def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
METHODE ELECTRONICS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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previous filing by registration statement number, or the Form or Schedule and the date of its
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METHODE
ELECTRONICS, INC.
7401 West Wilson Avenue
Chicago, Illinois 60706
(708) 867-6777
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
September 13,
2007
To the Stockholders of Methode Electronics, Inc.:
Notice is hereby given that an annual meeting of stockholders of
Methode Electronics, Inc. will be held on Thursday,
September 13, 2007 at 11:00 a.m., Chicago time, at the
Hyatt Rosemont Hotel, 6350 North River Road, Rosemont, Illinois,
for the following purposes:
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1.
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To elect a board of directors;
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2.
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To ratify the Audit Committees selection of
Ernst & Young LLP to serve as our independent
registered public accounting firm for the fiscal year ending
May 3, 2008;
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3.
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To approve the Methode Electronics, Inc. 2007 Cash Incentive
Plan;
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4.
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To approve the Methode Electronics, Inc. 2007 Stock
Plan; and
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5.
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To transact such other business as may properly come before the
annual meeting or any adjournment or postponement thereof.
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Our board of directors has fixed the close of business on
July 26, 2007 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
meeting and at any adjournment or postponement thereof.
It is important that your shares be represented and voted at the
annual meeting. Whether or not you plan to attend the annual
meeting, please complete, sign, date and mail the accompanying
proxy card in the enclosed self-addressed, stamped envelope, or
deliver your proxy by telephone or the Internet in accordance
with the instructions provided. We respectfully request your
cooperation.
By Order of the Board of Directors
Warren L. Batts
Chairman
August 10, 2007
Proxy
Statement for the
Annual Meeting of Stockholders of
METHODE ELECTRONICS, INC
To be held on Thursday, September 13, 2007
TABLE
OF CONTENTS
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Section
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Page
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2
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5
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11
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11
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14
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20
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27
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31
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37
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A-1
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B-1
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METHODE
ELECTRONICS, INC.
7401 West Wilson Avenue
Chicago, Illinois 60706
(708) 867-6777
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
September 13, 2007
GENERAL
INFORMATION
The enclosed proxy is solicited on behalf of Methode
Electronics, Inc. (Methode) in connection with an
annual meeting of our stockholders to be held on Thursday,
September 13, 2007 at 11:00 a.m., Chicago time, at the
Hyatt Rosemont Hotel, 6350 North River Road, Rosemont, Illinois,
and at any adjournment or postponement of the annual meeting.
At the annual meeting, we will ask our stockholders to elect our
board of directors, to ratify the Audit Committees
selection of Ernst & Young LLP
(Ernst & Young) to serve as our
independent registered public accounting firm for the 2008
fiscal year, to approve the Methode Electronics, Inc. 2007 Cash
Incentive Plan (the Cash Plan) and to approve the
Methode Electronics, Inc. 2007 Stock Plan (the Stock
Plan).
This proxy statement and the accompanying proxy card are first
being mailed to our stockholders on or about August 10,
2007.
Record
Date; Shares Outstanding
Our board of directors has fixed the close of business on
July 26, 2007 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
meeting and at any adjournment or postponement thereof. As of
the record date, there were 37,425,511 shares of our common
stock outstanding and entitled to vote at the annual meeting.
Quorum;
Votes Required
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of our common stock is
necessary to constitute a quorum at the annual meeting. Both
abstentions and broker non-votes are counted as present for the
purpose of determining the presence of a quorum at the annual
meeting. Generally, broker non-votes occur when shares held by a
broker or nominee for a beneficial owner are not voted with
respect to a particular proposal because the broker or nominee
has not received voting instructions from the beneficial owner
and the broker or nominee lacks discretionary power to vote such
shares.
At the annual meeting, each holder of common stock will be
entitled to one vote per share. The election of our board of
directors, the ratification of the selection of our independent
registered public accounting firm and the approval of the Cash
Plan and the Stock Plan require approval by a majority of the
shares of common stock represented at the meeting and entitled
to vote, assuming a quorum is present. Both abstentions and
broker non-votes will be considered as present but will not be
considered as votes in favor of any matter. However, broker
non-votes are excluded from the for,
against and abstain counts, and instead
are reported as simply broker non-votes.
Consequently, abstentions have the effect of voting against the
election of directors, the ratification of the selection of our
independent registered public accounting firm and approval of
the Cash Plan and the Stock Plan, while broker non-votes have no
effect as to voting for or against any such matter.
Voting
Procedures
It is important that your shares be represented and voted at the
annual meeting. Whether or not you plan to attend the annual
meeting, please complete, sign, date and mail the accompanying
proxy card in the enclosed self-addressed, stamped envelope, or
deliver your proxy by telephone or the Internet. In order to
grant a proxy by Internet, go to www.proxyvote.com and
enter your individual
12-digit
control number found on your proxy card in order to obtain your
records and to create an electronic voting instruction form. In
order to grant a proxy by
telephone, call
1-800-690-6903
and enter your individual
12-digit
control number found on your proxy card and then follow the
instructions given over the telephone. You may grant your proxy
by Internet or by telephone up until
11:59 p.m. Eastern Time the day before the annual
meeting date. Please do not submit a proxy card if you delivered
your proxy by telephone or the Internet unless you intend to
change your voting instructions.
If you return a proxy without direction, the proxy will be voted
FOR the election of all nine director nominees,
FOR the ratification of the selection of
Ernst & Young, FOR the approval of the
Cash Plan and FOR the approval of the Stock Plan.
Revoking
Your Proxy
If you decide to change your vote, you may revoke your proxy at
any time before the annual meeting. You may revoke your proxy by
notifying our Corporate Secretary in writing that you wish to
revoke your proxy at the following address: Methode Electronics,
Inc., 7401 West Wilson Avenue, Chicago, Illinois 60706,
attention Corporate Secretary. You may also revoke your proxy by
submitting a later-dated and properly executed proxy (including
by means of the telephone or Internet) or by voting in person at
the annual meeting. Attendance at the annual meeting will not,
by itself, revoke a proxy.
Proxy
Solicitation Expenses
We will bear the entire cost of the solicitation of proxies,
including preparation, assembly, printing and mailing of this
proxy statement, the proxy card and any additional information
furnished to stockholders. Copies of solicitation materials will
be furnished to banks, brokerage houses, fiduciaries and
custodians holding shares of our common stock beneficially owned
by others to be forwarded to such beneficial owners. We will
reimburse such persons for their reasonable costs of forwarding
solicitation materials to such beneficial owners. Our directors,
officers or other regular employees may solicit proxies by
telephone, by
e-mail, by
fax or in person. No additional compensation will be paid to
directors, officers and other regular employees for such
services.
CORPORATE
GOVERNANCE
We are committed to maintaining high standards of corporate
governance intended to serve the long-term interests of Methode,
our stockholders and our employees.
Director
Independence
Our board of directors has considered the independence of its
members under the applicable standards of the Securities and
Exchange Commission and the Nasdaq Stock Market. Our board has
determined that all of our current directors are independent
under those standards, except for Donald Duda, our President and
Chief Executive Officer. Mr. Dudas lack of
independence relates solely to his present service as an
executive officer and is not due to any other transactions or
relationships.
In addition, our board of directors has determined that each
current member of our Audit Committee, our Compensation
Committee, our Nominating and Governance Committee and our
Technology Committee satisfies the independence requirements of
the applicable standards, if any, of the Securities and Exchange
Commission and the Nasdaq Stock Market.
2
Board
Committees
The following chart sets forth the committees of our board:
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Number of
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Meetings in
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Committee
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Members
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Principal Functions
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Fiscal 2007
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Audit
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Lawrence B. Skatoff (Chair)
Isabelle C. Goossen
Paul G. Shelton
George S. Spindler
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Oversees accounting and
financial reporting and audits of financial statements.
Monitors performance of internal audit function and
our system of internal control.
Monitors performance, qualifications and
independence of our independent registered public accounting
firm and makes decisions regarding retention, termination and
compensation of the independent registered public accounting
firm and approves services provided by the independent
registered public accounting firm.
Monitors compliance with legal and regulatory
requirements, including our Code of Business Conduct.
Reviews our press releases and certain Securities
and Exchange Commission filings.
Reviews related party transactions and potential
conflict of interest situations.
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Compensation
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Paul G. Shelton (Chair)
Warren L. Batts
Darren M. Dawson
Isabelle C. Goossen
Christopher J. Hornung
George S. Spindler
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Oversees our
compensation policies and plans.
Approves goals and incentives for the compensation
of our Chief Executive Officer and with the advice of
management, other officers and managers.
Approves grants under our stock plans.
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Nominating and Governance
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Christopher J. Hornung
(Chair)
Warren L. Batts
J. Edward Colgate
Lawrence B. Skatoff
George S. Spindler
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Selects director
candidates for election to our board at the annual meeting or to
fill vacancies.
Recommends board committee assignments.
Recommends compensation and benefits for
directors.
Reviews our Corporate Governance Guidelines.
Conducts an annual assessment of board
performance.
Annually reviews succession planning for our Chief
Executive Officer.
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Technology
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Darren M. Dawson (Chair)
J. Edward Colgate
Isabelle C. Goossen
Christopher J. Hornung
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Reviews with management
our technology assets and future needs.
Reviews technology research and development
activities and possible acquisitions of technology.
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During the 2007 fiscal year, our board of directors held 12
meetings and no director attended less than 75% of the aggregate
of the total number of meetings of our board and the total
number of meetings held by the respective committees on which he
or she served. Under our Corporate Governance Guidelines, our
directors are expected to attend board and stockholder meetings
and meetings of committees on which they serve and to meet as
frequently as necessary to properly discharge their
responsibilities.
Our independent directors hold regularly scheduled executive
sessions at which only independent directors are present.
Pursuant to our Corporate Governance Guidelines, our Chairman of
the Board is the Presiding Director of such sessions.
Our Audit, Compensation, Nominating and Governance and
Technology Committees operate pursuant to charters adopted by
the board, which may be found on our website at
www.methode.com.
3
Nominating
Process of the Nominating and Governance Committee
Our Nominating and Governance Committee is responsible for
identifying and recommending to our board of directors
individuals qualified to become directors consistent with
criteria approved by our board. In considering potential
candidates for our board, including with respect to nominations
for re-election of incumbent directors, the Committee considers
the potential candidates integrity and business ethics;
strength of character, judgment and experience, consistent with
our needs; specific areas of expertise and leadership roles; and
the ability to bring diversity to our board. The Committee also
considers the ability of the individual to allocate the time
necessary to carry out the tasks of board membership, including
membership on appropriate committees. No person may be nominated
for election as a director after his or her 75th birthday.
The Committee identifies potential nominees by asking current
directors and others to notify the Committee if they become
aware of persons, meeting the criteria described above, who may
be available to serve on our board. The Committee has sole
authority to retain and terminate any search firm used to
identify director candidates and has sole authority to approve
the search firms fees and other retention terms.
Historically, the Committee has not engaged third parties to
assist in identifying and evaluating potential nominees, but
would do so in those situations where particular qualifications
are required to fill a vacancy and our boards contacts are
not sufficient to identify an appropriate candidate.
The Committee will consider suggestions from our stockholders.
Any recommendations received from stockholders will be evaluated
in the same manner that potential nominees suggested by board
members are evaluated. Upon receiving a stockholder
recommendation, the Committee will initially determine the need
for additional or replacement board members and evaluate the
candidate based on the information the Committee receives with
the stockholder recommendation or may otherwise acquire, and,
may, in its discretion, consult with the other members of our
board. If the Committee determines that a more comprehensive
evaluation is warranted, the Committee may obtain additional
information about the director candidates background and
experience, including by means of interviews with the candidate.
Our stockholders may recommend candidates at any time, but the
Committee requires recommendations for election at an annual
meeting of stockholders to be submitted to the Committee no
later than 120 days before the first anniversary of the
date of the proxy statement sent to stockholders in connection
with the previous years annual meeting. The Committee
believes this deadline is appropriate and in the best interests
of Methode and our stockholders because it ensures that the
Committee has sufficient time to properly evaluate all proposed
candidates. Therefore, to submit a candidate for consideration
for nomination at the 2008 annual meeting of stockholders, a
stockholder must submit the recommendation, in writing, by
April 12, 2008. The written notice must include:
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the name, age, business address and residential address of each
proposed nominee and the principal occupation or employment of
each nominee;
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the number of shares of our common stock that each nominee
beneficially owns;
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a statement that each nominee is willing to be
nominated; and
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any other information concerning each nominee that would be
required under the rules of the Securities and Exchange
Commission in a proxy statement soliciting proxies for the
election of those nominees.
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Recommendations must be sent to the Nominating and Governance
Committee, Methode Electronics, Inc., 7401 West Wilson
Avenue, Chicago, Illinois 60706.
Communications
with Directors
Our annual meeting of stockholders provides an opportunity each
year for stockholders to ask questions of, or otherwise
communicate directly with, members of our board of directors on
appropriate matters. All of our directors attended the 2006
annual meeting. We anticipate that all of our directors will
attend the 2007 annual meeting.
In addition, stockholders may, at any time, communicate in
writing with any particular director, or independent directors
as a group, by sending such written communication to the
Corporate Secretary of Methode Electronics, Inc. at
7401 West Wilson Avenue, Chicago, Illinois 60706. Copies of
written communications received at such
4
address will be provided to the relevant director or the
independent directors as a group unless such communications are
considered, in the reasonable judgment of the Corporate
Secretary, to be improper for submission to the intended
recipient(s). Examples of stockholder communications that would
be considered improper for submission include, without
limitation, customer complaints, solicitations, communications
that do not relate directly or indirectly to us or our business
or communications that relate to other improper or irrelevant
topics.
Codes of
Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct
and Ethics for members of our board of directors, as well as a
Code of Business Conduct that applies to our principal executive
officer, principal financial officer, principal accounting
officer or controller and persons performing similar functions,
as well as other employees. The codes may be found on our
website at www.methode.com.
If we make any substantive amendments to the Code of Business
Conduct or grant any waiver, including any implicit waiver, from
a provision of the Code of Business Conduct to our principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions, we will disclose the nature of such amendment or
waiver on our website or in a report on
Form 8-K
in accordance with applicable rules and regulations.
DIRECTOR
COMPENSATION
We use a combination of cash and restricted stock to compensate
our non-employee directors. Directors who are also our full-time
employees are not paid for their services as directors or for
attendance at meetings.
For the fiscal year ended April 28, 2007, non-employee
directors are entitled to receive an annual cash retainer of
$35,000 and an attendance fee of $1,000 for each special board
meeting and all committee meetings. Our Chairman of the Board
and the Chairman of each of our board committees received
supplemental annual retainers in the following amounts: Chairman
of the Board, $25,000; Chairman of the Audit Committee, $20,000;
and Chairman of each of our Compensation Committee, Nominating
and Governance Committee and Technology Committee, $10,000. In
addition, members of our Audit Committee receive an additional
annual retainer of $10,000. Pursuant to our Deferred
Compensation Plan, our directors may elect to defer up to 100%
of their retainers and attendance fees per year. Additional
information regarding the Deferred Compensation Plan is
described under the Nonqualified Deferred
Compensation section in this proxy statement.
In August 2006, each non-employee director received a grant of
3,000 shares of restricted stock. Directors receive
dividends on restricted stock subject to forfeiture. The
restrictions on the restricted stock awards lapse ratably over
three years. Generally, these awards become fully vested if a
directors service on the board is terminated due to
retirement on or after age 65, retirement on or after
age 55 with our consent, retirement at any age on account
of total and permanent disability, or death.
The following table sets forth certain information regarding
compensation to our non-employee directors during the fiscal
year ended April 28, 2007.
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Fees Earned or
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Stock Awards
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All Other
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Paid in Cash
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Compensation
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Total
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($)
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($)
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($)(3)
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($)
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Warren L. Batts
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78,000
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42,075
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1,000
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121,075
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J. Edward Colgate
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61,000
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28,026
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948
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89,974
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Darren M. Dawson
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56,000
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28,844
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1,000
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85,844
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Isabelle C. Goossen
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71,000
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28,844
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1,000
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100,844
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Christopher J. Hornung
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72,000
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29,947
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1,071
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103,018
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Paul G. Shelton
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75,000
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29,947
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1,071
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106,018
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Lawrence B. Skatoff
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74,000
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43,178
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1,071
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118,249
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George S. Spindler
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66,000
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42,607
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1,034
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109,642
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These amounts reflect the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended
April 28, 2007 in accordance with Statement of Financial
Accounting Standards No. 123 (SFAS No. 123(R)),
and include amounts from awards granted in and prior to fiscal
2007. Under SFAS No. 123(R), the fair value of these
awards is recognized ratably over the vesting period. Details of
the assumptions used in valuing these awards are set forth in
Note 4 to our audited financial statements included in our
Annual Report on
Form 10-K
for the fiscal year ended April 28, 2007. |
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As of April 28, 2007, each director held the following
number of vested restricted stock awards: Mr. Batts,
6,000 shares; Mr. Colgate, 5,370 shares;
Mr. Dawson, 6,000 shares; Ms. Goossen,
6,000 shares; Mr. Hornung, 6,850 shares;
Mr. Shelton, 6,850 shares; Mr. Skatoff,
6,850 shares; and Mr. Spindler, 6,410 shares. In
addition, each director held 3,000 shares of unvested
restricted stock. During fiscal 2007, each non-employee was
granted a restricted stock award for 3,000 shares of common
stock. The grant date fair value of each of these equity awards
as computed in accordance with SFAS No. 123(R) is
$22,920. As of April 28, 2007, Mr. Batts held a vested
stock option with respect to 10,000 shares of common stock. |
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Amounts reflect dividends paid with respect to outstanding
restricted stock awards. |
SECURITY
OWNERSHIP
Five
Percent Stockholders
The following table sets forth information regarding all persons
known to be the beneficial owners of more than 5% of
Methodes common stock as of July 13, 2007 (except as
set forth in the relevant footnotes).
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Number of Shares and
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Nature of Beneficial
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Percent of
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Name and Address of Beneficial Owner
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Title of Class
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Ownership(1)
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Class(2)
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Barclays Global Investors, N.A.(3)
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Common Stock
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3,733,263
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9.9%
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45 Fremont Street
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San Francisco, California
94105
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Royce & Associates, LLC(4)
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Common Stock
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2,484,255
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6.6%
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1414 Avenue of the Americas
New York, New York 10019
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T. Rowe Price Associates, Inc.(5)
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|
|
Common Stock
|
|
|
|
2,403,850
|
|
|
|
6.3%
|
|
100 East Pratt Street
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore, Maryland 21202
|
|
|
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP(6)
|
|
|
Common Stock
|
|
|
|
2,118,385
|
|
|
|
5.6%
|
|
1299 Ocean Avenue
Santa Monica, California 90401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Beneficial ownership arises from sole voting and sole investment
power of all shares reported unless otherwise indicated by
footnote. |
|
(2) |
|
Based on 37,347,192 shares of common stock outstanding as
of July 13, 2007. |
|
(3) |
|
Based solely on an amendment to Schedule 13G filed by
Barclays Global Investors, N.A. and related entities with the
Securities and Exchange Commission on May 10, 2007. Sole
voting power was reported with respect to 3,533,633 shares
and no voting power was reported with respect to
199,630 shares. |
|
(4) |
|
Based solely on a Schedule 13G filed by Royce &
Associates, LLC with the Securities and Exchange Commission on
January 23, 2007. |
|
(5) |
|
Based solely on an amendment to Schedule 13G filed by T.
Rowe Price Associates, Inc. with the Securities and Exchange
Commission on February 13, 2007. Sole voting power was
reported with respect to 587,700 shares and no voting power
was reported with respect to 1,816,150 shares. |
|
(6) |
|
Based solely on an amendment to Schedule 13G filed by
Dimensional Fund Advisors LP with the Securities and Exchange
Commission on February 9, 2007. |
6
Directors
and Executive Officers
The following table sets forth information regarding our common
stock beneficially owned as of July 13, 2007 by
(i) each director and nominee, (ii) each of the named
executive officers, and (iii) all current directors and
executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares and
|
|
|
|
|
|
|
|
|
Nature of Beneficial
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Title of Class
|
|
|
Ownership(1)
|
|
Class
|
|
|
Warren L. Batts
|
|
|
Common Stock
|
|
|
|
33,000(2)
|
|
|
*
|
|
J. Edward Colgate
|
|
|
Common Stock
|
|
|
|
8,370(3)
|
|
|
*
|
|
Darren M. Dawson
|
|
|
Common Stock
|
|
|
|
9,000(3)
|
|
|
*
|
|
Donald W. Duda
|
|
|
Common Stock
|
|
|
|
559,887(4)
|
|
|
1.5%
|
|
Isabelle C. Goossen
|
|
|
Common Stock
|
|
|
|
9,000(3)
|
|
|
*
|
|
Christopher J. Hornung
|
|
|
Common Stock
|
|
|
|
29,850(3)
|
|
|
*
|
|
Paul G. Shelton
|
|
|
Common Stock
|
|
|
|
18,850(3)
|
|
|
*
|
|
Lawrence B. Skatoff
|
|
|
Common Stock
|
|
|
|
10,850(3)
|
|
|
*
|
|
George S. Spindler
|
|
|
Common Stock
|
|
|
|
19,410(3)
|
|
|
*
|
|
Douglas A. Koman
|
|
|
Common Stock
|
|
|
|
239,698(5)
|
|
|
*
|
|
Robert J. Kuehnau**
|
|
|
Common Stock
|
|
|
|
52,145(6)
|
|
|
*
|
|
Thomas D. Reynolds
|
|
|
Common Stock
|
|
|
|
168,304(7)
|
|
|
*
|
|
Timothy R. Glandon
|
|
|
Common Stock
|
|
|
|
25,700(8)
|
|
|
*
|
|
All current directors and
executive officers as a group (15 individuals)
|
|
|
Common Stock
|
|
|
|
1,263,129(9)
|
|
|
3.3%
|
|
|
|
|
|
*
|
Percentage represents less than 1% of the total shares of common
stock outstanding as of July 13, 2007.
|
|
|
|
|
**
|
Mr. Kuehnau resigned as an executive officer effective
April 27, 2007.
|
|
|
|
|
(1)
|
Beneficial ownership arises from sole voting and investment
power unless otherwise indicated in the footnotes below.
|
|
|
(2)
|
Includes 3,000 shares of restricted stock subject to
forfeiture and options to purchase 10,000 shares of common
stock exercisable within 60 days.
|
|
|
(3)
|
Includes 3,000 shares of restricted stock subject to
forfeiture. For Messrs. Batts, Skatoff and Spindler, these
shares will automatically vest in the event of their retirement
from the Board.
|
|
|
(4)
|
Includes 225,060 shares of restricted stock subject to
forfeiture, options to purchase 25,000 shares of common
stock exercisable within 60 days, and 13,724 shares of
common stock held in our 401(k) Plan.
|
|
|
(5)
|
Includes 46,000 shares of restricted stock subject to
forfeiture, options to purchase 8,750 shares of common
stock exercisable within 60 days, and 12,456 shares of
common stock held in our 401(k) Plan.
|
|
|
(6)
|
Includes 26,215 shares of restricted stock subject to
forfeiture and 9,007 shares of common stock held in our
401(k) Plan.
|
|
|
(7)
|
Includes 70,000 shares of restricted stock subject to
forfeiture, options to purchase 7,500 shares of common
stock exercisable within 60 days and 10,504 shares of
common stock held in our 401(k) Plan.
|
|
|
(8)
|
Includes 21,599 shares of restricted stock subject to
forfeiture.
|
|
|
(9)
|
Includes 447,314 shares of restricted stock subject to
forfeiture, options to purchase 41,250 shares of common
stock exercisable within 60 days, and 52,111 shares of
common stock held in our 401(k) Plan.
|
7
PROPOSAL ONE:
ELECTION OF DIRECTORS
A board of nine directors will be elected at the annual meeting.
Each director will hold office until the next annual meeting of
stockholders and until his or her successor is elected and
qualified. All of the nominees listed below currently serve as
our directors, were recommended unanimously to our board of
directors by our Nominating and Governance Committee, and were
nominated by our board of directors. The shares represented by
the proxies given pursuant to this solicitation will be voted
for the following nominees unless votes are withheld in
accordance with the instructions contained in the proxy. If any
of these nominees is not a candidate for election at the annual
meeting, an event which our board of directors does not
anticipate, the proxies will be voted for a substitute nominee
recommended to our board of directors by our Nominating and
Governance Committee and nominated by our board of directors.
Our board of directors recommends a vote FOR the
election of the following nominees.
|
|
|
|
|
Warren L. Batts
Retired Chairman and Chief Executive Officer,
Tupperware Corporation
Director since 2001
Age 74
Mr. Batts is the retired Chairman and Chief Executive
Officer of Tupperware Corporation, a diversified consumer
products company. In 1997, Mr. Batts retired as Chairman of
Premark International, Inc., a diversified consumer products
company, where he also served as Chief Executive Officer from
1986 until 1996. Mr. Batts has taught as an Adjunct
Professor of Strategic Management at the University of Chicago
Graduate School of Business since 1998. Mr. Batts has also
served as a director and the Chairman of Chicago Childrens
Memorial Medical Center; a life trustee for the Art Institute of
Chicago; a director and the Chairman of the National Association
of Manufacturers; and a director of the National Association of
Corporate Directors. |
|
|
|
|
Dr. J. Edward Colgate
Pentair-Nugent Professor,
Department of Mechanical Engineering,
Northwestern University
Director since 2004
Age 44
Dr. Colgate is currently a Professor in the Department of
Mechanical Engineering and the Founding Director of the
Institute for Design Engineering and Applications at
Northwestern University, where he has served in various
professor positions since 1988. From June 1999 until September
2000, Dr. Colgate took a sabbatical leave from Northwestern
University to serve as a founder and the President of Cobotics,
Inc., which is now part of Stanley Assembly Technologies, a
supplier of human interface technologies for the industrial
marketplace. His research interests include human-machine
systems, especially cobotics and haptic interface.
Dr. Colgate is currently the holder of the Pentair-Nugent
Teaching Professorship, and
co-Director
of the newly formed Segal Design Institute. |
8
|
|
|
|
|
Dr. Darren M. Dawson
Professor,
Electrical and Computer Engineering Department,
Clemson University
Director since 2004
Age 44
Dr. Dawson currently serves as a Professor in the
Electrical and Computer Engineering Department at Clemson
University, where he has held various professor positions since
1990. Dr. Dawson leads the Robotics and Mechatronics
Laboratory, which is jointly operated by the Electrical and
Mechanical Departments. His research interests include nonlinear
control techniques for mechatronic systems, robotic manipulator
systems and vision-based systems. Dr. Dawsons work
has been recognized by several awards, including the Clemson
University Centennial Professorship in 2000.
|
|
|
|
|
|
Donald W. Duda
Chief Executive Officer and President,
Methode Electronics, Inc.
Director since 2001
Age 52
Mr. Duda has served as our Chief Executive Officer since
May 2004 and our President since 2001. Mr. Duda joined us
in 2000 and served as our Vice President
Interconnect Products Group. Prior to his service with us,
Mr. Duda held several positions with Amphenol Corporation,
a manufacturer of electronic connectors, most recently as
General Manager of its Fiber Optic Products Division from 1988
through 1998.
|
|
|
|
|
|
Isabelle C. Goossen
Vice President for Finance and Administration,
Chicago Symphony Orchestra Association
Director since 2004
Age 55
Ms. Goossen has served as the Vice President for Finance
and Administration for the Chicago Symphony Orchestra
Association since 2001. From 1986 through 1999, Ms. Goossen
held several management positions with Premark International,
Inc., a diversified consumer products company, most recently as
Vice President and Treasurer from 1996 through 1999.
|
|
|
|
|
|
Christopher J. Hornung
President, Pacific Cycle Division,
Dorel Industries, Inc.
Director since 2004
Age 55
Mr. Hornung has served as Chief Executive Officer of Next
Testing, Inc. since January 2007. Next Testing provides
comprehensive, sport-specific athletic testing programs. From
February 2004 through December 2006, Mr. Hornung served as
President of the Pacific Cycle Division of Dorel Industries,
Inc., a global consumer products company. Prior to the
acquisition of Pacific Cycle by Dorel Industries Inc.,
Mr. Hornung served as the Chairman and Chief Executive
Officer of Pacific Cycle.
|
9
|
|
|
|
|
Paul G. Shelton
Retired Vice President and Chief Financial Officer,
FleetPride, Inc.
Director since 2004
Age 57
Mr. Shelton retired in 2003 as Vice President and Chief
Financial Officer of FleetPride Inc., an independent heavy-duty
truck parts distributor. From 1981 through 2001,
Mr. Shelton served in various management positions at AMCOL
International Corporation, a supplier of specialty minerals and
chemicals, most recently as Senior Vice President from 1995
through 2001 and Chief Financial Officer from 1984 through 2001.
Mr. Shelton also served on the board of directors of AMCOL
International Corporation for 12 years.
|
|
|
|
|
|
Lawrence B. Skatoff
Retired Executive Vice President and Chief Financial Officer,
BorgWarner Inc.
Director since 2004
Age 67
Mr. Skatoff retired in 2001 as Executive Vice President and
Chief Financial Officer of BorgWarner Inc., a manufacturer of
highly engineered systems and components for the automotive
industry. Prior to joining BorgWarner Inc., Mr. Skatoff was
Senior Vice President and Chief Financial Officer of Premark
International, Inc., a diversified consumer products company,
from 1991 through 1999. Before joining Premark, Mr. Skatoff
was Vice President-Finance of Monsanto Company, a worldwide
manufacturer of chemicals and pharmaceuticals.
|
|
|
|
|
|
George S. Spindler
Retired Senior Vice President, Law and Corporate Affairs,
BP Amoco Corporation
Director since 2004
Age 69
Mr. Spindler retired in 1999 as Senior Vice President, Law
and Corporate Affairs, for BP Amoco Corporation, a provider of
oil, gas and renewable energy sources. Mr. Spindler joined
Amoco Corporation as an engineer in 1961 and, after completion
of his law degree in 1966, served in various legal and
management roles until his retirement. From 1999 to 2006,
Mr. Spindler taught as an Adjunct Professor of Strategic
Management at the University of Chicago Graduate School of
Business.
|
10
PROPOSAL 2:
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our board of directors has selected
Ernst & Young to serve as our independent registered
public accounting firm for the fiscal year ending May 3,
2008, subject to ratification of the selection by our
stockholders. Ernst & Young has served as our
independent registered public accounting firm for many years and
is considered to be well qualified. We entered into an
engagement agreement with Ernst & Young for its fiscal
2007 services, which, among other things, contains contractual
provisions that subject us to alternative dispute resolution
procedures and exclude punitive damages from any monetary award.
It is anticipated that the services performed by
Ernst & Young for fiscal 2008 will be subject to a
similar engagement agreement.
Representatives of Ernst & Young will be present at
the annual meeting, will have the opportunity to make a
statement and will be available to respond to appropriate
questions.
If our stockholders do not ratify the selection of
Ernst & Young, our Audit Committee will reconsider the
selection. Even if the selection is ratified, our Audit
Committee may select a different independent registered public
accounting firm at any time during the year if it determines
that a change would be in the best interests of Methode and our
stockholders.
Our board of directors recommends a vote FOR the
ratification of our audit committees selection of
Ernst & Young as our independent registered public
accounting firm.
PROPOSAL 3:
APPROVAL OF THE
METHODE ELECTRONICS, INC. 2007 CASH INCENTIVE PLAN
On June 21, 2007, our board of directors, on the
recommendation of our Compensation Committee and subject to
stockholder approval, adopted the Methode Electronics, Inc. 2007
Cash Incentive Plan (the Cash Plan) to provide
incentives for senior management to improve company performance
and increase value for stockholders.
The Cash Plan is designed to provide performance-based
compensation under Section 162(m) of the Internal
Revenue Code of 1986 (the Code), as amended.
Section 162(m), as clarified by recent guidance from the
Internal Revenue Service, generally denies corporate tax
deductions for annual compensation exceeding $1 million
paid to certain employees, generally the chief executive officer
and the three other most highly compensated executive officers
of a public company, but excluding the chief financial officer.
Certain types of compensation, including performance-based
compensation, are excluded from this deduction limit. In order
for compensation to qualify as performance-based,
the compensation may be paid only when the officers reach
performance goals that include certain performance criteria
approved by our stockholders, among other requirements. By
approving the Cash Plan, you will be approving the performance
criteria, eligibility requirements and annual incentive award
limits under the Cash Plan, among other things. Upon stockholder
approval, we believe that qualified awards payable pursuant to
the Cash Plan will be deductible for federal income tax purposes
under most circumstances, but there can be no assurance in this
regard.
Summary
of the Cash Plan
The principal features of the Cash Plan are summarized below.
This summary does not contain all information about the Cash
Plan. A copy of the complete text of the Cash Plan is included
in Appendix A to this proxy statement, and the following
description is qualified in its entirety by reference to the
text of the Cash Plan.
Administration. Our Compensation Committee is
responsible for administering the Cash Plan. Each current member
of our Compensation Committee is an outside director
for purposes of Section 162(m). Our Compensation Committee
has full and exclusive discretionary power to interpret the
terms of the Cash Plan, to determine eligibility for awards, and
to adopt rules, forms and guidelines.
Eligibility. Our Compensation Committee may
grant awards under the Cash Plan to present and future officers
and other key employees of Methode or any subsidiary.
11
Terms of the Awards. Our Compensation
Committee will determine the amounts and terms of each award,
including the performance criteria, performance goals and
performance period. Our Compensation Committee currently
anticipates awarding annual performance-based bonuses and
restricted stock award (RSA) tandem cash bonuses
pursuant to the Cash Plan. For additional information regarding
these awards, please see Fiscal 2008 Awards below
and the Compensation Discussion and Analysis section
in this proxy statement.
All awards under the Cash Plan will be payable in cash and may
be paid following the close of the performance period or receipt
of the awards may be deferred by the employee, subject to
certain deferral rules. Our Compensation Committee may establish
different levels of payment under an award to correspond with
different levels of achievement of performance goals specified
in the award. No payment will be made unless and until our
Compensation Committee has certified in writing that the
applicable performance objectives have been attained. For awards
other than RSA tandem cash bonuses, the maximum aggregate award
that an employee may receive in any one calendar year may not
exceed two times the employees annual salary (as listed on
the Summary Compensation Table in our annual proxy statement).
For RSA tandem cash bonuses, the value of the award may not
exceed 50% of the aggregate fair market value as of the vesting
date of the tandem restricted stock award. Both an RSA tandem
cash bonus award and a cash award subject to the dollar
limitation listed above may be made in the same calendar year.
If an award to an officer fails to meet the requirements under
Section 162(m), payment will be delayed until the amount is
deductible or upon the officers termination of employment,
whichever occurs first.
Acceleration of Payment. Generally, if an
employees employment with us is terminated due to
retirement (after the employees 65th birthday, or
55th birthday with our consent), death or disability, the
payment of outstanding awards under the Cash Plan will
accelerate. In addition, in the event of a change of
control (as defined in the Cash Plan), the payment of
outstanding awards will accelerate. In each case, payment will
be made on a pro rata basis based on performance to date.
Performance Criteria. Our Compensation
Committee will base awards under the Cash Plan upon an employee
attaining performance goals related to one or more performance
criteria selected by our Compensation Committee from among the
following measures, individually or in combination:
(a) meeting specific targets for or growth in any of the
following: stock price; net sales (dollars or volume); cash
flow; operating income; net income; earnings per share; earnings
before taxes; earnings before interest and taxes; or earnings
before interest, taxes, depreciation and amortization (EBITDA);
(b) return on any of the following: net sales; assets or
net assets; or invested capital;
(c) management of any of the following: working capital;
expenses; or cash flow;
(d) meeting specific targets for or growth in any of the
following: productivity; specified product lines; market share;
product development; customer service or satisfaction; employee
satisfaction; strategic innovation; or acquisitions;
(e) specific personal performance improvement objectives
relative to any of the following: formal education; executive
training; leadership training; or succession planning.
Amendment and Termination. Our board of
directors may amend the Cash Plan at any time, but may not
impair the rights of participants with respect to any
outstanding awards without the consent of the participants. Our
board of directors will seek stockholder approval of an
amendment to the Cash Plan if such approval is required under
Section 162(m) of the Code. Our board of directors may
terminate the Cash Plan at any time. The Cash Plan will
automatically terminate in ten years after it is adopted by our
board of directors.
New Plan Benefits. Our Compensation Committee
will grant awards under the Cash Plan in its discretion. Except
as described below under Fiscal 2008 Awards, the
participants and other terms of the awards have not been
determined at this time. Information regarding fiscal 2007
practices with respect to annual performance-based bonuses and
the RSA tandem cash bonuses is presented in the Summary
Compensation Table section in this proxy statement. We may
authorize and pay cash and non-cash awards under plans and
arrangements other than the Cash Plan.
12
Federal
Income Tax Consequences
Amounts paid pursuant to the Cash Plan are intended to qualify
as qualified performance-based compensation under
Section 162(m) of the Code. Upon receipt of cash awards
under the Cash Plan, the recipient will have taxable ordinary
income for federal income tax purposes, in the year of receipt,
equal to the amount of cash received. Unless limited by
Section 162(m), we will be entitled to a tax deduction in
the amount and at the time the recipient recognizes compensation
income. This discussion of the tax consequences of awards under
the Cash Plan does not purport to be complete in that it
discusses only federal income tax consequences and it does not
discuss tax consequences that may arise in special
circumstances, such as death of an award recipient.
Fiscal
2008 Awards
In July 2007, our Compensation Committee authorized certain
incentive awards to executive officers under the Cash Plan,
subject to stockholder approval of the Cash Plan. These awards
include an annual performance-based bonus award and an RSA
tandem cash bonus award. These awards are intended to qualify
for full deductibility under Section 162(m) of the Code if
they are subsequently earned and paid out.
The annual performance-based bonus awards are cash incentive
awards for the 2008 fiscal year, which will become payable for
performance if certain performance goals are achieved in the
2008 fiscal year. Pursuant to these awards, the key performance
measure for all of our executive officers is earnings before
interest and taxes based on our overall consolidated financial
results. For our executive officers other than Messrs. Duda
and Koman, a portion of this bonus is also dependent on
achieving certain individual management by objectives
(MBOs). MBOs include qualitative factors which
emphasize strong performance, such as product diversification,
technology acquisitions and talent management.
The RSA tandem cash bonus awards are cash incentive awards that
will become payable for performance over a three-year period if
certain performance goals are achieved. Our Compensation
Committee granted these awards concurrently with the restricted
stock awards described under the Proposal Four:
Approval of the Methode Electronics, Inc. 2007 Stock
Plan Fiscal 2008 Awards section in this proxy
statement. The performance measures for each of the named
executive officers include net sales growth and return on
invested capital. The maximum amount of the RSA tandem cash
bonus will equal the product of the closing price of our common
stock as of May 1, 2010, and 50% of the number of shares
awarded to such executive officer under the 2008 restricted
stock award. For Messrs. Duda and Koman, the measure is
based on our overall consolidated financial results. For
Messrs. Reynolds and Glandon, the measure is based
exclusively on the financial results of the respective divisions
they manage.
13
The table below shows the amounts payable under the fiscal 2008
awards under the Cash Plan upon the named officers achieving
specified levels of performance. In calculating the amounts set
forth below for the RSA tandem cash bonus awards, we used the
closing price of our common stock on July 16, 2007. The
actual amounts to be paid, if any, will depend on the closing
price of our common stock as of May 1, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Value
|
|
|
Dollar Value
|
|
|
Dollar Value
|
|
|
|
Type of Bonus
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Name and Position
|
|
Award
|
|
|
Threshold Level
|
|
|
Target Level
|
|
|
Maximum Bonus
|
|
|
Donald W. Duda
|
|
|
Annual
|
|
|
$
|
272,000
|
|
|
$
|
320,000
|
|
|
$
|
448,000
|
|
President and Chief
|
|
|
RSA Tandem
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
500,010
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Koman
|
|
|
Annual
|
|
|
$
|
110,500
|
|
|
$
|
130,000
|
|
|
$
|
182,000
|
|
Chief Financial Officer,
|
|
|
RSA Tandem
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
125,007
|
|
Vice President, Corporate Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Reynolds
|
|
|
Annual
|
|
|
$
|
95,200
|
|
|
$
|
160,000
|
|
|
$
|
204,800
|
|
Senior Vice President,
|
|
|
RSA Tandem
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
249,996
|
|
Worldwide Automotive Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy R. Glandon
|
|
|
Annual
|
|
|
$
|
71,400
|
|
|
$
|
120,000
|
|
|
$
|
153,600
|
|
Vice President and General
Manager, North
|
|
|
RSA Tandem
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
125,000
|
|
American Automotive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Executive
|
|
|
Annual
|
|
|
$
|
632,400
|
|
|
$
|
870,000
|
|
|
$
|
1,167,600
|
|
Officers as a Group(1)
|
|
|
RSA Tandem
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,250,032
|
|
|
|
|
(1) |
|
Mr. Kuehnau resigned as an executive officer effective
April 27, 2007, and was not granted an award under the Cash
Plan. Directors are not eligible to receive awards under the
Cash Plan. |
Our board of directors recommends a vote FOR the
approval of the Methode Electronics, Inc. 2007 Cash Incentive
Plan.
PROPOSAL 4:
APPROVAL OF THE
METHODE ELECTRONICS, INC. 2007 STOCK PLAN
On June 21, 2007, our board of directors, on the
recommendation of our Compensation Committee and subject to
stockholder approval, adopted the Methode Electronics, Inc. 2007
Stock Plan (the Stock Plan). Our board is asking you
to approve the Stock Plan because it advances our interests by
providing our eligible directors and employees with the
opportunity to acquire shares of our common stock. By
encouraging stock ownership, we seek to attract, retain, and
motivate the best available personnel for positions of
substantial responsibility and to provide additional incentives
to our directors and employees to promote the success of our
business.
The Stock Plan is designed to allow for performance-based
compensation under Section 162(m) of the Code.
Examples of performance-based compensation under the Stock Plan
include awards for which the grant or vesting is subject to
performance criteria. Under Section 162(m), in order for
compensation to be performance-based, the
compensation may be paid only when officers reach performance
goals that include performance criteria approved by our
stockholders, among other requirements. By approving the Stock
Plan, you will be approving the performance criteria,
eligibility requirements and annual incentive award limits under
the Stock Plan, among other things. Upon stockholder approval,
we believe that qualified awards payable pursuant to the Stock
Plan will be deductible for federal income tax purposes under
most circumstances, but there can be no assurance in this regard.
We currently grant equity incentive awards in the form of
restricted stock and restricted stock units under the Methode
Electronics, Inc. 2004 Stock Plan (the 2004 Plan) or
the Methode Electronics, Inc. 2000 Stock Plan (the 2000
Plan). The restricted stock and restricted stock unit
awards made to our executive officers have historically been
subject to a performance-based vesting condition linked to
revenue growth and return on invested capital achieved during a
three-year vesting period. Awards of restricted stock and
restricted stock units under the 2004 Plan and the 2000 Plan do
not technically qualify as performance-based
compensation under Section 162(m) of the Code. As
such, the value of these awards is required to be included for
purposes of determining whether the $1 million deduction
limit has been exceeded in each fiscal year.
14
As of April 28, 2007, awards with respect to
400,900 shares and 171,877 shares of our common stock
were subject to issuance under the 2004 Plan and the 2000 Plan,
respectively. Upon the adoption of the 2007 Stock Plan, our
board of directors elected to terminate the 2004 Plan and the
2000 Plan with respect to the shares reserved under these plans
that are not subject to outstanding awards.
Summary
of the Stock Plan
The principal features of the Stock Plan are summarized below.
This summary does not contain all information about the Stock
Plan. A copy of the complete text of the Stock Plan is included
in Appendix B to this proxy statement, and the following
description is qualified in its entirety by reference to the
text of the Stock Plan.
Type of Awards. The Stock Plan provides for
the granting of awards of nonqualified stock options
(NSOs), incentive stock options (ISOs),
restricted stock, restricted stock units, stock appreciation
rights (SARs), and performance share units
(Performance Share Units), any of which may be
performance-based awards.
Administration. Our Compensation Committee
will administer the Stock Plan. All determinations of our
Compensation Committee are final and binding on all
participants. Our Compensation Committee has discretionary
authority to interpret the terms of the Stock Plan, to determine
eligibility for and grant awards, and to adopt rules, forms and
guidelines, among other matters.
Participants. Present and future directors,
officers and key employees of Methode or any subsidiary are
eligible to participate in the Stock Plan. Our Compensation
Committee from time to time will select participants.
Number of Shares of Common Stock
Available. The Stock Plan permits a total of
1,250,000 shares of our common stock to be awarded to
participants. Shares issued under the Stock Plan may be either
authorized but unissued shares or treasury shares. If any award
terminates, expires, is cancelled or forfeited as to any number
of shares of common stock, new awards may be awarded with
respect to such shares. The total number of shares of common
stock with respect to which awards may be granted to any
participant in any calendar year shall not exceed
200,000 shares.
Nonqualified Stock Options. The Stock Plan
provides for the granting of NSOs to any of our directors,
officers or key employees. Our Compensation Committee has the
authority to determine the terms and conditions of each grant,
including the number of shares subject to each NSO, the option
period and the option exercise price. The NSO exercise price may
not be less than 100% of the fair market value of our common
stock on the date of grant.
Unless our Compensation Committee otherwise determines, the
option period for NSOs granted pursuant to the Stock Plan will
expire upon the earliest of: (1) ten years after the date
of grant; (2) three months after termination of employment
for any reason other than cause, death, or total and permanent
disability; (3) three months after a nonemployee
directors termination as a member of the board of
directors for any reason other than cause, death, or total and
permanent disability; (4) immediately upon termination of
employment or service on the board of directors for cause;
(5) 12 months after termination of employment on
account of death or total and permanent disability; or
(6) such other date or event as specified by our
Compensation Committee. These periods shall be tolled during any
period for which our employees are prohibited from engaging in
transactions in our stock.
Incentive Stock Options. The Stock Plan
provides for the granting of ISOs to any of our employees. Our
Compensation Committee has the authority to determine the terms
and conditions of each ISO grant, including without limitation,
the number of shares subject to each ISO and the option period.
The ISO exercise price is also determined by our Compensation
Committee and may not be less than the fair market value of our
common stock on the date of grant and not less than 110% of the
fair market value if the participant was the holder of more than
10% of our outstanding voting securities on the date of the
grant.
Unless our Compensation Committee otherwise determines, the
option period for ISOs granted under the Stock Plan will expire
upon the earliest of: (1) ten years after the date of grant
(five years in the case of a holder of more than 10% of our
outstanding voting securities); (2) three months after
termination of employment for any reason other than cause, death
or total and permanent disability; (3) immediately upon
termination of employment for cause; (4) 12 months
after death or total and permanent disability; or (5) such
other date or event as specified by
15
our Compensation Committee. These periods shall be tolled during
any period for which our employees are prohibited from engaging
in transactions in our stock.
Restricted Stock and Restricted Stock
Units. The Stock Plan permits the granting of
awards of shares of restricted stock and restricted stock units
to any director, officer or key employee. Awards of shares of
restricted stock and restricted stock units may be issued
without payment. Upon completion of a vesting period and the
fulfillment of any required conditions, restrictions upon the
shares of restricted stock or the restricted stock units expire
and new certificates representing unrestricted shares of common
stock are issued to the participant. Generally, in the case of
shares of restricted stock, the participant will have all of the
rights of our stockholders, including the right to vote the
shares and the right to receive dividends payable with respect
to the shares of restricted stock, unless our Compensation
Committee specifies otherwise in the award. In the case of an
award of restricted stock units, no shares of common stock or
other property will be issued at the time the award is granted.
Upon the lapse or waiver of restrictions and the restricted
period relating to restricted stock units, shares of common
stock will be issued to the holder of the restricted stock units.
Stock Appreciation Rights. The Stock Plan
provides for the granting of SARs to any director, officer or
key employee. A SAR will entitle the participant to surrender
any then exercisable portion of the SAR, and in exchange,
receive a number of shares of common stock with a fair market
value equal to the product of (1) the excess of the fair
market value of our common stock on the date of surrender over
the fair market value on the grant date, and (2) the number
of shares of common stock subject to such SAR. SARs may be
exercisable during a period established by our Compensation
Committee. The Compensation Committee may allow participants to
be paid in cash instead of shares of common stock.
Performance Share Units. The Stock Plan
permits the granting of awards of Performance Share Units to any
director or employee. No shares of common stock or other
property will be issued upon the grant of Performance Share
Units. Awards of Performance Share Units shall provide that upon
the achievement of specified performance goals, a certain number
of shares of common stock shall be issued to the participant.
The Compensation Committee may allow participants to be paid in
cash instead of shares of common stock.
Performance-Based Awards. Our Compensation
Committee may grant awards, including restricted stock or
restricted stock units, that are subject to the achievement of
performance goals as may be determined by our Compensation
Committee. These awards, when they are intended to qualify under
Section 162(m) of the Code, are called Qualified
Performance-Based Awards, and may be granted to certain
employees, generally the chief executive officer and three other
most highly compensated executive officers, but specifically
excluding the chief financial officer. Our Compensation
Committee may grant awards to these officers that are
performance-based but are not intended to qualify as Qualified
Performance-Based Awards.
For any award that is granted to our chief executive officer or
any of our three highest paid executive officers other than the
chief financial officer and is intended to comply with the
requirements for performance-based awards under
Section 162(m), our Compensation Committee will, in
writing, (a) designate the eligible officers,
(b) select the performance criteria applicable to the
performance period, (c) establish the performance goals,
and amounts of such awards, as applicable, which may be earned
for such performance period, and (d) specify the
relationship between performance criteria and the performance
goals and the amounts of such awards, as applicable, to be
earned by each eligible officer for the performance period.
Following the completion of each performance period, our
Compensation Committee will certify in writing whether the
applicable performance goals have been achieved for the
performance period. No award or portion of an award that is
subject to the satisfaction of any condition will be considered
to be earned or vested until our Compensation Committee
certifies in writing that the conditions to which the
distribution, earning or vesting of the award is subject have
been achieved. During the performance period, our Compensation
Committee may not increase the amount of a Qualified
Performance-Based Award that would otherwise be payable upon
satisfaction of the conditions, but may reduce or eliminate the
payments as provided for in the award agreement.
16
The payment of Qualified Performance-Based Awards under the
Stock Plan will be based upon officers attaining performance
goals related to one or more performance criteria selected by
our Compensation Committee from among the following measures,
individually or in combination:
(a) meeting specific targets for or growth in any of the
following: stock price; net sales (dollars or volume); cash
flow; operating income; net income; earnings per share; earnings
before taxes; earnings before interest and taxes; or earnings
before interest, taxes, depreciation and amortization (EBITDA);
(b) return on any of the following: net sales; assets or
net assets; or invested capital;
(c) management of any of the following: working capital;
expenses; or cash flow;
(d) meeting specific targets for or growth in any of the
following: productivity; specified product lines; market share;
product development; customer service or satisfaction; employee
satisfaction; strategic innovation; or acquisitions;
(e) specific personal performance improvement objectives
relative to any of the following: formal education; executive
training; leadership training; or succession planning.
Vesting. Unless our Compensation Committee
establishes a different vesting schedule at the time of grant,
awards generally vest 33% after one year, 66% after two years
and 100% after three years. A participant may not exercise an
option or SAR or transfer shares of restricted stock until the
award has vested. Generally, if a participants employment
with us is terminated due to retirement (after the
participants 65th birthday, or 55th birthday
with the consent of the company), death or retirement on account
of disability, the participants awards will become fully
vested. Awards to non-employee directors will become fully
vested if the individual ceases to be a director for any reason,
other than removal for cause. In addition, in the event of a
change of control, any award issued to participants
will be fully vested, except that awards with vesting subject to
performance criteria shall vest on a pro rata basis. If a
participants employment with us is terminated for any
other reason, any awards that are not yet vested are forfeited.
Adjustments for Change in Capitalization. The
Stock Plan provides that in the event of a stock dividend, stock
split, recapitalization or similar event affecting our capital
structure, or a merger, acquisition or similar transaction, our
Compensation Committee will make substitutions or adjustments as
it deems appropriate and equitable to the share reserve, the
share limitations described above, and the purchase price and
number of shares subject to outstanding awards.
Cashouts. In the event of certain
extraordinary corporate transactions, our Compensation Committee
may make provision for a cash payment or for the substitution or
exchange of any or all outstanding awards for the cash,
securities or property deliverable to the holder of any or all
outstanding awards based upon the distribution or consideration
payable to holders of common stock upon or in respect of such
event. However, in each case, with respect to any ISO, no such
adjustment may be made that would cause the Stock Plan to
violate Section 422 of the Code (or any successor
provision).
Federal Tax Consequences. The following brief
description of the tax consequences of awards under the Stock
Plan is based on federal income tax laws currently in effect and
does not purport to be a complete description of such federal
income tax consequences.
Incentive Stock Options. A grantee does
not generally recognize taxable income upon the grant or upon
the exercise of an ISO. Upon the sale of ISO shares, the grantee
recognizes income in an amount equal to the difference, if any,
between the exercise price of the ISO shares and the fair market
value of those shares on the date of sale. The income is taxed
at long-term capital gains rates if the grantee has not disposed
of the stock within two years after the date of the grant of the
ISO and has held the shares for at least one year after the date
of exercise and we are not entitled to a federal income tax
deduction. The exercise of an ISO may in some cases trigger
liability for the alternative minimum tax. If a grantee sells
ISO shares before having held them for at least one year after
the date of exercise and two years after the date of grant (a
disqualifying disposition), the grantee recognizes
ordinary income to the extent of the lesser of: (i) the
gain realized upon the sale; or (ii) the difference between
the exercise price and the fair market value of the shares on
the date of exercise. Any additional gain is treated as
long-term or short-term capital gain depending upon how long the
grantee has held the ISO shares prior to disposition. In the
year
17
of a disqualifying disposition, we receive a federal income tax
deduction in an amount equal to the ordinary income that the
grantee recognizes as a result of the disposition.
Nonqualified Stock Options. A grantee
does not recognize taxable income upon the grant of an NSO. Upon
the exercise of such option, the grantee recognizes ordinary
income to the extent the fair market value of the shares
received upon exercise of the NSO on the date of exercise
exceeds the exercise price. We receive an income tax deduction
in an amount equal to the ordinary income that the grantee
recognizes upon the exercise of the NSO.
Restricted Stock. A participant who
receives an award of restricted stock does not generally
recognize taxable income at the time of the award. Instead, the
participant recognizes ordinary income in the first taxable year
in which his or her interest in the shares becomes either:
(i) freely transferable; or (ii) no longer subject to
substantial risk of forfeiture. The amount of taxable income is
equal to the fair market value of the shares less the cash, if
any, paid for the shares. A participant may elect to recognize
income at the time he or she receives restricted stock in an
amount equal to the fair market value of the restricted stock
(less any cash paid for the shares) on the date of the award. We
receive a compensation expense deduction in an amount equal to
the ordinary income recognized by the participant in the taxable
year in which restrictions lapse (or in the taxable year of the
award if, at that time, the participant had filed a timely
election to accelerate recognition of income).
Other Awards. In the case of an
exercise of an SAR or an award of restricted stock units or
Performance Shares, the participant will generally recognize
ordinary income in an amount equal to any cash received and the
fair market value of any shares received on the date of payment
or delivery. In that taxable year, we will receive a federal
income tax deduction in an amount equal to the ordinary income
which the participant has recognized.
Section 162(m). Section 162(m)
of the Code generally disallows a public companys tax
deduction for compensation in excess of $1 million paid in
any taxable year to certain employees, generally the chief
executive officer and three other most highly compensated
executive officers, other than the chief financial officer.
Compensation that qualifies as performance-based
compensation, however, is excluded from the
$1 million deductibility cap. We intend that some of the
awards granted to these officers at the time a deduction arises
in connection with the awards qualify as performance-based
compensation so that deductions with respect to those
awards will not be subject to the $1 million cap under
Section 162(m) of the Code. Future changes in
Section 162(m) of the Code or the regulations thereunder
may adversely affect our ability to ensure that awards under the
Stock Plan will qualify as performance-based
compensation so that deductions are not limited by
Section 162(m) of the Code.
Amendment; Termination. Our board of directors
may amend the Stock Plan at any time, but may not impair the
rights of participants with respect to any outstanding awards
without the consent of participants. If our board wishes to
increase the limitations on the shares available under the Stock
Plan, it will seek approval of our stockholders. Our board may
not amend the provision of the Stock Plan that requires
stockholder approval before repricing an award. The Stock Plan
will terminate ten years after its adoption by our board of
directors; provided, however, that our board of directors may
terminate the Stock Plan at any time.
Fiscal
2008 Awards
In July 2007, our Compensation Committee authorized restricted
stock awards to executive officers under the Stock Plan, subject
to stockholder approval of the Stock Plan. These restricted
stock awards are subject to a performance-based vesting
condition linked to the net sales growth and return on invested
capital achieved during a three-year vesting period, ending on
May 1, 2010. For Messrs. Duda and Koman, the measure
is based on our overall consolidated financial results. For
Messrs. Reynolds and Glandon, the measure is based
exclusively on the financial results of the respective divisions
they manage. At this time, our Compensation Committee also
authorized restricted stock awards to our non-employee directors
under the Stock Plan, subject to stockholder approval of the
Stock Plan. Each of our non-employee directors received a
contingent grant of 3,000 shares of restricted stock.
18
The table below shows the number of shares of restricted stock
deliverable under the fiscal 2008 awards under the Stock Plan
upon achievement of specified levels of performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Number of Shares
|
|
|
Number of Shares
|
|
Name and Position
|
|
Threshold Level
|
|
|
Target Level
|
|
|
Maximum Bonus
|
|
|
Donald W. Duda
President and Chief
Executive Officer
|
|
|
11,955
|
|
|
|
59,773
|
|
|
|
59,773
|
|
Douglas A. Koman
Chief Financial Officer,
Vice President, Corporate Finance
|
|
|
2,989
|
|
|
|
14,943
|
|
|
|
14,943
|
|
Thomas D. Reynolds
Senior Vice President, Worldwide Automotive Operations
|
|
|
5,977
|
|
|
|
29,886
|
|
|
|
29,886
|
|
Timothy Glandon
Vice President and General Manager, North American Automotive
|
|
|
2,989
|
|
|
|
14,943
|
|
|
|
14,943
|
|
All Current Executive Officers as
a Group (1)
|
|
|
29,886
|
|
|
|
149,431
|
|
|
|
149,431
|
|
Non-Executive Director Group (2)
|
|
|
24,000
|
|
|
|
24,000
|
|
|
|
24,000
|
|
|
|
|
(1) |
|
Mr. Kuehnau resigned as an executive officer effective
April 27, 2007, and was not granted an award under the
Stock Plan. |
|
(2) |
|
The restricted stock awards granted to the non-executive
directors are not subject to any performance conditions. |
Equity
Compensation Plan Information
The following table provides information about shares of our
common stock that may be issued upon exercise of stock options
or granting of stock awards under all of our existing equity
compensation plans as of April 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Number of Securities
|
|
|
|
|
|
Under Equity
|
|
|
|
to Be Issued Upon
|
|
|
Weighted-Average
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Reflected in the First
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Column)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
818,918
|
|
|
$
|
10.26
|
|
|
|
572,777
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
818,918
|
|
|
$
|
10.26
|
|
|
|
572,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our board of directors recommends a vote FOR the
approval of the Methode Electronics, Inc. 2007 Stock Plan.
19
AUDIT
COMMITTEE MATTERS
Report of
the Audit Committee
The Audit Committee oversees our financial reporting process on
behalf of our board of directors. Our management has the primary
responsibility for the financial statements and the reporting
process, including the system of internal control. Our board has
determined that each member of our Audit Committee meets the
requirements as to independence, experience and expertise
established by the Nasdaq Stock Market. In addition, our board
has determined that Mr. Skatoff is an Audit Committee
financial expert as defined by the Securities and Exchange
Commission. In fulfilling its oversight responsibilities, our
Audit Committee reviewed and discussed the audited financial
statements in the Annual Report on
Form 10-K
for the year ended April 28, 2007 with management,
including a discussion of the quality, not just the
acceptability, of the accounting principles; the reasonableness
of significant judgments; and the clarity of disclosures in the
financial statements.
Our Audit Committee reviewed and discussed with our independent
registered public accounting firm, Ernst & Young,
which is responsible for expressing an opinion on the conformity
of the audited financial statements with U.S. generally
accepted accounting principles, the firms judgments as to
the quality, not just the acceptability, of our accounting
principles and such other matters as are required to be
discussed under the standards of the Public Company Accounting
Oversight Board (United States).
Ernst & Young provided to the Committee the written
disclosures and the letter required by Independence Standards
Board Standard No. 1, as amended (Independence Discussions
with Audit Committees). The Audit Committee discussed with
Ernst & Young the firms independence from
management and Methode and considered the compatibility of
nonaudit services with the firms independence.
Our Audit Committee discussed with our internal auditors and
Ernst & Young the overall scope and plans for their
respective audits. Our Audit Committee met with the internal
auditors and Ernst & Young, with and without
management present, to discuss the results of their
examinations, their evaluations of our internal controls, and
the overall quality of our financial reporting. The Committee
also discussed with Ernst & Young matters related to
the financial reporting process required to be discussed by
Statement on Auditing Standards No. 61, as amended
(Communication with Audit Committees).
In reliance on the reviews and discussions referred to above,
the Committee recommended to our board of directors (and our
board has approved) that the audited financial statements be
included in the Annual Report on
Form 10-K
for the year ended April 28, 2007 filed with the Securities
and Exchange Commission.
AUDIT COMMITTEE
Lawrence B. Skatoff, Chairman
Isabelle C. Goossen
Paul G. Shelton
George S. Spindler
20
Auditing
and Related Fees
Our Audit Committee engaged Ernst & Young to examine
our consolidated financial statements for the fiscal year ended
April 28, 2007. Fees paid to Ernst & Young for
services performed during the 2007 and 2006 fiscal years were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
|
Fiscal 2006
|
|
|
Audit Fees (1)
|
|
$
|
917,500
|
|
|
$
|
893,800
|
|
Audit-Related Fees (2)
|
|
|
1,900
|
|
|
|
12,900
|
|
Tax Fees (3)
|
|
|
22,400
|
|
|
|
118,200
|
|
All Other Fees (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
941,800
|
|
|
$
|
1,024,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees represent aggregate fees billed for professional
services rendered by Ernst & Young for the audit of
our annual financial statements and review of our quarterly
financial statements, audit services provided in connection with
other statutory and regulatory filings and consultation with
respect to various accounting and financial reporting matters. |
|
(2) |
|
Audit-related fees represent the aggregate fees billed for
assurance and related services by Ernst & Young that
are reasonably related to the performance of the audit or review
of our financial statements and are not reported under the
caption Audit Fees above. These audit-related fees
include fees for employee benefit plan audits, and due diligence
services. |
|
(3) |
|
Tax fees principally included tax compliance fees of $22,400 and
$58,200, in 2007 and 2006, respectively, and tax advice fees of
$60,000 in 2006. |
|
(4) |
|
There were no other fees billed by Ernst & Young in
the 2007 and 2006 fiscal years. |
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This compensation discussion and analysis describes the key
elements of our executive compensation program, including an
analysis of compensation earned by or paid to our named
executive officers in the 2007 fiscal year. In this discussion,
the term named executive officers refers to the five
officers about whose compensation we provide detailed tabular
and narrative information in this proxy statement.
Our Compensation Committee oversees the design, implementation
and administration of our executive compensation program. The
primary goal of our compensation program is to reward
performance and align executives interests with those of
our stockholders. The principal elements of our executive
compensation program are base salary, annual cash incentive
compensation, long-term incentive compensation in the form of
cash and/or
equity-based awards, opportunities for tax-efficient retirement
savings and company contributions under our 401(k) savings plan,
perquisites and welfare benefits. We also provide for benefits
upon a change in control in certain circumstances.
Objectives
and Measurement Principles
Our executive compensation program supports our objective of
enhancing stockholder value through a competitive program that
attracts high-quality talent and rewards executives for
demonstrating strong leadership and delivering results. Our
executive compensation program is designed to:
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Link pay to company and individual performance by targeting a
significant portion of an executives total direct
compensation as variable, at-risk compensation that is dependent
on successful achievement of specified annual and long-term
performance goals;
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Align executive interests with shareholder interests by
establishing programs that promote increased stockholder value
and require a significant ownership of our common stock for our
executive officers; and
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Attract and retain talent by paying competitively.
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21
The primary metrics we use in structuring our performance-based
equity and cash awards include annual sales goals, annual profit
goals, return on invested capital (over a three-year period) and
revenue growth (over a three-year period). In addition, we use
individual management by objectives (MBOs) to
determine payouts under our annual bonus program. MBOs include
qualitative factors which emphasize strong performance, such as
product diversification, technology acquisitions and talent
management.
Our
Compensation Process
Our Compensation Committee meets as often as necessary to
perform its duties. In fiscal 2007, our Compensation Committee
met nine (9) times. Although most decisions regarding
executive compensation are made in the first quarter of our
fiscal year, our management and our Compensation Committee
continue to monitor developments during the year. Our
Compensation Committee typically meets with Donald Duda, Chief
Executive Officer, and, where appropriate, Douglas Koman, Chief
Financial Officer. From time to time, our Compensation Committee
engages compensation consultants to review the competitiveness
and effectiveness of our executive compensation program. In
connection with setting fiscal 2007 compensation, both Towers
Perrin and The Delves Group were engaged to provide analyses of
our executive compensation program as compared to established
market benchmarks, as described more fully below.
Our Compensation Committee annually reviews tally sheets
summarizing our named executive officers total
compensation, including direct compensation; benefits under
equity compensation programs; and perquisites and potential
payments on termination of employment, whether on a change in
control of Methode or otherwise.
Our Chief Executive Officers compensation is determined by
our Compensation Committee. Management provides relevant survey
and other data to the Committee that it may consider for this
purpose. Management does not make recommendations to our
Compensation Committee regarding compensation elements with
respect to Mr. Dudas compensation. For named
executive officers other than Mr. Duda, total compensation
packages are developed and recommended by Mr. Duda, in
consultation with Mr. Koman, our Chief Financial Officer,
and based on guidelines provided by our Compensation Committee.
Our Compensation Committee determines whether to approve these
recommendations, subject to any further modifications that it
may deem appropriate.
Market
Benchmarking and Positioning
We strive to provide compensation opportunities that are
competitive with comparable positions at other companies with
which we compete for executive talent. As appropriate to further
this objective, we review market compensation data and evaluate
our executive compensation program as compared to a group of
peer companies and various compensation surveys and databases,
in each case as provided by our compensation consultants.
For compensation decisions affecting fiscal 2007 compensation,
our peer group included the following companies: Cobra
Electronics Corporation, CTS Corporation, Electro
Scientific Industries, Inc. Franklin Electric Co., Inc., Gerber
Scientific, Inc., Kemet Corporation, Littelfuse, Inc., Rogers
Corporation, Standard Motor Products, Inc., and Stoneridge, Inc.
In setting fiscal 2007 compensation, our Compensation Committee
also reviewed the following compensation surveys and databases:
Watson Wyatt Compensation Calculation (electrical equipment and
electronics companies); Watson Wyatt Top Management and Middle
Management Databases; Proprietary Cash Compensation Survey
(manufacturing companies); and Towers Perrin CDB Executive
Compensation and Middle Management and Professional Databases.
In identifying appropriate comparisons, our Compensation
Committee focuses on revenues, returns on sales, invested
capital and growth in sales and profits.
As a general policy, we target total direct compensation (that
is, base salary, annual and long-term cash incentives and
equity-based compensation) for our named executive officers in
the 50th to 75th percentile among companies in our
peer group and comparable companies within the applicable
compensation surveys and databases. In setting compensation for
each named executive officer, our Compensation Committee also
reviews historical compensation levels, internal equity and
consistency, tenure and industry conditions. These and other
factors may affect whether total pay for each of our named
executive officers falls within the benchmark range. For fiscal
2007 compensation, such other factors included the successful
diversification of our products, international expansion and
implementation of cost cutting measures. In addition, if we or
the relevant business unit performs particularly
22
well or poorly, total direct compensation for one or more of our
named executive officers could be above or below the target
levels.
Consistent with our pay-for-performance philosophy, our
executive compensation program is structured so that a
significant amount of each of our named executive officers
compensation is variable compensation and at risk
for non-payment if we fail or the executive fails to meet
performance targets. The proportion of compensation that is at
risk increases with the executives level of
responsibility. For fiscal 2007, the majority of the named
executive officers total direct compensation is at risk
(on average, 65%). At risk compensation for fiscal 2007 includes
the annual bonus and the restricted stock awards, together with
the RSA tandem cash awards (described below). As a general
policy, we structure the executive compensation program so that
approximately 50% to 75% of total direct compensation is in the
form of cash.
Elements
of Compensation
Base Salary. Our Compensation Committee
establishes base salaries on an annual basis, taking into
account levels of responsibility, prior experience and breadth
of knowledge, potential for advancement, recent promotions, past
performance, internal equity issues and external pay practices.
In general, we target annual base salaries for our named
executive officers at the 50th percentile among companies
in our peer group and comparable companies within the applicable
compensation surveys and databases. For fiscal 2007, our
Compensation Committee did not increase the base salary of
either Mr. Duda or Mr. Koman. In connection with
promotions, Messrs. Reynolds and Glandon were awarded base
salary raises of 32% and 45%, respectively.
Annual Performance-Based Bonus. At the
beginning of fiscal 2007, our Compensation Committee established
individual target awards, expressed as a percentage of base
salary, and subject to the achievement of performance goals for
all executive officers and management personnel. Bonuses are
paid quarterly and are capped at 140% of the established target
bonus amount. The awards generally reflect a threshold payment,
a target payment and a maximum payment, depending on the level
of performance measure achieved. For fiscal 2007, the
performance measures for each of the named executive officers
include annual net sales and quarterly profit measures compared
to budget. For Messrs. Duda, Koman and Kuehnau, the measure
is based on our overall consolidated financial results. For
Messrs. Reynolds and Glandon, the measure is based
exclusively on the financial results of the respective divisions
they manage.
In addition, the awards use individual MBOs as a performance
measure to determine payouts under our annual bonus program.
MBOs include qualitative factors which emphasize strong
performance, such as product diversification, technology
acquisitions and talent management. In general, the most
importance is given to quarterly profit measures, followed by
the MBOs. Our Compensation Committee believes that using sales
and profit measures as a key performance measure focuses the
executives on balancing investment and cost control to achieve
growth. In setting the measures, our Compensation Committee
considered, among other matters, each individuals and our
past performance, the fiscal 2007 operating budget, and general
economic conditions. Our Compensation Committee believes that
these performance measures are challenging. No amounts are
payable unless a specified threshold performance
level is reached for the applicable period.
Discretionary Cash Bonus. From time to time,
our Compensation Committee awards discretionary cash bonuses to
the executive officers for exceptional or unusual performance.
Historically, such discretionary cash bonuses have been granted
in connection with significant involvement in the negotiation,
due diligence and integration of an acquired business, the
development of a new product line or the recruitment of a
significant new customer. In fiscal 2007, Mr. Reynolds
received a discretionary bonus of $40,000 and Mr. Glandon
received a discretionary bonus of $30,000 in connection with the
acquisition of TouchSensor Technologies, L.L.C.
(TST). None of our other named executive officers
received a discretionary bonus in fiscal 2007.
Stock Awards. Our Compensation Committee
believes that equity-based compensation is the most effective
means of ensuring that our executive officers have a continuing
stake in our long-term success. We currently utilize restricted
stock awards and restricted stock units as our equity
compensation component. Our Compensation Committee believes that
these awards serve the following purposes: (i) reward
executive officers for long-term stockholder value creation;
(ii) provide competitive long-term incentive award
opportunities; (iii) retain employees through wealth
accumulation opportunities; and (iv) focus executive
officers on long-term, sustained performance.
23
The restricted stock awards and restricted stock unit awards
granted to our executive officers in fiscal 2007 are subject to
a performance-based vesting condition linked to the revenue
growth and return on invested capital achieved during a
three-year vesting period. These performance-based awards do not
vest unless we achieve a minimum target level of revenue growth
and return on invested capital.
RSA Tandem Cash Bonus. In connection with the
grant of the fiscal 2007 restricted stock awards, we agreed to
pay each executive officer a cash bonus if we exceed our
financial targets for revenue growth and return on invested
capital, which will be measured as of May 2, 2009. The
maximum amount of the tandem cash bonus will equal the product
of the closing price of our common stock as of May 2, 2009,
and 50% of the number of shares awarded to such executive under
the 2007 restricted stock award.
Legacy Longevity Bonus Program. For fiscal
2006 and previous years, our executive officers received
long-term incentive awards under the Longevity Contingent Bonus
Program (the Longevity Bonus Program). The Longevity
Bonus Program awards a matching bonus equal to the amount of the
current quarterly bonus, which will be considered as earned and
payable in three years, provided that the participant is still
employed and performance has been satisfactory. If, for any
reason other than death, disability, or retirement, the
participant terminates his or her employment with us during the
three-year period, or his or her performance is not
satisfactory, no longevity compensation is payable under this
program. Commencing with fiscal 2007, the named executive
officers are not eligible to receive future awards under the
Longevity Bonus Program. Amounts previously earned by these
executives under the Longevity Bonus Program will continue to be
paid through fiscal 2009.
Other Benefits and Perquisites. Executive
officers are eligible to participate in all of our employee
benefit plans, such as medical, dental, vision, group life,
disability, and our 401(k) savings plan (with a company
contribution), in each case on the same basis as other
employees, subject to applicable law. Our executive officers are
also provided deferred compensation opportunities through a
non-qualified Deferred Compensation Plan. In fiscal 2007, we did
not contribute any amounts to the Deferred Compensation Plan on
behalf of any of the named executive officers. For a description
of the Deferred Compensation Plan, please see the section
entitled Nonqualified Deferred Compensation below.
Dividends are paid with respect to all vested and unvested
outstanding restricted stock awards held by our employees.
Mr. Duda is also paid an amount equal to the dividend
payment with respect to the restricted stock units converted
from restricted stock awards (described in more detail below).
Mr. Kuehnau participates in our Capital Accumulation
Program (which was terminated several years ago), pursuant to
which he is entitled to above-market interest accruals on his
contributions to such plan. In addition, a few perquisites are
provided to the named executive officers. Perquisites include a
company car allowance, association dues, limited corporate
aircraft usage and provision for an annual physical exam.
Change of Control Payments. We have entered
into change of control agreements with our executive officers.
These agreements are designed to promote stability and
continuity of senior management, both of which are in the best
interest of Methode and our stockholders. Our change of control
provisions for the named executive officers are summarized below
under Executive Compensation Potential
Payments Upon Termination or Change of Control.
Significant
Policies and Procedures
Stock Ownership Policy. Our Compensation
Committee considers stock ownership by management to be an
important means of linking managements interests with
those of stockholders. We maintain stock ownership guidelines
for our executive officers. The amount of stock required to be
owned increases with the level of responsibility of each
executive. The requirements are subject to a phase-in period in
the event of a new hire or a promotion. Our Chief Executive
Officer and Chief Financial Officer are expected to own at least
80,000 and 28,000 shares, respectively. All other executive
officers are expected to own stock with a value at least equal
to their current base salary. Vested restricted stock awards and
restricted stock units are included in the calculation of stock
ownership for purposes of these guidelines. In valuing
restricted stock awards and restricted stock units for this
purpose, the policy permits the use of the greater of the grant
date fair market value or the current fair market value.
Considering the applicable phase-in periods, all of our named
executive officers were in compliance with our stock ownership
policy for fiscal 2007.
24
Practices Regarding Grants of Equity
Awards. Our broad-based equity grants are
generally made at a scheduled meeting of our Compensation
Committee occurring at approximately the same time each year. In
addition, our Compensation Committee may choose to make grants
of equity awards outside the annual broad-based grant, including
in the case of newly hired employees and in connection with
promotions.
Policy With Respect to Deductibility of
Compensation. Section 162(m) of the Code, as
clarified by recent guidance from the Internal Revenue Service,
generally denies corporate tax deductions for annual
compensation exceeding $1 million paid to certain employees
(generally the chief executive officer and the three other most
highly compensated executive officers of a public company, but
excluding the chief financial officer), unless that compensation
qualifies as performance-based compensation under a stockholder
approved plan and meets certain other technical requirements.
While it is the general intention of our Compensation Committee
to maximize the deductibility of executive compensation in
structuring our compensation plans and programs, our
Compensation Committee has approved, and may continue to approve
awards that may not qualify as performance-based compensation
under Section 162(m). Our Compensation Committee reserves
the flexibility and authority to make decisions that are in the
best interest of Methode and our stockholders, even if those
decisions do not result in full deductibility under
Section 162(m).
Resolution
of Issues Regarding Section 162(m) and Section 409A of
the Internal Revenue Code
During fiscal 2007, our Compensation Committee and Donald Duda,
our Chief Executive Officer, worked together to address certain
issues under Section 162(m) and Section 409A of the
Internal Revenue Code related to Mr. Dudas
compensation. The scheduled lapse of the restrictions on
Mr. Dudas 2004, 2005 and 2006 restricted stock awards
in April 2007, 2008 and 2009, respectively, would not qualify
for an exception under Section 162(m). As such, the value
of these awards would be required to be included for purposes of
determining whether the $1 million limit has been exceeded
in each such fiscal year. Section 409A subjects the
recipient of certain forms of non-qualified deferred
compensation to an additional 20% tax. Certain payments to be
made to Mr. Duda under the 2003 Cash Bonus Agreement
described below would be subject to this additional tax.
In order to mitigate the Section 162(m) deductibility
issue, eliminate the 409A tax consequences to Mr. Duda, and
eliminate variable accounting with respect to the 2003 Cash
Bonus Agreement, our Compensation Committee approached
Mr. Duda regarding the available alternatives.
Mr. Duda and our Compensation Committee worked diligently
to review and assess the alternatives with the assistance of
external legal and compensation advisors. The resolution agreed
upon involved multiple steps, including the exercise of stock
options and sale of all of the underlying stock by
Mr. Duda, the current payment of a portion of the cash
bonus to Mr. Duda under the 2003 Cash Bonus Agreement, the
amendment of the 2003 Cash Bonus Agreement and
Mr. Dudas 2004, 2005 and 2006 Restricted Stock Award
Agreements, and the deferral of certain bonus amounts by
Mr. Duda. In fiscal 2007, we were not permitted to deduct
$292,507 in compensation paid to Mr. Duda. We currently
expect to deduct all compensation payable to Mr. Duda in
fiscal 2008.
Amended and Restated Restricted Stock Unit Award
Agreements. During fiscal 2007, we entered into
Amended and Restated Restricted Stock Unit Award Agreements with
Mr. Duda. Pursuant to these agreements, the 2004, 2005 and
2006 restricted stock awards were amended and restated into the
form of restricted stock units. Under the terms of the amended
restricted stock units, at such time as the value of the award
is deductible by us or Mr. Dudas employment
terminates, shares of non-restricted common stock will be
delivered to Mr. Duda. The conversion mitigates the
Section 162(m) issue because restricted stock units are
deductible by us when paid to the executive, in contrast to
restricted stock which is deductible upon vesting and, as such,
would result in non-deductible compensation. The Amended and
Restated Restricted Stock Unit Award Agreements do not amend or
modify any other provisions under the 2004, 2005 and 2006
restricted stock awards, including, without limitation, the
vesting period or performance criteria.
Deferral of 2004, 2005 and 2006 RSA Tandem Cash
Bonuses. In 2004, 2005 and 2006, in connection
with the award of restricted stock awards, we agreed to pay
Mr. Duda a cash bonus if we met certain financial targets
measured as of the end of a three-year period. These cash
bonuses do not qualify for an exception under
Section 162(m) and will be included for purposes of
calculating the $1 million cap in the year paid.
Mr. Duda has deferred one hundred percent (100%) of these
bonuses pursuant to our Deferred Compensation Plan. The bonuses
25
are deferred until 2011, 2012 and 2013, respectively. It is
currently anticipated that at such time, a substantial portion
of Mr. Dudas annual compensation would qualify for an
exception under Section 162(m).
Amended Cash Bonus Agreement. Pursuant to the
2003 Cash Bonus Agreement, Mr. Duda was entitled to two
cash bonuses. The amount of the first cash bonus was to be
determined by multiplying 100,000 by the value of our common
stock in excess of $10.50 (the value of common stock on the date
of Mr. Dudas 2002 stock option grant). The bonus
vested in 25% annual increments commencing in June 2003 and
ending in June 2006. The amount of the second cash bonus was to
be determined by multiplying 150,000 by the value of the common
stock in excess of $11.44 (the value of common stock on the date
of Mr. Dudas 2003 stock option grant). The bonus
vests in 25% annual increments commencing in July 2004 and
ending in July 2007. Under the 2003 Cash Bonus Agreement,
Mr. Duda was required to exercise all vested options under
the 2002 and the 2003 grants prior to receiving any cash bonuses
thereunder. Pursuant to Section 409A, any portion of the
cash bonuses which were vested as of January 1, 2005 are
grandfathered and not subject to Section 409A. The portions
of the cash bonuses that were not vested as of that date are
subject to Section 409A and, pursuant to the terms of the
Cash Bonus Agreement, would subject Mr. Duda to an
additional 20% tax on these bonus amounts.
In connection with addressing the issues outlined above,
Mr. Duda agreed to elect to receive payment of all cash
bonus amounts payable under the 2003 Cash Bonus Agreement that
were vested as of January 1, 2005 and not subject to the
provisions of Section 409A. In order to make this election,
Mr. Duda was required to exercise all vested options under
the 2002 and 2003 stock option grants (175,000 shares). The
provision of Section 409A prohibited the amendment of the
2003 Cash Bonus Agreement to waive this condition without
triggering the 20% additional tax. Mr. Duda exercised these
options on April 4 and April 5, 2007, and subsequently sold
the underlying 175,000 shares of common stock at a weighted
average sale price of $15.32 per share. Also on April 6,
2007, Mr. Duda elected to receive a partial payment under
the 2003 Cash Bonus Agreement. We and Mr. Duda agreed that
for purposes of this payment and the payments pursuant to the
Amended Cash Bonus Agreement described below, the value of our
common stock would equal $15.32 per share, the weighted average
sales price of the sale of the 175,000 shares. Pursuant to
the terms of the Cash Bonus Agreement, these cash bonuses
totaled $241,000 [($15.32-$10.50) × 100,000 × 50%] and
$145,500 [($15.32-$11.44) × 150,000 × 25%],or $386,500
in the aggregate. These amounts will be included for purposes of
determining whether Mr. Dudas compensation has
exceeded the $1 million limit in fiscal-year 2007.
We entered into an Amended Cash Bonus Agreement with
Mr. Duda. Pursuant to the Amended Cash Bonus Agreement, we
will pay Mr. Duda cash bonuses in the amount of $241,000
[($15.32-$10.50) × 100,000 ×50%] and $436,500
[($15.32-$11.44) × 150,000 ×75%], or $677,500 in the
aggregate. These cash bonuses are payable on the earliest of the
following: (i) May 15, 2009; (ii) the date of
Mr. Dudas termination of employment for any reason;
or (iii) Mr. Dudas death or disability;
provided, however, that if, upon the payment date, the payment
is not deductible by us under Section 162(m), the payment
will be delayed until such time as it is deductible. In such
case, the amount may be payable in one or more installments.
Mr. Duda is not entitled to any other compensation pursuant
to the Amended Cash Bonus Agreement. Amendment of the 2003 Cash
Bonus Agreement eliminated variable accounting with respect to
the 2003 Cash Bonus Agreement.
26
COMPENSATION
COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management and, based
on such review and discussions, our Compensation Committee
recommended to our board of directors that the Compensation
Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Paul G. Shelton, Chairman
Warren L. Batts
Darren M. Dawson
Isabelle C. Goossen
Christopher J. Hornung
George S. Spindler
EXECUTIVE
COMPENSATION TABLES
Summary
Compensation Table
The following table sets forth certain summary information
regarding the compensation awarded to, earned by or paid by us
to or for the account of our Chief Executive Officer, our Chief
Financial Officer and our three other most highly compensated
executive officers for the fiscal year ended April 28, 2007.
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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(1)($)
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(2)($)
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(2)($)
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(3)($)
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(7)($)
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(8)($)
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($)
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Donald W. Duda
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2007
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560,168
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0
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1,129,295
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44,911
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399,681
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(4)
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0
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87,015
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2,911,005
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President and Chief
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410,020
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(5)
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Executive Officer
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279,915
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(6)
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Douglas A. Koman
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2007
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258,232
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0
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218,812
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17,166
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164,970
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(4)
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0
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27,558
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856,147
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Chief Financial Officer,
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75,444
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(5)
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Vice President,
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93,965
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(6)
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Corporate Finance
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Robert J. Kuehnau
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2007
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192,500
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0
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124,789
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3,109
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164,970
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(4)
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2,280
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23,162
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647,827
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Vice President,
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43,052
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(5)
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Treasurer and Controller
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,965
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Reynolds
|
|
|
2007
|
|
|
|
320,000
|
|
|
|
40,000
|
|
|
|
269,635
|
|
|
|
13,471
|
|
|
|
94,028
|
(4)
|
|
|
0
|
|
|
|
126,822
|
|
|
|
1,077,075
|
|
Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,783
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide Automotive Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,336
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Glandon
|
|
|
2007
|
|
|
|
220,000
|
|
|
|
30,000
|
|
|
|
60,297
|
|
|
|
0
|
|
|
|
65,588
|
(4)
|
|
|
0
|
|
|
|
19,257
|
|
|
|
477,584
|
|
Vice President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,442
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
General Manager,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Automotive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts reflect a discretionary cash bonus granted in connection
with significant involvement in the negotiation, due diligence
and integration of the TST business. |
|
(2) |
|
These amounts reflect the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended
April 28, 2007, in accordance with
SFAS No. 123(R), and include amounts from awards
granted in and prior to fiscal 2007. Under
SFAS No. 123(R), the fair value of these awards is
recognized ratably over the vesting period. Details of the
assumptions used in valuing these awards are set forth in
Note 4 to our audited financial statements included in our
Annual Report on Form
10-K for the
fiscal year ended April 28, 2007. |
|
(3) |
|
Amounts include performance-based bonuses pursuant to the annual
bonus plan. Pursuant to the annual bonus plan, the executive
officers bonus amounts are based on fiscal year 2007 sales
and profit performance |
27
|
|
|
|
|
compared to budget and on achieving individual objectives
established at the beginning of the fiscal year. Bonuses are
paid quarterly and are capped at 140% of the established target
bonus amount. Also includes amounts paid pursuant to a tandem
cash award granted in 2004 in connection with the grant of
restricted stock. In connection with the restricted stock
awards, we agreed to pay each such officer a cash bonus if we
exceeded certain financial targets for revenue growth and return
on invested capital, measured as of April 28, 2007. The
amount of the cash bonuses was calculated by multiplying the
number representing 50% of each officers respective earned
and vested restricted stock award by the closing price of our
common stock as of April 28, 2007. Also includes amounts
paid pursuant to our Longevity Contingent Bonus Program. The
Longevity Bonus Program awards a matching bonus equal to the
amount of the current quarterly bonus, which will be considered
as earned and payable in three years, provided that the
participant is still employed and performance has been
satisfactory. Commencing with fiscal year 2007, our Compensation
Committee has determined that the named executive officers will
not be eligible to receive future awards under the Longevity
Bonus Program. Amounts previously earned by these executives
under the Longevity Bonus Program will continue to be paid
through fiscal 2009. |
|
(4) |
|
Reflects the fiscal 2007 annual performance-based bonus. |
|
(5) |
|
Reflects amounts paid with respect to the 2004 RSA tandem cash
bonus grant for performance for the three-year period ended
April 28, 2007. |
|
(6) |
|
Reflects legacy payments under the Longevity Bonus Program. |
|
(7) |
|
Amount reflects above-market interest accruals under our Capital
Accumulation Program for Mr. Kuehnau. None of the other
named executive officers participates in the Capital
Accumulation Program. |
|
(8) |
|
Amounts reflect the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
|
401(k)
|
|
|
Life
|
|
|
|
|
|
|
|
|
Personal
|
|
|
|
|
|
Replacement
|
|
|
|
|
Executive
|
|
Dividends
|
|
|
Contribution
|
|
|
Insurance
|
|
|
Car Allowance
|
|
|
Relocation
|
|
|
Use*
|
|
|
Other
|
|
|
Bonus
|
|
|
Total
|
|
|
Mr. Duda
|
|
$
|
45,000
|
|
|
$
|
6,750
|
|
|
$
|
1,408
|
|
|
$
|
9,600
|
|
|
$
|
0
|
|
|
$
|
195
|
|
|
$
|
2,812
|
|
|
$
|
21,250
|
|
|
$
|
87,015
|
|
Mr. Koman
|
|
$
|
9,200
|
|
|
$
|
6,750
|
|
|
$
|
1,053
|
|
|
$
|
9,600
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
955
|
|
|
$
|
0
|
|
|
$
|
27,558
|
|
Mr. Kuehnau
|
|
$
|
5,243
|
|
|
$
|
6,750
|
|
|
$
|
1,124
|
|
|
$
|
9,600
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
445
|
|
|
$
|
0
|
|
|
$
|
23,162
|
|
Mr. Reynolds
|
|
$
|
14,000
|
|
|
$
|
6,750
|
|
|
$
|
1,017
|
|
|
$
|
9,000
|
|
|
$
|
89,121
|
|
|
$
|
6,934
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
126,822
|
|
Mr. Glandon
|
|
$
|
4,107
|
|
|
$
|
6,750
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
19,257
|
|
|
|
|
* |
|
Reflects the aggregate incremental cost of personal use of the
corporate aircraft. The aggregate incremental cost is based on
the cost of fuel, trip-related maintenance, crew travel
expenses, on-board catering, landing fees, trip-related
hangar/parking costs and smaller variable costs. Since our
aircraft is used primarily for business travel, we do not
include the fixed costs that do not change based on usage, such
as pilots salaries, the purchase costs of the
company-owned aircraft, and the cost of maintenance not related
to these trips. |
28
Grants of
Plan-Based Awards
The following table sets forth certain information regarding
grants of plan-based awards to the named executive officers
during the fiscal year ended April 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
Estimated Future Payouts Under
|
|
Estimated Future Payouts Under
|
|
of Stock
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Equity Incentive Plan Awards(3)
|
|
and Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(4)($)
|
|
Donald W. Duda
|
|
|
8/7/2006
|
|
|
|
190,400
|
(1)
|
|
|
320,000
|
(1)
|
|
|
409,600
|
(1)
|
|
|
20,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
764,000
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
382,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Koman
|
|
|
8/7/2006
|
|
|
|
82,875
|
(1)
|
|
|
130,0030
|
(1)
|
|
|
169,000
|
(1)
|
|
|
4,600
|
|
|
|
23,000
|
|
|
|
23,000
|
|
|
|
175,720
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
87,860
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Kuehnau
|
|
|
8/7/2006
|
|
|
|
82,875
|
(1)
|
|
|
130,000
|
(1)
|
|
|
169,000
|
(1)
|
|
|
2,618
|
|
|
|
13,090
|
|
|
|
13,090
|
|
|
|
100,008
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
50,004
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Reynolds
|
|
|
8/7/2006
|
|
|
|
102,000
|
(1)
|
|
|
160,000
|
(1)
|
|
|
208,000
|
(1)
|
|
|
5,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
343,800
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
171,900
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy R. Glandon
|
|
|
8/7/2006
|
|
|
|
76,500
|
(1)
|
|
|
120,000
|
(1)
|
|
|
156,000
|
(1)
|
|
|
4,000
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
152,800
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
76,400
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects cash incentive awards pursuant to the annual bonus
plan. The executive officers bonus amounts are based on
fiscal year 2007 sales and profit performance compared to budget
and on achieving individual management objectives established at
the beginning of the fiscal year. Bonuses are paid quarterly and
are capped at 140% of the established target bonus amount.
Amounts earned in fiscal 2007 by the executive officers under
this plan are reported in the column titled Non-Equity
Incentive Plan Compensation in the Summary
Compensation Table. |
|
(2) |
|
Reflects tandem cash awards granted in connection with the
fiscal 2007 grant of restricted stock (see footnote 3 below).
Pursuant to the awards, we agree to pay each such officer a cash
bonus if we exceed certain financial targets for revenue growth
and return on invested capital over a three-year period,
measured as of May 2, 2009. The maximum amount of the
tandem cash bonus will equal the product of the closing price of
our common stock as of May 2, 2009, and 50% of the number
of shares awarded to such executive under the 2007 restricted
stock award. |
|
(3) |
|
Reflects restricted stock awards which vest on May 2, 2009
if we have met certain financial targets based upon revenue
growth and return on invested capital. The restricted stock
awards are entitled to payments of dividends. |
|
(4) |
|
Amounts represent the total fair value of restricted stock
granted in fiscal 2007 under SFAS No. 123(R). Details
of the assumptions used in valuing these equity awards are set
forth in Note 4 to our audited financial statements
included in our Annual Report on
Form 10-K
for the fiscal year ended April 28, 2007 |
29
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding the
outstanding equity awards of the named executive officers at
April 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Unearned
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Rights That
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(3)(#)
|
|
($)
|
|
Donald W. Duda
|
|
|
29,413
|
(1)
|
|
|
0
|
|
|
|
17.658
|
|
|
|
3/1/2010
|
|
|
|
125,000
|
|
|
|
1,552,500
|
|
|
|
|
100,000
|
(1)
|
|
|
0
|
|
|
|
6.350
|
|
|
|
5/3/2011
|
|
|
|
100,000
|
|
|
|
764,000
|
|
|
|
|
0
|
|
|
|
25,000
|
(2)
|
|
|
11.440
|
|
|
|
7/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Koman
|
|
|
17,648
|
(1)
|
|
|
0
|
|
|
|
10.624
|
|
|
|
12/11/2010
|
|
|
|
23,000
|
|
|
|
285,660
|
|
|
|
|
25,000
|
(1)
|
|
|
0
|
|
|
|
7.450
|
|
|
|
5/3/2011
|
|
|
|
23,000
|
|
|
|
175,720
|
|
|
|
|
75,000
|
(2)
|
|
|
0
|
|
|
|
10.500
|
|
|
|
6/19/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
(2)
|
|
|
8,750
|
(2)
|
|
|
11.440
|
|
|
|
7/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Kuehnau
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125
|
|
|
|
163,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,090
|
|
|
|
100,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Reynolds
|
|
|
12,000
|
(1)
|
|
|
0
|
|
|
|
8.530
|
|
|
|
11/19/2011
|
|
|
|
25,000
|
|
|
|
310,500
|
|
|
|
|
30,000
|
(2)
|
|
|
0
|
|
|
|
10.500
|
|
|
|
6/10/2012
|
|
|
|
25,000
|
|
|
|
191,000
|
|
|
|
|
22,500
|
(2)
|
|
|
7,500
|
(2)
|
|
|
11.440
|
|
|
|
7/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy R. Glandon
|
|
|
2,500
|
(1)
|
|
|
0
|
|
|
|
11.440
|
|
|
|
8/1/2011
|
|
|
|
20,000
|
|
|
|
152,800
|
|
|
|
|
(1) |
|
These options vest 50% after one year and 100% after two years. |
|
(2) |
|
These options vest 25% after one year, 50% after two years, 75%
after three years and 100% after four years. |
|
(3) |
|
These performance-based restricted stock awards vest as of the
end of the third fiscal year following the grant date, provided
certain financial targets are satisfied. |
Option
Exercises and Stock Vested
The following table sets forth certain information regarding
option exercises and the vesting of restricted stock held by the
named executive officers during the fiscal year ended
April 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Donald W. Duda
|
|
|
100,000
|
|
|
|
478,020
|
|
|
|
100,000
|
|
|
|
1,577,000
|
|
|
|
|
45,000
|
|
|
|
172,798
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
111,873
|
|
|
|
|
|
|
|
|
|
Douglas A. Koman
|
|
|
|
|
|
|
|
|
|
|
18,400
|
|
|
|
290,168
|
|
Robert J. Kuehnau
|
|
|
48,576
|
|
|
|
53,796
|
|
|
|
10,500
|
|
|
|
165,585
|
|
|
|
|
20,000
|
|
|
|
104,909
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
65,869
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
25,109
|
|
|
|
|
|
|
|
|
|
Thomas D. Reynolds
|
|
|
3,000
|
|
|
|
15,894
|
|
|
|
15,800
|
|
|
|
249,166
|
|
Timothy R. Glandon
|
|
|
10,000
|
|
|
|
41,379
|
|
|
|
0
|
|
|
|
0
|
|
30
Nonqualified
Deferred Compensation
The following table sets forth certain information regarding
deferred compensation with respect to the named executive
officers for the fiscal year ended April 28, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last
|
|
|
in Last
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Last Fiscal
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Last Fiscal Year
|
|
|
Distributions
|
|
|
Year-End
|
|
Name
|
|
(1)($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(1)($)
|
|
|
Donald W. Duda
|
|
|
22,956
|
|
|
|
0
|
|
|
|
2,798
|
|
|
|
0
|
|
|
|
25,754
|
|
Douglas A. Koman
|
|
|
33,272
|
|
|
|
0
|
|
|
|
2,081
|
|
|
|
0
|
|
|
|
35,353
|
|
Robert J. Kuehnau
|
|
|
214,430
|
|
|
|
0
|
|
|
|
21,905
|
|
|
|
0
|
|
|
|
236,335
|
|
Thomas D. Reynolds
|
|
|
20,000
|
|
|
|
0
|
|
|
|
1,970
|
|
|
|
0
|
|
|
|
21,970
|
|
Timothy R. Glandon
|
|
|
25,227
|
|
|
|
0
|
|
|
|
2,869
|
|
|
|
0
|
|
|
|
28,096
|
|
|
|
|
(1) |
|
All executive contributions were reported as compensation in the
Summary Compensation Table under the
Salary and/or Non-Equity Incentive Plan
Compensation columns, depending on the source of the
executive contribution. |
The Methode Electronics, Inc. Nonqualified Deferred Compensation
Plan (the Deferred Compensation Plan) allows a
select group of management and highly compensated employees to
defer up to 75% of their annual base salary, 100% of their
annual bonus,
and/or 100%
of their RSA tandem cash bonus, with an aggregate minimum
deferral of $3,000. The minimum period of deferral is three
years. Participants are immediately 100% vested. All of our
executive officers participate in the Deferred Compensation Plan.
In addition to employee-directed deferrals, we may be required
to make contributions to a participants account in the
Deferred Compensation Plan under a separate agreement, such as
an employment agreement. We may also make contributions to the
Deferred Compensation Plan to make up for limits applicable
under our qualified plans and may make additional discretionary
contributions as well. Participants shall vest in company
contributions in accordance with the schedule set forth in the
applicable agreement or plan governing such contributions. We
made no contributions to the Deferred Compensation Plan in
fiscal 2007.
Participants may elect from a list of certain mutual funds to
determine any amounts credited or debited from their accounts,
although we are under no obligation to invest the deferred
amounts in any specified fund. This list is made available to
all participants and account balances are credited or debited
based on the current market rates for these funds. Participants
may reallocate account balances
and/or
future deferrals on a daily basis.
Participants are entitled to receive a distribution from their
account balances at the earlier of the end of the elected
deferral period or retirement, disability, termination of
employment, or a change in control. Accounts are distributed in
a lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. Participants can also petition
the Compensation Committee to receive a full or partial payout
from the Deferred Compensation Plan in the event of an
unforeseeable financial emergency.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following summaries set forth potential payments payable to
our named executive officers upon termination of their
employment or a change of control of Methode. Our executive
officers are entitled to these payments under their change of
control agreements, our stock plans and certain other benefit
plans. The amounts shown assume that such termination was
effective as of April 28, 2007 (the last business day of
our 2007 fiscal year), and reflect the price of our common stock
on such date ($15.77). The tables below do not reflect amounts
payable to our executive officers pursuant to plans or
arrangements that are available generally to all of our salaried
employees, such as payments under the 401(k) Plan, the life
insurance plan, the disability insurance plan and the vacation
pay policy, and payment of accrued base salary and accrued
bonuses.
31
Payments
Made Upon Retirement, Death or Disability
In the event of the retirement, death or disability of an
executive officer, the executive officer is entitled to the
following:
|
|
|
|
|
in certain cases, immediate vesting of a pro rata portion of the
executives outstanding performance-based restricted stock
awards (pursuant to the terms of the award agreements, immediate
vesting occurs if retirement occurs at or after 65, or after 55
with our consent, at the discretion of our Compensation
Committee);
|
|
|
|
in certain cases, payment of a pro rata portion of the cash
bonus associated with the executives outstanding
performance-based restricted stock awards (pursuant to the terms
of the cash award agreements, the executive is entitled to the
payment if retirement occurs at or after 65, or after 55 with
our consent, at the discretion of our Compensation Committee);
|
|
|
|
continued payments under the Longevity Contingent Bonus Program
pursuant to the original payment schedule; and
|
|
|
|
the executives account balance in the Deferred
Compensation Plan.
|
Payments
Made In Connection With a Change of Control
In the event of a change of control, each executive officer is
entitled to immediate vesting of a pro rata portion of the
executives outstanding performance-based restricted stock
awards and the payment of a pro rata portion of the cash bonus
associated with the executives outstanding
performance-based restricted stock awards. In addition, based on
their respective elections, each executive officer is entitled
to his account balance in the Deferred Compensation Plan.
If within two years of a change of control or during a period
pending a change of control, we terminate the executives
employment without good cause or the executive voluntarily
terminates his or her employment for good reason, the executive
is entitled to the following:
|
|
|
|
|
a lump sum payment in an amount equal to three times (two times
in the case of Messrs. Reynolds and Glandon) the
executives annual salary;
|
|
|
|
a lump sum cash bonus payment equal to the sum of the following
amounts: (i) three times (two times in the case of
Messrs. Reynolds and Glandon) the lesser of: (a) the
executives target bonus amount for the fiscal year in
which executives employment termination occurs, or
(b) the bonus the executive earned in the prior fiscal year
(however, if the termination occurs in fiscal 2007, this amount
will be the target bonus amount); plus (ii) all of
executives unpaid, but accrued matching bonus pursuant to
the Longevity Contingent Bonus Plan;
|
|
|
|
a gross-up
payment to provide the executive officer with an amount, on an
after-tax basis, equal to any excise taxes payable by the
executive officer under the tax laws in connection with the
payments described above; and
|
|
|
|
continued participation in our welfare benefit plans for three
years (two years in the case of Messrs. Reynolds and
Glandon) or until the executive becomes covered under other
welfare benefit plans providing substantially similar benefits.
|
In addition to the applicable benefits described above, in the
event Mr. Dudas employment terminates for any reason,
he will receive one share of common stock for each outstanding
and vested restricted stock unit.
32
Donald W.
Duda
The following table shows the potential payments upon
termination or a change of control of Methode for Donald W.
Duda, our Chief Executive Officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
|
Control on
|
|
|
on 4/28/07 and
|
|
|
|
|
|
|
|
|
|
4/28/07 and
|
|
|
Executive Resigns
|
|
|
Death, Disability or
|
|
|
|
Resignation or
|
|
|
Executives
|
|
|
for Good Reason
|
|
|
Qualified
|
|
Benefits and Payments Upon
|
|
Termination on
|
|
|
Employment
|
|
|
or is Terminated
|
|
|
Retirement(1)
|
|
Termination
|
|
4/28/07
|
|
|
Continues
|
|
|
Without Cause
|
|
|
on 4/28/07
|
|
|
Salary Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,680,504
|
|
|
$
|
|
|
Bonus Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,040,000
|
|
|
$
|
|
|
Pro Rata Vesting of Restricted
Stock Units and Delivery of Underlying Common Stock(2)
|
|
$
|
|
|
|
$
|
1,839,834
|
|
|
$
|
1,839,834
|
|
|
$
|
1,839,834
|
|
Pro Rata Payment of Tandem Cash
Bonus(2)
|
|
$
|
|
|
|
$
|
404,764
|
|
|
$
|
404,764
|
|
|
$
|
404,764
|
|
Accelerated Vesting of Stock
Options
|
|
$
|
|
|
|
$
|
108,250
|
|
|
$
|
108,250
|
|
|
$
|
108,250
|
|
Delivery of Common Stock
Underlying Vested Restricted Stock Units
|
|
$
|
1,577,000
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
Deferred Compensation Plan(4)
|
|
$
|
25,754
|
|
|
$
|
25,754
|
|
|
$
|
25,754
|
|
|
$
|
25,754
|
|
Health and Welfare Benefits(5)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,360
|
|
|
$
|
|
|
Excise Tax &
Gross-Up
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,530,608
|
|
|
$
|
|
|
|
|
|
(1) |
|
Considered qualified retirement if occurs at or after 65, or
after 55 with our consent, at the discretion of our Compensation
Committee. |
|
(2) |
|
For purposes of this table, we have assumed that our
Compensation Committee has elected to accelerate all awards in
each instance in which the acceleration is subject to the
discretion of our Compensation Committee. |
|
(3) |
|
Amounts reflected above under Pro Rata Vesting of
Restricted Stock Units and Delivery of Underlying Common
Stock. |
|
(4) |
|
Amounts only include executive contributions and earnings
thereon. Participants are entitled to receive a distribution at
the earlier of the end of the elected deferral period or
retirement, disability, termination of employment or, based on
an election, a change of control. Accounts are distributed in a
lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. |
|
(5) |
|
Reflects the estimated lump-sum present value of all future
premiums which will be paid on behalf of the executive under our
health and welfare benefit plans. |
33
Douglas
A. Koman
The following table shows the potential payments upon
termination or a change of control of Methode for Douglas A.
Koman, our Chief Financial Officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
|
Control on
|
|
|
on 4/28/07 and
|
|
|
|
|
|
|
|
|
|
4/28/07 and
|
|
|
Executive Resigns
|
|
|
Death, Disability or
|
|
|
|
Resignation or
|
|
|
Executives
|
|
|
for Good Reason or
|
|
|
Qualified
|
|
Benefits and Payments Upon
|
|
Termination on
|
|
|
Employment
|
|
|
is Terminated
|
|
|
Retirement(1)
|
|
Termination
|
|
4/28/07
|
|
|
Continues
|
|
|
Without Cause
|
|
|
on 4/28/07
|
|
|
Salary Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
774,696
|
|
|
$
|
|
|
Bonus Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
422,500
|
|
|
$
|
|
|
Pro Rata Vesting of Restricted
Stock Awards and Payout(2)
|
|
$
|
|
|
|
$
|
367,710
|
|
|
$
|
367,710
|
|
|
$
|
367,710
|
|
Pro Rata Payment of Tandem Cash
Bonus(2)
|
|
$
|
|
|
|
$
|
79,796
|
|
|
$
|
79,796
|
|
|
$
|
79,796
|
|
Accelerated Vesting of Stock
Options
|
|
$
|
|
|
|
$
|
37,888
|
|
|
$
|
37,888
|
|
|
$
|
37,888
|
|
Deferred Compensation Plan(3)
|
|
$
|
35,353
|
|
|
$
|
35,353
|
|
|
$
|
35,353
|
|
|
$
|
35,353
|
|
Health and Welfare Benefits(4)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,360
|
|
|
$
|
|
|
Excise Tax &
Gross-Up
|
|
$
|
|
|
|
$
|
|
|
|
$
|
779,049
|
|
|
$
|
|
|
|
|
|
(1) |
|
Considered qualified retirement if occurs at or after 65, or
after 55 with our consent, at the discretion of our Compensation
Committee. |
|
(2) |
|
For purposes of this table, we have assumed that our
Compensation Committee has elected to accelerate all awards in
each instance in which the acceleration is subject to the
discretion of our Compensation Committee. |
|
(3) |
|
Amounts only include executive contributions and earnings
thereon. Participants are entitled to receive a distribution at
the earlier of the end of the elected deferral period or
retirement, disability, termination of employment or, based on
an election, a change of control. Accounts are distributed in a
lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. |
|
(4) |
|
Reflects the estimated lump-sum present value of all future
premiums which will be paid on behalf of the executive under our
health and welfare benefit plans. |
Robert J.
Kuehnau
The following table shows the potential payments upon
termination or a change of control of Methode for Robert J.
Kuehnau, our former Vice President, Treasurer, Controller and
Assistant Secretary. Mr. Kuehnau resigned as an executive
officer effective April 27, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
|
Control on
|
|
|
on 4/28/07 and
|
|
|
|
|
|
|
|
|
|
4/28/07 and
|
|
|
Executive Resigns
|
|
|
Death, Disability or
|
|
|
|
Resignation or
|
|
|
Executives
|
|
|
for Good Reason or
|
|
|
Qualified
|
|
Benefits and Payments Upon
|
|
Termination on
|
|
|
Employment
|
|
|
is Terminated
|
|
|
Retirement(1)
|
|
Termination
|
|
4/28/07
|
|
|
Continues
|
|
|
Without Cause
|
|
|
on 4/28/07
|
|
|
Salary Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
577,500
|
|
|
$
|
|
|
Bonus Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
422,500
|
|
|
$
|
|
|
Pro Rata Vesting of Restricted
Stock Awards and Payout(2)
|
|
$
|
|
|
|
$
|
206,798
|
|
|
$
|
206,798
|
|
|
$
|
206,798
|
|
Pro Rata Payment of Tandem Cash
Bonus(2)
|
|
$
|
|
|
|
$
|
45,493
|
|
|
$
|
45,493
|
|
|
$
|
45,493
|
|
Deferred Compensation Plan(3)
|
|
$
|
236,336
|
|
|
$
|
236,336
|
|
|
$
|
236,336
|
|
|
$
|
236,336
|
|
Health and Welfare Benefits(4)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,360
|
|
|
$
|
|
|
Excise Tax &
Gross-Up
|
|
$
|
|
|
|
$
|
|
|
|
$
|
551,063
|
|
|
$
|
|
|
34
|
|
|
(1) |
|
Considered qualified retirement if occurs at or after 65, or
after 55 with our consent, at the discretion of our Compensation
Committee. |
|
(2) |
|
For purposes of this table, we have assumed that our
Compensation Committee has elected to accelerate all awards in
each instance in which the acceleration is subject to the
discretion of our Compensation Committee. |
|
(3) |
|
Amounts only include executive contributions and earnings
thereon. Participants are entitled to receive a distribution at
the earlier of the end of the elected deferral period or
retirement, disability, termination of employment or, based on
an election, a change of control. Accounts are distributed in a
lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. |
|
(4) |
|
Reflects the estimated lump-sum present value of all future
premiums which will be paid on behalf of the executive under our
health and welfare benefit plans. |
Thomas D.
Reynolds
The following table shows the potential payments upon
termination or a change of control of Methode for Thomas D.
Reynolds, our Senior Vice President, Worldwide Automotive
Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
|
Control on
|
|
|
on 4/28/07 and
|
|
|
|
|
|
|
|
|
|
4/28/07 and
|
|
|
Executive Resigns
|
|
|
Death, Disability or
|
|
|
|
Resignation or
|
|
|
Executives
|
|
|
for Good Reason or
|
|
|
Qualified
|
|
Benefits and Payments Upon
|
|
Termination on
|
|
|
Employment
|
|
|
is Terminated
|
|
|
Retirement(1)
|
|
Termination
|
|
4/28/07
|
|
|
Continues
|
|
|
Without Cause
|
|
|
on 4/28/07
|
|
|
Salary Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
640,000
|
|
|
$
|
|
|
Bonus Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
360,000
|
|
|
$
|
|
|
Pro Rata Vesting of Restricted
Stock Awards and Payout(2)
|
|
$
|
|
|
|
$
|
499,383
|
|
|
$
|
499,383
|
|
|
$
|
499,383
|
|
Pro Rata Payment of Tandem Cash
Bonus(2)
|
|
$
|
|
|
|
$
|
109,864
|
|
|
$
|
109,864
|
|
|
$
|
109,864
|
|
Accelerated Vesting of Stock
Options
|
|
$
|
|
|
|
$
|
32,475
|
|
|
$
|
32,475
|
|
|
$
|
32,475
|
|
Deferred Compensation Plan(3)
|
|
$
|
21,969
|
|
|
$
|
21,969
|
|
|
$
|
21,969
|
|
|
$
|
21,969
|
|
Health and Welfare Benefits(4)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,240
|
|
|
$
|
|
|
Excise Tax &
Gross-Up
|
|
$
|
|
|
|
$
|
|
|
|
$
|
731,676
|
|
|
$
|
|
|
|
|
|
(1) |
|
Considered qualified retirement if occurs at or after 65, or
after 55 with our consent, at the discretion of our Compensation
Committee. |
|
(2) |
|
For purposes of this table, we have assumed that our
Compensation Committee has elected to accelerate all awards in
each instance in which the acceleration is subject to the
discretion of our Compensation Committee. |
|
(3) |
|
Amounts only include executive contributions and earnings
thereon. Participants are entitled to receive a distribution at
the earlier of the end of the elected deferral period or
retirement, disability, termination of employment or, based on
an election, a change of control. Accounts are distributed in a
lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. |
|
(4) |
|
Reflects the estimated lump-sum present value of all future
premiums which will be paid on behalf of the executive under our
health and welfare benefit plans. |
35
Timothy
R. Glandon
The following table shows the potential payments upon
termination or a change of control of Methode for Timothy
Glandon, our Vice President and General Manager, North American
Automotive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
|
Control on
|
|
|
on 4/28/07 and
|
|
|
|
|
|
|
|
|
|
4/28/07 and
|
|
|
Executive Resigns
|
|
|
Death, Disability or
|
|
|
|
Resignation or
|
|
|
Executives
|
|
|
for Good Reason
|
|
|
Qualified
|
|
Benefits and Payments Upon
|
|
Termination on
|
|
|
Employment
|
|
|
or is Terminated
|
|
|
Retirement(1)
|
|
Termination
|
|
4/28/07
|
|
|
Continues
|
|
|
Without Cause
|
|
|
on 4/28/07
|
|
|
Salary Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
440,000
|
|
|
$
|
|
|
Bonus Severance
|
|
$
|
|
|
|
$
|
|
|
|
$
|
270,000
|
|
|
$
|
|
|
Pro Rata Vesting of Restricted
Stock Awards and Payout(2)
|
|
$
|
|
|
|
$
|
227,093
|
|
|
$
|
227,093
|
|
|
$
|
227,093
|
|
Pro Rata Payment of Tandem Cash
Bonus(2)
|
|
$
|
|
|
|
$
|
23,129
|
|
|
$
|
23,129
|
|
|
$
|
23,129
|
|
Deferred Compensation Plan(3)
|
|
$
|
28,095
|
|
|
$
|
28,095
|
|
|
$
|
28,095
|
|
|
$
|
28,095
|
|
Health and Welfare Benefits(4)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,240
|
|
|
$
|
|
|
Excise Tax &
Gross-Up
|
|
$
|
|
|
|
$
|
|
|
|
$
|
371,331
|
|
|
$
|
|
|
|
|
|
(1) |
|
Considered qualified retirement if occurs at or after 65, or
after 55 with our consent, at the discretion of our Compensation
Committee. |
|
(2) |
|
For purposes of this table, we have assumed that our
Compensation Committee has elected to accelerate all awards in
each instance in which the acceleration is subject to the
discretion of our Compensation Committee. |
|
(3) |
|
Amounts only include executive contributions and earnings
thereon. Participants are entitled to receive a distribution at
the earlier of the end of the elected deferral period or
retirement, disability, termination of employment or, based on
an election, a change of control. Accounts are distributed in a
lump sum or, in certain circumstances, in installments over a
period of up to fifteen years. |
|
(4) |
|
Reflects the estimated lump-sum present value of all future
premiums which will be paid on behalf of the executive under our
health and welfare benefit plans. |
36
OTHER
INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
Under the securities laws, our directors and executive officers
are required to report their initial ownership of our common
stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these
reports have been established and we are required to disclose in
this proxy statement if a director or executive officer filed a
late report. During fiscal 2007, there were no delinquent
reports. In making these disclosures, we have relied solely on
written representations of our directors and executive officers
and copies of the reports filed with the Securities and Exchange
Commission.
Stockholder
Proposals
Our Corporate Secretary must receive stockholder proposals no
later than April 12, 2008 to be considered for inclusion in
our proxy materials for our next annual meeting. Additionally,
our advance notice by-law provisions require that any
stockholder proposal to be presented from the floor of the next
annual meeting must be received by our Corporate Secretary not
later than the 60th day nor earlier than the 90th day
prior to September 13, 2008 (the first anniversary of the
preceding years annual meeting). If the date of our next
annual meeting is more than 30 days before or more than
60 days after September 13, 2008, stockholder
proposals must be delivered no earlier than the 90th day
prior to such annual meeting date and not later than the later
of the 60th day prior to such annual meeting date or the
10th day following our public announcement of the meeting
date for such annual meeting. Also, such proposal must be, under
law, an appropriate subject for stockholder action in order to
be brought before the meeting and must contain the information
required by the advance notice by-law provision. These notices
should be directed to the Corporate Secretary of Methode
Electronics, Inc. at 7401 West Wilson Avenue, Chicago,
Illinois 60706.
Additional
Information
A copy of our Annual Report on
Form 10-K
for the fiscal year ended April 28, 2007, as filed with the
Securities and Exchange Commission, will be provided to
stockholders without charge upon written request directed to
Investor Relations, Methode Electronics, Inc., 7401 West
Wilson Avenue, Chicago, Illinois 60706.
Other
Matters
Neither our board of directors nor management knows of any other
business that will be presented at the annual meeting. Should
any other business properly come before the annual meeting, the
persons named in the enclosed proxy will vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
Warren L. Batts
Chairman
Chicago, Illinois
August 10, 2007
37
APPENDIX A
METHODE
ELECTRONICS, INC. 2007 CASH INCENTIVE PLAN
Methode Electronics, Inc., a Delaware corporation (the
Company), hereby establishes the Methode
Electronics, Inc. 2007 Cash Incentive Plan (the
Plan) as an incentive for selected officers and key
employees of the Company to improve corporate performance by
providing each participating officer and other selected key
employees with an opportunity to receive a cash incentive
payment based upon the accomplishment of certain performance
criteria.
|
|
2.
|
Definitions
and Rules of Construction.
|
2.01
Definitions.
(a) Affiliate means any entity during
any period that, in the opinion of the Committee, the Company
has a significant economic interest in the entity.
(b) Award means the grant of a cash
incentive award hereunder.
(c) Award Date means the date upon which
an Award is granted to a Participant under the Plan.
(d) Board or Board of
Directors means the board of directors of the Company.
(e) Cause shall mean:
(i) Participants conviction of a felony;
(ii) Participants commission of any act or acts of
personal dishonesty intended to result in substantial personal
enrichment to Participant to the detriment of the Company;
(iii) repeated violations of Participants
responsibilities which are demonstrably willful and deliberate,
provided that such violations have continued more than ten days
after the Board of Directors of the Company has given written
notice of such violations and of its intention to terminate
Participants employment because of such violations;
(iv) any willful misconduct by the Participant which
affects the business reputation of the Company;
(v) breach by the Participant of any provision of any
employment, consulting, advisory, nondisclosure, non-competition
or other similar agreement between the Participant and the
Company or any Affiliate or Subsidiary; or
(vi) Participants violation of the Companys
code of conduct.
The Participant shall be considered to have been discharged for
Cause if the Company determines, within 30 days
after the Participants resignation, that discharge for
Cause was warranted.
(f) Change of Control shall be deemed to
have occurred on the first to occur of any of the following as a
result of one transaction or a series of transactions:
(i) the date any one person, or more than one
person acting as a group, acquires (or has acquired
during the twelve (12) month period ending on the date of
the most recent acquisition by such person(s)) ownership of
stock of the Company possessing thirty percent (30%) or more of
the total voting power of the stock of the Company;
(ii) the date a majority of the members of the
Companys Board of Directors is replaced during any twelve
(12) month period by directors whose appointment or
election is not endorsed by a majority of the Companys
Board of Directors before the date of the appointment or
election; or
A-1
(iii) the date any one person, or more than one person
acting as a group, acquires ownership of stock of the Company
that, together with stock held by such person or group,
constitutes more than fifty percent (50%) percent of the fair
market value or total voting power of the stock of the Company.
(g) Code means the Internal Revenue Code
of 1986, as amended from time to time or any successor thereto.
(h) Committee means the Compensation
Committee of the Board of Directors.
(i) Company means Methode Electronics,
Inc., a Delaware corporation, and any successor thereto.
(j) Family Members mean with respect to
an individual, any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
including adoptive relationships, any person sharing the
individuals household (other than a tenant or employee), a
trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
individual) control the management of assets, and any other
entity in which these persons (or the individual) own more than
50% of the voting interests.
(k) Participant means an individual to
whom an Award has been granted under the Plan.
(l) Plan means the Methode Electronics,
Inc. 2007 Cash Incentive Plan, as set forth herein and from time
to time amended.
(m) Subsidiary means any entity during
any period of which the Company owns or controls more than 50%
of (i) the outstanding capital stock, or (ii) the
combined voting power of all classes of stock.
2.02
Rules of Construction.
(a) Governing Law and Venue. The
construction and operation of this Plan are governed by the laws
of the State of Illinois without regard to any conflicts or
choice of law rules or principles that might otherwise refer
construction or interpretation of this Plan to the substantive
law of another jurisdiction, and any litigation arising out of
this Plan shall be brought in the Circuit Court of the State of
Illinois or the United States District Court for the Eastern
Division of the Northern District of Illinois.
(b) Undefined Terms. Unless the context
requires another meaning, any term not specifically defined in
this Plan is used in the sense given to it by the Code.
(c) Headings. All headings in this Plan
are for reference only and are not to be utilized in construing
the Plan.
(d) Conformity with
Section 162(m). Any awards issued to
specified employees (as defined in Section 162(m) of the
Code) with any of the performance criteria listed in
Section 5 are intended to qualify as performance-based
compensation under Section 162(m) of the Code to which the
applicable remuneration limits of Section 162(m)(1) do not
apply.
(e) Gender. Unless clearly inappropriate,
all nouns of whatever gender refer indifferently to persons of
any gender.
(f) Singular and Plural. Unless clearly
inappropriate, singular terms refer also to the plural and vice
versa.
(g) Severability. If any provision of
this Plan is determined to be illegal or invalid for any reason,
the remaining provisions are to continue in full force and
effect and to be construed and enforced as if the illegal or
invalid provision did not exist, unless the continuance of the
Plan in such circumstances is not consistent with its purposes.
The Committee shall administer the Plan. All determinations of
the Committee are made by a majority vote of its members. The
Committees determinations are final and binding on all
Participants. In addition to any other powers set forth in this
Plan, the Committee has the following powers:
(a) to construe and interpret the Plan;
A-2
(b) to establish, amend and rescind appropriate rules and
regulations relating to the Plan;
(c) subject to the terms of the Plan, to select the
individuals who will receive Awards, the times when they will
receive them, the form of agreements which evidence such Awards,
the amount of such Award, the performance targets to be achieved
to receive payment of the Award, the expiration date applicable
to each Award and other terms, provisions and restrictions of
the Awards (which need not be identical) and subject to
Section 13 hereof, to amend or modify any of the terms of
outstanding Awards;
(d) to contest on behalf of the Company or Participants, at
the expense of the Company, any ruling or decision on any matter
relating to the Plan or to any Awards; and
(e) generally, to administer the Plan, and to take all such
steps and make all such determinations in connection with the
Plan and the Awards granted thereunder as it may deem necessary
or advisable.
Except to the extent prohibited by applicable law, the Committee
may allocate all or any portion of its responsibilities and
powers to any one or more of its members and may delegate all or
any part of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
|
|
4.
|
Eligible
Participants.
|
Present and future officers and key employees of the Company or
any Subsidiary shall be eligible to participate in the Plan. The
Committee from time to time shall select those officers and key
employees of the Company and any Subsidiary of the Company who
shall be designated as Participants and shall designate in
accordance with the terms of the Plan the amount of any Award to
be awarded to each Participant.
|
|
5.
|
Performance
Criteria (162(m) Awards).
|
Subject to the terms of the Plan, the Committee, in its
discretion, may make the grant or vesting of an Award to a
specified employee (as defined in
Section 162(m) of the Code and the regulations thereunder)
subject to performance criteria (a 162(m) Award).
All 162(m) Awards shall be granted by the Committee when
composed of two or more outside directors, as prescribed by
Section 162(m) of the Code and the regulations thereunder.
The Committee shall certify that the performance goals and other
material terms have been satisfied before payment of a 162(m)
Award is made. All 162(m) Awards shall be paid solely on account
of the attainment of one or more pre-established, objective
performance goals, which goals shall be established on a timely
basis, in conformity with the timing requirements of
Section 162(m) of the Code. Notwithstanding any provision
of the Plan to the contrary, the Committee shall not have
discretion to waive or amend such performance goals or to
increase the amount payable pursuant to a 162(m) Award after the
performance goals have been established; provided, however, the
Committee may, in its sole discretion, reduce the amount that
would otherwise be payable with respect to any 162(m) Award.
Permissible performance goals include any one of the following
or combination thereof which may be applicable on a Company-wide
basis and/or
with respect to operating units, divisions, subsidiaries,
acquired businesses, minority investments, partnerships or joint
ventures:
(a) meeting specific targets for or growth in:
(1) stock price,
(2) net sales (dollars or volume),
(3) cash flow,
(4) operating income,
(5) net income,
(6) earnings per share,
(7) earnings before taxes,
(8) earnings before interest and taxes, or
A-3
(9) earnings before interest, taxes, depreciation and
amortization (EBITDA);
(b) return on:
(1) net sales,
(2) assets or net assets, or
(3) invested capital;
(c) management of:
(1) working capital,
(2) expenses, or
(3) cash flow;
(d) meeting specific targets for or growth in:
(1) productivity,
(2) specified product lines,
(3) market share,
(4) product development,
(5) customer service or satisfaction,
(6) employee satisfaction,
(7) strategic innovation, or
(8) acquisitions;
(e) specific personal performance improvement objectives
relative to:
(1) formal education,
(2) executive training,
(3) leadership training; or
(4) succession planning.
(f) any other criteria established by the Committee (but
only if such other criteria are approved by the stockholders).
The material terms of the 162(m) Award shall be disclosed and
approved by stockholders prior to payment, in conformity with
the requirements under Section 162(m) of the Code. Subject
to such deferral
and/or other
conditions as may be permitted or required by the Committee,
cash amounts earned under an award will be paid or distributed
as soon as practicable following the Committees
determination and certification of such amounts. Notwithstanding
anything to the contrary contained herein, no Participant may
earn more than two (2) times his or her annual base salary
in any calendar year (as listed on the Summary Compensation
Table in the Companys annual proxy statement) pursuant to
an Award made under the Plan, except that Tandem Cash Awards
shall be subject to a different limitation. A Tandem Cash Award
is an Award made under this Plan which Award is made at the same
time as a restricted stock award. Tandem Cash Awards shall have
a maximum value of 50% of the aggregate fair market value as of
the vesting date of the tandem restricted stock award. Both a
Tandem Cash Award and a Cash Award subject to the dollar
limitation listed above may be made in the same calendar year.
Any 162(m) Award that fails to meet the requirements under this
Section 5 or the requirements under Section 162(m) and
its regulations shall not be nullified or voided. Instead,
payment of such a 162(m) Award shall be delayed until the
applicable remuneration is deductible or upon the specified
employees termination of employment, whichever occurs
first.
A-4
|
|
6.
|
Terms and
Conditions of Cash Incentive Awards.
|
The Committee may, in its discretion, grant an Award to any
Participant under the Plan. Each Award shall be evidenced by an
agreement between the Company and the Participant. Such Award
shall specify a performance period and performance criteria that
must be satisfied in order for a payment to be made. Such
performance criteria may (but need not) include the goals
itemized in Section 5 above. The Award agreement shall
specify the amount to be paid (or formula for determining the
payment amount), the payment schedule for such Award, the
expiration of such Award, and such other information necessary
or desirable for the proper administration of such Award. Unless
such Award is properly deferred under Section 9, all Awards
shall be paid to the Participant within
21/2
months after the end of the Companys or the
Participants taxable year in which the Participant became
entitled to the Award payment.
|
|
7.
|
Acceleration
of Payment.
|
Notwithstanding the above schedule, unless otherwise determined
by the Committee and set forth in the agreement evidencing an
Award, payment of a Participants Awards shall accelerate
if a Participants employment with the Company and its
Subsidiaries and Affiliates or service on the board of directors
of the Company, a Subsidiary or an Affiliate is terminated due
to: (i) retirement on or after his sixty-fifth birthday;
(ii) retirement on or after his fifty-fifth birthday with
consent of the Company; (iii) retirement at any age on
account of total and permanent disability as determined by the
Company; or (iv) death. If payment is accelerated, payment
of the Award shall be made on a pro rata basis, based on
performance to date and on the total number of days the
Participant was employed during the performance period in
relation to the scheduled number of days between the Award Date
and the scheduled payment date.
A Participants employment shall not be considered to be
terminated hereunder by reason of a transfer of his employment
from the Company to a Subsidiary or Affiliate, or vice versa, or
a leave of absence approved by the Participants employer.
A Participants employment shall be considered to be
terminated hereunder if, as a result of a sale or other
transaction, the Participants employer ceases to be a
Subsidiary or Affiliate (and the Participants employer is
or becomes an entity that is separate from the Company and its
Subsidiaries and Affiliates).
|
|
8.
|
Effect of
Change of Control.
|
Unless otherwise determined by the Committee and set forth in
the agreement evidencing an Award, immediately following a
Change of Control, payment of any outstanding Award shall be
accelerated. Payment of an Award subject to performance criteria
shall be made on a pro rata basis, based on performance to date
and on the total number of days during the performance period
before the Change of Control in relation to the entire
performance period.
A Participant may elect to defer receipt of all or a portion of
an Award payment, subject to the rules listed below:
(a) a deferral may be made for any amount of time, if the
election is received by the Committee no later than the calendar
year prior to the date of the grant of the applicable Award;
(b) a deferral may be made no later than twelve months
before the portion of the Award vests, but payment must be
deferred for at least five years from the original payment date;
(c) a Participant who first becomes eligible to participate
in the Plan (or any other plan subject to the aggregation rules
under Section 409A of the Code) may make a deferral for any
amount of time, but such deferral must be made within the first
30 days in which the Participant becomes eligible to
participate and the deferral may only apply to compensation
earned after the election is made;
(d) a deferral may be made for any amount of time, but
(1) such election must be made within 30 days of the
grant;
A-5
(2) such election may only apply with respect to the
portion of the Award whose vesting is contingent on the
Participant performing services for at least an additional
twelve months from the date of election; and
(3) such election may not be not effective until
12 months from the date it is made; or
(e) a deferral may be made for any amount of time up until
six months before the Award vests if the Award is for
performance-based compensation (as determined under
Section 409A of the Code) measured over a period of at
least twelve (12) months and either
(1) the amount of the compensation cannot be reasonably
ascertained at the time of the election, or
(2) the performance requirement is still not substantially
certain to be met at the time of the election.
Notwithstanding any other provision of this Plan, a deferred
Award shall be accelerated and paid out upon a
Participants separation from service or death, except that
a Participant who is a specified employee under
Section 409A of the Code shall have the payment of his
deferred Award delayed for an additional six months after his
separation from service to the extent required to comply with
Section 409A of the Code.
|
|
10.
|
Nontransferability
of Awards.
|
All Awards granted pursuant to this Plan are transferable by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, or in
the Committees discretion after vesting. With the approval
of the Committee, a Participant may transfer an Award for no
consideration to or for the benefit of one or more Family
Members of the Participant subject to such limits as the
Committee may establish, and the transferee shall remain subject
to all the terms and conditions applicable to the Award prior to
such transfer. The transfer of an Award pursuant to this
Section 10 shall include a transfer of the right set forth
in Section 13 hereof to consent to an amendment or revision
of the Plan and, in the discretion of the Committee, shall also
include transfer of ancillary rights associated with the Award.
The Committee may, in its discretion and subject to such rules
as it may adopt, permit or require a Participant to pay all or a
portion of the federal, state and local taxes, including FICA
and Medicare withholding tax, arising in connection with any
Awards.
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12.
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No Right
to Employment.
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Participation in the Plan will not give any Participant a right
to be retained as an employee or director of the Company, its
Subsidiaries, or an Affiliate, or any right or claim to any
benefit under the Plan, unless the right or claim has
specifically accrued under the Plan.
A-6
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13.
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Amendment
of the Plan.
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The Board of Directors may from time to time amend or revise the
terms of this Plan in whole or in part, subject to the following
limitations. No amendment may, in the absence of written consent
to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary),
adversely affect the rights of any Participant or beneficiary
under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided, however, no such
consent shall be required if the Committee determines in its
sole and absolute discretion that the amendment or revision is
required or advisable in order for the Company, the Plan or the
Award to satisfy applicable law, to meet the requirements of any
accounting standard or to avoid any adverse accounting
treatment, or (ii) is otherwise in the best interests of
the Company or its stockholders. The Committee may, but need
not, take the tax consequences to affected Participants into
consideration in acting under the preceding sentence.
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14.
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Effective
Date and Termination of Plan.
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(a) Effective Date. This Plan is
effective as of the date of its approval by the stockholders of
the Company. Awards may be made under this Plan prior to
stockholder approval, but such Awards shall be conditioned on
the approval of this Plan by stockholders of the Company.
(b) Termination of the Plan. The Plan
will terminate 10 years after the date it is approved by
the Board of Directors; provided, however, that the Board of
Directors may terminate the Plan at any time prior thereto.
Termination of the Plan will not affect the rights and
obligations of any Participant with respect to Awards granted
before termination.
A-7
APPENDIX B
METHODE
ELECTRONICS, INC. 2007 STOCK PLAN
Methode Electronics, Inc., a Delaware corporation (the
Company), hereby establishes the Methode
Electronics, Inc. 2007 Stock Plan (the Plan) as a
means whereby the Company may, through awards of
(i) incentive stock options (ISOs) within the
meaning of Section 422 of the Code, (ii) non-qualified
stock options (NSOs), (iii) stock appreciation
rights (SARs), (iv) restricted stock
(Restricted Stock); (v) restricted stock units
(Restricted Stock Units) and (vi) performance
share units (Performance Share Units):
(a) provide selected officers, directors and key employees
with additional incentive to promote the success of the
Companys business;
(b) encourage such persons to remain in the service of the
Company; and
(c) enable such persons to acquire proprietary interests in
the Company.
The provisions of this Plan do not apply to or affect any
option, stock appreciation right, restricted stock, restricted
stock unit or performance share unit award hereafter granted
under any other stock plan of the Company, and all such option,
stock appreciation right, restricted stock, restricted stock
unit or performance share unit awards shall be governed by and
subject to the applicable provisions of the plan under which
they will be granted.
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2.
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Definitions
and Rules of Construction.
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2.01
Definitions.
(a) Affiliate means any entity during
any period that, in the opinion of the Committee, the Company
has a significant economic interest in the entity.
(b) Award means the grant of Options,
SARs, Restricted Stock, Restricted Stock Units,
and/or
Performance Share Units to a Participant.
(c) Award Date means the date upon which
an Award is granted to a Participant under the Plan.
(d) Board or Board of
Directors means the board of directors of the Company.
(e) Cause shall mean:
(i) Participants conviction of a felony;
(ii) Participants commission of any act or acts of
personal dishonesty intended to result in substantial personal
enrichment to Participant to the detriment of the Company;
(iii) repeated violations of Participants
responsibilities which are demonstrably willful and deliberate,
provided that such violations have continued more than ten days
after the Board of Directors of the Company has given written
notice of such violations and of its intention to terminate
Participants employment because of such violations;
(iv) any willful misconduct by the Participant which
affects the business reputation of the Company;
(v) breach by the Participant of any provision of any
employment, consulting, advisory, nondisclosure, non-competition
or other similar agreement between the Participant and the
Company or any Affiliate or Subsidiary; or
(vi) Participants violation of the Companys
code of conduct.
The Participant shall be considered to have been discharged for
Cause if the Company determines, within 30 days
after the Participants resignation, that discharge for
Cause was warranted.
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(f) Change of Control shall be deemed to
have occurred on the first to occur of any of the following as a
result of one transaction or a series of transactions:
(i) the date any one person, or more than one
person acting as a group, acquires (or has acquired
during the twelve (12) month period ending on the date of
the most recent acquisition by such person(s)) ownership of
Common Stock possessing thirty percent (30%) or more of the
total voting power of the Common Stock of the Company;
(ii) the date a majority of the members of the
Companys Board of Directors is replaced during any twelve
(12) month period by directors whose appointment or
election is not endorsed by a majority of the Companys
Board of Directors before the date of the appointment or
election; or
(iii) the date any one person, or more than one person
acting as a group, acquires ownership of stock of the Company
that, together with stock held by such person or group,
constitutes more than fifty percent (50%) percent of the Fair
Market Value or total voting power of the Common Stock of the
Company.
(g) Code means the Internal Revenue Code
of 1986, as amended from time to time or any successor thereto.
(h) Committee means the Compensation
Committee of the Board of Directors.
(i) Common Stock means common stock of
the Company, par value $.50 per share.
(j) Company means Methode Electronics,
Inc., a Delaware corporation, and any successor thereto.
(k) Exchange Act shall mean the
Securities Exchange Act of 1934, as it exists now or from time
to time may hereafter be amended.
(l) Fair Market Value means as of any
date, the closing price for the Common Stock on that date, or if
no sales occurred on that date, the next trading day on which
actual sales occurred (as reported by the NASDAQ Stock Market
System or any securities exchange or automated quotation system
of a registered securities association on which the Common Stock
is then traded or quoted).
(m) Family Members mean with respect to
an individual, any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece,
nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
including adoptive relationships, any person sharing the
individuals household (other than a tenant or employee), a
trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
individual) control the management of assets, and any other
entity in which these persons (or the individual) own more than
50% of the voting interests.
(n) ISO means an incentive stock option
within the meaning of Section 422 of the Code.
(o) NSO means a non-qualified stock
option which is not intended to qualify as an incentive stock
option under Section 422 of the Code.
(p) Option means the right of a
Participant, whether granted as an ISO or an NSO, to purchase a
specified number of shares of Common Stock, subject to the terms
and conditions of the Plan.
(q) Option Price means the price per
share of Common Stock at which an Option may be exercised.
(r) Participant means an individual to
whom an Award has been granted under the Plan.
(s) Performance Share Unit means a unit
awarded to a Participant pursuant to Section 11 of this
Plan.
(t) Plan means the Methode Electronics,
Inc. 2007 Stock Plan, as set forth herein and from time to time
amended.
(u) Restricted Stock means the Common
Stock awarded to a Participant pursuant to Section 9 of
this Plan.
(v) Restricted Stock Unit means a unit
awarded to a Participant pursuant to Section 9 of this Plan
evidencing the right of a Participant to receive a fixed number
of shares of Common Stock at some future date.
(w) SAR means a stock appreciation right
issued to a Participant pursuant to Section 10 of this Plan.
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(x) SEC means the Securities and
Exchange Commission.
(y) Subsidiary means any entity during
any period of which the Company owns or controls more than 50%
of:
(i) the outstanding capital stock, or
(ii) the combined voting power of all classes of stock.
2.02
Rules of Construction.
(a) Governing Law and Venue. The
construction and operation of this Plan are governed by the laws
of the State of Illinois without regard to any conflicts or
choice of law rules or principles that might otherwise refer
construction or interpretation of this Plan to the substantive
law of another jurisdiction, and any litigation arising out of
this Plan shall be brought in the Circuit Court of the State of
Illinois or the United States District Court for the Eastern
Division of the Northern District of Illinois.
(b) Undefined Terms. Unless the context
requires another meaning, any term not specifically defined in
this Plan is used in the sense given to it by the Code.
(c) Headings. All headings in this Plan
are for reference only and are not to be utilized in construing
the Plan.
(d) Conformity with Section 422. Any
ISOs issued under this Plan are intended to qualify as incentive
stock options described in Section 422 of the Code, and all
provisions of the Plan relating to ISOs shall be construed in
conformity with this intention. Any NSOs issued under this Plan
are not intended to qualify as incentive stock options described
in Section 422 of the Code, and all provisions of the Plan
relating to NSOs shall be construed in conformity with this
intention.
(e) Conformity with
Section 162(m). Any awards issued to
specified employees (as defined in Section 162(m) of the
Code) with any of the performance criteria listed in
Section 6 are intended to qualify as performance-based
compensation under Section 162(m) of the Code to which the
applicable remuneration limits of Section 162(m)(1) do not
apply.
(f) Gender. Unless clearly inappropriate,
all nouns of whatever gender refer indifferently to persons of
any gender.
(g) Singular and Plural. Unless clearly
inappropriate, singular terms refer also to the plural and vice
versa.
(h) Severability. If any provision of
this Plan is determined to be illegal or invalid for any reason,
the remaining provisions are to continue in full force and
effect and to be construed and enforced as if the illegal or
invalid provision did not exist, unless the continuance of the
Plan in such circumstances is not consistent with its purposes.
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3.
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Stock
Subject to the Plan.
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Subject to adjustment as provided in Section 15 hereof, the
aggregate number of shares of Common Stock for which Awards may
be issued under this Plan may not exceed 1,250,000 shares.
Reserved shares may be either authorized but unissued shares or
treasury shares, in the Boards discretion. If any Award
shall terminate, expire, be cancelled or forfeited as to any
number of shares of Common Stock, new Awards may thereafter be
awarded with respect to such shares. Notwithstanding the
foregoing, the total number of shares of Common Stock with
respect to which Awards may be granted to any Participant in any
calendar year shall not exceed 200,000 shares (subject to
adjustment as provided in Section 15 hereof).
The Committee shall administer the Plan. All determinations of
the Committee are made by a majority vote of its members. The
Committees determinations are final and binding on all
Participants. In addition to any other powers set forth in this
Plan, the Committee has the following powers:
(a) to construe and interpret the Plan;
B-3
(b) to establish, amend and rescind appropriate rules and
regulations relating to the Plan;
(c) subject to the terms of the Plan, to select the
individuals who will receive Awards, the times when they will
receive them, the form of agreements which evidence such Awards,
the number of Options, Restricted Stock, Restricted Stock Units,
Performance Share Units
and/or SARs
to be subject to each Award, the Option Price, the vesting
schedule (including any performance targets to be achieved in
connection with the vesting of any Award), the expiration date
applicable to each Award and other terms, provisions and
restrictions of the Awards (which need not be identical) and
subject to Section 20 hereof, to amend or modify any of the
terms of outstanding Awards provided, however, that except as
permitted by Section 15.01, no outstanding Award may be
repriced, whether through cancellation of the Award and the
grant of a new Award, or the amendment of the Award, without the
approval of the stockholders of the Company;
(d) to contest on behalf of the Company or Participants, at
the expense of the Company, any ruling or decision on any matter
relating to the Plan or to any Awards;
(e) generally, to administer the Plan, and to take all such
steps and make all such determinations in connection with the
Plan and the Awards granted thereunder as it may deem necessary
or advisable; and
(f) to determine the form in which tax withholding under
Section 18 of this Plan will be made (i.e., cash, Common
Stock or a combination thereof).
Except to the extent prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may allocate
all or any portion of its responsibilities and powers to any one
or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by
it. Any such allocation or delegation may be revoked by the
Committee at any time.
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5.
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Eligible
Participants.
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Present and future directors, officers and key employees of the
Company or any Subsidiary shall be eligible to participate in
the Plan. The Committee from time to time shall select those
officers, directors and key employees of the Company and any
Subsidiary of the Company who shall be designated as
Participants and shall designate in accordance with the terms of
the Plan the number, if any, of ISOs, NSOs, SARs, Restricted
Stock Units, Performance Share Units and shares of Restricted
Stock or any combination thereof, to be awarded to each
Participant.
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6.
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Performance
Criteria (162(m) Awards).
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Subject to the terms of the Plan, the Committee, in its
discretion, may make the grant or vesting of an Award to a
specified employee (as defined in
Section 162(m) of the Code and the regulations thereunder)
subject to performance criteria (a 162(m) Award).
All 162(m) Awards shall be granted by the Committee when
composed of two or more outside directors, as prescribed by
Section 162(m) of the Code and the regulations thereunder.
The Committee shall certify that the performance goals and other
material terms have been satisfied before payment of a 162(m)
Award is made. All 162(m) Awards shall be paid solely on account
of the attainment of one or more pre-established, objective
performance goals, which goals shall be established on a timely
basis, in conformity with the timing requirements of
Section 162(m) of the Code. Notwithstanding any provision
of the Plan to the contrary, the Committee shall not have
discretion to waive or amend such performance goals or to
increase the amount payable pursuant to a 162(m) Award after the
performance goals have been established; provided, however, the
Committee may, in its sole discretion, reduce the amount that
would otherwise be payable with respect to any 162(m) Award.
Permissible performance goals include any one of the following
or combination thereof which may be applicable on a Company-wide
basis and/or
with respect to operating units, divisions, subsidiaries,
acquired businesses, minority investments, partnerships or joint
ventures:
(a) meeting specific targets for or growth in:
(1) stock price,
(2) net sales (dollars or volume),
B-4
(3) cash flow,
(4) operating income,
(5) net income,
(6) earnings per share,
(7) earnings before taxes,
(8) earnings before interest and taxes, or
(9) earnings before interest, taxes, depreciation and
amortization (EBITDA);
(b) return on:
(1) net sales,
(2) assets or net assets, or
(3) invested capital;
(c) management of:
(1) working capital,
(2) expenses, or
(3) cash flow;
(d) meeting specific targets for or growth in:
(1) productivity,
(2) specified product lines,
(3) market share,
(4) product development,
(5) customer service or satisfaction,
(6) employee satisfaction,
(7) strategic innovation, or
(8) acquisitions;
(e) specific personal performance improvement objectives
relative to:
(1) formal education,
(2) executive training,
(3) leadership training, or
(4) succession planning.
(f) any other criteria established by the Committee (but
only if such other criteria are approved by the stockholders).
The material terms of the 162(m) Award shall be disclosed and
approved by stockholders prior to payment, in conformity with
the requirements under Section 162(m) of the Code.
Notwithstanding anything to the contrary contained herein, no
Participant may be granted more than 200,000 shares
(subject to adjustment as provided in Section 15 hereof) in
any calendar year pursuant to a 162(m) Award made under the
Plan. Any 162(m) Award that fails to meet the requirements under
this Section 6 or the requirements under
Section 162(m) and its regulations shall not be nullified
or voided. Instead, payment of such a 162(m) Award shall be
delayed until the applicable remuneration is deductible or upon
the specified employees termination of employment,
whichever occurs first.
B-5
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7.
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Terms and
Conditions of Non-Qualified Stock Option Awards.
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Subject to the terms of the Plan, the Committee, in its
discretion, may award an NSO to any Participant. Each NSO shall
be evidenced by an agreement, in such form as is approved by the
Committee, and except as otherwise provided by the Committee in
such agreement, each NSO shall be subject to the following
express terms and conditions, and to such other terms and
conditions, not inconsistent with the Plan, as the Committee may
deem appropriate:
7.01 Option Period. Each NSO will expire
as of the earliest of:
(a) the date on which it is forfeited under the provisions
of Sections 13.01 and 13.03;
(b) 10 years from the Award Date;
(c) in the case of a Participant who is an employee of the
Company or a Subsidiary, three months after the
Participants termination of employment with the Company
and its Subsidiaries and Affiliates for any reason other than
for Cause or death or total and permanent disability;
(d) in the case of a Participant who is a member of the
board of directors of the Company or a Subsidiary or Affiliate,
but not an employee of the Company, a Subsidiary or an
Affiliate, three months after the Participants termination
as a member of the board for any reason other than for Cause or
death or total and permanent disability;
(e) immediately upon the Participants termination of
employment with the Company and its Subsidiaries and Affiliates
or service on a board of directors of the Company or a
Subsidiary or Affiliate for Cause;
(f) 12 months after the Participants death or
total and permanent disability; or
(g) any other date specified by the Committee when the NSO
is granted.
The periods set forth above shall be tolled during any period
for which employees of the Company are prohibited by the Company
from engaging in transactions in the Companys securities.
7.02 Option Price. At the time granted,
the Committee shall determine the Option Price of any NSO, and
in the absence of such determination, the Option Price shall be
100% of the Fair Market Value of the Common Stock subject to the
NSO on the Award Date.
7.03 Vesting. Unless otherwise determined
by the Committee and set forth in the agreement evidencing an
Award, NSO Awards shall vest in accordance with
Sections 13.01 and 13.03.
7.04 Other Option Provisions. The form of
NSO authorized by the Plan may contain such other provisions as
the Committee may from time to time determine.
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8.
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Terms and
Conditions of Incentive Stock Option Awards.
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Subject to the terms of the Plan, the Committee, in its
discretion, may award an ISO to any employee of the Company or a
Subsidiary. Each ISO shall be evidenced by an agreement, in such
form as is approved by the Committee, and except as otherwise
provided by the Committee, each ISO shall be subject to the
following express terms and conditions and to such other terms
and conditions, not inconsistent with the Plan, as the Committee
may deem appropriate:
8.01 Option Period. Each ISO will expire
as of the earliest of:
(a) the date on which it is forfeited under the provisions
of Section 13.01 and 13.03;
(b) 10 years from the Award Date, except as set forth
in Section 8.02 below;
(c) immediately upon the Participants termination of
employment with the Company and its Subsidiaries for Cause;
(d) three months after the Participants termination
of employment with the Company and its Subsidiaries for any
reason other than for Cause or death or total and permanent
disability;
B-6
(e) 12 months after the Participants death or
total and permanent disability; or
(f) any other date (within the limits of the Code)
specified by the Committee when the ISO is granted.
The periods set forth above shall be tolled during any period
for which employees of the Company are prohibited by the Company
from engaging in transactions in the Companys securities.
Notwithstanding the foregoing provisions granting discretion to
the Committee to determine the terms and conditions of ISOs,
such terms and conditions shall meet the requirements set forth
in Section 422 of the Code or any successor thereto.
8.02 Option Price and Expiration. The Option Price
of any ISO shall be determined by the Committee at the time an
ISO is granted, and shall be no less than 100% of the Fair
Market Value of the Common Stock subject to the ISO on the Award
Date; provided, however, that if an ISO is granted to a
Participant who, immediately before the grant of the ISO,
beneficially owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or
its parent or subsidiary corporations, the Option Price shall be
at least 110% of the Fair Market Value of the Common Stock
subject to the ISO on the Award Date and in such cases, the
exercise period specified in the Option agreement shall not
exceed five years from the Award Date.
8.03 Vesting. Unless otherwise determined by the
Committee and set forth in the agreement evidencing an Award,
ISO Awards shall vest in accordance with Sections 13.01 and
13.03.
8.04 Other Option Provisions. The form of ISO
authorized by the Plan may contain such other provisions as the
Committee may, from time to time, determine; provided, however,
that such other provisions may not be inconsistent with any
requirements imposed on incentive stock options under Code
Section 422 and the regulations thereunder.
8.05 $100,000 Limitation. To the extent required by
Code Section 422, if the aggregate Fair Market Value
(determined as of the time of grant) of Common Stock with
respect to which ISOs are exercisable for the first time by a
Participant during any calendar year (under this Plan and all
other plans of the Company and its Subsidiaries) exceeds
$100,000, the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall
be treated as NSOs.
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9.
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Terms and
Conditions of Restricted Stock or Restricted Stock Unit
Awards.
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Subject to the terms of the Plan, the Committee, in its
discretion, may award Restricted Stock or Restricted Stock Units
to any Participant. Each Award of Restricted Stock or Restricted
Stock Units shall be evidenced by an agreement, in such form as
is approved by the Committee, and all shares of Common Stock
awarded to Participants under the Plan as Restricted Stock and
all Restricted Stock Units shall be subject to the following
express terms and conditions and to such other terms and
conditions, not inconsistent with the Plan, as the Committee
shall deem appropriate:
(a) Restricted Period. Except as
permitted by Section 16 hereof, shares of Restricted Stock
awarded under this Section 9 may not be sold, assigned,
transferred, pledged or otherwise encumbered before they vest,
and Restricted Stock Units may not be sold, assigned,
transferred, pledged, or otherwise encumbered at any time.
(b) Vesting. Unless otherwise determined
by the Committee and set forth in the agreement evidencing an
Award, Awards of Restricted Stock and Restricted Stock Units
under this Section 9 shall vest in accordance with
Sections 13.02 and 13.03.
(c) Certificate Legend for Restricted Stock
Awards. Each certificate issued in respect of
shares of Restricted Stock awarded under this Section 9
shall be registered in the name of the Participant and shall
bear the following (or a similar) legend until such shares have
vested: The transferability of this certificate and the
shares of stock represented hereby are subject to the terms and
conditions (including forfeiture) relating to Restricted Stock
contained in Section 9 of the Methode Electronics, Inc.
2007 Stock Plan and an Agreement entered into between the
registered owner and Methode Electronics, Inc. Copies of such
Plan and Agreement are on file at the principal office of
Methode Electronics, Inc.
B-7
(d) Restricted Stock Units. In the case
of an Award of Restricted Stock Units, no shares of Common Stock
or other property shall be issued at the time such Award is
granted. Upon the lapse or waiver of restrictions and the
restricted period relating to Restricted Stock Units (or at such
other later time as may be determined by the Committee), shares
of Common Stock shall be issued to the holder of the Restricted
Stock Units and evidenced in such manner as the Committee may
deem appropriate.
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10.
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Terms and
Conditions of Stock Appreciation Right Awards.
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The Committee may, in its discretion, grant an SAR to any
Participant under the Plan. Each SAR shall be evidenced by an
agreement between the Company and the Participant, and may
relate to and be associated with all or any part of a specific
ISO or NSO. An SAR shall entitle the Participant to whom it is
granted the right, so long as such SAR is exercisable and
subject to such limitations as the Committee shall have imposed,
to surrender any then exercisable portion of his SAR and, if
applicable, the related ISO or NSO, in whole or in part, and
receive from the Company in exchange, without any payment of
cash (except for applicable employee withholding taxes), that
number of shares of Common Stock having an aggregate Fair Market
Value on the date of surrender equal to the product of
(i) the excess of the Fair Market Value of a share of
Common Stock on the date of surrender over the Fair Market Value
of the Common Stock on the date the SARs were issued, or, if the
SARs are related to an ISO or an NSO, the per share Option Price
under such ISO or NSO on the Award Date, and (ii) the
number of shares of Common Stock subject to such SAR, and, if
applicable, the related ISO or NSO or portion thereof which is
surrendered.
Except as otherwise determined by the Committee and set forth in
the Agreement, an SAR granted in conjunction with an ISO or NSO
shall terminate on the same date as the related ISO or NSO and
shall be exercisable only if the Fair Market Value of a share of
Common Stock exceeds the Option Price for the related ISO or
NSO, and then shall be exercisable to the extent, and only to
the extent, that the related ISO or NSO is exercisable. The
Committee may at the time of granting any SAR add such
additional conditions and limitations to the SAR as it shall
deem advisable, including, but not limited to, limitations on
the period or periods within which the SAR shall be exercisable
and the maximum amount of appreciation to be recognized with
regard to such SAR. Any ISO or NSO or portion thereof which is
surrendered with an SAR shall no longer be exercisable. An SAR
that is not granted in conjunction with an ISO or NSO shall
terminate on such date as is specified by the Committee in the
SAR agreement and shall vest in accordance with
Section 13.02 and 13.03. The Committee, in its sole
discretion, may allow the Company to settle all or part of the
Companys obligation arising out of the exercise of an SAR
by the payment of cash equal to the aggregate Fair Market Value
of the shares of Common Stock which the Company would otherwise
be obligated to deliver, less the withholding required under
Section 18 hereof.
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11.
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Terms and
Conditions of Performance Share Unit Awards.
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Subject to the terms of the Plan, the Committee, in its
discretion, may award Performance Share Units to any
Participant. Each Award of Performance Share Units shall be
evidenced by an agreement, in such form as is approved by the
Committee, and all shares of Common Stock awarded to
Participants under the Plan as Performance Share Units shall be
subject to the following express terms and conditions and to
such other terms and conditions, not inconsistent with the Plan,
as the Committee shall deem appropriate:
(a) In the case of an Award of Performance Share Units, no
shares of Common Stock or other property shall be issued at the
time such Award is granted. Upon the achievement of specified
performance goals, which goals may include (but are not required
to include) the criteria outlined in Section 6 above,
shares of Common Stock shall be issued to the holder of the
Performance Share Units and evidenced in such manner as the
Committee may deem appropriate.
(b) The Committee may elect in its sole discretion, without
further approval of the stockholders, to pay to the grantee of
any Performance Share Unit Award, in lieu of delivering all or
any part of the Common Stock that would be otherwise delivered
to the Participant, a cash amount equal to the aggregate Fair
Market Value of such Common Stock that would otherwise be
delivered, less all amounts as may be required by law to be
withheld in the manner contemplated by Section 18 hereof.
B-8
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12.
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Manner of
Exercise of Options.
|
To exercise an Option in whole or in part, a Participant (or,
after his death, his executor or administrator) must give
written notice to the Committee on a form acceptable to the
Committee, stating the number of shares with respect to which he
intends to exercise the Option. The Company will issue the
shares with respect to which the Option is exercised upon
payment in full of the Option Price. The Committee may permit
the Option Price to be paid in cash or shares of Common Stock
held by the Participant having an aggregate Fair Market Value,
as determined on the date of delivery, equal to the Option
Price. The Committee may also permit the Option Price to be paid
by any other method permitted by law, including by delivery to
the Committee from the Participant of an election directing the
Company to withhold the number of shares of Common Stock from
the Common Stock otherwise due upon exercise of the Option
having an aggregate Fair Market Value on that date equal to the
Option Price. If a Participant pays the Option Price with shares
of Common Stock which were received by the Participant upon
exercise of an ISO, and such Common Stock has not been held by
the Participant for at least the greater of:
(a) two years from the date the ISO was granted; or
(b) one year after the transfer of the shares of Common
Stock to the Participant;
the use of the shares shall constitute a disqualifying
disposition and the ISO underlying the shares used to pay the
Option Price shall no longer satisfy all of the requirements of
Code Section 422.
13.01 Options. A Participant may not
exercise an Option until it has become vested. The portion of an
Award of Options that is vested depends upon the period that has
elapsed since the Award Date.
The following schedule applies to any Award of Options under
this Plan unless the Committee establishes a different vesting
schedule on the Award Date as set forth in the Agreement
evidencing the Award:
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|
|
|
|
Number of Months
|
|
Vested
|
|
Since Award Date
|
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Percentage
|
|
|
fewer than 12 months
|
|
|
0
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%
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at least 12 months, but less
than 24 months
|
|
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331/3
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%
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at least 24 months, but less
than 36 months
|
|
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662/3
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%
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36 months or more
|
|
|
100
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%
|
Notwithstanding the above schedule, except as provided below and
unless otherwise determined by the Committee and set forth in
the agreement evidencing an Award, a Participants Awards
shall become fully vested if a Participants employment
with the Company and its Subsidiaries and Affiliates is
terminated due to: (i) retirement on or after his
sixty-fifth birthday; (ii) retirement on or after his
fifty-fifth birthday with consent of the Company;
(iii) retirement at any age on account of total and
permanent disability as determined by the Company; or
(iv) death. Notwithstanding the foregoing, an Award to a
member of the Board of Directors who is not an employee of the
Company or its Subsidiaries shall become fully vested if the
Participant ceases to be a member of the Board for any reason,
other than removal from office by shareholders of the Company
for Cause at a special meeting of the shareholders called for
that purpose. Vesting of an Award subject to performance
criteria shall be made on a pro rata basis, based on performance
to date and on the total number of days during the performance
period before the termination in relation to the entire
performance period. Unless the Committee otherwise provides in
the applicable agreement evidencing an Award or the preceding
sentence of this Section or Section 13.03 applies, if a
Participants employment with or service to the Company, a
Subsidiary or an Affiliate terminates for any other reason, any
Awards that are not yet vested are immediately and automatically
forfeited; provided, however, in such special circumstances as
the Committee deems appropriate, the Committee may take such
action as it deems equitable in the circumstances or in the best
interests of the Company, including, without limitation, fully
vesting an Award or waiving or modifying any other limitation or
requirement under the Award.
A Participants employment shall not be considered to be
terminated hereunder by reason of a transfer of his employment
from the Company to a Subsidiary or Affiliate, or vice versa, or
a leave of absence approved by the Participants employer.
A Participants employment shall be considered to be
terminated hereunder if, as a result of
B-9
a sale or other transaction, the Participants employer
ceases to be a Subsidiary or Affiliate (and the
Participants employer is or becomes an entity that is
separate from the Company and its Subsidiaries and Affiliates).
13.02 Restricted Stock, Restricted Stock Units and
SARs. The Committee shall establish the vesting
schedule to apply to any Award of Restricted Stock, Restricted
Stock Units or SARs that is not associated with an ISO or NSO
granted under the Plan to a Participant, and in the absence of
such a vesting schedule set forth in the Agreement evidencing
the Award, such Award shall vest in accordance with
Section 13.01.
13.03 Effect of Change of
Control. Notwithstanding
Sections 13.01 and 13.02 above, except as provided below
and unless otherwise determined by the Committee and set forth
in the agreement evidencing an Award, immediately following a
Change of Control, any Award issued to the Participant shall be
fully vested and payment of all Awards shall be accelerated.
Payment of an Award subject to performance criteria shall be
made on a pro rata basis, based on performance to date and on
the total number of days during the performance period before
the Change of Control in relation to the entire performance
period.
A Participant may elect to defer receipt of all or a portion of
a Restricted Stock Unit, Stock Appreciation Right, or
Performance Share Unit Award, subject to the rules listed below:
(a) a deferral may be made for any amount of time, if the
election is received by the Committee no later than the calendar
year prior to the date of the grant of the applicable Award;
(b) a deferral may be made no later than twelve months
before the portion of the Award vests, but payment must be
deferred for at least five years from the original payment date;
(c) a Participant who first becomes eligible to participate
in the Plan (or any other plan subject to the aggregation rules
under Section 409A of the Code) may make a deferral for any
amount of time, but such deferral must be made within the first
30 days in which the Participant becomes eligible to
participate and the deferral may only apply to compensation
earned after the election is made;
(d) a deferral may be made for any amount of time, but
(1) such election must be made within 30 days of the
grant;
(2) such election may only apply with respect to the
portion of the Award whose vesting is contingent on the
Participant performing services for at least an additional
twelve months from the date of election; and
(3) such election may not be not effective until
12 months from the date it is made; or
(e) a deferral may be made for any amount of time up until
six months before the Award vests if the Award is for
performance-based compensation (as determined under
Section 409A of the Code) measured over a period of at
least twelve (12) months and either
(1) the amount of the compensation cannot be reasonably
ascertained at the time of the election, or
(2) the performance requirement is still not substantially
certain to be met at the time of the election.
Notwithstanding any other provision of this Plan, a deferred
Award shall be accelerated and paid out upon a
Participants separation from service or death, except that
a Participant who is a specified employee under
Section 409A of the Code shall have the payment of his
deferred Award delayed for an additional six months after his
separation from service to the extent required to comply with
Section 409A of the Code.
|
|
15.
|
Adjustments
to Reflect Changes in Capital Structure.
|
15.01 Adjustments. If there is any change
in the corporate structure or shares of the Company, the
Committee will make any appropriate adjustments, including, but
not limited to, such adjustments deemed necessary to prevent
accretion, or to protect against dilution, in the number and
kind of shares of Common Stock with respect to which Awards may
be granted under this Plan (including the maximum number of
shares of
B-10
Common Stock with respect to which Awards may be granted under
this Plan in the aggregate and individually to any Participant
during any calendar year as specified in
Section 3) and, with respect to outstanding Awards, in
the number and kind of shares covered thereby and in the
applicable Option Price. For the purposes of this
Section 15, a change in the corporate structure or shares
of the Company includes, without limitation, any change
resulting from a recapitalization, stock split, stock dividend,
consolidation, rights offering, separation, reorganization, or
liquidation (including a partial liquidation) and any
transaction in which shares of Common Stock are changed into or
exchanged for a different number or kind of shares of stock or
other securities of the Company or another corporation.
15.02 Cashouts. In the event of an
extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets,
split up, exchange, or spin off, or other extraordinary
corporate transaction, the Committee may, in such manner and to
such extent (if any) as it deems appropriate and equitable, make
provision for a cash payment or for the substitution or exchange
of any or all outstanding Awards for the cash, securities or
property deliverable to the holder of any or all outstanding
Awards based upon the distribution or consideration payable to
holders of Common Stock upon or in respect of such event;
provided, however, in each case, that with respect to any ISO no
such adjustment may be made that would cause the Plan to violate
Section 422 of the Code (or any successor provision).
|
|
16.
|
Nontransferability
of Awards.
|
16.01 ISOs. ISOs are not transferable,
voluntarily or involuntarily, other than by will or by the laws
of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code. During a
Participants lifetime, his ISOs may be exercised only by
him.
16.02 Awards Other Than ISOs. All Awards
granted pursuant to this Plan other than ISOs are transferable
by will or by the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code,
or in the Committees discretion after vesting. With the
approval of the Committee, a Participant may transfer an Award
(other than an ISO) for no consideration to or for the benefit
of one or more Family Members of the Participant subject to such
limits as the Committee may establish, and the transferee shall
remain subject to all the terms and conditions applicable to the
Award prior to such transfer. The transfer of an Award pursuant
to this Section 16 shall include a transfer of the right
set forth in Section 20 hereof to consent to an amendment
or revision of the Plan and, in the discretion of the Committee,
shall also include transfer of ancillary rights associated with
the Award. The provisions of this Section 16 shall not
apply to any Common Stock issued pursuant to an Award for which
all restrictions have lapsed and is fully vested.
|
|
17.
|
Rights as
Stockholder.
|
No Common Stock may be delivered upon the exercise of any Option
until full payment has been made. A Participant has no rights
whatsoever as a stockholder with respect to any shares covered
by an Award until the date of the issuance of a stock
certificate for the shares except as otherwise determined by the
Committee and set forth in the Agreement.
The Committee may, in its discretion and subject to such rules
as it may adopt, permit or require a Participant to pay all or a
portion of the federal, state and local taxes, including FICA
and Medicare withholding tax, arising in connection with any
Awards by (i) having the Company withhold shares of Common
Stock at the minimum rate legally required, (ii) tendering
back shares of Common Stock received in connection with such
Award or (iii) delivering other previously acquired shares
of Common Stock having a Fair Market Value approximately equal
to the amount to be withheld.
|
|
19.
|
No Right
to Employment.
|
Participation in the Plan will not give any Participant a right
to be retained as an employee or director of the Company, its
Subsidiaries, or an Affiliate, or any right or claim to any
benefit under the Plan, unless the right or claim has
specifically accrued under the Plan.
B-11
|
|
20.
|
Amendment
of the Plan.
|
The Board of Directors may from time to time amend or revise the
terms of this Plan in whole or in part, subject to the following
limitations:
(a) No amendment may, in the absence of written consent to
the change by the affected Participant (or, if the Participant
is not then living, the affected beneficiary), adversely affect
the rights of any Participant or beneficiary under any Award
granted under the Plan prior to the date such amendment is
adopted by the Board; provided, however, no such consent shall
be required if the Committee determines in its sole and absolute
discretion that the amendment or revision (i) is required
or advisable in order for the Company, the Plan or the Award to
satisfy applicable law, to meet the requirements of any
accounting standard or to avoid any adverse accounting
treatment, or (ii) in connection with any transaction or
event described in Section 15, is in the best interests of the
Company or its stockholders. The Committee may, but need not,
take the tax consequences to affected Participants into
consideration in acting under the preceding sentence.
(b) no amendment may increase the limitations on the number
of shares set forth in Section 3, unless any such amendment
is approved by the Companys stockholders; and
(c) no amendment may be made to the provisions of
Section 4(c) relating to repricing unless such amendment is
approved by the Companys stockholders;
provided; however, that adjustments pursuant to
Section 15.01 shall not be subject to the foregoing
limitations of this Section 20.
|
|
21.
|
Conditions
Upon Issuance of Shares.
|
An Option shall not be exercisable and a share of Common Stock
shall not be issued pursuant to the exercise of an Option, and
Restricted Stock, Restricted Stock Units, and Performance Share
Units shall not be awarded until and unless the Award of
Restricted Stock, Restricted Stock Units or Performance Share
Units, exercise of such Option and the issuance and delivery of
such share pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any
stock exchange or national securities association upon which the
shares of Common Stock may then be listed or quoted, and shall
be further subject to the approval of counsel for the Company
with respect to such compliance.
Unless otherwise specified in the agreement evidencing an Award,
all Restricted Stock and Restricted Stock Unit Awards shall be
entitled to dividends, even if not vested or the restrictions
applicable thereto have not yet lapsed. For all other Awards
(except if specified otherwise in the agreement evidencing the
Award), no dividends shall be paid unless and until Common Stock
is issued under the Award, the Award is fully vested, and all
restrictions upon the Award have lapsed or been waived. If this
Section 22 or the agreement evidencing an Award allows for
the payment of dividends, all noncash dividends and
distributions shall be subject to the same vesting and other
restrictions applicable to the underlying Award.
B-12
|
|
23.
|
Substitution
or Assumption of Awards by the Company.
|
The Company, from time to time, also may substitute or assume
outstanding awards granted by another company, whether in
connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under the Plan
in substitution of such other companys award, or
(b) assuming such award as if it had been granted under the
Plan if the terms of such assumed award could be applied to an
Award granted under the Plan. Such substitution or assumption
shall be permissible if the holder of the substituted or assumed
award would have been eligible to be granted an Award under the
Plan if the other company had applied the rules of the Plan to
such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall
remain unchanged (except that the exercise price and the number
and nature of shares issuable upon exercise of any such option
will be adjusted appropriately pursuant to Section 424(a)
of the Code). In the event the Company elects to grant a new
Award rather than assuming an existing option, such new Award
may be granted with a similarly adjusted exercise price.
|
|
24.
|
Effective
Date and Termination of Plan.
|
24.01 Effective Date. This Plan is
effective as of the date of its approval by the stockholders of
the Company. Awards may be made under this Plan prior to
stockholder approval, but such Awards shall be conditioned on
the approval of this Plan by stockholders of the Company.
24.02 Termination of the Plan. The Plan
will terminate 10 years after the date it is approved by
the Board of Directors; provided, however, that the Board of
Directors may terminate the Plan at any time prior thereto with
respect to any shares that are not then subject to Awards.
Termination of the Plan will not affect the rights and
obligations of any Participant with respect to Awards granted
before termination.
B-13
METHODE ELECTRONICS, INC.
COMMON STOCK |
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS OF
METHODE ELECTRONICS, INC. |
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS |
The undersigned hereby appoints Warren L. Batts, Donald W. Duda and Douglas A. Koman, and each
of them, with full power of substitution, as proxies to vote all shares of Methode Electronics,
Inc. common stock which the undersigned is entitled to vote at the Annual Meeting of Methode
Electronics, Inc. to be held on Thursday, September 13, 2007 at 11:00 a.m., Chicago time, at the
Hyatt Rosemont Hotel, 6350 North River Road, Rosemont, Illinois, and at any adjournment or
postponement thereof. |
This proxy when properly signed will be voted in the manner directed herein by the undersigned
stockholder. IF NO DIRECTION IS PROVIDED, THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF
DIRECTORS. If other business is presented at the Annual Meeting, this proxy shall be voted in
accordance with the best judgment of the persons named as proxies above. |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED |
1. The election of the following nominees as directors: 01) Warren L. Batts, 02) J. Edward
Colgate, 03) Darren M. Dawson, 04) Donald W. Duda, 05) Isabelle C. Goossen, 06) Christopher
J. Hornung, 07) Paul G. Shelton, 08) Lawrence B. Skatoff and 09) George S. Spindler. |
FOR ALL WITHHOLD ALL FOR ALL EXCEPT To withhold authority to
vote, mark FOR ALL EXCEPT
and write the nominees
number on the line below.
[_] [_] [_] ___ |
2. The ratification of the Audit Committees selection of Ernst & Young LLP to serve as
our independent registered public accounting firm for the fiscal year ending May 3, 2008. |
FOR AGAINST ABSTAIN
[_] [_] [_] |
3. The approval of the Methode Electronics, Inc. 2007 Cash Incentive Plan. |
[_] FOR [_] AGAINST [_] ABSTAIN |
4. The approval of the Methode Electronics, Inc. 2007 Stock Plan. |
[_] FOR [_] AGAINST [_] ABSTAIN |
IMPORTANT PLEASE VOTE, SIGN AND RETURN PROMPTLY. When there is more than one owner of shares,
both should sign. Signatures should correspond with names printed on this proxy card. When
signing as an attorney, executor, administrator, trustee, or guardian, please add your full title
as such. If a corporation, please sign in full corporate name, and this proxy should be signed by
a duly authorized officer. If a partnership, please sign in partnership name by an authorized
person. |
Signature ___Dated: ___, 2007
Signature if held jointly ___Dated: ___, 2007 |
METHODE ELECTRONICS, INC.
7401 West Wilson Avenue, Chicago, IL 60706
If you grant a proxy by telephone or the Internet,
DO NOT mail back the proxy card.
THANK YOU FOR VOTING!
YOU CAN GRANT YOUR PROXY BY TELEPHONE OR INTERNET!
Methode Electronics, Inc. encourages you to take advantage of convenient ways to vote these shares.
If voting by proxy, you may grant a proxy by mail, or choose one of the two methods described
below. Your telephone or Internet proxy authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, and returned your proxy card. To grant your proxy by
telephone or Internet, read the annual meeting proxy statement and then follow these easy steps:
Grant your proxy by Internet www.proxyvote.com
Use the Internet to transmit your voting instructions for electronic delivery of information up
until 11:59 P.M. Central Time the day before the annual meeting date. Have your proxy card in hand
when you access the web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
Grant your proxy by phone 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Central Time
the day before the annual meeting date. Have your proxy card in hand when you call and then follow
the simple instructions the vote voice provides you.
Grant your proxy by mail
Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or
return it to Methode Electronics, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Methode Electronics, Inc. in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate that you agree to
receive or access shareholder communications electronically in future years.