NEO 2018 Base Salary
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NEO
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Current Base Salary
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Effective Date
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Previous
Base Salary
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Effective Date
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Troy A. Clarke
(1)
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$
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1,050,000
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April 16, 2018
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$
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1,000,000
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April 22, 2016
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Walter G. Borst
(2)
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$
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772,335
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February 1, 2018
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$
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749,840
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February 1, 2016
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Persio V. Lisboa
(2)
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$
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729,000
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February 1, 2018
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$
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675,000
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March 1, 2017
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William V. McMenamin
(2)
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$
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460,000
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September 1, 2017
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$
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386,650
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February 1, 2016
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Curt A. Kramer
(2)
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$
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440,800
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February 1, 2018
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$
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380,000
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April 1, 2017
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.
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(1)
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Mr. Clarke received a base salary increase upon renewal of his Employment Agreement in April 2018.
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(2)
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Messrs. Borst, Lisboa, McMenamin and Kramer, received base salary increases due to performance.
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Goal Setting For Incentive Plans
On an annual basis, the Board reviews a multi-year strategic plan developed and presented by the management team. Based on that plan, an operating plan is developed for the subsequent year and reviewed by the Board. The Compensation Committee approves
the AI and LTI plan targets on the basis of the annual operating plan. The operating plan is based upon the goals of sustaining profitability and competitiveness with the market and the strategic plan incorporates long-term growth targets.
Annual Incentive or "AI"
Navistar provides its executives with an annual incentive compensation opportunity through the Annual Incentive ("AI") plan, a short-term incentive plan designed to align a significant portion of their total cash compensation with the overall financial performance of
the Company. Each executive’s target award is determined based on a percentage of their base pay and organization level. For 2018, Mr. Clarke’s target annual incentive opportunity
is 125% of base
salary. For other NEOs, target awards range from 55 to 75 percent of base salary.
2018 Annual Incentive
The AI plan for 2018 was based on the attainment of 100% corporate goals established and approved by the Compensation Committee. The AI plan was authorized under our stockholder approved
2013
Performance Incentive Plan (the "
2013
PIP"). The AI plan has threshold, target, and distinguished goal ranges for NEOs from 40% to 150%. AI payout targets for NEOs ranged from 55% to 125% of base salary. Consolidated financial results between performance levels were interpolated on a straight-line basis to determine payment amounts.
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•
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Each AI financial performance metric is independent. Eligibility for payout is based on the attainment of each individual metric.
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•
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We use two design features: an adjusted EBITDA multiplier which scales the annual incentive up or down from the target level based upon actual financial performance of Navistar, and an individual performance factor.
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•
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We continue to leverage our AI scorecard using multiple performance metrics. This allows the NEOs to see how their individual achievements contribute to the overall effort and success of the Company.
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Below is a summary of the 2018 AI performance goals, as
sociated performance metrics, and level of goal achievement.
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2018 Performance Goal
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Metric
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% Allocation
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Level Achieved
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Market Share
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Weighted Average Market Share
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35%
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Below Target
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Cost
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Total Cost Reduction
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35%
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Below Target
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Liquidity
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Operating Cash Flow
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20%
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Distinguished
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Quality
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First Time Quality
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10%
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Above Target
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2018 Annual Incentive Target Award Percentages and Amount Earned
As seen in the table above, Navistar met or exceeded two of the 2018 AI plan targets for many of the performance goals while the Company was below target on other goals, yielding an overall payout percentage of 112.4% of target. Below are the NEO payment amounts.
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Named Executive Officer
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Target as % of Base Salary
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2018 AI Amount
Earned
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Troy A. Clarke
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125%
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$1,475,250
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Walter G. Borst
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75%
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$651,078
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Persio V. Lisboa
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75%
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$614,547
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William V. McMenamin
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60%
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$310,224
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Curt A. Kramer
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55%
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$272,503
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2019 Annual Incentive
In 2019, we intend to build on our progress and expect to be profitable by leveraging the TRATON alliance, investing in high-quality products, and continuing to deliver and pursue innovative technology solutions. Our strategic direction continues to focus on our customer-centric strategy, operational excellence and our business transformation.
Due to our success in driving business results in 2018, we created an AI plan that enables our strategy and drives results for our employees, customers and shareholders. The table below illustrates the 2019 AI performance goals and metrics.
2019 Annual Incentive Targets
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2019 Performance Goal
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Weighting
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Description
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Target
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Market Share
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30%
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Segment-Weighted (Heavy/Severe, Medium & Bus)
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18.4%
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Cost
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30%
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Total Cost Reduction
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$0 (Cost Neutral)
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Liquidity
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30%
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Operating Cash Flow
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$275 Million
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Uptime
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10%
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24 Hour Repair Velocity
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50%
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2019 AI design features include:
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•
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Continuing to use Market Share, Cost and Liquidity metrics;
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•
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Replacing Quality metric with Uptime (24 Hour Repair Velocity) metric; and
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•
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Continuing the use of the adjusted EBITDA multiplier and an individual performance factor.
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The final payout as a percent of target will be calculated based upon level of attainment of the performance metrics multiplied by the adjusted EBITDA multiplier and the individual performance factor. Payout levels will be interpolated on a straight line basis between threshold, target, and distinguished levels.
Long-Term Incentives or "LTI"
Our objectives for including long-term incentives as part of our executive officer’s total compensation package include:
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•
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Aligning NEO and stockholder interests by tying compensation to share price appreciation;
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•
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Building long-term stockholder value; and
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•
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Cultivating stock ownership.
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LTI awards are governed by the
2013
PIP, which is an omnibus plan that allows for various awards such as cash, time and performance based stock options, stock appreciation rights, time and performance-based RSUs, restricted cash units ("RCUs"), PSUs, DSUs and performance shares.
The Compensation Committee approved LTI awards under the
2013
PIP for 2018 for eligible plan participants in February 2018. LTI awards granted to NEOs in 2018 were comprised of performance-based RCUs, based on adjusted EBITDA and revenue growth goals, time-based RSUs, and time-based stock options as indicated in the following table. The value of each NEO's LTI awards was split 50% in RCUs, 30% in RSUs and 20% in stock options.
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2018 LTI Plan
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Vesting
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Performance Measures
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Goals
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Performance Vesting Criteria
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Performance-Based RCUs
(1) (2)
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3 year cliff
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Adjusted EBITDA
(50%)
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Cumulative 2018, 2019, 2020 EBITDA goal of $2.34B
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Based on the Company's cumulative 2018-2020 EBITDA goal and TSR Modifier
(3)
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Revenue Growth (50%)
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3 Year Annual + Cumulative Goal) (1) 2018 - 10% (2) 2019 - 6% (3) 2020 - 6% (4) Cumulative - 24%
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Based on the Company's 4 performance goals and the 3-Year Relative Total Shareholder (TSR) multiplier: 2018 goal achieved for a future payout of 50% as determined in year 1 of the 3 year period and subject to the the TSR multiplier
(5)
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Time-Based Restricted Stock Units
(4)
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3 year cliff
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N/A
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N/A
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N/A
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Time-Based Stock Options
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Ratably, annually, over 3 years
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N/A
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N/A
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N/A
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(1)
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The RCUs represent a cash plan with each RCU representing $1. Vesting and/or payment is subject to service and performance conditions.
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(2)
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The performance targets for 2018-2020 were established by the Compensation Committee of the Board of Directors within 90 days of the beginning of the fiscal year 2018.
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(3)
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We have a 3-Year Relative Total Shareholder Return (TSR) "wrapper" around the annual goals in order to measure Navistar's stock price against our proxy peer group and any payouts are subject to the TSR multiplier which can decrease the payment by as much as 25% or increase the payment by as much as 25%, depending on the value of the TSR at the end of fiscal year 2020.
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(4)
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These awards are share-settled.
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(5)
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Revenue Growth payout is dependent on number of goals achieved (1 out of 4 goals is a 50% payout of the 50% Revenue Growth component,2 out of 4 goals is a 100% payout, 3 out of 4 goals is a 150% payout and 4 out of 4 goals is a 200% payout) and subject to the 3-Year Relative Total Shareholder Return (TSR) multiplier which can decrease the payment by as much as 25% or increase the payment by as much as 25%, depending on the value of the TSR at the end of fiscal year 2020.
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2018 Long-Term Incentive Awards
The following table summarizes our 2018 long-term incentive grant for our NEOs.
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NEO
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Performance-Based RCUs
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Time-Based Restricted Stock Units
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Time-Based Stock Options
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Targeted Economic
Value
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Troy A. Clarke
(1)
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$2,750,000
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40,530
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56,497
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$5,500,000
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Walter G. Borst
(1)
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$1,050,000
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15,679
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22,617
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$2,100,000
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Persio V. Lisboa
(1)
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$800,000
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11,946
|
17,232
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$1,600,000
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William V. McMenamin
(1)
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$250,000
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3,733
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5,385
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$500,000
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Curt A. Kramer
(1)
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$250,000
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3,733
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5,385
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$500,000
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(1) Long-term incentive awards for all NEOs were granted in February 2018 with the exception of Mr. Clarke. Mr. Clarke's long-term incentive awards were granted in April 2018.
2016 Long Term Incentive - Performance Awards
The table below provides details on the performance awards our NEOs with the exception of Mr. Kramer were granted in 2016 and the actual amounts earned for the performance period ending October 31, 2018 upon the attainment of certain performance metrics as certified by the Compensation Committee in December 2018. The Performance-Based RCU payments will be made in February of 2019. The right to the awards are subject to service conditions being met.
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Type of Award
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Performance Measure
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Performance Goals
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Performance Result
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Payout as % of Target
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Performance-Based RCUs
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Adjusted EBITDA
1 goal met - 50%
2 goals met - 100%
3 goals met - 150%
4 goals met - 200%
(1)
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2016 - $600M
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2016 - $508M
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As 1 goal was met - payout was 50% of RCU Target
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2017 - $650M
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2017 - $582M
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2018 - $700M
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2018 - $825M
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Cumulative - $2B
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Cumulative - $1.915B
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Performance-Based RCUs
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Market Share
1 goal met - 50%
2 goals met - 100%
3 goals met - 150%
4 goals met - 200%
(1)
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2016 -17.0%
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2016 - 15.8%
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0%
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2017 - 18.0%
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2017 - 17.3%
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2018 - 19.0%
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2018 - 17.5%
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Average - 18.0%
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Average - 16.9%
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(1)
There was no interpolation between points.
Due to Mr. Kramer's organizational level in fiscal year 2016, he did not receive a performance-based RCU grant. Instead he was granted time-based RCUs and subject to continued employment will vest and be paid in February 2019.
Executive Benefits and Perquisites
The following table summarizes the executive benefits and perquisites we provide to our NEOs:
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NEO
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Life Insurance
(1)
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Executive Flexible Perquisite Program
(2)
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Pension/Retirement/401(k) Plans(3)
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RAP
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SRAP
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SERP
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Troy A. Clarke
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•
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•
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•
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•
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•
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Walter G. Borst
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•
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•
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•
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•
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•
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Persio V. Lisboa
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•
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•
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•
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•
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•
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William V. McMenamin
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•
|
•
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•
|
•
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•
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Curt A. Kramer
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•
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•
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•
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•
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•
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(1) Life Insurance. We provide our executives Company-paid life insurance equal to five times base
salary. The beneficiary of each individual policy is as designated by the executive.
(2) Executive Flexible Perquisites. This provides a cash stipend to each of our NEOs, the amount
of which varies by executive, based upon the executive’s organization level and is set forth in the table below.
In addition, a spouse may accompany an NEO while he or she is traveling on Company business. Although
this occurs on a limited basis, the spouse’s travel expense is included in taxable compensation of the NEO.
(3) Pension/Retirement/401(k) Plans
We began transitioning to defined contribution/401(k) plans as the primary retirement income program for
all non-represented employees hired on or after January 1, 1996. These plans are as follows:
•
Retirement Accumulation Plan (‘‘RAP’’). This is our tax-qualified defined contribution/401(k) plan for
salaried employees. Our NEOs receive age-weighted contributions and/or matching contributions
depending on their eligibility for retiree medical coverage.
•
Supplemental Retirement Accumulation Plan (‘‘SRAP’’). This is our non-qualified deferred compensation
plan designed primarily to restore the age-weighted contributions that participants would otherwise have
received if the IRC Compensation limit had not applied to the RAP.
•
Supplemental Executive Retirement Plan (‘‘SERP’’). This is designed as a pension supplement to attract
and retain key executives. The SERP is unfunded and is not qualified for tax purposes.
Additional information on the pension/401(k) plans are provided in the
Pension Benefits, Non-Qualified Defined Contribution and Other Non-Qualified Deferred Compensation
sections of this proxy statement.
Executive Perquisite — 2018
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|
|
|
|
Named Executive Officer
|
Annual Flexible
Perquisite Payment ($)
|
Perquisite Payment ($)
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Total
Perquisite Payment ($)
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Troy A. Clarke
|
46,000
(1)
|
16,524
|
62,524
|
Walter G. Borst
|
37,000
|
—
|
37,000
|
Persio V. Lisboa
|
37,000
|
—
|
37,000
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William V. McMenamin
|
29,333
(2)
|
—
|
29,333
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Curt A. Kramer
|
20,000
|
—
|
20,000
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(1) $16,524 was paid on behalf of Mr. Clarke for legal fees incurred during the amendment of his Employment Agreement.
(2) Mr. McMenamin's annual flexible perqisite payment is $28,000, however, he received an additional amount of $1,333.33 in May 2018. The additional amount was a payment due to Mr. McMenamin's promotion to the next organizational level in September 2017.
Executive Stock Ownership Program
Our stock ownership guidelines are designed to increase an executive’s equity stake in Navistar and more closely align his
or her financial interests with those of the Navistar’s stockholders. At year end 2018, our stock ownership guidelines applied to 35 executives, all of whom hold t
he title of vice president and above, including all of our NEOs.
Our Executive Stock Ownership Program requires stock ownership guideline multiples of six times salary for the President and CEO and three times salary for other senior executives and has the following features:
|
|
•
|
A requirement that an executive retain a certain amount of shares received pursuant to
|
Company executive compensation programs (75% for the CEO and 50% for other
executives) until the executive satisfies the stock ownership guideline multiples described above and;
|
|
•
|
A one-year holding period (75% for the CEO and 50% for other executives) of shares received pursuant to Company executive compensations programs after the executive
|
satisfies the stock ownership guideline multiples described above.
|
|
•
|
All NEOs were in compliance with the program ownership requirement in 2018.
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Hedging and Pledging
The Company considers it improper and inappropriate for executives to engage in short-term or speculative transactions in Company securities. Navistar’s policy on transactions in securities prohibits executives from
short selling, trading in derivatives or engaging in hedging transactions. In addition, any pledges and margin account use must be pre-cleared through the Corporate Secretary or the General Counsel.
Recoupment (Clawback) Policy
The Company maintains a clawback policy. Under this policy, the Company may recover incentive-based compensation from an executive officer in the event of
an accounting restatement due to material non-compliance with financial reporting requirements, as well as intentional misconduct.
Employment Contracts and Executive Severance Agreements
Except for our President and CEO, Troy A. Clarke, we do not have employment contracts with our executive officers. Employment with each of them is "at will." However, like many companies, to ensure stability and continuity of management, we provide our executive officers with an Executive Severance Agreement (an "ESA"), which provides for severance benefits in the event of a specified termination event such as an
involuntary termination not for cause or a termination in connection with a change in control. Please refer to the
Potential Payments Upon Termination or Change-in-Control
section of this proxy statement for more information. A summary of Mr. Clarke’s Employment Agreement appears in the
Chief Executive Officer Compensation
section of this proxy statement.
Tax and Accounting Implications
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code ("IRC") provides that a public company generally may not deduct the amount of non-performance based compensation paid to certain executive officers (generally, the officers who are "named executive officers" in the summary compensation table in the issuer's proxy statement) that exceeds $1 million in any one taxable year. With respect to grants made prior to November 2, 2017, "qualified performance-based compensation" was not counted against the $1 million deductibility limit. The options, granted prior to this date, with an exercise price at least equal to 100% of the fair market value of the underlying shares at the date of grant may satisfy the requirements for treatment as "qualified performance-based compensation." In
addition LTI plan awards and awards under the AI plan, granted prior to November 2, 2017, that are conditioned upon achievement of certain performance goals may satisfy the requirements for treatment as "qualified performance-based compensation." Following the enactment of the Tax Cuts and Jobs Act, beginning with our 2019 fiscal year, the $1 million annual deduction limitation under Section 162(m) will apply to all compensation paid to these executive officers other than performance-based compensation paid under certain grants and awards made prior to November 2, 2017. Accordingly, the Company's ability to actually receive a corresponding deduction for the grants and awards described above may be limited by this tax law.
Executive Compensation Tables
The table below summarizes the total compensation paid to or earned by each of our NEOs for the years ending October 31 for 2018, 2017 and 2016:
Summary Compensation Table
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Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
(1)
|
Option Awards ($)
(2)
|
Non-Equity
Incentive
Plan Comp
($)
(3)
|
Change in
Pension
Value & Non-
Qualified
Deferred Comp
Earnings
($)
(4)
|
All Other
Comp
($)
(5)
|
Total
($)
|
Troy A. Clarke
President and Chief
Executive Officer
|
2018
|
1,027,183
|
—
|
1,649,976
|
1,099,997
|
2,350,250
|
593,454
|
202,289
|
6,923,149
|
2017
|
1,000,000
|
—
|
1,349,982
|
904,087
|
1,497,500
|
615,235
|
181,594
|
5,548,398
|
2016
|
950,000
|
—
|
1,963,667
|
—
|
547,500
|
1,299,928
|
134,758
|
4,895,853
|
Walter G. Borst
Executive Vice President
and Chief Financial Officer
|
2018
|
766,711
|
—
|
629,982
|
419,998
|
1,018,578
|
4,644
|
123,455
|
2,963,368
|
2017
|
749,840
|
—
|
629,979
|
421,907
|
673,731
|
54,965
|
130,173
|
2,660,595
|
2016
|
742,630
|
—
|
537,750
|
—
|
246,322
|
77,855
|
135,564
|
1,740,121
|
Persio V. Lisboa
President, Operations
|
2018
|
715,500
|
—
|
479,990
|
319,998
|
859,547
|
398,058
|
109,850
|
2,882,943
|
2017
|
633,750
|
—
|
479,972
|
321,407
|
606,488
|
209,173
|
107,585
|
2,358,375
|
2016
|
544,688
|
—
|
358,500
|
—
|
181,086
|
424,669
|
84,758
|
1,593,701
|
William V. McMenamin
President Financial Services and Treasurer
|
2018
|
460,000
|
—
|
149,992
|
99,999
|
388,974
|
357,860
|
80,567
|
1,537,392
|
2017
|
398,875
|
—
|
149,986
|
100,448
|
330,648
|
147,201
|
69,456
|
1,196,614
|
Curt A. Kramer
Senior Vice President and General Counsel
|
2018
|
425,600
|
—
|
149,992
|
99,999
|
272,503
|
155,339
|
53,252
|
1,156,685
|
|
|
(1)
|
The amounts reported in this column reflect the aggregate fair value of stock-based awards (other than stock options) granted in the year computed in accordance with FASB ASC Topic 718. Generally the aggregate grant date fair value is the amount that the Company expects to expense for accounting purposes over the award's vesting schedule and does not correspond to the actual value that will be realized by the officers. The fair values of stock-based awards are estimated using the closing price of our stock on the grant date. Stock-based awards settle in common stock on a one-for-one basis, or the cash equivalent of the common stock. The grant date fair values of each individual stock based award in 2018 are set forth in the 2018 Grant of Plan Based Awards table on page 52. Additional information about these values is included in Note 17 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2018.
|
|
|
(2)
|
The amounts reported in this column reflect the aggregate fair value of stock options, granted in the year computed in accordance with FASB ASC Topic 718. These amounts reflect the Company's accounting expense and do not correspond to the actual value that will be realized by the officers. Assumptions used in the calculation of these values are included in Note17 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2018. A description of stock options appears in the narrative text following the 2018 Grants of Plan-Based Awards table.
|
|
|
(3)
|
The amounts reported in this column represent the 2018 AI plan award payment based on an actual payout at 112.4% of target and performance-based RCUs earned in 2018 under the 2016 LTI. AI awards are projected to be paid in February 2019. The value of the 2018 AI Awards are as follows: Mr. Clarke $1,475,250, Mr. Borst $651,078, Mr. Lisboa $614,547, Mr. McMenamin $310,224, and Mr. Kramer $272,503. In addition, we reported the value of performance-based RCUs earned in fiscal year 2018 based on the probable outcome of such performance conditions, which was not maximum. The value of the performance-based RCUs for each NEO are as follows: Mr. Clarke $875,000, Mr. Borst $367,500, Mr. Lisboa $245,000, and Mr. McMenamin $78,750. Mr. Kramer did not receive performance-based RCUs in fiscal year 2016 due to his organizational level at that time .
|
|
|
(4)
|
These amounts represent the difference in the market interest rate under the IRC and the interest credit rate of 7.5% per annum compounded on a daily basis on the SRAP. The 7.5% is the rate used to design the SRAP as a comparable replacement for the Managerial Retirement Objective("MRO"). The interest credit rate constitutes an ‘‘above-market interest rate’’ under the IRC. These amounts also represent the change in actuarial present value of the SERP for Messrs. Clarke, Borst, Lisboa, McMenamin and Kramer. The change in actuarial present value of Mr. Borst’s non-qualified pension from 10/31/2017 to 10/31/2018 is negative $35,327. The increase in the SERP benefit for pay rate increase and service accrual was less than the decrease in present value due to increase in the discount rate.
|
|
|
(5)
|
"All Other Compensation" reflects the following items: flexible perquisite cash allowances; Company-paid life and accidental death and disability ("AD&D") insurance premiums; Company contributions to the RAP and the SRAP; taxable spouse travel and non-cash recognition awards; and legal fees for Mr. Clarke.
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NEO
|
Flexible
Perquisites
|
Perquisites
(1)
|
Company
Paid Life
and AD&D Insurance
|
RAP
|
SRAP
|
Taxable
Spouse
Travel
|
Other Comp
|
Total
|
Clarke
|
$
|
46,000
|
|
$
|
16,524
|
|
$
|
29,310
|
|
$
|
27,125
|
|
$
|
83,038
|
|
$
|
213
|
|
$
|
80
|
|
$
|
202,289
|
|
Borst
|
$
|
37,000
|
|
$
|
0
|
|
$
|
12,050
|
|
$
|
27,125
|
|
$
|
47,201
|
|
$
|
0
|
|
$
|
80
|
|
$
|
123,456
|
|
Lisboa
|
$
|
37,000
|
|
$
|
0
|
|
$
|
7,788
|
|
$
|
26,870
|
|
$
|
36,755
|
|
$
|
1,437
|
|
$
|
0
|
|
$
|
109,850
|
|
McMenamin
|
$
|
29,333
|
|
$
|
0
|
|
$
|
8,883
|
|
$
|
27,125
|
|
$
|
15,226
|
|
$
|
0
|
|
$
|
0
|
|
$
|
80,567
|
|
Kramer
|
$
|
20,000
|
|
$
|
0
|
|
$
|
3,716
|
|
$
|
23,465
|
|
$
|
6,009
|
|
$
|
0
|
|
$
|
62
|
|
$
|
53,252
|
|
|
|
(1)
|
The amount reported for Mr. Clarke represent legal fees incurred during the amendment of his 2018 Employment Agreement and paid on Mr. Clarke's behalf.
|
Grants of Plan-Based Awards Table — 2018
The following table provides information for each of our NEOs with respect to annual and long-term incentive award opportunities, including the range of potential payouts under non-equity incentive plans for the year ended October 31, 2018. Specifically the table presents the 2018 grants of AI plan awards, performance RCUs, share settled RSUs, and stock options. All of the awards were granted under the
2013
PIP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
#(1)
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
|
Exercise or
Base Price
of Option
Awards
($/Sh)
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(3)
|
Name
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Troy A. Clarke
|
|
|
|
|
|
|
|
|
Performance RCU - EBITDA(4)
|
4/16/2018
|
515,625
|
|
1,375,000
|
|
3,437,500
|
|
|
|
|
|
Performance RCU - Market Share(4)
|
4/16/2018
|
515,625
|
|
1,375,000
|
|
3,437,500
|
|
|
|
|
|
AI Plan Award - Cash(5)
|
|
131,250
|
|
1,312,500
|
|
2,460,937.5
|
|
|
|
|
|
RSU
|
4/16/2018
|
|
|
|
40,530
|
|
|
|
1,649,976
|
|
Stock Option
|
4/16/2018
|
|
|
|
|
56,497
|
|
40.71
|
|
1,099,997
|
|
Walter G. Borst
|
|
|
|
|
|
|
|
|
Performance RCU - EBITDA(4)
|
2/13/2018
|
196,875
|
|
525,000
|
|
1,312,500
|
|
|
|
|
|
Performance RCU - Market Share(4)
|
2/13/2018
|
196,875
|
|
525,000
|
|
1,312,500
|
|
|
|
|
|
AI Plan Award - Cash(5)
|
|
57,925.1
|
|
579,251
|
|
1,086,095.625
|
|
|
|
|
|
RSU
|
2/13/2018
|
|
|
|
15,679
|
|
|
|
629,982
|
|
Stock Option
|
2/13/2018
|
|
|
|
|
22,617
|
|
40.18
|
419,998
|
|
Persio V. Lisboa
|
|
|
|
|
|
|
|
|
Performance RCU - EBITDA(4)
|
2/13/2018
|
150,000
|
|
400,000
|
|
1,000,000
|
|
|
|
|
|
Performance RCU - Market Share(4)
|
2/13/2018
|
150,000
|
|
400,000
|
|
1,000,000
|
|
|
|
|
|
AI Plan Award - Cash(5)
|
|
54,675
|
|
546,750
|
|
1,025,156.25
|
|
|
|
|
|
RSU
|
2/13/2018
|
|
|
|
11,946
|
|
|
|
479,990
|
|
Stock Option
|
2/13/2018
|
|
|
|
|
17,232
|
|
40.18
|
|
319,998
|
|
William V. McMenamin
|
|
|
|
|
|
|
|
|
Performance RCU - EBITDA(4)
|
2/13/2018
|
46,875
|
|
125,000
|
|
312,500
|
|
|
|
|
|
Performance RCU - Market Share(4)
|
2/13/2018
|
46,875
|
|
125,000
|
|
312,500
|
|
|
|
|
|
AI Plan Award - Cash(5)
|
|
27,600
|
|
276,000
|
|
517,500
|
|
|
|
|
|
RSU
|
2/13/2018
|
|
|
|
3,733
|
|
|
|
149,992
|
Stock Option
|
2/13/2018
|
|
|
|
|
5,385
|
|
40.18
|
99,999
|
Curt A. Kramer
|
|
|
|
|
|
|
|
|
Performance RCU - EBITDA(4)
|
2/13/2018
|
46,875
|
|
125,000
|
|
312,500
|
|
|
|
|
|
Performance RCU - Revenue Growth(4)
|
2/13/2018
|
46,875
|
|
125,000
|
|
312,500
|
|
|
|
|
|
AI Plan Award - Cash(5)
|
|
24,244
|
|
242,440
|
|
454,575
|
|
|
|
|
|
RSU
|
2/13/2018
|
|
|
|
3,733
|
|
|
|
149,992
|
|
Stock Option
|
2/13/2018
|
|
|
|
|
5,385
|
|
40.18
|
|
99,999
|
|
|
|
(1)
|
Restricted Stock Units.
The amounts shown for RSUs represent the number of RSUs awarded to the NEO's in the fiscal year under our 2013 PIP, as described more fully under the
Long-Term Incentives
section of this proxy statement. The RSUs will cliff vest as to 100% of the units awarded
|
on the 3 year anniversary of the date the award was granted, subject to service conditions being met. The RSUs will be settled in shares at the time they vest.
|
|
(2)
|
Stock Options.
The amounts shown represent the number of stock options awarded to the NEO's in the fiscal year under our 2013 PIP, as described more fully under the
Long-Term Incentives
section of this proxy statement. The stock options generally vest over a three-year period with 1/3
rd
of the award vesting on each of the first three anniversaries of the date on which they are awarded, so that in three years the stock options are 100% vested, subject to service conditions being met. The stock options expire ten years after the date of grant.
|
|
|
(3)
|
The amounts shown do not reflect realized compensation by the NEOs. The amounts shown represent the value of the stock settled RSUs and stock options granted to the NEOs based on the grant date fair value of the awards as determined in accordance with FASB ASC Topic 718.
|
|
|
(4)
|
Performance RCUs - EBITDA and Performance RCUs - Revenue Growth.
The amounts shown represent the threshold, target and maximum number of performance RCUs that we awarded in the fiscal year to the NEOs under our 2013 PIP, as described more fully under the
Long Term
Incentive
section of this proxy statement. The extent to which our NEOs will receive any amounts under the EBITDA performance award is based on the 3 year cumulative Adjusted EBITDA target percentage achieved for 2018, 2019 and 2020, with a relative 3 year TSR modifier. The extent to which our NEOs will receive any amounts under the Revenue Growth performance award is based on the individual Revenue Growth rates for fiscal years 2018, 2019 and 2020, and a Cumulative Revenue Growth rate, based on the percentage increase in fiscal year 2020 Revenue vs. fiscal year 2017 Revenue with a 3-year relative TSR modifier. The RCUs represent a cash plan with each RCU representing $1. These amounts may not be paid to or realized by the NEOs. The RCUs generally cliff vest as to 100% of the units awarded on the 3 year anniversary of the date the award was granted, subject to the service conditions and performance conditions being met.
|
|
|
(5)
|
The amounts set forth in this row rep
resent the estimated cash payments to be awarded to our NEO's under the Company's 2018 AI Plan. The actual cash payments will be based on achievement at 112.4% of tar
get. For additional information regarding the 2018 cash AI awards, see the Annual Incentives section of this proxy statement. Under the AI plan, the performance metric threshold is 40% of target, target is 100% and for purposes of this table maximum equals distinguished which is 150% of target. In addition, there is an EBITDA multiplier under the AI plan which is 25% for under threshold, 40% at threshold, 100% at target and 125% at distinguished.
|
Outstanding Equity Awards at Year End 2018
The following table provides information on the holdings of stock options and stock awards by our NEOs as of the year ended October 31, 2018. The table includes unexercised, vested and unvested stock option awards, performance stock options, unvested PSUs, unvested RSUs, and unvested performance shares. The vesting information for each grant is provided in the footnotes to this table, based on the stock option or stock award grant date. The market value of the stock awards is based on the closing price of our Common Stock as of October 31, 2018, which was $33.49 per share. For additional information about the stock option awards and stock awards, see the description of
Long-Term Incentive Compensation
section of this proxy statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
(1)(3)
|
Stock Awards
|
|
Number of Securities
Underlying
Unexercised Options
(#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of Stock
Held that
Have Not
Vested
(#)
(2)(3)
|
Market Value
of Shares or
Units of Stock
Held that
Have Not
Vested
($)
|
Name
|
Exercisable
|
Unexercisable
|
Troy A. Clarke
|
33,300
|
|
—
|
|
37.200
|
|
12/19/2018
|
4,815
|
|
161,254
|
|
|
102,796
|
|
—
|
|
27.240
|
|
2/19/2020
|
46,455
|
|
1,555,778
|
|
|
224,000
|
|
—
|
|
38.300
|
|
4/22/2020
|
49,126
|
|
1,645,230
|
|
|
373,333
|
|
—
|
|
30.640
|
|
4/22/2020
|
40,530
|
|
1,357,350
|
|
|
135,012
|
|
—
|
|
35.090
|
|
3/10/2021
|
—
|
|
—
|
|
|
81,007
|
|
—
|
|
43.860
|
|
3/10/2021
|
—
|
|
—
|
|
|
22,745
|
|
45,488
|
|
27.480
|
|
2/14/2027
|
—
|
|
—
|
|
|
—
|
|
56,497
|
|
40.710
|
|
4/16/2028
|
—
|
|
—
|
|
Total:
|
972,193
|
|
101,985
|
|
|
|
140,926
|
|
4,719,612
|
|
Walter G. Borst
|
58,789
|
|
—
|
|
35.220
|
|
8/1/2020
|
3,215
|
|
107,670
|
|
|
12,476
|
|
—
|
|
27.670
|
|
2/11/2022
|
25,000
|
|
837,250
|
|
|
14,971
|
|
—
|
|
27.670
|
|
2/11/2022
|
22,925
|
|
767,758
|
|
|
10,614
|
|
21,228
|
|
27.480
|
2/14/2027
|
15,679
|
|
525,090
|
|
|
—
|
|
22,617
|
|
40.18
|
|
2/13/2028
|
—
|
|
—
|
|
Total:
|
96,850
|
|
43,845
|
|
|
|
66,819
|
|
2,237,768
|
|
Persio V. Lisboa
|
32,895
|
|
—
|
|
27.240
|
|
2/19/2020
|
2,341
|
|
78,400
|
|
|
8,317
|
|
—
|
|
27.670
|
|
2/11/2022
|
16,667
|
|
558,178
|
|
|
9,981
|
|
—
|
|
27.670
|
|
2/11/2022
|
15,283
|
|
511,828
|
|
|
7,076
|
|
14,152
|
|
27.480
|
|
2/14/2027
|
2,097
|
|
70,229
|
|
|
973
|
|
1,946
|
|
28.610
|
|
3/1/2027
|
11,946
|
|
400,072
|
|
|
—
|
|
17,232
|
|
40.180
|
|
2/13/2028
|
—
|
|
—
|
|
Total:
|
59,242
|
|
33,330
|
|
|
|
48,334
|
|
1,618,707
|
|
William V. McMenamin
|
9,663
|
|
—
|
|
27.240
|
|
2/19/2020
|
1,210
|
|
40,523
|
|
|
1,723
|
|
—
|
|
27.670
|
|
2/11/2022
|
5,357
|
|
179,406
|
|
|
2,067
|
|
—
|
|
27.670
|
|
2/11/2022
|
5,458
|
|
182,788
|
|
|
2,527
|
|
5,054
|
|
27.480
|
|
2/14/2027
|
3,733
|
|
125,018
|
|
|
—
|
|
5,385
|
|
40.180
|
2/13/2028
|
—
|
|
—
|
|
Total:
|
15,980
|
|
10,439
|
|
|
|
15,758
|
|
527,735
|
|
Curt A. Kramer
|
1,028
|
|
—
|
|
27.240
|
|
2/19/2020
|
595
|
|
19,927
|
|
|
1,028
|
|
—
|
|
27.240
|
|
2/19/2020
|
1,212
|
|
40,590
|
|
|
1,101
|
|
2,202
|
|
24.620
|
|
3/31/2027
|
2,437
|
|
81,615
|
|
|
—
|
|
5,385
|
|
40.180
|
|
2/13/2028
|
3,733
|
|
125,018
|
|
Total:
|
3,157
|
|
7,587
|
|
|
|
7,977
|
|
267,150
|
|
|
|
(1)
|
All stock options, other than performance stock options, became or will become exercisable under the following schedule: ⅓
rd
on each of the first three anniversaries of the date of grant. Performance stock options that expire on February 19, 2020 or February 11, 2022, vest on the three year anniversary of the date of grant if performance conditions have been met. The Compensation Committee has certified that the performance conditions have been met in full on the performance options that expire on February 19, 2020 and that EBITDA performance conditions on options expiring on February 11, 2022 was met as to 30% and that Revenue Growth performance conditions on options expiring on February 11, 2022 was met as to 25%.
|
|
|
(2)
|
Amounts in this column represent RSUs. In general RSUs become vested as to ⅓
rd
of the shares granted on each of the first three anniversaries of the date of grant or cliff vest three years after the date of grant, except that RSUs granted to certain of our NEO's in 2016 for partial payment of 2015 AI vested over 3 years as follows: year 1 (60%), year 2 (30%) and year 3 (10%), for Mr. Clarke this award was in the amount of 48,146 shares, for Mr. Borst 32,142 shares, for Mr. Lisboa 23,404 shares, and for Mr. McMenamin 12,096 shares. Mr. Kramer's 2015 AI was paid all in cash.
|
|
|
(3)
|
The vesting dates of outstanding unexercisable stock options and unvested RSUs at October 31, 2018, are listed below.
|
|
|
|
|
|
|
|
|
|
Name
|
Type of Award
|
Grant Date
|
Number of
Unexercised
or Unvested
Shares
Remaining
from Original
Grant
|
Number of
Shares
Vesting and
Vesting
Date in 2019
|
Number of
Shares
Vesting and
Vesting
Date in 2020
|
Number of
Shares
Vesting and
Vesting
Date in 2021
|
Troy A. Clarke
|
Options
|
2/14/2017
|
45,488
|
22,744 on 2/14/2019
|
22,744 on 2/14/2020
|
|
|
Options
|
4/16/2018
|
56,497
|
18,833 on 4/16/2019
|
18,832 on 4/16/2020
|
18,832 on 4/16/2021
|
|
RSUs
|
2/1/2016
|
4,815
|
4,815 on 2/1/2019
|
|
|
|
RSUs
|
4/22/2016
|
46,455
|
46,455 on 4/22/2019
|
|
|
|
RSUs
|
2/14/2017
|
49,126
|
|
49,126 on 2/14/2020
|
|
|
RSUs
|
4/16/2018
|
40,530
|
|
|
40,530 on 4/16/2021
|
Walter G. Borst
|
Options
|
2/14/2017
|
21,228
|
10,614 on 2/14/2019
|
10,614 on 2/14/2020
|
|
|
Options
|
2/13/2018
|
22,617
|
7,539 on 2/13/2019
|
7,539 on 2/13/2020
|
7,539 on 2/13/2021
|
|
RSUs
|
2/1/2016
|
3,215
|
|
3,215 on 2/1/2019
|
|
|
|
RSUs
|
2/10/2016
|
25,000
|
|
25,000 on 2/10/2019
|
|
|
|
RSUs
|
2/14/2017
|
22,925
|
|
|
22,925 on 2/14/2020
|
|
|
RSUs
|
2/13/2018
|
15,679
|
|
|
|
15,679 on 2/13/2021
|
Persio V. Lisboa
|
Options
|
2/14/2017
|
14,152
|
|
7,076 on 2/14/2019
|
7,076 on 2/14/2020
|
|
|
Options
|
3/1/2017
|
1,946
|
|
973 on 3/1/2019
|
973 on 3/1/2020
|
|
|
Options
|
2/13/2018
|
17,232
|
|
5,744 on 2/13/2019
|
5,744 on 2/13/2020
|
5,744 on 2/13/2021
|
|
RSUs
|
2/1/2016
|
2,341
|
|
2,341 on 2/1/2019
|
|
|
|
RSUs
|
2/10/2016
|
16,667
|
|
16,667 on 2/10/2019
|
|
|
|
RSUs
|
2/14/2017
|
15,283
|
|
|
15,283 on 2/14/2020
|
|
|
RSUs
|
31/2017
|
2,097
|
|
|
2,097 on 3/1/2020
|
|
|
RSUs
|
2/13/2018
|
11,946
|
|
|
|
11,946 on 2/13/2021
|
William V. McMenamin
|
Options
|
2/14/2017
|
5,054
|
|
2,527 on 2/14/2019
|
2,527 on 2/14/2020
|
|
|
Options
|
2/13/2018
|
5,385
|
|
1,795 on 2/13/2019
|
1,795 on 2/13/2020
|
1,795 on 2/13/2021
|
|
RSUs
|
2/1/2016
|
1,210
|
|
1,210 on 2/1/2019
|
|
|
|
RSUs
|
2/10/2016
|
5,357
|
|
5,357 on 2/10/2019
|
|
|
|
RSUs
|
2/14/2017
|
5,458
|
|
|
5,458 on 2/14/2020
|
|
|
RSUs
|
2/13/2018
|
3,733
|
|
|
|
3,733 on 2/13/2021
|
Curt A. Kramer
|
Options
|
3/31/2017
|
2,202
|
|
1,101 on 3/31/2019
|
1,101 on 3/31/2020
|
|
|
Options
|
2/13/2018
|
5,385
|
|
1,795 on 2/13/2019
|
1,795 on 2/13/2020
|
1,795 on 2/13/2021
|
|
RSUs
|
2/10/2016
|
595
|
|
595 on 2/10/2019
|
|
|
|
RSUs
|
2/14/2017
|
1,212
|
|
606 on 2/14/2019
|
606 on 2/14/2020
|
|
|
RSUs
|
3/31/2017
|
2,437
|
|
|
2,437 on 3/31/2020
|
|
|
RSUs
|
2/13/2018
|
3,733
|
|
|
|
3,733 on 2/13/2021
|
Option Exercises and Stock Vested Table
The following table provides information regarding stock option exercises by our NEOs during the year ended October 31, 2018, including the number of shares of Common Stock acquired upon exercise and the value realized and the number of shares acquired upon the vesting of RSUs and the value realized by the NEO before payment of any applicable withholding tax and broker commissions based on the fair market value (or market price) of our Common Stock on the date of exercise or vesting, as applicable.
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of
Shares
Acquired on
Exercise
(#)
|
Value
Realized
Upon
Exercise
($)
|
Number of
Shares
Acquired on
Vesting
(#)
|
Value
Realized
Upon
Vesting
($)
(1)
|
Troy A. Clarke
|
—
|
|
—
|
|
60,899
|
|
2,447,414
|
Walter G. Borst
|
—
|
|
—
|
|
55,513
|
|
2,304,776
|
Persio V. Lisboa
|
8,455
|
|
59,012
|
|
37,601
|
|
1,564,094
|
William V. McMenamin
|
4,502
|
|
37,112
|
|
11,868
|
|
502,280
|
Curt A. Kramer
|
2,300
|
|
29,009
|
|
1,804
|
|
72,923
|
|
|
(1)
|
The value realized upon vesting for our NEOs is attributable to the vesting of cash and share settled RSUs during the year ended October 31, 2018.
|
Pension Benefits — 2018
The amounts reported in the table below equal the present value of the accumulated benefit at October 31, 2018 for the NEOs under the SERP, based on the assumptions described in the footnote below the table:
Pension Benefits Table
|
|
|
|
|
Named Executive Officers
|
Number of
Years of
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
(1)
|
Payments During Last Fiscal Year ($)
|
Troy A. Clarke
|
8.0
|
6,550,828
|
—
|
Walter G. Borst
|
5.5
|
2,741,114
|
—
|
Persio V. Lisboa
|
20.0
|
2,022,397
|
—
|
William V. McMenamin
|
17.6
|
1,741,691
|
—
|
Curt A. Kramer
|
17.0
|
625,484
|
—
|
|
|
(1)
|
Unless otherwise noted, all present values reflect benefits payable at the earliest retirement date when the pension benefits are unreduced.
|
Also unless otherwise noted, form of payment, discount rate (4.48%) and mortality (115% of RP2014 White Collar headcount-weighted
table projected using Scale MP2018 with generational projection, modified to converge to 75% of long-term improvement rates by 2034) is
based on assumptions from the guidance on accounting for pensions. Additionally, SERP benefits have only been offset by benefits under
Navistar sponsored retirement programs. At actual retirement, these benefits will also be offset by benefits accumulated under programs for
employment prior to Navistar. The present value of Mr. Borst’s accumulated benefit as of 10/31/2018 is less than the present value of his
accumulated benefit as of 10/31/2017. The increase in the SERP benefit for pay rate increase and service accrual was less than the
decrease in present value due to increase in the discount rate.
Historically, we have provided our employees with retirement income programs. Over the years, the programs have changed for various reasons. Effective January 1, 1996, we began transitioning from defined benefit retirement income programs to defined contribution retirement income programs as the primary vehicle to deliver those benefits. Effective January 1, 2014, we accelerated the transition by freezing the U.S. defined benefit retirement income programs. All U.S. employees now participate in our defined contribution retirement income programs.
The following briefly describes the various programs.
Navistar, Inc. Supplemental Executive Retirement Plan or ‘‘SERP’’.
The SERP is designed as a pension
supplement to attract and retain executive officers. Executive officers are eligible to participate in the SERP upon attainment of age 55 or upon their date of hire if later.
The SERP is unfunded and is not qualified for tax purposes. An eligible executive’s benefit under the SERP is equal to a percentage of his or her final average compensation. A pro-rated portion of AI plan payments is included in the definition of eligible compensation and the amount included is also subject to a cap determined as a percentage of the executive officer's annualized base salary. The pro-rated portion and the cap depend on the executive officer's organizational level in the Company.
The following table summarizes the determination of the total percentage of final average compensation, which is the sum of the accrual rates described below.
|
|
|
|
|
Up to
Age 55
|
On or After
Age 55
|
Each Year of Age
|
1/2%
|
1%
|
Each Year of Service
|
1/2%
|
1%
|
The resulting benefit is offset by no more than 50% of the executive’s Social Security benefit, and any defined benefit pension plan (qualified or non-qualified) of the Company or any prior employer. The benefit is also offset by the actuarial equivalent of any of our defined contribution pension plans (qualified or non-qualified) or that of any prior employer that is funded by the employer’s contributions and is an integral part of the employer’s retirement program. Normal retirement age is 65. An executive may retire early with reduced benefits after having worked 5 years and is at least age 55.
All of the NEOs are eligible to participate in the SERP.
Other Retirement Income Programs.
We sponsor the Navistar, Inc. Salaried Employees Pension Plan or "SEPP" and the Navistar, Inc. Hourly Employees Pension Plan or "HEPP" which are tax-qualified defined benefit pension plans. We also sponsor the Navistar, Inc. Managerial Retirement Objection Plan or "MRO" which is an unfunded non-qualified defined benefit pension plan. None of the NEO's participate in the SEPP, HEPP, or MRO.
We also sponsor the Navistar, Inc. 401(k) Plan for Represented Employees or ‘‘REP’’ and the Navistar, Inc.
Retirement Accumulation Plan or ‘‘RAP’’. Represented employees are allowed to defer a portion of their compensation to the REP up to the IRC limitations. All non-represented employees are allowed to defer a portion of their compensation to the RAP up to the IRC limitations. Employees receive non-elective employer retirement contributions equal to a percentage of compensation up to the IRC compensation limit ranging from 2% up to 6.5% based on their age at the beginning of the calendar year. Additionally, employees who do not participate in our retiree medical plan receive matching contributions equal to 50% of the first 6% of employee elective pre-tax deferrals. For those executives whose employer retirement contributions would be limited by the IRC compensation limit, the SRAP (described below) provides for employer retirement contributions in excess of the IRC compensation limit. This plan is described in more detail within the
Non-Qualified Deferred Compensation
section of this proxy statement.
All of the NEOs receive non-elective employer retirement contributions in the RAP and also participate in the SRAP.
We do not grant extra pension service.
Non-Qualified Deferred Compensation Plans
The table below provides information on the non-qualified deferred compensation in which our NEOs participated during the year ended October 31, 2018.
Non-Qualified Deferred Compensation Table
|
|
|
|
|
|
|
Named Executive Officers
|
Registrant
Contributions
in Last Fiscal
Year
(1)
($)
|
Executive Contributions in Last Fiscal Year ($)
|
Aggregate
Earnings In
Last Fiscal
Year
(2)
($)
|
Aggregate
Withdrawals/Distributions
($)
|
Aggregate
Balance As of
Last Fiscal
Year End
(3)
($)
|
Troy A. Clarke
|
83,038
|
—
|
34,640
|
—
|
715,996
|
Walter G. Borst
|
47,201
|
—
|
19,236
|
—
|
631,262
|
Persio V. Lisboa
|
36,755
|
—
|
13,464
|
—
|
213,758
|
William V. McMenamin
|
15,226
|
—
|
8,744
|
—
|
184,330
|
Curt A. Kramer
|
6,009
|
—
|
2,069
|
—
|
30,731
|
|
|
(1)
|
Our contributions represent any notional contribution credits to the SRAP during the year.
|
|
|
(2)
|
‘‘Aggregate Earnings in Last Fiscal Year’’ represent the notional interest credited during the year for participants in the SRAP, if applicable, plus the change in value from the beginning of the year to the end of the year in the PSUs and/or DSUs held by each NEO. For the SRAP, ‘‘Aggregate Earnings in Last Fiscal Year’’ is the interest credited to each NEO from the beginning of the year until the end of the year at a 7.5% interest crediting rate. ‘‘Aggregate Earnings in Last Fiscal Year’’ for purposes of the PSU is the aggregate change in value of the PSUs held during the year.
|
|
|
(3)
|
The ‘‘Aggregate Balance as of Last Fiscal Year End’’ consists of the sum of each NEO’s notional account balance in the SRAP at the end of the year and the value at year end of the outstanding PSUs and/or DSUs.
|
We sponsor the following non-qualified deferred compensation programs:
Navistar, Inc. Supplemental Retirement Accumulation Plan or ‘‘SRAP’’.
The SRAP provides executive officers with contributions equal to the amount by which their employer retirement contributions to the RAP are limited by the IRC compensation limit. The SRAP is unfunded and is not qualified for tax purposes.
A bookkeeping account balance is established for each participant. The account balance is credited with notional contributions and notional interest. The SRAP does not permit any executive to electively defer any of his or her base compensation or bonus. However, any increase in payments under the AI plan will increase contributions to the SRAP because contributions are a function of compensation.
The interest crediting rate is 7.5% per annum compounded on a daily basis. The interest crediting rate constitutes an ‘‘above-market interest rate’’ under the IRC.
An executive officer is eligible to participate in the SRAP if the executive officer was hired on or after January 1, 1996 or was hired prior to January 1, 1996 and subsequently ceased participation in the Navistar, Inc. Managerial Retirement Objective Plan or "MRO".
Executive officers who were hired prior to January 1, 1996 and who subsequently ceased participation in the MRO
received an adjustment to their notional contributions. The adjustment is a ‘‘Points Multiplier’’ designed to provide them with value from the SRAP comparable to what they would have received had they continued to participate in the "MRO" until they reached age 62.
Effective January 1,
2014
, all executive officers were eligible for the SRAP due to the freezing of the MRO. At retirement, each participant may elect to receive the bookkeeping account balance by either or some combination of (1) a lump-sum payment or (2) annual installments over a period of 2 to 20 years. However, if the executive officer also participated in the SERP prior to January 1, 2012, he or she must receive the SRAP account balance in the form of an annuity. This is a requirement under IRC Section 409A. The NEO cannot withdraw any amounts from such NEO's bookkeeping account balance until such NEO either retires or otherwise terminates employment with the Company.
All of the NEOs participate in the SRAP.
Premium Share Units or ‘‘PSUs’’.
In general, our Executive Stock Ownership Program as in effect during
2013
required all of our executive officers to acquire, by direct purchase or through salary or annual bonus reduction, an ownership interest in Navistar by acquiring a designated amount of our Common Stock at specified
times. Participants were required to hold such stock for the entire period in which they are employed by the Company. PSUs may have been awarded under the
2013
PIP to participants who completed their ownership requirement on an accelerated basis. PSUs vest in equal installments on each of the first three anniversaries of the date on which they are awarded. Each vested PSU will be settled by delivery of one share of Common Stock. Such settlement will occur within 10 days after a participant’s termination of employment or at such later date as required by IRC Section Rule 409A. All of the NEOs participate in the Executive Stock Ownership Program and were eligible to acquire PSUs. The Executive Stock Ownership Program was amended effective November 1, 2013 to eliminate an executive’s ability to earn PSUs.
Deferred Share Units or ‘‘DSUs’’.
Under our Executive Stock Ownership Program in effect for 2013 and prior years, executives were able to defer their cash bonus into DSUs. DSUs are credited into the participants' account at the then- current market price. The DSUs are generally distributed to the participant in the form of our Common Stock at the date specified by the participant at the time of his or her election to defer. During the deferral period, the participant had no right to vote the Common Stock, no right to receive any dividend declared on the Common Stock and no other rights as a stockholder. If an executive officer elected to defer a cash bonus, the number of shares shown for such NEO includes these DSUs. These DSUs vest immediately. The number of shares shown as owned for each NEO (and all Executive Officers as a group) also includes PSUs that were awarded pursuant to the Executive Stock Ownership Program. Our Executive Stock Ownership Program eliminated an executive’s ability to defer their cash bonus into DSUs. Likewise, under our Non-Employee Directors Deferred Fee Plan, directors may defer all or a portion of their annual retainer into DSUs. If a director elected to defer a portion of his annual retainer and/or meeting fees into DSUs, these DSUs are shown as owned.
Potential Payments Upon Termination or Change-in-Control
The amount of compensation payable to each of the NEOs upon voluntary termination, termination with or without cause, involuntary termination in the event of a Change in Control, or termination as a result of death, disability or retirement are shown in the
Estimated Cash Payments Upon Termination
table of this proxy statement. Unless otherwise indicated, the amounts shown assume that such termination was effective October 31, 2018, are based on the terms of the applicable plans and agreements that were in effect on October 31, 2018, assume that the executive officer has satisfied all relevant prerequisites for eligibility for such payments and benefits and are estimates of the amounts which would be paid out to the executive officer
following his or her termination. The actual amounts of payments and benefits can only be determined at the time the relevant termination event occurs.
To assure stability and continuity of management, we entered into Executive Severance Agreements ("ESAs") with each of our executive officers with the exception of our CEO who has an Employment Agreement.
Executive Severance Agreements or ‘‘ESAs’’
All of our NEOs, with the exception of Mr. Clarke who is covered by an employment agreement, are covered under an "ESA". The following summarizes certain of the material provisions:
|
|
•
|
The expiration date of the agreement period post-Change in Control will be the date that occurs eighteen (18) months after the date of the CIC;
|
|
|
•
|
A CIC will not occur if certain ‘‘Excluded Persons’’ (including Mark H. Rachesky, Icahn Enterprises and employee or retirement benefit plans or trusts sponsored or established by the Company) become the ‘‘Beneficial Owner’’ of securities representing 50% or more of the combined voting power of the Company’s then-outstanding securities;
|
|
|
•
|
The level of ownership of securities required to trigger a CIC is 50% or more of the combined voting power of the Company’s then-outstanding securities;
|
|
|
•
|
A termination will be deemed to occur after a CIC if it occurs during the agreement period or during the eighteen (18) month period immediately following the CIC;
|
|
|
•
|
A diminution of authority sufficient to trigger a termination for ‘‘Good Reason’’ occurs if the executive officer experiences a decrease in his or her organizational level, a reduction in base salary by ten percent (10%) or more, or a change to his or her reporting structure that requires the executive to report to a supervisor whose organizational level is below the executive’s current organizational level;
|
|
|
•
|
The executive officer’s obligations (i) not to disclose confidential, secret, proprietary or privileged information pertaining to the business of the Company, (ii) to refrain from making any defamatory, disparaging, slanderous, libelous or derogatory statements about the Company and (iii) to cooperate and provide assistance to the Company in connection with litigation or any other matters, continue at all times during the agreement period of the ESA and at all times following the executive officer’s termination of employment for any reason;
|
|
|
•
|
The Compensation Committee may require the executive officer to repay incentive pay previously received from the Company if the Compensation Committee determines that repayment is due on account of a restatement of the Company’s financial statements or for another reason under the Company’s Clawback Policy;
|
|
|
•
|
Continued life insurance coverage provided for an 18 month period following termination;
|
|
|
•
|
In the event of a termination under the ESA, the executive officer’s eligibility for separation payments and benefits is conditioned on the executive officer’s timely signing, and not revoking, a written release agreement in a form acceptable to the Company; and
|
|
|
•
|
No payments are eligible for IRC Section 280G excise tax gross-up.
|
Summary of the Circumstances, Rights and Obligations Attendant to Each Type of Termination Under the ESA
All executive officers are ‘‘at-will’’ employees of the Company, except for the Company’s CEO who has an Employment Agreement. The ‘‘at-will’’ relationship between the executive officer and the Company means that either party may terminate the employment relationship at any time, and for any reason. Depending on the circumstances of the executive’s termination from the Company, the executive may be eligible for certain separation payments and benefits as summarized below. Under the 2013 PIP, individual equity award agreements, and the ESA:
|
|
•
|
Voluntary Termination by Executive and Involuntary (Termination for ‘‘Cause’’) by us:
We are not obligated to provide the executive with any additional or special compensation or benefits upon a voluntary termination by the executive or termination for ‘‘Cause’’ by us. All compensation, bonuses, benefits, and perquisites cease upon a voluntary termination by the executive or termination for ‘‘Cause’’ by us. In general, in the event of either such termination, an executive officer would:
|
|
|
•
|
Be paid the value of unused and accrued vacation;
|
|
|
•
|
Not be eligible for an AI payment if the termination occurred prior to year-end or if the termination occurred after year end and prior to the payment date;
|
|
|
•
|
Be able to exercise vested stock options for three months or twelve months depending on the date of grant, following a voluntary termination;
|
|
|
•
|
Forfeit any unvested time and performance-based stock options;
|
|
|
•
|
Forfeit any unvested restricted stock and time and performance-based RSUs;
|
|
|
•
|
Forfeit any unvested cash-settled performance shares; and
|
|
|
•
|
Forfeit any unvested RCUs.
|
As defined in the ESA, ‘‘Cause’’ generally means the reason for the executive’s involuntary termination of employment was (i) willful misconduct involving an offense of a serious nature that is demonstrably and materially injurious to the Company, monetarily or otherwise, (ii) conviction of, or entry of a plea of guilty or nolo contendere to, a felony as defined by the laws of the United States of America or by the laws of the State or other jurisdiction in which the executive is so convicted or pleads guilty or nolo contendere, or (iii) continued failure to substantially perform required duties for the Company (other than a failure due to physical or mental disability).
The executive officer would not receive any cash severance in the event of either a voluntary termination of employment without "Good Reason" (as defined below) or involuntary termination for ‘‘Cause’’ by us.
|
|
•
|
Retirement and Early Retirement:
If an executive officer terminates employment due to retirement, then the officer would generally be eligible to receive:
|
|
|
•
|
The value of unused and accrued vacation;
|
|
|
•
|
Monthly income from any defined benefit pension plans, both tax-qualified and non-tax-qualified, that the executive participated in solely to the extent provided under the terms of such plans;
|
|
|
•
|
Lump sum distributions from any defined contribution plans, both tax-qualified and non-tax-qualified, that the executive participated in solely to the extent provided under the terms of such plans; and
|
|
|
•
|
A pro-rata portion of cash-settled PSUs and RCUs.
|
Retirement and early retirement are defined in the respective plans in which the executive officer participates. In addition, if an executive meets the ‘‘qualified retirement’’ definition under our 2004 Performance Incentive Plan, as amended ("2004 PIP")
2013
PIP or Award Agreement (as applicable) and holds outstanding stock options, he or she may exercise those stock options to the extent that those stock options are exercisable or become exercisable in accordance with their terms, at any time during the term of the option grant. If he or she holds restricted stock or RSUs, they will continue to vest according to the terms of the restricted stock grant. If he or she holds PSUs, vesting accelerates and the shares will be issued after retirement.
|
|
•
|
Termination Without ‘‘Cause’’ by us or “Good Reason” Termination by Executive:
If the employment of an executive officer is terminated either due to either an involuntary termination by us without ‘‘Cause’’ or by the executive for ‘‘Good Reason’’ (as defined below), in each case either before the date of a
|
Change in Control (as defined in the ESA) or more than 18 months after the date of the most recent Change in Control, then the executive would generally be eligible to receive the following:
|
|
•
|
An amount equal to one-hundred to two-hundred percent (100% to 200%) of the total of (i) the executive’s annual base salary in effect at the time of termination and (ii) the executive’s AI plan award at target level (the ‘‘Severance Pay’’);
|
|
|
•
|
Continued health insurance for the 24-month period following termination; provided that for the first 12 month period, the executive shall pay for such coverage at no greater after tax costs to the executive than the after-tax cost to the executive officer immediately prior to the date of termination and for the remaining 12-month period, the executive officer shall pay for such coverage on a monthly cost of coverage basis;
|
|
|
•
|
Pro-rata annual incentive for the number of months of fiscal year eligible participation which is based upon actual results and will only be paid if and at the same time that the Company pays AI plan awards to active employees;
|
|
|
•
|
Continued life insurance coverage for the
18-m
onth period following termination;
|
|
|
•
|
Retention of any flexible perquisite allowance actually paid to the executive officer on or before the time of termination;
|
|
|
•
|
A lump sum cash payment equal to the value of unused and accrued vacation;
|
|
|
•
|
Such pension and post-retirement health and life insurance benefits due to the executive officer upon his or her termination pursuant to and in accordance with the respective Company-sponsored benefit plans, programs, or policies under which they are accrued and/or provided (including grow-in rights as provided under the terms of the applicable plan, program or policy);
|
|
|
•
|
The right to exercise vested stock options for three months or twelve months, depending upon date of grant; and
|
|
|
•
|
Forfeit any unvested cash-settled PSUs, any unvested RCUs, any unvested time and performance based stock options and any unvested restricted stock, time and performance based RSUs or PSUs.
|
As defined in the ESA, ‘‘Good Reason’’ means the occurrence of any of the following events or conditions: (i) we reduce the executive officer’s base salary by ten percent (10%) or more (either upon one reduction or in a series of reductions over a period of time);
provided
, that such reduction neither comprises a part of a general reduction for the executive officer’s then-current peers as a group (determined as of the date immediately before the date on which the executive officer becomes subject to such material reduction) nor results from a deferral of the executive officer’s base salary, (ii) a change to the
executive's reporting structure that requires the executive to report to a supervisor whose organizational level is below the executive's current organizational level, or (iii) a demotion in position (including a decrease in organization level) resulting in the material diminution of the executive officer’s authority (including, but not limited to, the budget over which the executive officer retains authority), duties, or responsibilities within the Company except, in case of each of (i) or (ii), in connection with the involuntary termination of the executive officer’s employment for Cause.
|
|
•
|
Termination Related to a Change in Control:
If the employment of an executive officer is involuntarily terminated for any reason other than for "Cause" or if a "Constructive Termination" (as defined below) occurs within 18 months after a Change in Control, then the executive would generally be eligible to receive the following:
|
|
|
•
|
An amount equal to (i) a pro rata portion of the executive officer’s AI plan award at target level (the ‘‘CIC Prorated Bonus’’), which payment shall be in lieu of any payment to which the executive officer may otherwise have been entitled to receive under a Change in Control-sponsored incentive or bonus plan, plus (ii) a multiplier ranging from 150% to 300% of the sum of the executive officer’s annual base salary in effect at the time of termination and the executive officer’s AI award at target level (the ‘‘CIC Severance Pay’’). The CIC Severance Pay and the CIC Prorated Bonus shall be paid in a lump sum on the payment date;
|
|
|
•
|
Continued health insurance for the 24-month period following termination; provided that for the first 12 month period, the executive officer shall pay for such coverage at no greater after tax costs to the executive officer than the after tax cost to the executive officer immediately prior to the date of termination and for the remaining 12-month period, the executive officer shall pay for such coverage on a monthly cost of coverage basis;
|
|
|
•
|
Continued life insurance coverage for the 18-month period following termination;
|
|
|
•
|
Tax counseling and tax preparation services;
|
|
|
•
|
Retention of any flexible perquisite allowance actually paid to the executive officer on or before the time of termination;
|
|
|
•
|
A lump sum cash payment equal to the value of unused vacation;
|
|
|
•
|
Acceleration of the exercisability of options that would otherwise have vested over a period of three years from the date of the Change in Control had the executive officer continued employment for that period;
|
|
|
•
|
Acceleration of the vesting of cash-settled PSUs and RCUs at the target performance level;
|
|
|
•
|
Acceleration of vesting o the SRAP balance; and
|
|
|
•
|
A lump sum cash payment equal to the difference in (i) the actuarial present value of the executive officer’s non-tax-qualified pension benefits assuming the executive officer was 18 months older and had 18 more months of service, over (ii) the actuarial present value of the executive officer’s non-tax-qualified pension benefits at the date of termination.
|
As defined in the ESA, ‘‘Constructive Termination’’ means the occurrence of any of the following events or conditions:
(i) a material diminution in the executive officer’s authority (including, but not limited to, the budget over which the executive retains authority), duties or responsibilities, (ii) the executive officer’s base salary or total incentive compensation opportunity is reduced by ten percent (10%) or more, (iii) a material breach of the executive officer’s ESA, and (iv) the executive officer is required to be based anywhere more than 45 miles from the location of either the executive's office (if other than the Company’s headquarters) or Company’s headquartered offices.
The table below states the multiplier of the sum of annual base salary plus AI plan award at target level used in each NEO's severance formula under a termination without Cause by us or by the NEO for Good Reason as of October 31, 2018.
|
|
|
|
NEO
|
Multiplier – Involuntary
Not for Cause or Good
Reason Termination
|
Multiplier – Change
in Control
|
Troy A. Clarke
(1)
|
200%
|
200%
|
Walter G. Borst
|
200%
|
300%
|
Persio V. Lisboa
|
200%
|
300%
|
William V. McMenamin
|
150%
|
300%
|
Curt A. Kramer
|
150%
|
200%
|
|
|
(1)
|
Mr. Clarke does not have an ESA. Per his Employment Agreement, in the event his employment with the Company is terminated
(i) by the Company without Cause, or (ii) by executive due to Constructive Termination, as defined in his Employment Agreement, then in addition to accrued obligations, he is eligible for the sum of 200% of his base salary plus target annual incentive.
|
Disability and Death:
If an executive officer is disabled and is prevented from working for pay or profit in any job or occupation, he or she may be eligible for our ‘‘Non-Represented Employee Disability Benefit Program’’ which provides for short-term and long-term disability (‘‘LTD’’) benefits. Our executive officers are not covered under a separate program. While covered under LTD, an executive officer is eligible for 60 percent of his or her base salary reduced (or offset) by other sources of income, such as social security disability. In the event of a total and permanent disability as defined by this program, an executive officer may exercise outstanding stock options any time within three years after such termination. In the event an executive officer has restricted stock, or RSUs, the restricted stock or RSUs will continue to vest according to the terms of the grant. In the event an executive officerhas PSUs, vesting accelerates and the shares are issued immediately. In addition, while classified as
disabled, the executive officer continues to accrue benefits under the defined benefit plans.
In the event of an executive officer’s death, a beneficiary of the executive officer may exercise an outstanding stock option at any time within a period of two years after death. Restricted stock, RSUs or PSUs will vest as of the date of death and all restrictions lapse and the restricted stock,
RSUs or PSUs will be immediately transferable to the executive officer’s beneficiary or estate. The executive officer’s beneficiary will also be eligible for a pro-rata payment under the AI plan based upon the number of months the executive officer was an active employee during the year. The executive officer’s beneficiary will also receive surviving spouse benefits under the defined benefit and defined contribution plans solely to the extent provided in those plans.
The table below shows the estimated cash payments that our NEOs would receive if their employment was terminated under various circumstances based on the terms of the plans and agreements that were in effect as of October 31, 2018. For purposes of this table, references to "ESAs" will be deemed to include Mr. Clarke's Employment Agreement.
Estimated Cash Payments Upon Termination
|
|
|
|
|
|
|
|
|
|
NEO
|
Severance
Amount/Cash
Payment
($)
|
Payment Under Non-Qualified Plan ($)
|
Stock
Options
($)
(1)
|
Restricted
Stock/Units
($)
(2)
|
Performance
Units
($)
(3)
|
Benefit
Continuation
($)
(4)
|
Outplacement
Counseling
($)
(5)
|
Total ($)
|
Troy A. Clarke
|
|
|
|
|
|
|
|
|
Without Cause or Good Reason Termination
(6)
|
4,725,000
|
—
|
—
|
1,723,328
|
4,455,000
|
61,803
|
20,000
|
10,985,131
|
Change in Control
(6(11)
|
6,037,500
|
460,764
|
273,383
|
4,924,336
|
7,500,000
|
61,803
|
20,000
|
19,277,786
|
Disability
(7)
|
630,000
|
460,764
|
273,383
|
4,924,336
|
3,196,347
|
—
|
—
|
9,484,830
|
Death
(8)
|
—
|
—
|
273,383
|
4,924,336
|
3,196,347
|
—
|
—
|
8,394,066
|
Voluntary and Involuntary for Cause Termination
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Walter G. Borst
|
|
|
|
|
|
|
|
|
Without Cause or Good Reason Termination
(9)
|
2,703,173
|
—
|
—
|
454,828
|
—
|
45,175
|
20,000
|
3,223,176
|
Change in Control
(10(11)
|
4,634,010
|
284,104
|
127,580
|
2,584,926
|
3,150,000
|
45,175
|
20,000
|
10,845,795
|
Disability
(7)
|
463,401
|
284,104
|
127,580
|
2,584,926
|
1,509,373
|
—
|
—
|
4,969,384
|
Death
(8)
|
—
|
—
|
127,580
|
2,584,926
|
1,509,373
|
—
|
—
|
4,221,879
|
Voluntary and Involuntary for Cause Termination
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Persio V. Lisboa
|
|
|
|
|
|
|
|
|
Without Cause or Good Reason Termination
(9)
|
2,551,500
|
—
|
—
|
171,837
|
—
|
40,968
|
20,000
|
2,784,305
|
Change in Control
(10)11)
|
4,374,000
|
178,628
|
94,550
|
1,712,143
|
2,300,000
|
40,968
|
20,000
|
8,720,289
|
Disability
(7)
|
437,400
|
178,628
|
94,550
|
1,712,143
|
1,116,459
|
—
|
—
|
3,539,180
|
Death
(8)
|
—
|
—
|
94,550
|
1,712,143
|
1,116,459
|
—
|
—
|
2,923,152
|
Voluntary and Involuntary for Cause Termination
|
—
|
—
|
—
|
79,204
|
—
|
—
|
—
|
79,204
|
|
|
|
|
|
|
|
|
|
|
NEO
|
Severance
Amount/Cash
Payment
($)
|
Payment Under Non-Qualified Plan ($)
|
Stock
Options
($)
(1)
|
Restricted
Stock/Units
($)
(2)
|
Performance
Units
($)
(3)
|
Benefit
Continuation
($)
(4)
|
Outplacement
Counseling
($)
(5)
|
Total ($)
|
William V. McMenamin
(12)
|
|
|
|
|
|
|
|
|
Without Cause or Good Reason Termination
(9)
|
1,104,000
|
115,099
|
30,375
|
459,014
|
278,062
|
13,165
|
20,000
|
2,019,715
|
Change in Control
(10(11)
|
2,484,000
|
482,236
|
30,375
|
584,032
|
725,000
|
13,165
|
20,000
|
4,338,808
|
Disability
(7)
|
276,000
|
115,099
|
30,375
|
584,032
|
351,432
|
—
|
—
|
1,356,938
|
Death
(8)
|
—
|
134,232
|
30,375
|
584,032
|
351,432
|
—
|
—
|
1,100,071
|
Voluntary and Involuntary for Cause Termination
|
—
|
115,099
|
—
|
—
|
—
|
—
|
—
|
115,099
|
Curt A. Kramer
|
|
|
|
|
|
|
—
|
|
Without Cause or Good Reason Termination
(9)
|
1,024,860
|
—
|
—
|
—
|
—
|
34,952
|
20,000
|
1,079,812
|
Change in Control
(10(11)
|
1,608,920
|
33,474
|
19,532
|
292,150
|
350,000
|
34,952
|
20,000
|
2,359,028
|
Disability
(7)
|
264,480
|
30,731
|
19,532
|
292,150
|
164,375
|
—
|
—
|
771,268
|
Death
(8)
|
—
|
—
|
19,532
|
292,150
|
164,375
|
—
|
—
|
476,057
|
Voluntary and Involuntary for Cause Termination
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
(1)
|
The amount includes the value of un-vested in-the-money stock options.
The per share value for options is equal to the difference between the option exercise price and the closing price as of the last day of the fiscal year (October 31, 2018), which was $33.49 per share. Please refer to the
Outstanding Equity Awards Table
of this proxy statement for more information on this subject as the amounts in this column represent awards that have already been granted to the NEOs in previous years. The value in the table actually realized by the terminated executive could be higher or lower than what is set forth in the table due to the price at the time the terminated executive exercises the option, if the terminated executive does, in fact timely exercise.
|
|
|
(2)
|
The value of outstanding restricted stock, RSUs or PSUs is based on the October 31, 2018 closing price of $33.49 per share. Please refer to the
Outstanding Equity Awards Table
of this proxy statement for more information on this subject as the amounts in this column represent awards that have already been granted to the NEOs in previous years. Amounts indicated for voluntary and involuntary for Cause termination represent deferred shares that have already been earned.
|
|
|
(3)
|
This amount includes the value of all un-vested cash-settled performance RCUs based on current forecasting models with respect to the attainment of the applicable performance goal. The value to be received is contingent on actual performance achieved.
|
|
|
(4)
|
Benefits include 12 months continued health care coverage with an option to purchase an additional 12 months at the cost of coverage rate. Benefits also include 18 months of continued life insurance coverage for all NEOs (per their ESAs) terminated without Cause, with Good Reason or following a Change in Control.
|
|
|
(5)
|
This amount represents our cost for NEO outplacement counseling and services.
|
|
|
(6)
|
In the event Mr. Clarke’s employment and service with the Company terminate for any reason, including due to his death or disability, Mr. Clarke will be entitled to unpaid and accrued payments and benefits.
|
If Mr. Clark
e’s employment and service with the Company is terminated by the Company without Cause or by Mr. Clarke due to a Constructive Termination, as defined in his Employment Agreement, then in addition to his accrued obligations and the accelerated vesting of his options, subject to Mr. Clarke's execution of a release (without revocation), Mr. Clarke will
be entitled to the following:
|
|
1.
|
A lump sum severance payment equal to 200% of the sum of his base salary and AI target;
|
|
|
2.
|
Twelve months continued health care coverage with an option to purchase an additional 12 months at the cost of coverage rate;
|
|
|
3.
|
24 months continued life insurance coverage;
|
|
|
4.
|
Outplacement services;
|
|
|
5.
|
Retention of any remaining flexible perquisite allowance already paid;
|
|
|
6.
|
Company-paid tax counseling and tax forms preparation services up to and including the taxable year of Mr. Clarke in which the termination occurred; and
|
|
|
7.
|
Pro-rata portion of the earned AI award that would have been payable to Mr. Clarke for the Company’s fiscal year in which the termination occurred, based on actual performance effective October 31
|
If Mr. Clarke’s employment and service with the Company is terminated by the Company without Cause or by Mr. Clarke due to a Constructive Termination, in either case, during the 24 months after the date of the then-most recent "Change in Control" as defined in his Employment Agreement, Mr. Clarke will be entitled to the same benefits referenced above in items 1-7 except with respect to item 7 above, instead of the pro-rata portion of the AI award it will be the pro-rata portion of the target AI award.
|
|
(7)
|
This amount is 60% of annualized base salary as of October 31, 2018 and is not offset by other sources of income, such as Social Security. It represents the amount that would be paid annually over the term of the disability. In addition, the NEOs would be eligible for a SRAP benefit.
|
|
|
(8)
|
Our NEOs participate in our defined contribution plans and a deferred benefit plan that provides a surviving spouse benefit.
|
|
|
(9)
|
This calculation, as described in the ESA, is 150 to 200 percent of the sum of the NEO’s annual base salary plus AI target.
|
|
|
(10)
|
The Change in Control calculation, as defined in the ESA, is 300% of the sum of the executive’s annual base salary plus AI target plus pro-rata AI.
|
|
|
(11)
|
Included in the Payment Under Non-Qualified Plan figure above for Change in Control is the lump sum cash payment equal to the difference in (i) the actuarial present value of the NEOs non-tax qualified pension benefits assuming the executive was 18 months older and had 18 months more of service, over (ii) the actuarial present value of the NEOs' non-tax qualified pension benefits at the date of termination. The lump sum cash payments for Mr. McMenamin is $367,136 and Mr. Kramer is $2,744. The lump sum cash payments for Messrs. Borst and Lisboa are $0 because the vesting of the SRAP under a CIC, which offsets the non-tax qualified pension benefits, offsets the effect of the additional 18 months of age and service.
The lump sum cash payment for Mr. Clarke is $0 as Mr. Clarke's Employment Agreement does not have a provision for this lump sum cash payment. Also included in the Payment Under Non-Qualified Plan figure above for Change in Control, is the value of the SRAP account which immediately vests upon a CIC. For Messrs. Borst and Kramer, the SRAP would be paid as a lump sum and the figure reported is the SRAP account balance which is $284,104 for Mr. Borst and $30,731 for Mr. Kramer. For Messrs. Clarke, Lisboa and McMenamin, the SRAP would be paid as an annuity and the figure reported is the actuarial present value of the SRAP annuity which is $460,764 for Mr. Clarke, $178,628 for Mr. Lisboa, and $115,099 for Mr. McMenamin. The monthly annuities are in the form of 55% Joint & Survivor and a payable for the lifetime of the partcipant to the participant and 55% of the monthly benefit is paid to the spouse following the death of the participant. The monthly benefit amounts are $2,368.80 for Mr. Clarke, $897.32 for Mr. Lisboa and $512.81 for Mr. McMenamin.
|
(12) Mr. McMenamin is retirement eligible under the SRAP plan and therefore is eligible for his SRAP benefit in all termination circumstances.
CEO PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the ratio of the annual total compensation of our median employee to the annual total compensation of our CEO, Mr. Clarke in 2018.
The 2018 annual total compensation of our CEO was $6,923,149. The 2018 annual total compensation of the median employee (excluding our CEO) was $35,951. The resulting ratio of the annual total compensation of our CEO to the annual total compensation of our median employee is 193:1.This ratio is calculated in a manner consistent with the Securities and Exchange Commission rules (the “SEC Rules”), based on our payroll and employment records and the methodology described below.
As permitted by SEC Rules, to identify our median employee, we selected August 31, 2018, which is within the last three months of our 2018 fiscal year, as the date upon which we would identify the median employee. As of that date, the Company and its consolidated subsidiaries employed 13,535 employees in 12 countries. As it represents the principal form of compensation provided to our employees, we selected the year-to-date earnings information which would be recorded in Box 1 of IRS Form W-2 for employees located in the U.S. and the year-to-date earnings information calculated in a substantially similar and consistently applied compensation measure manner
(“CACM”) for employees located in Brazil and Mexico. Using this methodology, we determined that the “median employee” had anomalous compensation characteristics. Therefore, we selected the employee closest to the “median employee” with substantially similar compensation calculated using the CACM and with lower compensation.
The SEC Rules include an exemption which allows companies to exclude non-U.S. employees from the median employee calculation if the non-U.S. employees in a specific country comprise five percent (5%) or less of the company’s total number of employees. We applied this de minimus exemption in determining the median employee which resulted in the exclusion of 311 employees located in Argentina, Australia, Canada, China, Dubai, Germany, India, South Africa, and the United Kingdom.
The SEC Rules for identifying the “median employee” and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the ratios reported by other companies may not be comparable to the ratio set forth above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Compensation Risk
The Company performed, and the Compensation Committee reviewed, a risk assessment to determine whether our compensation policies, practices, plans and programs were ‘‘reasonably likely to have a materially adverse effect’’ on the Company. Approximately thirty compensation-related topics were reviewed during 2018, including but not limited to, programs governed by the 2013 PIP. A matrix was created for management's use that summarized the program reviewed, as well as associated mitigating factors. Management discussed the analysis internally and with our compensation consultant, and discussed final results with the Compensation Committee. The Company and the Compensation Committee believe that the following are factors that mitigate the likelihood of excessive risk taking.
|
|
|
General Description
|
•
Compensation Committee approval of overall compensation philosophy and plan design
•
Compensation mix of base salary, short-term and long-term incentives
•
Market competitive analysis conducted using the comparator group
•
Market analysis based on individual job
|
Executive Stock Ownership Plan
|
•
Aligns executives' interests with stockholders
•
Ownership requirement of 1x base pay for executives, 3x base pay for senior executives and 6x base pay for CEO
•
Holding periods for at least 1 year following the vesting date of equity awards; even after ownership requirements have been attained
|
2018 Annual Incentive Plan
|
•
Design focused on four key financial performance metrics enabling our strategy and driving
results for our employees, customers and stockholders
•
Individual Performance Factor applies to only a small percentage of employees
|
2018 Long-Term Incentive Awards
|
•
Performance-based equity awards are made at the discretion of the Compensation Committee and are intended to focus participants on the long-term growth of the Company
•
LTI awards are calculated based on actual grant date values
•
LTI values primarily based upon external market data
|
Executive Severance Agreements ("ESAs")
|
•
The Change-in-Control definition in our ESAs excludes funds affiliated with designated board members
•
Good Reason in our ESAs requires a decrease in the executive’s organizational level or a change to his or her reporting structure that requires the executive to report to a supervisor whose organizational level is below the executive’s current organizational level
•
Agreement period post Change in Control is to eighteen
months
•
The agreement is automatically extended annually for successive one-year periods starting on the first anniversary of the Effective Date and on each subsequent anniversary of the Effective Date.
|
Other Controls and Procedures
|
•
Capital expenditure approval policies and procedures that control the possibility of engaging in unintended risk
•
Sarbanes Oxley / Internal Controls procedures and processes adopted by the Company
•
Claw
-
back policy that requires the repayment of short-and long-term incentive
-
based compensation as a result of a financial restatement or intentional misconduct
|