Date of report (Date of earliest event reported)
February 25, 2016
DARLING INGREDIENTS INC.
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction
251 O’CONNOR RIDGE BLVD., SUITE 300, IRVING, TEXAS
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
A reduction in the maximum payout from 300% to 200% of target, with continued annual incentive award opportunity tied to (i) global and/or regional earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (ii) the performance of the individual with respect to key strategic, personal and operational (“SOP”) goals.
Enhanced clarity in the SOP goals to focus on growth, cost controls and individual performance.
Continued weighting of the annual incentive award opportunity to 65% EBITDA-based and 35% SOP-based in order to reflect the additional SOP focus areas.
Change in the LTI approach from backward-looking, performance-based restricted stock and performance-based stock options, to a mix of forward-looking performance share units (“PSUs”) (60% weight) and time-vested stock options (40% weight).
Emphasis on the new PSU design which is well-aligned with market practice. Annual, overlapping grants of PSUs are tied to three-year, forward-looking performance. PSUs will be earned based on the Company’s average return on capital employed (“ROCE”) relative to the average ROCE of the Company’s performance peer group companies.
Application of a forward-looking total shareholder return (“TSR”) cap/collar modifier to all PSUs that will reduce or increase the number of shares earned depending on the Company’s three-year TSR performance relative to the Company’s performance peer group.
Elimination of the guarantee of 25% of target LTIP value. If performance is below threshold, no PSUs will be earned. Awards are also capped so that the maximum number of PSUs that may be earned for ROCE and TSR performance is 225% of target.
Elimination of the immediate 25% vesting of equity awards; instead: (i) time-based stock options will vest 33-1/3% on the 1st, 2nd and 3rd anniversaries of grant; and (ii) any PSUs earned at the end of the three-year performance period (net of shares needed to pay taxes) will be subject to a holding period (restriction on sale) for two years after the end of the performance period (subject to acceleration if termination of service occurs during the holding period).
Award of a one-time transition grant in 2016 to bridge the switch to a forward-looking program. The transition grant does not increase the overall PSU grant value so that the target value of PSUs in 2016 is split between: (i) regular PSUs (75% of target award) with cliff vesting based on three year performance from 2016 to 2018, with earned award to be determined within the first quarter of 2019; and (ii) one-time transition PSUs (25% of target award) with cliff vesting based on two-year performance from 2016 to 2017, with earned award to be determined within the first quarter of 2018.
DARLING INGREDIENTS INC.
Date: March 2, 2016
/s/ John F. Sterling
John F. Sterling
Executive Vice President and