following factors when establishing an executives compensation in addition to market data:
|
|
|
Role and responsibilities within the Company;
|
|
|
|
Experience and value to the Company;
|
|
|
|
Individual performance;
|
|
|
|
Long-term succession potential; and
|
|
|
|
Ability of the Company to replicate the executives knowledge, skills and abilities.
|
The total target
compensation (i.e., the sum of base salary, target annual incentive opportunity and target long-term incentive opportunity) for the NEOs other than Messrs. Baldock and Baladi was within the competitive range of the 50
th
percentile of market comparability data.
12
Mr. Baladis total target compensation was above the
50
th
percentile of peer group compensation. The Compensation Committee reviewed Mr. Baladis total target compensation, recognizing that it fell outside the Companys target range,
and determined the compensation to be appropriate based on his strong record of success and unique skill set as well as differences in regional market data.
Mr. Baldocks total target compensation was at the third quartile of peer group compensation. The Compensation Committee reviewed
Mr. Baldocks total target compensation, recognizing that it fell outside the Companys target range, and determined the compensation to be appropriate. Mr. Baldock retired from the Company effective December 31, 2013.
Stockholder Input
The Compensation Committee also seeks
to assure that the Companys executive pay program is aligned with the interests of its stockholders. In that respect, as part of its ongoing review of the Companys executive pay program, the Compensation Committee considered the approval
by more than 94% of the votes cast for the Say on Pay vote at the Companys 2013 annual meeting of stockholders and determined that the Companys executive pay philosophy, compensation objectives, and compensation elements
continued to be appropriate and did not suggest any changes to the Companys executive pay program in response to such vote.
ELEMENTS OF NEO PAY
The
principal components of NEO compensation are base salary, annual and long-term incentive compensation and retirement and severance benefits. The chart below depicts the relative weighting of 2013 base salary and target annual and long-term
incentives for our NEOs.
Base Salary
The
Company provides a market-competitive base salary to its NEOs to attract and retain quality talent. Each NEOs base salary recognizes level of responsibility, experience, regional market differences in order to be competitive, individual
performance and tenure. The Compensation Committee may adjust base salaries from the targeted pay objective to reflect a particular NEOs unique skill set, experience, performance, and expertise. In 2013, base salaries for NEOs other than
Mr. Baldock were increased consistent with a typical market merit increase as reflected in the chart below. The base salaries for the NEOs as of December 31, 2013 and 2012 were as follows:
|
|
|
|
|
|
|
NEO
|
|
Base Salary
12/31/13
|
|
Base Salary
12/31/12
|
|
Percent Increase
|
Matthew J. Shattock
|
|
$1,030,000
|
|
$1,000,000
|
|
3.00%
|
Robert F. Probst
|
|
$580,000
|
|
$561,000
|
|
3.40%
|
William A. Newlands
|
|
$580,000
|
|
$561,000
|
|
3.40%
|
Philip Baldock
|
|
AUD$678,000
(USD$604,573)
1
|
|
AUD$678,000
(USD$704,713)
1
|
|
0.00%
|
Albert Baladi
|
|
EUR$417,150
(USD$573,289)
2
|
|
EUR$386,250
(USD$509,580)
2
|
|
8.00%
|
1
|
Based on a conversion rate of AUD to USD of 1 to 0.8917 on December 31, 2013 and AUD to USD of 1 to 1.0394 on December 31, 2012.
|
2
|
Based on a conversion rate of EUR to USD of 1 to 1.3743 on December 31, 2013 and EUR to USD of 1 to 1.3193 on December 31, 2012.
|
13
Annual Incentive Compensation
Each NEO participated in the Beam Executive Incentive Plan (the EIP) in 2013. The Company provides awards to NEOs under the EIP to align each
NEOs performance with the short-term goals of the Company, as measured by sales, operating income and Company free cash flow performance. The Compensation Committee established targets and executive awards under the EIP based on a combination
of performance metrics. For Messrs. Shattock and Probst, the Compensation Committee established goals under a Company net sales/operating income matrix and based on Company free cash flow. For Messrs. Newlands, Baldock and Baladi, the Compensation
Committee established targets under the same metrics applicable to Messrs. Shattock and Probst, plus a regional matrix aligned with their own respective areas of responsibility. The metrics applicable to each executive were evaluated and approved by
the Compensation Committee to align the compensation of each executive with Company-wide and/or business segment performance, depending on the executives role within the Company. The operating income metrics in the respective matrices are on a
before charges/gains basis.
Executive awards under the EIP are subject to discretionary adjustment by the Compensation Committee based on its evaluation
of performance and overall contributions to the performance of the Company. In making any such discretionary adjustments, the Compensation Committee takes into consideration performance against specific goals, outstanding performance in a particular
region, entrepreneurial and outstanding achievement, innovation, outstanding and forward thinking leadership, establishment of new relationships and product lines, success despite regional or broader market challenges, and other individual efforts
that exceed expectations or the executives scope of duties and drive the Companys success. The Committee may also adjust awards to account for unusual or unexpected events, the impact of acquisitions and divestitures, and non-recurring
items.
Weighting of EIP performance metrics for 2013 are set forth in the following table:
|
|
|
NEO
|
|
2013 Metrics
|
Matthew J. Shattock
|
|
80% Beam Sales/Operating Income Matrix; 20% Beam Free Cash Flow
|
Robert F. Probst
|
|
80% Beam Sales/Operating Income Matrix; 20% Beam Free Cash Flow
|
William A. Newlands
|
|
60% Segment Sales/Operating Income Matrix; 20% Beam Sales/Operating Income Matrix; 20% Beam Free Cash Flow
|
Philip Baldock
|
|
60% Segment Sales/Operating Income Matrix; 20% Beam Sales/Operating Income Matrix; 20% Beam Free Cash Flow
|
Albert Baladi
|
|
60% Segment Sales/Operating Income Matrix; 20% Beam Sales/Operating Income Matrix; 20% Beam Free Cash Flow
|
A particular performance matrix is built around targets for sales and operating income performance for the Company or
particular business segment, which produces an operating income margin focus. The Company or business segment must achieve at least the minimum operating income growth threshold in order to receive a payout. For 2013, the threshold and maximum award
opportunities were 20% and 200% of target, respectively.
14
The 2013 matrix for Company performance was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beam Inc.
|
Operating Income
(shown as millions)
OI Margin
(Operating Income / Net Sales)
|
|
27.0%
|
|
80%
$676.4
|
|
150%
$696.7
|
|
200%
$717.0
|
|
|
|
80%
$659.5
|
|
100%
$676.4
|
|
150%
$696.7
|
|
|
60%
$642.6
|
|
80%
$659.5
|
|
100%
$676.4
|
|
|
40%
$625.7
|
|
60%
$642.6
|
|
80%
$659.5
|
|
23.7%
|
|
20%
$608.8
|
|
40%
$625.7
|
|
60%
$642.6
|
|
|
|
|
$2,505.9
0.0%
|
|
$2,606.2
4.0%
|
|
$2,706.4
8.0%
|
|
|
|
|
|
|
|
Net Sales (shown as millions)
(Growth Rate over Prior FY)
|
The Compensation Committee determined target performance goals to be appropriate because at the time of grant, the goals were
believed to be challenging but achievable through sound management and execution against overall Company and business segment strategy. Award levels at the higher levels of performance under each matrix were established as stretch goals for the
Company or business segment and the leadership team.
Individual award targets were established as a percentage of each NEOs base salary under the
EIP. Targets were developed based on each NEOs role within the organization and the assessment of the NEOs total compensation relative to market. The EIP targets for the NEOs were as follows as of December 31, 2013:
|
|
|
|
|
NEO
|
|
Annual Incentive
Target
|
|
Matthew J. Shattock
|
|
|
130
|
%
|
Robert F. Probst
|
|
|
85
|
%
|
William A. Newlands
|
|
|
85
|
%
|
Philip Baldock
|
|
|
65
|
%
|
Albert Baladi
|
|
|
65
|
%
|
For 2013, the Compensation Committee set Company net sales and operating income before charges/gains targets of $2,606.2
million and $676.4 million, respectively, and a free cash flow target of $341.4 million. The Compensation Committee set segment net sales and operating income before charges/gains targets as follows: North America $1,612.3 million and $428.1
million, respectively, EMEA $526.3 million and $127.9 million, respectively, and APSA $519.6 million and $119.2 million, respectively.
The Company
reported net sales of $2,547.3 million and operating income before charges/gains of $667.6 million.* As permitted under the terms of the EIP, the Committee adjusted the performance results to account for the impact of foreign exchange rates and
other costs that the Committee deemed were not indicative of the Companys underlying performance for 2013.
For 2013, adjusted performance for Beam
Inc. and EMEA exceeded targeted goals as measured by the applicable performance matrix but did not exceed the Company free cash flow target. In 2013, adjusted performance on the Company net sales/operating income matrix was 106% of target and on
each of the segment sales/operating income matrices was: North America 90% of target, APSA 0% of target and EMEA 125% of target. Company free cash flow was at 86% of target.
15
Based on its evaluation of the applicable performance matrices, the Compensation Committee subsequently approved
awards to each NEO as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
Target
Award
|
|
|
Maximum
Award
|
|
|
Actual
Award
|
|
Matthew J. Shattock
|
|
$
|
1,339,000
|
|
|
$
|
2,678,000
|
|
|
$
|
1,365,780
|
|
Robert F. Probst
|
|
$
|
493,000
|
|
|
$
|
986,000
|
|
|
$
|
502,860
|
|
William A. Newlands
|
|
$
|
493,000
|
|
|
$
|
986,000
|
|
|
$
|
458,490
|
|
Philip Baldock
|
|
$
|
392,972
|
|
|
$
|
785,944
|
|
|
$
|
153,259
|
|
Albert Baladi
|
|
$
|
372,638
|
|
|
$
|
745,276
|
|
|
$
|
421,081
|
|
Long-Term Performance Incentives
Overview
In 2011, Company stockholders approved the Beam
Inc. 2011 Long-Term Incentive Plan (LTIP). The Company designed the LTIP to allow for flexibility in rewarding the attainment of Company goals, while also assuring the alignment of NEO interests with those of stockholders, and
particularly the long-term profitability of the Company and the performance of Company stock. The LTIP also plays an important role in promoting an ownership culture among the employees of the Company while supporting the overall goal of a
pay-for-performance culture. Under the LTIP, the Compensation Committee has the authority to grant performance shares, stock options, restricted stock, restricted stock units, and cash-based incentive awards.
Each NEO is granted awards under the LTIP with an aggregate target value established with reference to market
50
th
percentile. In 2012, the Company changed the mix of LTIP awards for its executives, including the NEOs, to eliminate cash-settled performance awards as a form of award and to shift an
increasing percentage of each executives awards to stock based compensation. The Committee felt that this change would further align the interests of each executive with those of stockholders. Mr. Shattocks 2013 awards were
allocated as follows: 50% performance shares, 25% stock options and 25% restricted stock units. The remaining NEOs were allocated 2013 awards as follows: 40% performance shares, 30% stock options and 30% restricted stock units.
The treatment of outstanding LTIP awards, including the 2013 grants, is addressed in the Merger Agreement. See Impact of Merger Agreement on page
8 of this report for more details.
*
|
Reconciliations for non-GAAP measures to the most closely comparable GAAP measures are presented in Appendix A to this report, along with a a description of the methodology used to determine such non-GAAP measures.
|
Performance Share Awards
Performance shares are awarded based on achievement of cumulative earnings per share (EPS) and return on invested capital (ROIC)
targets over a three-year performance period. EPS is weighted at 80% and ROIC is weighted at 20%. These two measures were selected because the Compensation Committee believes that they drive long-term stockholder value creation by capturing growth
through the EPS measure and returns through the ROIC measure. The Company grants performance share awards with payout determined following the end of a three-year performance period. At the completion of the three-year performance period, overall
performance is evaluated and appropriate awards are determined based on performance against stated targets.
16
At its February 2013 meeting, the Compensation Committee approved target performance share awards for the
2013-2015 performance period for each of Messrs. Shattock, Probst, Newlands, Baldock and Baladi. The target number of performance shares awarded to each NEO was determined based on the closing price of Company common stock on the date of grant and
is listed in the table on page 22 of this report.
Stock Options
In February 2013, the Compensation Committee granted stock options to each of the NEOs. The exercise price of the options was established as the closing price
of Company common stock on the date of grant. The number of stock options granted to each NEO in 2013 is listed in the table on page 22 of this report. Stock options only have value to the extent that the price of Beam stock on the date of exercise
exceeds the stock price on the date of grant. Options are therefore provided to executives to align their long-term interests with those of stockholders. Stock options also create a retention mechanism by virtue of their multi-year vesting schedule.
Time-Vested Restricted Stock Units
Restricted Stock
Units (RSUs) are time-vested grants that award shares of common stock to executives who satisfy the applicable vesting period. Each RSU is settled in one share of Company common stock. It is a market-competitive practice in the
Companys Peer Group to issue RSUs, and the Compensation Committee believes that RSUs enforce stability in the Companys executive workforce by providing an incentive to the executive to remain employed with the Company. The Compensation
Committee believes that RSUs also encourage long-term value creation and align NEO financial interests with those of stockholders.
The Compensation
Committee approved the award of RSUs to Messrs. Shattock, Probst, Newlands, Baldock and Baladi at its February 2013 meeting. The number of RSUs awarded to each NEO was determined based on the closing price of Company common stock on the date of
grant. The RSUs cliff vest on the third anniversary of the date of grant and are also subject to a performance metric specifically designed to qualify the awards for the performance-based exemption under Section 162(m) of the
Internal Revenue Code. The number of RSUs granted to each NEO in 2013 is listed in the table on page 22 of this report.
Cash-Settled Performance
Awards
Cash-settled performance awards were historically provided at the business segment level, and were introduced to reward intermediate and
long-term performance goals specific to the operating company. The Company evaluated its practice of providing cash-settled performance awards in 2011, and determined to discontinue this practice for grants occurring in 2012 and thereafter. When it
made this change, the Company determined that long-term awards were more appropriately linked to the Companys equity as opposed to cash payment, particularly since awards under the EIP are also paid in cash.
For the 2011-2013 performance period, the NEOs other than Mr. Baldock received cash-settled performance awards valued based on performance units with a
notional target value of $400 per unit. Performance is evaluated based 50% on operating income results and 50% on return on net tangible assets (RONTA) results. Goals for the 2011-2013 performance period were based on operating income
and RONTA for the full three-year performance period, as established at the start of the performance period. In Mr. Baldocks case, target cash-settled performance awards are valued as a percentage of base salary rather than as performance
units. His cash-settled performance awards were targeted at 60% of base salary, and measured in the same equally weighted operating income and RONTA measures applicable to other NEOs.
The 2011 2013 performance period resulted in a 93% achievement against target with payouts to the NEOs as follows: Mr. Shattock $651,000;
Mr. Probst $148,800; Mr. Newlands $148,800, and Mr. Baldock $337,352 and Mr. Baladi $148,800.
OTHER ELEMENTS
OF NEO COMPENSATION AND BENEFITS
Retirement and Deferred Compensation Benefits
The Company believes that retirement benefits are an important element of its executive pay program. The Company feels that the retirement and deferred
compensation benefits offered provide a market-competitive level of income upon retirement. The Company provides retirement benefits to NEOs in the United States through a combination of a tax-qualified defined contribution plan and a nonqualified
excess benefit plan, with a defined contribution component. The nonqualified plan allows participating executives to accrue benefits that are otherwise limited by the Internal Revenue Code under the Companys qualified defined contribution
retirement plan. Effective as of January 1, 2013, the Company also established a voluntary deferral nonqualified deferred compensation plan for its eligible U.S. employees including members of senior management. The new plan allows participants
to voluntarily defer receipt of a portion of their cash compensation. The Company provides retirement benefits to NEOs in Spain and Australia through locally maintained defined contribution plans.
17
Perquisites
The Company provides its NEOs with modest perquisites and other personal benefits which are consistent with market practice and the Compensation
Committees philosophy of attracting and retaining exemplary executive talent. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs to assure that such benefits are consistent
with the Companys executive pay philosophy.
Change in Control and Severance Agreements
The Company maintains a severance and change in control agreement with each NEO. The Company maintains these agreements to assure the continuity of key
management through the date of a potential change in control, and to allow management to maintain focus on the business in the event of a change in control. These market-competitive agreements generally provide for severance pay in the event of
involuntary termination of employment by the Company without cause or voluntary termination of employment by a NEO in the event of good reason. No severance is available if a NEOs employment is terminated due to death or disability
or by the Company for cause. The agreements also limit the ability of executives to work for direct competitors after their employment with the Company has ended in connection with a non-change in control severance.
Enhanced benefits are available to NEOs if their termination event occurs within a specified period following a change in control. The change in control
severance pay is a double trigger severance benefit, meaning that both a change in control must occur, and the executive must either voluntarily terminate employment for good reason following the change in control, or be
terminated by the Company or its successor without cause following the change in control. The Company entered into these agreements with the NEOs in 2011 based on a review of market practices and the advice of Meridian. In designing the agreements,
the Company specifically prohibited excise tax gross-ups. These agreements are described in more detail on pages 27 to 30 of this report.
POLICIES, GUIDELINES AND DEDUCTIBILITY OF COMPENSATION
Clawback Policy
The Companys clawback policy empowers the Board to seek recoupment of incentive compensation paid to NEOs and other key employees in the event of a
material restatement of the Companys financial statements (other than changes required to comply with changes to applicable accounting principles). The Compensation Committee regularly reviews the clawback policy to assure compliance with
applicable laws, and the Compensation Committee will revise the policy as appropriate to assure compliance with applicable law. The clawback policy applies to the Companys annual incentive plan and long-term incentive plan.
Stock Ownership Guidelines
The following summarizes the
ownership multiples in the current Stock Ownership Guidelines as approved by the Compensation Committee and in effect for NEOs:
|
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Officer Level
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Ownership Multiple
|
Chief Executive Officer
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6 times base salary
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Senior Vice Presidents (Region Presidents and CFO)
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3 times base salary
|
The guidelines are intended to provide a minimum level of ownership for executives of the Company. In addition, Company policy
prohibits directors, officers and certain subsidiary employees from hedging the risk of owning Company stock or from trading in derivatives of the Companys stock. Each of the NEOs is on pace to satisfy or exceed the requirements of the
guidelines within the five-year period outlined in the guidelines.
Deductibility of Certain Compensation
Section 162(m) of the Internal Revenue Code limits the income tax deduction that is available to public companies for compensation paid to each of the
chief executive officer and the other three most highly compensated executive officers, other than the chief financial officer, unless the compensation qualifies as performance-based compensation under Section 162(m). The Company intends to
avail itself of the exemption from Section 162(m) for performance-based compensation when practicable, but reserves the right to award compensation that may not be fully deductible if payment of such compensation is determined to be in the
interests of the Company and its stockholders.
18
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, the
Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2013.
|
Compensation and Benefits Committee
|
|
Ann F. Hackett, Chair
Stephen W. Golsby
Gretchen W. Price
Peter M. Wilson
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person who served as a member of the Compensation Committee during the last fiscal year has (i) served as one of our officers or
employees; or (ii) any relationship requiring disclosure under Item 404 of the SECs Regulation S-K. None of our executive officers serve as a member of the board of directors or as a member of a compensation committee of any other
company that has an executive officer serving as a member of our Companys Board or our Companys Compensation Committee.
COMPENSATION RISKS
We believe that risks arising from our compensation policies and practices for our
employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Compensation Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive
risks. The Compensation Committee, with assistance from its independent compensation consultant, reviewed the elements of executive compensation extensively to determine whether any portion of the Companys executive compensation policies and
practices encouraged excessive risk taking and concluded:
|
|
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significant weighting towards long-term incentive compensation discourages short-term risk taking;
|
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|
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rolling three-year performance targets discourage short-term risk taking;
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caps on incentive awards and compensation clawback provisions discourage excessive risk taking;
|
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equity ownership guidelines discourage excessive risk taking; and
|
|
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as a consumer products business, the Company does not face the same level of risks associated with compensation for employees in other industries or sectors, such as financial services (traders and transactions
involving instruments with a high degree of risk) or technology (rapidly changing markets).
|
Furthermore, as described in
the Compensation Discussion and Analysis, compensation decisions include independent committee oversight, which prevents excessive risk taking aimed at exploiting formulae or objective evaluation metrics.
19
2013 EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth accounting values for both fixed and variable elements of compensation for the NEOs, including unvested and/or
unpaid stock awards and unexercised stock options. For example, stock options granted to each of the NEOs during 2013 are presented in the Option Awards column of the table below based on the awards grant date fair value as determined under
applicable accounting rules. However, the amount each NEO realizes from these equity awards may differ materially from the amounts shown in the table below and the related footnotes (in certain circumstances, the NEOs may realize no value under
these awards). Similarly, restricted stock unit and performance share awards that have been granted to each of the NEOs during 2013 are presented in the Stock Awards column of the table below based on the awards grant date fair value as
determined under applicable accounting rules, even though the executive may later forfeit the award. Investors should note that equity compensation awards granted or paid to the NEOs are reported in several different tables in this report as
required by the SECs executive compensation disclosure rules.
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Name and Principal Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)(2)
|
|
|
Stock Awards
($)(3)(4)
|
|
|
Option
Awards
($)(4)(5)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(6)
|
|
|
All Other
Compensation
($)(7)
|
|
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Total
($)
|
|
|
|
A
|
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|
B
|
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|
C
|
|
|
D
|
|
|
E
|
|
|
F
|
|
|
G
|
|
|
H
|
|
Matthew J. Shattock
|
|
|
2013
|
|
|
|
1,021,950
|
|
|
|
0
|
|
|
|
3,224,980
|
|
|
|
1,074,996
|
|
|
|
2,016,780
|
|
|
|
294,411
|
|
|
|
7,633,117
|
|
President & CEO
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|
2012
|
|
|
|
991,667
|
|
|
|
0
|
|
|
|
3,000,038
|
|
|
|
999,998
|
|
|
|
2,748,167
|
|
|
|
259,111
|
|
|
|
7,998,980
|
|
|
|
|
2011
|
|
|
|
851,250
|
|
|
|
0
|
|
|
|
4,659,073
|
|
|
|
4,206,388
|
|
|
|
2,037,875
|
|
|
|
222,289
|
|
|
|
11,976,875
|
|
Robert F. Probst
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|
|
2013
|
|
|
|
574,902
|
|
|
|
0
|
|
|
|
804,971
|
|
|
|
345,007
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|
|
|
651,660
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|
|
|
145,597
|
|
|
|
2,522,137
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|
SVP & Chief Financial
|
|
|
2012
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|
|
|
558,250
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|
|
|
0
|
|
|
|
769,978
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|
|
|
329,998
|
|
|
|
648,102
|
|
|
|
139,526
|
|
|
|
2,445,855
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Officer
|
|
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2011
|
|
|
|
512,500
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|
|
|
0
|
|
|
|
1,054,808
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|
|
|
1,339,690
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|
|
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784,700
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|
|
|
129,147
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|
|
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3,820,845
|
|
William A. Newlands
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2013
|
|
|
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574,902
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|
|
|
0
|
|
|
|
804,971
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|
|
|
345,007
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|
|
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607,290
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|
|
|
163,321
|
|
|
|
2,495,490
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|
SVP, President North
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|
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2012
|
|
|
|
558,250
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|
|
|
0
|
|
|
|
769,978
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|
|
|
329,998
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|
|
|
790,035
|
|
|
|
150,993
|
|
|
|
2,599,254
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|
America
|
|
|
2011
|
|
|
|
520,000
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|
|
|
400,000
|
|
|
|
1,054,808
|
|
|
|
1,339,690
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|
|
|
830,800
|
|
|
|
144,869
|
|
|
|
4,290,167
|
|
Philip Baldock
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|
|
2013
|
|
|
|
604,573
|
|
|
|
0
|
|
|
|
560,028
|
|
|
|
239,997
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|
|
|
490,611
|
|
|
|
49,302
|
|
|
|
1,944,511
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|
SVP, President Asia
|
|
|
2012
|
|
|
|
704,713
|
|
|
|
0
|
|
|
|
524,977
|
|
|
|
224,998
|
|
|
|
684,282
|
|
|
|
57,167
|
|
|
|
2,196,137
|
|
Pacific/South America
|
|
|
2011
|
|
|
|
692,170
|
|
|
|
0
|
|
|
|
790,988
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|
|
|
1,089,697
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|
|
|
1,012,031
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|
|
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56,446
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|
|
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3,641,332
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|
Albert Baladi
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2013
|
|
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|
561,894
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|
|
|
0
|
|
|
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595,037
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|
|
|
254,994
|
|
|
|
569,881
|
|
|
|
96,636
|
|
|
|
2,078,442
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SVP, President EMEA
|
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2012
|
|
|
|
505,869
|
|
|
|
400,000
|
|
|
|
524,977
|
|
|
|
224,998
|
|
|
|
493,273
|
|
|
|
103,926
|
|
|
|
2,253,044
|
|
|
|
|
2011
|
|
|
|
404,750
|
|
|
|
400,000
|
|
|
|
790,988
|
|
|
|
1,000,147
|
|
|
|
302,900
|
|
|
|
498,946
|
|
|
|
3,397,731
|
|
(1)
|
Salary:
The amounts listed in Column B reflect base salaries received by the NEOs. In the case of Messrs. Baldock and Baladi, base salary amounts have been converted to U.S. dollars from local currency based on
the conversion rate in effect on December 31 of the reported year. For the year ended December 31, 2013, the conversion rates were AUD to USD of 1 to 0.8917 for Mr. Baldock and EUR to USD of 1 to 1.3743 for Mr. Baladi.
|
(2)
|
Bonus:
The amounts listed in Column C reflect a $400,000 sign-on bonus paid to Mr. Baladi in each of 2011 and 2012 and a $400,000 retention bonus paid to Mr. Newlands in 2011 pursuant to a 2009
retention agreement.
|
(3)
|
Stock Awards:
The amounts listed in Column D reflect the grant date fair values calculated in accordance with Financial Accounting Standards Board Accounting Codification Topic 718, Compensation Stock
Compensation (FASB ASC Topic 718) for RSUs and, with respect to 2013 and 2012, performance shares awarded. The amounts for performance shares granted during 2013 and 2012 are calculated based on the Company achieving a target
level of performance, which is the probable satisfaction of the performance conditions for such awards. The maximum payout for these performance shares is 200%, for which in 2013, assuming a value per share of $61.42, would equate to $4,300,014 for
Mr. Shattock; $919,949 for Mr. Probst; $919,949 for Mr. Newlands; $639,996 for Mr. Baldock and $680,042 for Mr. Baladi.
|
(4)
|
Founders Grants:
The values for 2011 in Columns D and E include one-time founders grants to the NEOs. In recognition of the changing roles of the NEOs in connection with the Home & Security spin-off, the
Compensation Committee awarded one-time founders grants to the NEOs effective as of October 4, 2011. The founders grants were issued in the form of stock options and RSUs, each weighted equally in economic value.
|
(5)
|
Option Awards:
The amounts listed in Column E reflect the grant date fair values calculated in accordance with FASB ASC Topic 718. For assumptions used in determining these values, see footnote 5 to the
consolidated financial statements contained in the Original Filing.
|
(6)
|
Non-Equity Incentive Plan:
Column F lists amounts earned under the Long-Term Incentive Plan and the Beam Executive Incentive Plan. For 2013, these amounts include the following amounts earned under the LTIP for
the 2011-2013 performance period: $651,000 for Mr. Shattock; $148,800 for Mr. Probst; $148,800 for Mr. Newlands; $337,352 for Mr. Baldock and $148,800 for Mr. Baladi; and the following amounts earned under the EIP:
$1,365,780 for Mr. Shattock; $502,860 for Mr. Probst; $458,490 for Mr. Newlands; $153,259 for Mr. Baldock and $421,081 for Mr. Baladi. Refer to the Compensation Discussion and Analysis on pages 14 to 17 of this report for
more details on the annual incentive plans.
|
(7)
|
Perquisites and All Other Compensation:
In 2013, the Company provided an annual car allowance, financial planning, health club membership and physical examination to Messrs. Shattock, Probst, and Newlands. The
annual value of the benefits provided to each executive was as follows: $21,193 for Mr. Shattock, $20,018 for Mr. Probst, and $22,921 for Mr. Newlands. The Company also provided an annual car allowance and physical examinations to
Messrs. Baldock and Baladi, and Mr. Baladi also received financial planning assistance. The value of these perquisites was $26,751 for Mr. Baldock and $24,778 for Mr. Baladi.
|
Long-Term Disability and Life Insurance:
The amounts in Column G include the amount of all life insurance premiums paid by the Company.
For 2013, these amounts were: $2,377 for Mr. Shattock, $1,378 for Mr. Probst and $3,116 for Mr. Newlands. Also included is the amount of long-term disability insurance coverage premiums paid by the Company. For 2013, these amounts
were: $691 for each of Messrs. Shattock, Probst, and Newlands and $8,882 for Mr. Baladi.
20
Medical and Dental Insurance:
The amounts in column G include the cost of all medical and dental insurance
provided by the Company. For 2013, these amounts were: $9,739 for Mr. Shattock, $9,739 for Mr. Probst, $9,739 for Mr. Newlands and $4,873 for Mr. Baladi.
Defined Contribution Benefits, Nonqualified Plan Earnings and Medicare Tax Payments:
The amounts in Column G also include:
(a)
|
Defined Contribution Plan Contributions:
Company contributions for 2013 to the Companys tax-qualified defined contribution plan were $30,813 for each of Messrs. Shattock, Probst and Newlands. The Company
contributed $22,293 ($25,000 AUD) to Australias superannuation retirement account for Mr. Baldock. The Company contributed $58,103 (42,278 EUR) to Mr. Baladis Spanish retirement account.
|
(b)
|
Supplemental Plan:
The Supplemental Plan credits certain executives with amounts that would have been contributed to their profit sharing accounts under the tax qualified defined contribution plan but for the
limitations on contributions imposed by the Internal Revenue Code. Profit sharing credits earned under the Supplemental Plan for 2013 were $221,158 for Mr. Shattock, $79,921 for Mr. Probst, and $92,518 for Mr. Newlands. These amounts
were credited to executives accounts in early 2014.
|
(c)
|
Medicare Tax Payments:
The defined contribution credits to the Supplemental Plan are subject to Medicare tax. In 2013, the Company reimbursed the NEOs for Medicare taxes. In 2013, the Company reimbursed the NEOs
as follows: $8,439 for Mr. Shattock, $3,036 for Mr. Probst, and $3,524 for Mr. Newlands.
|
21
2013 GRANTS OF PLAN-BASED AWARDS
The following table summarizes grants of plan-based awards made during the year ended December 31, 2013.
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All Other
|
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All Other
|
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Stock
|
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Option
|
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Exercise
|
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|
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Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
|
Awards:
Number of
Shares of
|
|
|
Awards:
Number of
Securities
|
|
|
or Base
Price of
Option
|
|
|
Grant Date Fair
Value of Stock
|
|
Name
|
|
Grant Date
|
|
|
Threshold
($)
|
|
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Target
($)
|
|
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Maximum
($)
|
|
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Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
Stock or
Units (#)
|
|
|
Underlying
Options (#)
|
|
|
Awards
($/Sh)
|
|
|
& Option
Awards ($)(1)
|
|
Matthew J. Shattock
|
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|
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Annual Bonus
|
|
|
2/21/2013
|
(2)
|
|
$
|
0
|
|
|
$
|
1,339,000
|
|
|
$
|
2,678,000
|
|
|
|
|
|
|
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|
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|
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|
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RSUs
|
|
|
2/21/2013
|
(3)
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,502
|
|
|
|
|
|
|
|
|
|
|
$
|
1,074,973
|
|
Options
|
|
|
2/21/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,384
|
|
|
$
|
61.42
|
|
|
$
|
1,074,996
|
|
Performance Shares
|
|
|
2/21/2013
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
35,005
|
|
|
|
70,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,150,007
|
|
Robert F. Probst
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus
|
|
|
2/21/2013
|
(2)
|
|
$
|
0
|
|
|
$
|
493,000
|
|
|
$
|
986,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
2/21/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,617
|
|
|
|
|
|
|
|
|
|
|
$
|
344,996
|
|
Options
|
|
|
2/21/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,947
|
|
|
$
|
61.42
|
|
|
$
|
345,007
|
|
Performance Shares
|
|
|
2/21/2013
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
7,489
|
|
|
|
14,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
459,974
|
|
William A. Newlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus
|
|
|
2/21/2013
|
(2)
|
|
$
|
0
|
|
|
$
|
493,000
|
|
|
$
|
986,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
2/21/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,617
|
|
|
|
|
|
|
|
|
|
|
$
|
344,996
|
|
Options
|
|
|
2/21/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,947
|
|
|
$
|
61.42
|
|
|
$
|
345,007
|
|
Performance Shares
|
|
|
2/21/2013
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
7,489
|
|
|
|
14,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
459,974
|
|
Philip Baldock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus
|
|
|
2/21/2013
|
(2)
|
|
$
|
0
|
|
|
$
|
392,972
|
|
|
$
|
785,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
2/21/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,908
|
|
|
|
|
|
|
|
|
|
|
$
|
240,029
|
|
Options
|
|
|
2/21/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,267
|
|
|
$
|
61.42
|
|
|
$
|
239,997
|
|
Performance Shares
|
|
|
2/21/2013
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,210
|
|
|
|
10,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
319,998
|
|
Albert Baladi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus
|
|
|
2/21/2013
|
(2)
|
|
$
|
0
|
|
|
$
|
372,638
|
|
|
$
|
745,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
2/21/2013
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,152
|
|
|
|
|
|
|
|
|
|
|
$
|
255,016
|
|
Options
|
|
|
2/21/2013
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,221
|
|
|
$
|
61.42
|
|
|
$
|
254,994
|
|
Performance Shares
|
|
|
2/21/2013
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,536
|
|
|
|
11,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
340,021
|
|
(1)
|
The grant date fair value of stock option awards is based on the Black-Scholes value of $15.72 on the February 21, 2013 grant date. The grant date fair value of restricted stock units is determined based on the
close price of Company stock of $61.42 on the February 21, 2013 grant date. The amounts for the 2013 performance shares are calculated based on the Company achieving a target level of performance, which is the probable satisfaction
of the performance conditions for such awards. Grant date fair values are computed in accordance with FASB ASC Topic 718. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed
in the Merger Agreement.
|
(2)
|
The numbers in this row reflect the range of potential payments under the Beam Executive Incentive Plan.
|
(3)
|
The numbers in this row reflect the number of restricted stock units that were awarded and as originally contemplated, would have vested on the third anniversary of the grant date subject to continued employment and the
achievement of an EPS goal of $1.00 cumulatively over the three-year vesting period for Section 162(m) participants. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed
in the Merger Agreement.
|
(4)
|
Numbers in this row reflect the annual stock option awards granted in February 2013 that as originally contemplated, would have vested ratably on the first three anniversaries of the grant date. For assumptions used in
determining these values, see footnote 5 to the consolidated financial statements contained in the Original Filing. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed in the
Merger Agreement.
|
(5)
|
Numbers in this row reflect the performance shares granted in February 2013 that as originally contemplated, would have vested at the end of the three year performance period following certification of performance by
the Compensation Committee. The maximum payout for these performance shares is 200% which, assuming a value per share of $61.42, would have equated to $4,300,014 for Mr. Shattock; $919,949 for Mr. Probst; $919,949 for Mr. Newlands;
$639,996 for Mr. Baldock and $680,042 for Mr. Baladi. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed in the Merger Agreement.
|
Non-Equity Incentive Plan
The Executive Incentive Plan
is a cash-based, pay-for-performance incentive plan. Under the Executive Incentive Plan, participants are eligible to receive a cash bonus if the performance goals established for the year are met or exceeded. See pages 27 to 30 of this report for a
description of the treatment of non-equity incentive awards upon termination of employment.
Long-Term Equity Incentive Plan
The LTIP allows the Company to award executives a variety of forms of equity compensation using the Companys common stock. In 2013, the Company awarded
annual grants of performance shares, stock options and restricted stock units. See pages 27 to 30 of this report for a description of the treatment of equity awards upon termination of employment and see page 8 of this report for a description of
the treatment of equity awards in the Merger Agreement.
22
OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR-END
Listed in the table below are the number of Beam Inc. outstanding performance shares, stock options and restricted stock units for each named executive
officer on December 31, 2013.
OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
|
|
|
Number of
Securities
Underlying
Unexercisable
Options (#)
Unexercised
(2)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares
of Stock
or Units
that Have
Not
Vested
(#)
|
|
|
Market Value
of Shares or
Units of
Stock that
Have Not
Vested ($)
(3)
|
|
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
Not
Vested (#) (4)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have
Not
Vested ($) (5)
|
|
Matthew J. Shattock
|
|
|
64,130
|
|
|
|
|
|
|
$
|
35.67
|
|
|
|
9/30/2016
|
|
|
|
106,001
|
(6)
|
|
$
|
7,214,428
|
|
|
|
71,087
|
|
|
$
|
4,838,181
|
|
|
|
|
49,597
|
|
|
|
|
|
|
$
|
36.25
|
|
|
|
2/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,413
|
|
|
|
16,706
|
|
|
$
|
51.08
|
|
|
|
2/22/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,704
|
|
|
|
197,406
|
|
|
$
|
44.75
|
|
|
|
10/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,960
|
|
|
|
43,916
|
|
|
$
|
55.43
|
|
|
|
2/21/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,384
|
|
|
$
|
61.42
|
|
|
|
2/21/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert F. Probst
|
|
|
51,186
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
9/29/2015
|
|
|
|
26,470
|
(7)
|
|
$
|
1,801,548
|
|
|
|
15,427
|
|
|
$
|
1,049,962
|
|
|
|
|
25,761
|
|
|
|
|
|
|
$
|
35.67
|
|
|
|
9/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,783
|
|
|
|
|
|
|
$
|
36.25
|
|
|
|
2/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,064
|
|
|
|
8,031
|
|
|
$
|
51.08
|
|
|
|
2/22/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,204
|
|
|
|
56,406
|
|
|
$
|
44.75
|
|
|
|
10/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,247
|
|
|
|
14,492
|
|
|
$
|
55.43
|
|
|
|
2/21/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,947
|
|
|
$
|
61.42
|
|
|
|
2/21/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Newlands
|
|
|
23,729
|
|
|
|
|
|
|
$
|
67.19
|
|
|
|
2/25/2015
|
|
|
|
26,470
|
(7)
|
|
$
|
1,801,548
|
|
|
|
15,427
|
|
|
$
|
1,049,962
|
|
|
|
|
23,729
|
|
|
|
|
|
|
$
|
64.95
|
|
|
|
2/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,064
|
|
|
|
8,031
|
|
|
$
|
51.08
|
|
|
|
2/22/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,406
|
|
|
$
|
44.75
|
|
|
|
10/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,247
|
|
|
|
14,492
|
|
|
$
|
55.43
|
|
|
|
2/21/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,947
|
|
|
$
|
61.42
|
|
|
|
2/21/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Baldock
|
|
|
8,542
|
|
|
|
|
|
|
$
|
61.74
|
|
|
|
9/26/2013
|
|
|
|
19,140
|
(8)
|
|
$
|
1,302,668
|
|
|
|
10,622
|
|
|
$
|
722,933
|
|
|
|
|
8,542
|
|
|
|
|
|
|
$
|
67.19
|
|
|
|
9/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,467
|
|
|
|
|
|
|
$
|
57.18
|
|
|
|
9/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,846
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
9/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,039
|
|
|
|
|
|
|
$
|
35.67
|
|
|
|
9/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,023
|
|
|
$
|
36.25
|
|
|
|
2/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,032
|
|
|
|
16,063
|
|
|
$
|
51.08
|
|
|
|
2/22/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,460
|
|
|
$
|
44.75
|
|
|
|
10/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,822
|
|
|
$
|
55.43
|
|
|
|
2/21/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,267
|
|
|
$
|
61.42
|
|
|
|
2/21/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert Baladi
|
|
|
12,049
|
|
|
|
6,022
|
|
|
$
|
49.93
|
|
|
|
3/28/2021
|
|
|
|
19,384
|
(9)
|
|
$
|
1,319,275
|
|
|
|
10,948
|
|
|
$
|
745,121
|
|
|
|
|
21,154
|
|
|
|
42,306
|
|
|
$
|
44.75
|
|
|
|
10/4/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,942
|
|
|
|
9,880
|
|
|
$
|
55.43
|
|
|
|
2/21/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,221
|
|
|
$
|
61.42
|
|
|
|
2/21/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Each outstanding stock option granted that is currently vested and exercisable is listed in this column. These stock option grants vested ratably on the first three anniversaries of the grant date.
|
(2)
|
Each outstanding stock option that is unvested and unexercisable is listed in this column. These stock option grants vest ratably on the first three anniversaries of the grant date except for the stock options granted
as part of the founders grant in October 2011, which vest one-third on each of the second, third and fourth anniversaries of the grant date. The chart below reflects the vesting schedule for each outstanding stock option grant awarded to the NEOs
(assuming continued employment):
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Vesting in 2014
(dates refer to grant date)
|
|
|
Number
of
Options
Vesting
|
|
|
Options Vesting in 2015
(dates refer to grant date)
|
|
|
Number
of
Options
Vesting
|
|
|
Options
Vesting in 2016
(dates refer to
grant date)
|
|
|
Number
of
Options
Vesting
|
|
|
|
2/22/2011
|
|
|
3/28/2011
|
|
|
10/4/2011
|
|
|
2/21/2012
|
|
|
2/21/2013
|
|
|
in 2014
|
|
|
10/4/2011
|
|
|
2/21/2012
|
|
|
2/21/2013
|
|
|
in 2015
|
|
|
2/21/2013
|
|
|
in 2016
|
|
Matthew J. Shattock
|
|
|
16,706
|
|
|
|
|
|
|
|
98,703
|
|
|
|
21,958
|
|
|
|
22,796
|
|
|
|
160,163
|
|
|
|
98,703
|
|
|
|
21,958
|
|
|
|
22,794
|
|
|
|
143,455
|
|
|
|
22,794
|
|
|
|
22,794
|
|
Robert F. Probst
|
|
|
8,031
|
|
|
|
|
|
|
|
28,203
|
|
|
|
7,246
|
|
|
|
7,317
|
|
|
|
50,797
|
|
|
|
28,203
|
|
|
|
7,246
|
|
|
|
7,315
|
|
|
|
42,764
|
|
|
|
7,315
|
|
|
|
7,315
|
|
William A. Newlands
|
|
|
8,031
|
|
|
|
|
|
|
|
28,203
|
|
|
|
7,246
|
|
|
|
7,317
|
|
|
|
50,797
|
|
|
|
28,203
|
|
|
|
7,246
|
|
|
|
7,315
|
|
|
|
42,764
|
|
|
|
7,315
|
|
|
|
7,315
|
|
Philip Baldock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert Baladi
|
|
|
|
|
|
|
6,022
|
|
|
|
21,153
|
|
|
|
4,940
|
|
|
|
5,407
|
|
|
|
37,522
|
|
|
|
21,153
|
|
|
|
4,940
|
|
|
|
5,407
|
|
|
|
31,500
|
|
|
|
5,407
|
|
|
|
5,407
|
|
(3)
|
This column reflects the value of restricted stock units using the December 31, 2013 closing price of the Companys common stock of $68.06. Restricted stock units, other than the restricted stock units granted
as part of the founders grant in October 2011, as originally contemplated would have vested on the third anniversary of the grant date subject to continued employment and the achievement of an EPS goal of $1.00 cumulatively over the three-year
vesting period for Section 162(m) participants. The restricted stock units granted as part of the founders grant on October 4, 2011 as originally contemplated would have vested one-third on each of the second, third and fourth
anniversaries of the grant date. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed in the Merger Agreement.
|
(4)
|
This column reflects the following unvested performance shares granted in 2013, based on the achievement of target performance: 35,005 for Mr. Shattock, 7,489 for Mr. Probst, 7,489 for
Mr. Newlands, 5,210 for Mr. Baldock and 5,536 for Mr. Baladi. This column also includes the unvested performance shares granted in 2012, based on the achievement of target performance: 36,082 for Mr. Shattock, 7,938
for Mr. Probst, 7,938 for Mr. Newlands, 5,412 for Mr. Baldock, and 5,412 for Mr. Baladi. As originally contemplated these shares would have vested following completion of the three year performance period upon certification of
performance by the Compensation Committee. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed in the Merger Agreement.
|
(5)
|
This column reflects the value of unvested performance shares using the December 31, 2013 closing price of the Companys common stock of $68.06, based on the achievement of target performance,
which is the probable satisfaction of the performance conditions. As noted above in Impact of Merger Agreement on page 8 of this report, the treatment of these awards was addressed in the Merger Agreement.
|
(6)
|
This amount consists of 52,146 restricted stock units granted as part of the founders grant on October 4, 2011, 18,312 restricted stock units granted on February 22, 2011, 18,041 restricted stock units
granted on February 21, 2012 and 17,502 restricted stock units granted on February 21, 2013.
|
(7)
|
This amount consists of 14,900 restricted stock units granted as part of the founders grant on October 4, 2011, 5,953 restricted stock units granted on February 21, 2012 and 5,671 restricted stock units
granted on February 21, 2013.
|
(8)
|
This amount consists of 11,173 restricted stock units granted as part of the founders grant on October 4, 2011, 4,059 restricted stock units granted on February 21, 2012 and 3,908 restricted stock units
granted on February 21, 2013.
|
(9)
|
This amount consists of 11,173 restricted stock units granted as part of the founders grant on October 4, 2011, 4,059 restricted stock units granted on February 21, 2012 and 4,152 restricted stock units
granted on February 21, 2013.
|
24
2013 OPTION EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name of Executive
Officer
|
|
Number of Shares
Acquired on
Exercise (#)(1)
|
|
|
Value Realized on
Exercise ($)(2)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized on
Vesting ($)
|
|
Matthew J. Shattock
|
|
|
0
|
|
|
$
|
0
|
|
|
|
42,097
|
(3)
|
|
$
|
2,712,067
|
(6)
|
Robert F. Probst
|
|
|
20,000
|
|
|
$
|
295,562
|
|
|
|
7,450
|
(4)
|
|
$
|
501,385
|
(7)
|
William A. Newlands
|
|
|
94,461
|
|
|
$
|
1,649,209
|
|
|
|
7,450
|
(5)
|
|
$
|
495,798
|
(8)
|
Philip Baldock
|
|
|
73,077
|
|
|
$
|
1,159,374
|
|
|
|
5,587
|
(5)
|
|
$
|
371,815
|
(8)
|
Albert Baladi
|
|
|
0
|
|
|
$
|
0
|
|
|
|
5,587
|
(5)
|
|
$
|
371,815
|
(8)
|
(1)
|
This column reflects stock options exercised during 2013.
|
(2)
|
This column reflects the difference between the market value of the shares on the date of exercise and the exercise price of the stock options.
|
(3)
|
This reflects the number of restricted stock units that vested in 2013. 16,023 restricted stock units vested February 5, 2013 and 26,074 vested on October 31, 2013.
|
(4)
|
This reflects the number of restricted stock units that vested October 4, 2013.
|
(5)
|
This reflects the number of restricted stock units that vested October 31, 2013.
|
(6)
|
This reflects values determined using a per share price of $60.96 for the shares that vested on February 5, 2013 and a share price of $66.55 for the shares that vested on October 31, 2013.
|
(7)
|
This reflects values determined using a per share price of $67.30 for the shares that vested on October 4, 2013.
|
(8)
|
This reflects values determined using a per share price of $66.55 for the shares that vested on October 31, 2013.
|
25
2013 NONQUALIFIED DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Executive
Officer
|
|
Executive
Contributions in
Last FY $ (4)
|
|
|
Registrant
Contribution in
Last FY $ (1)
|
|
|
Aggregate
Earnings in Last
FY $ (1)(2)
|
|
|
Aggregate
Withdrawals /
Distributions $
|
|
|
Aggregate
Balance at Last
FYE $ (3)
|
|
Matthew J. Shattock
|
|
$
|
0
|
|
|
$
|
221,158
|
|
|
|
($8,391
|
)
|
|
$
|
0
|
|
|
$
|
646,495
|
|
Robert F. Probst
|
|
$
|
0
|
|
|
$
|
79,921
|
|
|
|
($4,242
|
)
|
|
$
|
0
|
|
|
$
|
292,934
|
|
William A. Newlands
|
|
$
|
114,976.92
|
|
|
$
|
92,518
|
|
|
|
($5,787
|
)
|
|
$
|
0
|
|
|
$
|
380,037
|
|
Philip Baldock
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Albert Baladi
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
(1)
|
Amounts listed in the Registrant Contributions column were reported as compensation in the last fiscal year in the All Other Compensation column of the Summary Compensation Table. No amounts listed in the
Aggregate Earnings column were reported in the All Other Compensation column of the Summary Compensation Table.
|
(2)
|
Earnings are credited to the accounts of executives based on the Citigroup U.S. Broad Investment Grade Bond Index.
|
(3)
|
Amounts in this column include the following amounts that were previously reported in Summary Compensation Table as compensation for 2012: $188,211 for Mr. Shattock, $79,073 for Mr. Probst, and $83,453 for
Mr. Newlands and for 2011: $150,262 for Mr. Shattock, $70,063 for Mr. Probst, and $76,592 for Mr. Newlands.
|
(4)
|
This column reflects the amount that Mr. Newlands deferred under the Companys voluntary cash deferral nonqualified deferred compensation plan.
|
The Companys nonqualified deferred compensation plan is a supplemental plan that pays the difference between the profit sharing
contribution provided under the tax-qualified defined contribution plan and the contribution that would have been made if the Internal Revenue Code did not limit the compensation that may be taken into account under tax-qualified retirement plans.
The profit sharing contribution amount in 2013 was equal to 7.1% of adjusted compensation for Messrs. Shattock, Probst and Newlands, which generally includes salary and annual bonus. Compensation is adjusted by multiplying amounts in excess of the
Social Security taxable wage base ($113,700 in 2013) by 1.25. The pertinent profit sharing formula applies uniformly to all eligible employees in the applicable plan and is not enhanced for executives. Nonqualified profit-sharing benefits are paid
in a lump sum upon termination of an executives employment.
26
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
Termination
(Involuntary or
|
|
Compensation Program
|
|
For Good
Reason ($)
|
|
|
Without
Good
Reason ($)
|
|
|
Other Than
for Good
Reason ($)
|
|
|
Without
Cause ($)
|
|
|
Death ($)
|
|
|
Disability
($)
|
|
|
Change in
Control (4)($)
|
|
|
for Good Reason)
After Change in
Control ($)
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
5,074,738
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,074,738
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,612,107
|
|
Robert F. Probst
|
|
|
1,688,597
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,688,597
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,251,462
|
|
William A. Newlands
|
|
|
1,738,667
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,738,667
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,318,222
|
|
Philip Baldock
|
|
|
1,405,631
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,405,631
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,874,175
|
|
Albert Baladi
|
|
|
1,332,897
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,332,897
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,777,197
|
|
Health and Welfare Related Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
24,232
|
|
|
|
0
|
|
|
|
0
|
|
|
|
24,232
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
36,348
|
|
Robert F. Probst
|
|
|
16,677
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,677
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
22,235
|
|
William A. Newlands
|
|
|
19,282
|
|
|
|
0
|
|
|
|
0
|
|
|
|
19,282
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
25,710
|
|
Philip Baldock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Albert Baladi
|
|
|
20,633
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,633
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
27,511
|
|
Options
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,893,944
|
|
|
|
5,893,944
|
|
|
|
5,893,944
|
|
|
|
5,893,944
|
|
Robert F. Probst
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
William A. Newlands
|
|
|
319,407
|
|
|
|
0
|
|
|
|
0
|
|
|
|
319,407
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
|
|
1,779,959
|
|
Philip Baldock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,348,683
|
|
|
|
1,348,683
|
|
|
|
1,348,683
|
|
|
|
1,348,683
|
|
Albert Baladi
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,327,801
|
|
|
|
1,327,801
|
|
|
|
1,327,801
|
|
|
|
1,327,801
|
|
Performance Shares
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,838,181
|
|
|
|
4,838,181
|
|
|
|
2,431,307
|
|
|
|
2,431,307
|
|
Robert F. Probst
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,049,962
|
|
|
|
1,049,962
|
|
|
|
530,074
|
|
|
|
530,074
|
|
William A. Newlands
|
|
|
540,260
|
|
|
|
0
|
|
|
|
0
|
|
|
|
540,260
|
|
|
|
1,049,962
|
|
|
|
1,049,962
|
|
|
|
530,074
|
|
|
|
530,074
|
|
Philip Baldock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
722,933
|
|
|
|
722,933
|
|
|
|
363,758
|
|
|
|
363,758
|
|
Albert Baladi
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
745,121
|
|
|
|
745,121
|
|
|
|
371,154
|
|
|
|
371,154
|
|
RSUs
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,023,242
|
|
|
|
6,023,242
|
|
|
|
7,214,428
|
|
|
|
7,214,428
|
|
Robert F. Probst
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,419,255
|
|
|
|
1,419,255
|
|
|
|
1,801,548
|
|
|
|
1,801,548
|
|
William A. Newlands
|
|
|
405,161
|
|
|
|
0
|
|
|
|
0
|
|
|
|
405,161
|
|
|
|
1,419,255
|
|
|
|
1,419,255
|
|
|
|
1,801,548
|
|
|
|
1,801,548
|
|
Philip Baldock
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,036,690
|
|
|
|
1,036,690
|
|
|
|
1,302,668
|
|
|
|
1,302,668
|
|
Albert Baladi
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,036,690
|
|
|
|
1,036,690
|
|
|
|
1,319,275
|
|
|
|
1,319,275
|
|
Total Potential Payments Upon Termination or Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Shattock
|
|
|
5,098,970
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,098,970
|
|
|
|
16,755,367
|
|
|
|
16,755,367
|
|
|
|
15,539,679
|
|
|
|
23,188,134
|
|
Robert F. Probst
|
|
|
1,705,274
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,705,274
|
|
|
|
4,249,176
|
|
|
|
4,249,176
|
|
|
|
4,111,581
|
|
|
|
6,385,278
|
|
William A. Newlands
|
|
|
3,022,777
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,022,777
|
|
|
|
4,249,176
|
|
|
|
4,249,176
|
|
|
|
4,111,581
|
|
|
|
6,455,513
|
|
Philip Baldock
|
|
|
1,405,631
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,405,631
|
|
|
|
3,108,306
|
|
|
|
3,108,306
|
|
|
|
3,015,109
|
|
|
|
4,889,284
|
|
Albert Baladi
|
|
|
1,353,530
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,353,530
|
|
|
|
3,109,612
|
|
|
|
3,109,612
|
|
|
|
3,018,230
|
|
|
|
4,822,938
|
|
(1)
|
This table assumes the specified termination events or a change in control occurred on December 31, 2013. The value of the equity awards that would vest or be settled in connection with a termination event or a
change in control is calculated based on the Companys closing share price on the last day of its 2013 fiscal year, December 31, 2013.
|
(2)
|
With respect to the Health and Welfare Related Benefits under Death and Disability, there is no incremental value of life insurance benefits above the benefit level applicable to all employees generally.
|
(3)
|
Other than William Newlands who met the retirement requirements (age 55 and 5years of service) in December 2013 and had additional vesting on grants prior to February 2013, none of the other NEOs met the retirement
requirements as of December 31, 2013.
|
(4)
|
The normal terms and conditions of the LTIP and the relevant award agreements provided for 100% vesting of stock options upon a change in control (single trigger) and no additional vesting for restricted
stock units and performance shares. As described further on page 8, the Merger Agreement reflecting the acquisition by Suntory Holdings of all the shares of the Companys outstanding common stock provided for 100% vesting on outstanding RSUs
and a proration at target for outstanding performance awards upon the change in control. This table reflects the single trigger provisions for all of the outstanding equity with the December 31, 2013 stock price of $68.06.
|
27
A number of Company employee benefit and incentive plans provide for payment or vesting of
benefits upon termination of employment of any participant, including the NEOs. If terminated on December 31, 2013, the NEOs would receive benefits and payments under these plans in addition to the amounts described in the table above.
Annual Incentive Plan Awards
. The following table shows the treatment of annual awards under the applicable annual incentive plan
following a termination of employment, depending upon the reason for such termination. The annual incentive plan does not distinguish between a termination of employment prior to or following a change in control. However, as described in greater
detail on page 30, under the terms of each NEOs termination agreement, in the event that (1) the Company terminates the NEOs employment for a reason other than disability or cause, or (2) the NEO terminates his employment
for good reason, the NEO would be entitled to receive any earned but unpaid annual incentive compensation for the immediately preceding year and annual incentive compensation for the year in which the terminated occurs, pro-rated and based upon
actual Company performance.
|
|
|
|
|
REASON FOR TERMINATION
|
Termination by
the Company
|
|
Voluntary
Termination
|
|
Death, Disability or
Retirement
|
Executive forfeits his annual bonus.
|
|
Executive forfeits his annual bonus.
|
|
Executive (or his estate) is paid a prorated annual bonus based on actual Company performance at the same time bonuses are paid to other executives of the Company.
|
LTIP Awards.
The following table shows the treatment of LTIP awards following a termination of
employment, depending upon the reason for such termination.
|
|
|
|
|
|
|
AWARD
|
|
REASON FOR TERMINATION
|
|
|
Voluntary
Termination
|
|
Death
|
|
Disability or
Retirement
|
|
|
|
|
Stock Options
|
|
Vested options expire three months after the termination date, or, if sooner, on the regularly- scheduled expiration date.
|
|
Vested options granted after 2005 expire at the end of the three- year period following death or, if sooner, on the regularly-scheduled
expiration date, provided that options may be exercised for at least one year following death even if this extends past the regularly-scheduled expiration date.
Vested options granted before 2005 expire on the regularly-scheduled expiration date.
Founders grant options vest in full upon death, and remain exercisable for three years following death or, if sooner, on the regularly-scheduled expiration
date, provided that options may be exercised for at least one year following death even if this extends past the regularly-scheduled expiration date.
|
|
Options granted from September 2005 to September 2008 expire three years after employment terminates, or on the regularly- scheduled
expiration date, if earlier. Other options, except founders grants, expire on their regularly-scheduled expiration date. The executive must have been employed for six months following grant in the case of disability, and for one year following grant
in the case of retirement to receive this treatment.
Founders grant options expire on their regularly scheduled expiration date. Founders grant options
vest in full at termination resulting from disability if the executive has been employed for at least six months from the date of grant; and founders grants are forfeited in the event of
retirement.
|
28
|
|
|
|
|
|
|
AWARD
|
|
REASON FOR TERMINATION
|
|
|
Voluntary
Termination
|
|
Death
|
|
Disability or
Retirement
|
|
|
|
|
RSUs
|
|
Outstanding RSUs are forfeited.
|
|
Full vesting at termination.
|
|
Executives are treated as remaining employed and they continue to vest as scheduled, provided the executive has been employed for at least
six months following grant, in the case of disability and one year following grant in the case of retirement.
Founders grant RSUs vest in full at
termination resulting from disability if the executive has been employed for at least six months from the date of grant.
|
|
|
|
|
|
|
|
AWARD
|
|
REASON FOR TERMINATION
|
|
|
Voluntary
Termination
|
|
Death or Disability
|
|
Retirement
|
|
|
|
|
Performance Shares
|
|
Outstanding performance shares are forfeited.
|
|
If the executive terminates employment he will receive an award based on actual EPS and ROIC.
|
|
If the executive terminates employment after one year following the award date he will receive an award based on actual EPS and ROIC.
|
|
|
|
|
Cash Awards
|
|
Outstanding cash awards are forfeited.
|
|
Prorated based on actual performance through the date of termination.
|
|
Prorated based on actual performance through the date of termination.
|
The following chart explains the treatment of LTIP awards in the event of a change in control. The chart
describes the terms of the LTIP and the relevant award agreements. It does not describe the impact of the Merger Agreement. For more information regarding the treatment of these equity awards pursuant to the Merger Agreement, please see Impact
of the Merger Agreement on page 8:
|
|
|
AWARD
|
|
TREATMENT UPON CHANGE IN CONTROL
|
Stock Options
|
|
All stock options; including founders grants, become fully vested.
|
|
|
RSUs
|
|
In the event of termination of employment by the Company without cause or by the executive for good reason following a change in control, all outstanding RSUs vest and are paid out on the date employment terminates. In the event
employment is not terminated following a change in control, vesting continues under normal terms.
|
|
|
Performance Shares
|
|
In the event of termination of employment by the Company without cause or by the executive for good reason following a change in control, all outstanding performance shares, prorated based on target performance for the portion of
the performance period that elapsed prior to termination, immediately vest and are paid out on the date employment terminates. In the event employment is not terminated following a change in control, vesting continues under normal terms.
|
|
|
Cash Awards
|
|
In the event of termination of employment by the Company without cause or by the executive for good reason following a change in control, awards are calculated at target and prorated based on the portion of the year completed at
termination; Mr. Shattocks awards are calculated at maximum award and prorated based on the portion of the year completed at termination.
|
29
Retirement Benefits.
Upon termination of employment, participants in the Companys
defined contribution plans (both tax-qualified and nonqualified) may receive a distribution of their account balances. The Nonqualified Deferred Compensation table on page 26 of this report lists each executive officers balance under the
nonqualified defined contribution plan as of the last fiscal year end.
Health and Related Benefits.
In addition to the dollar
values in the table above for health and related benefit continuation pursuant to severance and change in control agreements, the NEOs will receive health and related benefits pursuant to the Companys benefit plans applicable to employees
generally.
Termination Agreements.
In 2011, the Company entered into termination agreements with Messrs. Shattock, Probst,
Newlands, Baldock and Baladi specifying certain compensation and benefits payable to the executives in the event of their termination of employment. Each agreement states that if (1) the Company terminates the executives employment for a
reason other than disability or cause, or (2) the executive terminates his employment for good reason, the executive will receive the following, in addition to compensation and benefits payable through the executives termination date
pursuant to applicable plans and programs:
|
(i)
|
1.5 times his base salary, 1.5 times the amount of his target annual incentive compensation award and 1.5 times the annual defined contribution plan allocation for the year prior to the year in which the termination of
employment occurs (and the supplemental profit sharing allocation under the Supplemental Plan) (Mr. Shattocks multiplier is 2 rather than 1.5); and
|
|
(ii)
|
18 months of coverage under our life, health, accident, disability and other employee plans (24 months for Mr. Shattock).
|
If the executives employment is terminated involuntarily by the Company for reasons other than disability or without cause or by the executive for good
reason within 24 months following a change in control, the multiplier in sub-paragraph (i) above is changed from 1.5 to 2 (from 2 to 3 for Mr. Shattock) and the period of benefits continuation coverage in sub-paragraph (ii) is changed
from 18 months to 24 months (from 24 months to 36 months for Mr. Shattock). Payments under these agreements are generally in the form of regular installments commencing within 90 days following termination; provided, however, that if a
termination occurs following a change in control, payments are in the form of a lump sum within 30 days following termination of employment. If payments to the executive due to a change in control do not exceed the threshold dollar amount that
triggers the excise tax under Section 280G of the Internal Revenue Code by more than a specified amount, payments to the executive are reduced in order to avoid application of the excise tax.
The executive shall also receive any earned but unpaid annual incentive compensation for the immediately preceding year and annual incentive
compensation for the year in which termination occurs based on actual Company performance and prorated for the portion of the year completed as of the executives termination of employment.
Severance payments under the agreements provide compensation to the executives in exchange for the non-compete and non-solicitation
protections received by the Company. All the agreements contain restrictions on soliciting Company employees, competing with the Company and revealing confidential information for a twelve-month period following termination of employment.
The amount of severance payments provided in the termination agreements reflects competitive benefits in the market for executive talent,
based upon advice from the compensation consultant, other advisors and the experiences of Compensation Committee members.
30
DIRECTOR COMPENSATION
The following table sets forth information regarding 2013 compensation for each of our non-employee directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
*
|
|
Fees
Earned
or Paid in
Cash ($)
|
|
|
Stock
Awards
($)(1)
|
|
|
All Other
Compensation
($)(2)
|
|
|
Total
($)
|
|
Richard A. Goldstein
|
|
|
98,750
|
|
|
|
114,995
|
|
|
|
|
|
|
|
213,745
|
|
Stephen W. Golsby
|
|
|
87,500
|
|
|
|
114,995
|
|
|
|
|
|
|
|
202,495
|
|
Ann F. Hackett
|
|
|
102,500
|
|
|
|
114,995
|
|
|
|
|
|
|
|
217,495
|
|
A. D. David Mackay
|
|
|
302,500
|
|
|
|
114,995
|
|
|
|
|
|
|
|
417,495
|
|
Gretchen W. Price
|
|
|
94,918
|
|
|
|
114,995
|
|
|
|
|
|
|
|
209,913
|
|
Robert A. Steele
|
|
|
87,500
|
|
|
|
114,995
|
|
|
|
|
|
|
|
202,495
|
|
Peter M. Wilson(3)
|
|
|
102,500
|
|
|
|
114,995
|
|
|
|
|
|
|
|
217,495
|
|
*
|
Although Matthew Shattock serves as a member of the Board, he does not receive any additional compensation for such service.
|
(1)
|
The amounts in this column represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Codification Topic 718, Compensation Stock Compensation
(FASB ASC Topic 718). Except for Ms. Hackett, each director received on the date of the 2013 Annual Meeting a grant of shares having a grant date fair value of $64.64 per share. Ann Hackett elected to defer receipt of these
shares until the January following the calendar year in which she no longer serves as a director of the Company.
|
See
Stock Ownership on page 32 of this Amendment for the number of shares of stock held by each current director as of the latest practicable date.
(2)
|
The aggregate amount of perquisites and personal benefits given to each director valued on the basis of aggregate incremental cost to the Company was less than $10,000 and, accordingly, is not reported in this column.
|
(3)
|
As of December 31, 2013, Peter Wilson held options exercisable for 2,490 shares of common stock, issued under the 2002 Non-Employee Director Stock Option Plan. The plan expired on December 31, 2006, and stock
options have not been granted to non-employee directors since 2005.
|
The annual cash fee for services as a non-employee
director of the Company was $80,000 during 2013. Members of the Audit Committee and the Compensation Committee received an additional $7,500 for their service on these committees. The Companys non-executive Chairman receives an additional
annual cash fee of $200,000. The Chair of each of the Audit, Compensation and Benefits, Corporate Responsibility and Nominating Committees received an additional cash fee of $15,000 for such service. All director fees were pro-rated during 2013 for
the portion of the year in which each director served on the Board, its respective committees or as a Chair.
Each non-employee director
receives an annual stock grant under the 2010 Non-Employee Director Stock Plan that is based on a set dollar value. The number of shares granted is determined by dividing the set dollar value by the closing price of the Companys common stock
on the grant date. In April 2013, the Nominating Committee set the dollar value at $115,000, with each non-employee director other than Ann Hackett receiving 1,779 shares of our common stock. Ann Hackett deferred receipt of these shares until the
January following the calendar year in which she no longer serves as a director of the Company.
Stock Ownership of Board Members
In order to more directly align the Boards interests with those of stockholders, the Company expects directors to establish and maintain
a significant level of stock ownership. Stock ownership guidelines have been established for directors. The guideline for directors is three times their annual cash fee. The guidelines allow directors five years from the date of the directors
election to the Board to meet the guidelines. All of the directors who have been on the Board at least five years satisfy the guidelines. For information on the beneficial ownership of securities of the Company by directors and executive officers
see Stock Ownership on page 32.
31