Post on 11-Mar-2020
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
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April12,2018 Via live webcast at www.virtualshareholdermeeting.com/BW2018
Dear Fellow Stockholders:
OnbehalfofyourBoardofDirectors,wearepleasedtoinviteyoutoattendtheBabcock&WilcoxEnterprises,Inc.(B&W)2018AnnualMeetingofStockholdersonMay16,2018.The2018AnnualMeetingofStockholderswillbeavirtualmeetingofstockholders,beginningat9:30a.m.EasternTime,conductedvialiveaudiowebcast.Youwillbeabletoattendthe2018AnnualMeetingofStockholdersonlineandsubmitquestionsduringthemeetingbyvisitingwww.virtualshareholdermeeting.com/BW2018.YouwillalsobeabletovoteyourshareselectronicallyattheAnnualMeeting(otherthansharesheldthroughtheB&WThriftPlan,whichmustbevotedpriortothemeeting).Wealsoinviteyoutoreadthisyear'sproxystatementthathighlightskeyactivitiesandaccomplishmentsin2017andpresentsthemattersforwhichweareseekingyourvoteatthe2018AnnualMeeting.
LookingBackandAheadThepastyearwaschallengingforBabcock&Wilcox,butwebelievethatourprogressshowswearefirmlyontherightpathforward.Duringtheyear,asweworkedtoadvanceengineeringandconstructiononourrenewableenergyprojectsinEurope,wealsoredefinedourapproachtobiddingandexecutingfutureprojects,betteraligningwithourcorecompetenciesandreducingourriskprofile.Additionally,wemaintainedstrongmarginsinourPowersegment,continuedeffortstogrowourIndustrialsegmentandbeganstrengtheningourinternalprojectmanagementandexecutioncapabilitiestoreduceriskandimproveprofitabilityinthefuture.Todayandalways,weremainfocusedondeliveringonourcommitmentstoourcustomers,improvingourbusinessandstrengtheningourcompanyforthefuture.
OurCorporateGovernanceWehavecontinuedtobeguidedbystrongcorporategovernancepracticesthatdemonstrateourcommitmenttoethicalvaluesandtobeingresponsivetoourstockholders.Ourengaged,committedanddiverseBoardservesasacompetitiveadvantagethathelpstoguideandoverseeourcompany,andwearepleasedthatMatthewE.Avril,HenryE.BartoliandBrianR.KahnjoinedtheBoardearlierthisyear.Wewelcomefeedbackfromourstockholdersand,inresponsetowhatwehaveheard,recommendthattheyvoteinfavorofallofmanagement’sproposalsinthisproxystatement,includingthedeclassificationoftheBoard.
YourViewpointisImportantWehopeyouareabletoparticipateinourannualmeetingtohearmoreaboutouroperationsandourprogress,andweencourageyoutoshareyourthoughts,concernsandsuggestionswithus.Wealsowanttoensureyoursharesarerepresentedasweconductavoteonthemattersoutlinedintheproxystatement.Ifyouareunabletoattend,pleasecastyourvoteassoonaspossibleeithervia:
• theInternetatwww.proxyvote.com• bycalling1-800-690-6903,or• byreturningtheaccompanyingproxycardifyoureceivedaprintedsetofmaterialsbymail.
Furtherinstructionsonhowtovoteyoursharescanbefoundinourproxystatement.While2017wasadifficultyearforB&W,weareexcitedaboutouropportunitiesforthefuture.OnbehalfoftheBoardofDirectorsandthemorethan4,800employeesofB&W,Iwanttothankyouforyourcontinuedsupportandinvestmentinourbusiness.Ifyouhaveanyquestionsorsuggestions,pleasefeelfreetocontactusattheaddressbeloworbyvisitingourwebsite.BoardofDirectorsBabcock&WilcoxEnterprises,Inc.13024BallantyneCorporatePlaceSuite700Charlotte,NC28277c/oJ.AndréHall,CorporateSecretary
Sincerely,
Leslie C. Kass PresidentandChiefExecutiveOfficer
April12,2018
Babcock&WilcoxEnterprises,Inc.13024BallantyneCorporatePlace,Suite700Charlotte,NorthCarolina28277
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
The2018AnnualMeetingoftheStockholders(the“AnnualMeeting”)ofBabcock&WilcoxEnterprises,Inc.,aDelawarecorporation(the“Company”),willbeavirtualmeetingofstockholders,beginningat9:30a.m.EasternTime,conductedvialiveaudiowebcast.Youwillbeabletoattendthe2018AnnualMeetingofStockholdersonlineandsubmitquestionsduringthemeetingbyvisitingwww.virtualshareholdermeeting.com/BW2018.YouwillalsobeabletovoteyourshareselectronicallyattheAnnualMeeting(otherthansharesheldthroughtheB&WThriftPlan,whichmustbevotedpriortothemeeting).TheAnnualMeetingwillbeheldto:
(1) approveamendmentstotheCompany’sRestatedCertificateofIncorporation(“CertificateofIncorporation”)todeclassifytheBoardofDirectorsandprovideforannualelectionsofalldirectorsbeginningatthe2020annualmeetingofstockholders;
(2) ifProposal1isapproved,electThomasA.Christopher,BrianR.KahnandLeslieC.KassasClassIdirectorsoftheCompany;
(3) ifProposal1isnotapproved,electThomasA.Christopher,BrianR.KahnandLeslieC.KassasClassIIIdirectorsoftheCompany;
(4) approveamendmentstotheCompany’sCertificateofIncorporationtoremoveprovisionsthatrequiretheaffirmativevoteofholdersofatleast80%ofthevotingpowertoapprovecertainamendmentstotheCertificateofIncorporationandtheAmendedandRestatedBylaws(“Bylaws”);
(5) ratifyourAuditandFinanceCommittee’sappointmentofDeloitte&ToucheLLPasourindependentregisteredpublicaccountingfirmfortheyearendingDecember31,2018;
(6) approve,onanon-bindingadvisorybasis,thecompensationofournamedexecutiveofficers;
(7) approvetheBabcock&WilcoxEnterprises,Inc.AmendedandRestated2015Long-TermIncentivePlan;and
(8) transactsuchotherbusinessasmayproperlycomebeforetheAnnualMeetingoranyadjournmentthereof.
IfyouwereastockholderasofthecloseofbusinessonApril5,2018,youareentitledtovoteattheAnnualMeetingandatanyadjournmentthereof.ToparticipateintheAnnualMeetingvialivewebcast,youwillneedthe16-digitcontrolnumberincludedonyourproxycardandontheinstructionsthataccompanyyourproxymaterials.TheAnnualMeetingwillbeginpromptlyat9:30a.m.EasternTime.Onlinecheck-inwillbeginat9:25a.m.EasternTime.OnApril12,2018,wemailedourproxymaterialstoallstockholdersofrecordasofApril5,2018andpostedourproxymaterialsatwww.proxyvote.com.Wehaveenclosedacopyofour2017AnnualReporttoStockholderswiththisnoticeandproxystatement.Yourvoteisimportant.Pleasevoteyourproxypromptlysoyoursharescanberepresented,evenifyouplantoattendtheAnnualMeeting.YoucanvotebyInternet,bytelephone,orbyrequestingaprintedcopyoftheproxymaterialsandusingtheenclosedproxycard.ByOrderoftheBoardofDirectors,
J. André Hall CorporateSecretary
2018 PROXY STATEMENT SUMMARY
2017Performance
B&Wmarkedits150thyearin2017–anothermilestoneinalonghistory–aswecontinuedtosetthestandardinprovidingenergyandenvironmentalproducts,servicesandsolutionstocustomersaroundtheworld.Thoughtheyearwasalsomarkedbychallengesthatimpactedourfinancialresults,wetookactionsthatwebelieveareaddressingthoseconcerns.
InourPowerbusiness,weexperiencedsustainedpressuresfromacontinuallychangingregulatoryenvironmentthatcausedbookingsdelaysfrombothourNorthAmericanandinternationalcustomerbase.Wefocusedonoptimizingcostsandprovidingoutstandingprojectexecutionandservicetoourcustomers,whichprovedsuccessfulaswereportedsegmentgrossprofitmarginwithinourexpectationsdespitelowerrevenue.
InIndustrial,bookingsandrevenuewerebelowouroriginalexpectations,althoughwesawstrongsignsofimprovementastheyearprogressed.ToaddresslowerprofitabilitywithinourB&WSPIGbusinessline,wehavebecomemoreselectiveintheprojectswepursue,moredisciplinedinourapproachtoprojectexecutionandmorefocusedonreducingcosts,asweworktoexpandouraftermarketpresenceinNorthAmericawherewealreadyhaveastrongfootprintwithourPowersegment’sutilitycustomers.
InourRenewablesegment,wefacedaseriesofprojectexecutionchallengeswithinourEuropeanrenewablenew-buildprojectportfoliothatwehaveworkeddiligentlytoresolve.Toaddressthesechallenges,atargetedfocusonimprovingourprojectmanagement,leadershipandinternalreviewprocesseshelpedusadvancethechallengedprojectsinthatbusinesstowardbeingsubstantiallyconstructioncomplete.Wealsoredefinedourapproachtothiskeymarketareatofocusonengineeringandsupplyingourcorewaste-to-energyandrenewableenergytechnologies–steamgeneration,combustiongrate,environmentalequipment,materialhandlingandcoolingcondensers–whilepartneringwithotherfirmstoexecutethebalanceofplantandcivilconstructionscope.Thisapproachbetteralignswithourcorecompetenciesandriskprofileasasupplierofengineeredequipmentandtechnologiesandaftermarketservices.
Wealsotookanumberofstepsdesignedtoimproveefficiencyandcashflowacrossourbusinesses.Whileouroverallperformanceandoutlookcontinuedtoimprovebyyear-end,toenhanceourfinancialflexibility,wealsoannouncedthatweareevaluatingstrategicalternativesforourMEGTECandUniversalbusinesses.Thoughwebelievethatouroutlookremainsfavorableforthesebusinesses,weconcludedthatitwasprudenttoexplorealternativesforthesepartsofourcompany,providinggreateroptionalityifneeded.
Asweendoursesquicentennialyear,weareoptimisticaboutthepathaheadaswecontinueworkingtostrengthenourbusinessesandbetterpositionourcompanyforsuccess.
2017 PAY-FOR-PERFORMANCE
Ourexecutivecompensationprogramsarebasedonastrongalignmentbetweenpayandperformanceandthisisreflectedinthepayoutamountsunderourannualincentiveplanandthevalueofawardsgrantedunderourlong-termincentiveplan.DecisionsbytheCompensationCommitteein2017alsotookintoaccountfeedbackfromourstockholdersandconcernforretentionofkeyemployeeswhileweaddressoperationalissues.B&Wdidnotperformasexpectedin2017;consequently,thepayoutunderourannualincentiveplanwas10%ofthetargetawardopportunities.Oursafetymetrics,whichareevaluatedindependentlyfromourfinancialperformance,accountfor10%ofthetargetawards.SolelyasaresultoftheCompany’ssignificantimprovementinsafetyperformanceover2016andthepriorthree-yearaverage,thepayoutpercentageforeachofournamedexecutiveofficers("NEOs")was10%ofthetargetannualincentiveaward.Forthesecondyearinarow,nopaymentwasearnedunderthefinancialorindividualcomponentsoftheannualincentiveaward.See"2017SummaryCompensationTable"foracomparisonofthetotalcompensationreceivedbyourNEOsin2017versus2016and2015,asapplicable.Ourlong-termincentivecompensationmetrics(earningspershare,relativetotalstockholderreturnandreturnoninvestedcapital),aredesignedtodriveperformanceandaligntheinterestsofemployeeswiththoseofstockholders.Inlightofourrecentfinancialperformance,however,thecurrentprojectedvalueoftheperformance-basedshareawardsgrantedin2017and2016underourlong-termincentiveplanissignificantlyimpaired.
CorporateGovernanceAspartofourcommitmenttoeffectivecorporategovernance,managementandourBoardundertookareviewofcurrentcorporategovernancetrendsandconsideredtheviewheldbymanyinstitutionalstockholdersthataclassifiedboardstructurehasthepotentialeffectofreducingtheaccountabilityofdirectors.Aftercarefulconsideration,theBoardunanimouslyapproved,andrecommendsthatourstockholdersapprove,amendmentstoourCertificateofIncorporationthat,ifadopted,wouldeliminatetheclassifiedstructureoftheBoardoveratwo-yearperiod.
GovernanceHighlights
Corporategovernanceisimportant,andwebelievethatourgovernancepoliciesandstructuresprovideastrongframeworkandassurancethatweareclear,ethicalandtransparentinallofourbusinessdealings.Theyhelpusoperatemoreeffectively,mitigateriskandactasasafeguardagainstmismanagement.
Board Elections •Majorityvotinginuncontestedelections
Board Independence •Sixoutofsevenofourdirectorsareindependent•OurCEOistheonlymanagementdirector
Board Composition
•Currentlytheboardhasfixedthenumberofdirectorsatseven•Theboardannuallyassessesitsperformancethroughboardandcommitteeself-evaluations•TheGovernanceCommitteeleadsthefullboardinconsideringboardcompetenciesandrefreshmentinlightofcompanystrategy
Board Committees •Wehavethreestandingboardcommittees–AuditandFinance,Governance,andCompensation•Allcommitteesarecomposedentirelyofindependentdirectors
Leadership Structure•OurindependentChairmanworkscloselywithourCEOandprovidesfeedbacktomanagement•Amongotherduties,ourChairmanisinvolvedinsettingtheBoard'sagendaandchairsexecutivesessionsoftheindependentdirectorstodiscusscertainmatterswithoutmanagementpresent
Risk Oversight•Ourfullboardisresponsibleforriskoversight,andhasdesignatedcommitteestohaveparticularoversightofcertainkeyrisks•Ourboardoverseesmanagementasmanagementfulfillsitsresponsibilitiesfortheassessmentandmitigationofrisks,andtakingappropriaterisks
Open Communication•WeencourageopencommunicationandstrongworkingrelationshipsamongtheChairmanand
otherdirectors•Ourdirectorshaveaccesstomanagementandemployees
Director Stock Ownership •Ourdirectorsarerequiredtoownfivetimestheirannualbaseretainersinsharesofcommonstock
Accountability to Stockholders •Weactivelyreachouttoourstockholdersthroughourengagementprogram•Stockholderscancontactourboard,Chairmanormanagementthroughourwebsiteorbyregularmail
Management Succession Planning •Theboardactivelymonitorsoursuccessionplanningandpeopledevelopment•Atleastonceperyear,theboardreviewsseniormanagementsuccessionanddevelopmentplans
TABLE OF CONTENTS
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APPROVALOFAMENDMENTSTOTHECOMPANY’SCERTIFICATEOFINCORPORATIONTODECLASSIFYTHEBOARDOFDIRECTORSANDPROVIDEFORANNUALELECTIONSOFALLDIRECTORSBEGINNINGATTHE2020ANNUALMEETINGOFSTOCKHOLDERS(PROPOSAL1) -1RecommendationandVoteRequired -1
IFPROPOSAL1ISAPPROVED,ELECTIONOFTHREECLASSIDIRECTORS(PROPOSAL2) 2RecommendationandVoteRequired 2
IFPROPOSAL1ISNOTAPPROVED,ELECTIONOFTHREECLASSIIIDIRECTORS(PROPOSAL3) 2RecommendationandVoteRequired 2
INFORMATIONREGARDINGDIRECTORSANDDIRECTORNOMINEES -3VintageCapitalManagementAgreement -7SummaryofDirectorCoreCompetenciesandAttributes -8
CORPORATEGOVERNANCE -9DirectorIndependence -9BoardFunction,LeadershipStructureandExecutiveSessions 10DirectorNominationProcess 11CommunicationwiththeBoard -11BoardOrientationandContinuingEducation 12BoardAssessments -12TheRoleoftheBoardinSuccessionPlanning -12TheRoleoftheBoardinRiskOversight -12BoardofDirectorsandItsCommittees -12
COMPENSATIONOFDIRECTORS -15SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENT -16SECTION16(a)BENEFICIALOWNERSHIPCOMPLIANCE -18CERTAINRELATIONSHIPSANDRELATEDTRANSACTIONS -18NAMEDEXECUTIVEOFFICERPROFILES -19APPROVALOFAMENDMENTSTOTHECOMPANY’SCERTIFICATEOFINCORPORATIONTOREMOVEPROVISIONSTHAT
REQUIRETHEAFFIRMATIVEVOTEOFHOLDERSOFATLEAST80%OFTHEVOTINGPOWERTOAPPROVECERTAINAMENDMENTSTOTHECERTIFICATEOFINCORPORATIONANDTHEBYLAWS(PROPOSAL4) -20RecommendationandVoteRequired -20
RATIFICATIONOFAPPOINTMENTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMFORYEARENDINGDECEMBER31,2018(PROPOSAL5) -21RecommendationandVoteRequired -21
AUDITANDFINANCECOMMITTEEREPORT -22APPROVAL,ONANON-BINDINGADVISORYBASIS,OFNAMEDEXECUTIVEOFFICERCOMPENSATION(PROPOSAL6) -23
EffectofProposal -23RecommendationandVoteRequired -23
COMPENSATIONDISCUSSIONANDANALYSIS -24
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TABLE OF CONTENTS(continued)
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ExecutiveSummary -24WeAreCommittedtoCompensationBestPractices -28PeerGroup -29CompensationPhilosophyandProcess -302017CompensationDecisions -32OtherCompensationPracticesandPolicies -38
COMPENSATIONCOMMITTEEREPORT -40COMPENSATIONOFNAMEDEXECUTIVEOFFICERS -41
2017SummaryCompensationTable -412017GrantsofPlan-BasedAwards -44OutstandingEquityAwardsat2017FiscalYear-End -462017OptionExercisesandStockVested -492017PensionBenefits -502017Non-qualifiedDeferredCompensation -51PotentialPaymentsUponTerminationorChangeInControl -54
CEOPAYRATIO -64APPROVALOFTHEBABCOCK&WILCOXENTERPRISES,INC.AMENDEDANDRESTATED2015LONG-TERMINCENTIVEPLAN
(PROPOSAL7) -65Introduction -65RecommendationandVoteRequired 79
STOCKHOLDERS’PROPOSALS -80GENERALINFORMATION -80VOTINGINFORMATION -81
RecordDateandWhoMayVote -81HowtoVote -81HowtoChangeYourVoteorRevokeYourProxy -82HowtoParticipateintheAnnualMeeting -82HowtoLocateYour16-DigitControlNumber -82Quorum -82ProposalsPresentedforVote -82VoteRequired 83HowVotesareCounted -83ConfidentialVoting -84
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APPROVAL OF AMENDMENTS TO THE COMPANY’S CERTIFICATE OF INCORPORATION TODECLASSIFY THE BOARD OF DIRECTORS AND PROVIDE FOR ANNUAL ELECTIONS OF ALLDIRECTORS BEGINNING AT THE 2020 ANNUAL MEETING OF STOCKHOLDERS (PROPOSAL1)General
OurCertificateofIncorporationcurrentlyprovidesforaclassifiedboardstructure,pursuanttowhichtheBoardisdividedintothreeclassesanddirectorsareelectedtostaggeredthree-yeartermswithmembersofoneofthethreeclasseselectedeveryyear.Aftercarefulconsideration,theBoard,upontherecommendationoftheGovernanceCommittee,unanimouslyapproved,andrecommendsthatourstockholdersapproveamendmentstoourCertificateofIncorporationthat,ifadopted,wouldeliminatetheclassifiedstructureoftheBoardbythe2020annualmeetingofstockholdersandallowforremovalofdirectorswithorwithoutcausewhentheBoardisnolongerclassified.
Summary of Principal Changes
Ifthisproposalisadopted,ArticleFifthofourCertificateofIncorporationwillbeamendedtoprovidethatalldirectornomineesstandingforelectionwillbeelectedtoaone-yeartermatorafterthe2020annualmeetingofstockholders.AttheAnnualMeeting,directorswhosetermsexpireatthatmeetingwillbeelectedtoatwo-yearterm.Atthe2019annualmeetingofstockholders,directorswhosetermsexpireatthatmeetingwillbeelectedtoaone-yearterm.Asaresult,beginningatthe2019annualmeetingofstockholders,andateachannualmeetingthereafter,alldirectorswillserveone-yearterms.DirectorselectedtofillanyvacancyontheBoardortofillnewlycreateddirectorpositionsresultingfromanincreaseinthenumberofdirectorswouldservetheremainderofthetermofthatposition.
Inconnectionwiththedeclassification,ArticleFifthwouldalsobeamendedtoprovidethat,commencingwiththeelectionofdirectorsatthe2020annualmeetingofstockholders,directorsmayberemovedwithorwithoutcauseasprovidedintheGeneralCorporationLawoftheStateofDelaware,andonlytheapprovalofamajorityofthevotingpoweroftheCompanywouldberequiredtoremoveadirectorwithorwithoutcause.
ThisdescriptionoftheproposedamendmentstoourCertificateofIncorporationisonlyasummaryofthoseamendmentsandisqualifiedinitsentiretybyreferenceto,andshouldbereadinconjunctionwith,thefulltextofArticleFIFTHoftheCertificateofIncorporation,markedtoshowtheproposedamendments,acopyofwhichisattachedtothisproxystatementasAppendixA.Ifadopted,theamendmentstotheCertificateofIncorporationwillbecomeeffectiveuponfilingoftheamendedCertificateofIncorporationwiththeSecretaryofStateofDelaware,whichisexpectedtooccurpromptlyfollowingthestockholdervote.IftheamendmentstotheCertificateofIncorporationareapprovedbystockholdersandbecomeeffective,theBoardexpectstoapprovecertainconformingamendmentstoourBylawstoremovereferencestoaclassifiedBoardandtoreflectstockholders’abilitytoremovedirectorsonanunclassifiedBoardwithorwithoutcauseatorafterthe2020annualmeetingofstockholders.
RecommendationandVoteRequired
Our Board recommends that stockholders vote “FOR” the approval of amendments to the Company’s Certificate of Incorporation todeclassify the Board and provide for annual elections of all directors beginning at the 2020 annual meeting of stockholders. Theproxyholderswillvoteallproxiesreceivedforapprovalofthisproposalunlessinstructedotherwise.Approvaloftheproposalrequirestheaffirmativevoteofatleast80%oftheoutstandingsharesofourcommonstock.Accordingly,abstentionsandbrokernon-voteswillhavetheeffectofavoteagainstthisproposal.
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IF PROPOSAL 1 IS APPROVED, ELECTION OF THREE CLASS I DIRECTORS (PROPOSAL 2)
IfProposal1isapproved,stockholderswillvotetoelectthreedirectorstoholdofficeforatwo-yeartermexpiringatthe2020annualmeetingofstockholders.Insuchevent,theBoardhasrecommendedeachofThomasA.Christopher,BrianR.KahnandLeslieC.Kassforelectionasdirectors,toserveuntilthe2020annualmeetingofstockholdersoruntilhisorhersuccessorisdulyelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.
Informationregardingthedirectornomineesissetforthbelowundertheheading“InformationRegardingDirectorsandDirectorNominees.”
RecommendationandVoteRequired
Youmayvote“FOR”alldirectornomineesorwithholdyourvoteforanyoneormoreofthedirectornominees.Subjecttoourmajorityvotingrequirementsdescribedbelow,directornomineesareelectedbyapluralityofthevotescastbythesharesofourcommonstockentitledtovoteintheelectionofdirectorsatameetingofstockholdersatwhichaquorumispresent.The Board recommends that stockholders vote “FOR” theelection of each of Thomas A. Christopher, Brian R. Kahn and Leslie C. Kass.
IF PROPOSAL 1 IS NOT APPROVED, ELECTION OF THREE CLASS III DIRECTORS(PROPOSAL 3)
IfProposal1isnotapproved,stockholderswillvotetoelectthreedirectorstoholdofficeforathree-yearterm.Insuchevent,theBoardhasrecommendedeachofThomasA.Christopher,BrianR.KahnandLeslieC.Kassforelectionasdirectors,toserveuntilthe2021annualmeetingofstockholdersoruntilhisorhersuccessorisdulyelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.
Informationregardingthedirectornomineesissetforthbelowundertheheading“InformationRegardingDirectorsandDirectorNominees.”
RecommendationandVoteRequired
Youmayvote“FOR”alldirectornomineesorwithholdyourvoteforanyoneormoreofthedirectornominees.Subjecttoourmajorityvotingrequirementsdescribedbelow,directornomineesareelectedbyapluralityofthevotescastbythesharesofourcommonstockentitledtovoteintheelectionofdirectorsatameetingofstockholdersatwhichaquorumispresent.The Board recommends that stockholders vote “FOR” theelection of each of Thomas A. Christopher, Brian R. Kahn and Leslie C. Kass.
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INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEESOurBoardcurrentlyincludessevenhighlyqualifieddirectorswithskillsalignedtoourbusinessandstrategywhobringsignificantvalueanddiversitytotheCompany.OurBoardiscomprisedofthefollowingmembers:
NAME CLASS YEAR TERM EXPIRESThomas A. Christopher ClassIII 2018
Brian R. Kahn ClassIII 2018
Leslie C. Kass ClassIII 2018
Henry E. Bartoli ClassI 2019
Cynthia S. Dubin ClassI 2019
Matthew E. Avril ClassII 2020
Anne R. Pramaggiore ClassII 2020
TheBoardcurrentlyconsistsofthreeClassesofdirectorswitheachdirectorservingastaggeredthree-yearterm.TheClassIdirectorsareHenryE.BartoliandCynthiaS.Dubin.TheClassIIdirectorsareMatthewE.AvrilandAnneR.Pramaggiore.TheClassIIIdirectorsareThomasA.Christopher,BrianR.KahnandLeslieC.Kass.
IfProposal1isapproved,theBoardwillconsistoftwoClassesofdirectors,withthedirectorsinClassIservinguntiltheCompany’s2020annualmeetingofstockholdersandthedirectorsinClassIIservinguntiltheCompany’s2019annualmeetingofstockholders.IfProposal1isapproved,thedirectorscurrentlyinClassIIIwillbedesignatedasClassIdirectorsandthedirectorscurrentlyinClassIandClassIIwillbedesignatedasClassIIdirectors.
MatthewE.Avril,anindependentdirector,currentlyservesasBoardChairman.SolongastheBoardChairmanisanindependentdirector,theBoardpresentlyexpectsthatitwouldnotdesignateanotherdirectorasLeadIndependentDirector.
Unlessotherwisedirected,thepersonsnamedasproxiesontheenclosedproxycardintendtovote“FOR”theelectionofthenominees.Ifanynomineeshouldbecomeunavailableforelection,theshareswillbevotedforsuchsubstitutenomineeasmaybeproposedbyourBoard.However,wearenotawareofanycircumstancesthatwouldpreventanyofthenomineesfromservingasadirector.
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ThefollowingsectionprovidesinformationwithrespecttoeachnomineeforelectionasadirectorandeachdirectoroftheCompanywhowillcontinuetoserveasadirectorafterthisyear’sAnnualMeeting.Itincludesthespecificexperience,qualificationsandskillsconsideredbytheGovernanceCommitteeand/ortheBoardinassessingtheappropriatenessofthepersontoserveasadirector.(agesareasofMay1,2018)
Nominees
THOMAS A. CHRISTOPHER Directorsince2015Age:73GovernanceCommittee
Qualifications:
Followinghisretirementin2009,Mr.Christopherhasprovidedindependentconsultantservicestovariousenergyindustryparticipants.HeservesasamemberoftheOperatingAdvisoryBoardofFortPointCapital,aprivateequityfirm.Healsoteachesagraduate-levelcourseinmanagementprinciplesattheUniversityofPittsburgh.FromJanuary2009untilhisretirementinJune2009,Mr.ChristopherservedastheViceChairmanofArevaNPInc.(“Areva”),acommercialnuclearpowerengineering,fuelandnuclearservicescompany.Previously,heservedasAreva’sPresidentandChiefExecutiveOfficerfromApril2000toJanuary2009andservedonAreva’sglobalExecutiveCommitteeinFrancefromJanuary2005untilDecember2008.PriortojoiningArevain2000,Mr.ChristopherservedasVicePresidentandGeneralManagerofSiemens/WestinghousePowerServicesDivisionssinceAugust1998,VicePresidentandGeneralManagerofWestinghouseEnergyServicesDivisionsfromJanuary1996untilAugust1998,andVicePresidentandGeneralManagerofWestinghouseGlobalNuclearServiceDivisionsfromJuly1982untilDecember1996.Mr.ChristopheralsospentsixyearswiththeU.S.Navyasanofficerinthenuclearsubmarineforce,holdingthenavalreactorsengineercertification.
Mr.Christopherbringsanextensiveanduniqueunderstandingoffossilpoweroperations,thepowermarketandpowerengineeringtotheCompany’sboardofdirectors.Asanenergybusinessexecutive,heisfamiliarwithourkeycustomersandtheirinvestmentdecisionmakingprocess.Heisalsoexperiencedinmanaginginternationaloperationsforenergyservicescompaniesthroughouttheworld.Mr.Christopher’smanagementexperienceandtechnicalbackgroundintheenergyindustrymakehimwellqualifiedtoserveonourboardofdirectors.
BRIAN R. KAHN Directorsince2018Age:44CompensationCommitteeGovernanceCommittee
Qualifications:
Since1999,Mr.KahnhasservedasthemanagingpartnerofVintageCapitalManagement,LLC,aprivate-equityinvestmentorganizationspecializinginthedefense,manufacturingandconsumersectors.HeservedasadirectorofAaron’s,Inc.,fromMay2014toAugust2015.Mr.KahnalsoservedastheChairmanoftheBoardofWhiteElectronicDesignsCorporationfromJune2009toApril2010.Hehasalsoservedasadirectorofnumerousprivately-heldcompaniesincludingAPITechnologiesCorp.,Buddy’sHomeFurnishings,EnergesServicesLLC,IECElectronicsandKVHIndustries,Inc.
MrKahn’sextensiveexperienceasadirectoracrossmultipleindustriesmakeshimavaluablememberofourboardofdirectors.
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LESLIE C. KASS Directorsince2018Age:47
Qualifications:
Ms.KasshasservedasourPresidentandChiefExecutiveOfficersinceJanuary2018.Previously,Ms.KassservedastheCompany’sSeniorVicePresident,IndustrialfromMay2017throughJanuary2018.Priortothisappointment,sheservedinavarietyofrolesattheCompany,includingVicePresidentofRetrofitsandContinuousEmissionsMonitoringfortheCompany’sPowersegmentfromAugust2016toMay2017,VicePresident,InvestorRelations&CommunicationsfromJune2015toAugust2016,andVicePresidentofRegulatoryAffairsfromJanuary2013toJune2015.BeforejoiningtheCompany,Ms.Kassheldanumberofengineeringandprojectmanagement-relatedpositionsofincreasingresponsibilitywithWestinghouseElectricCompany,EntergyCorporationandDukeEnergyCorporation.
Ms.Kassisanexperiencedexecutivewithanextensiveengineeringandprojectmanagementbackground.Thisexperience,combinedwithherstrategicvision,makeheravaluablememberofourboardofdirectors.
ContinuingDirectors
MATTHEW E. AVRIL Directorsince2018Age:57 AuditandFinanceCommitteeCompensationCommittee
Qualifications:
Mr.AvrilisamemberofthestrategicadvisoryboardofVintageCapitalManagement,aprivate-equityinvestmentorganizationspecializinginthedefense,manufacturingandconsumersectors.FromNovember2016toMarch2017,heservedasChiefExecutiveOfficerofDiamondResortsInternational,Inc.Previously,hewasChiefExecutiveOfficer-electforVistanaSignatureExperiences,Inc.,fromFebruarytoNovember2015,afterhisretirementasPresident,HotelGroup,forStarwoodHotels&ResortsWorldwide,Inc.–apositionheheldfrom2008to2012.Beforethat,from2002to2008,heservedinanumberofexecutiveleadershippositionswithStarwood,andfrom1989to1998,heldvariousseniorleadershippositionswithVistana.
Mr.AvrilisaCertifiedPublicAccountant(inactivestatus),andhisknowledgeofaccountingandfinancemakeshimavaluablememberofourboardofdirectors.
ANNE R. PRAMAGGIORE Directorsince2015Age:59AuditandFinanceCommitteeCompensationCommittee
Qualifications:
SinceFebruary24,2012,Ms.PramaggiorehasservedasPresidentandChiefExecutiveOfficerofCommonwealthEdisonCompany(“ComEd”),anelectricutilitycompany.Priortohercurrentposition,sheservedasComEd’sPresidentandChiefOperatingOfficerfromMay2009throughFebruary23,2012.Ms.PramaggiorejoinedComEdin1998andservedasitsExecutiveVicePresident,CustomerOperations,RegulatoryandExternalAffairsfromSeptember2007toMay2009,SeniorVicePresident,RegulatoryandExternalAffairsfromNovember2005toSeptember2007,andVicePresident,RegulatoryandExternalAffairsfromOctober2002toNovember2005.ShealsoservedasitsLeadCounsel.Ms.PramaggiorehasalsoservedasamemberoftheBoardofDirectorsofMotorolaSolutions,Inc.sinceJanuary2013.Inaddition,Ms.PramaggioreservesasaboardmemberontheChicagoFederalReserveBoard.
Ms.PramaggioreisalicensedattorneyandbringstotheCompany’sboardofdirectorsextensiveexperienceintheutilitiesindustry,ashighlightedbyheryearsofserviceatComEd.Herexperienceasacurrentexecutiveatanotherpubliccompanyandherperspectiveonthetechnical,regulatory,operationalandfinancialaspectsofthepowerindustrymakeherwellqualifiedtoserveonourboardofdirectors.
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HENRY E. BARTOLI Directorsince2018Age:71 GovernanceCommittee
Qualifications:
In2014,Mr.BartoliretiredasPresidentandChiefExecutiveOfficerofHitachiPowerSystemsAmericaLTD,apositionheheldfrom2004to2014.From2002to2004,hewasExecutiveVicePresidentofTheShawGroup,afterservinginanumberofseniorleadershiprolesatFosterWheelerLtd.from1992to2002,includingGroupExecutiveandCorporateSeniorVicePresident,EnergyEquipmentGroup,andGroupExecutiveandCorporateVicePresidentandGroupExecutive,FosterWheelerPowerSystemsGroup.Previously,from1971to1992,heservedinanumberofpositionsofincreasingimportanceatBurnsandRoeEnterprises,Inc.
Withmorethan35yearsofexperienceintheglobalpowerindustry,Mr.Bartoliisavaluablememberofourboardofdirectors.
CYNTHIA S. DUBIN Directorsince2015Age:56AuditandFinanceCommittee
Qualifications:
FromNovember2011throughJanuary2016,Ms.DubinservedasFinanceDirectorofJKXOil&Gasplc,apubliclyheldoilandgasexploration,developmentandproductioncompany.PriortojoiningJKXOil&Gasplc,sheco-foundedandservedasChiefFinancialOfficerofCanamensEnergyLimited,anoilandgasexplorationandproductioncompanyfocusedontheCaspian,NorthAfrica,MiddleEastandNorthSearegions,from2006to2011.PriortojoiningCanamensEnergyLimited,Ms.DubinservedasVicePresidentandFinanceDirector,Europe,MiddleEastandAfricaDivisionforEdisonMissionEnergy,aU.S.ownedelectricpowergeneratorwhichdeveloped,acquired,financed,ownedandoperatedreliableandefficientpowersystems.Ms.DubinstartedhercareeratTheBankofNewYorkandMitsubishiBankadvisingonandlendingtolargeenergyprojects.
Ms.DubinbringsvaluablefinanceandenergyindustryexperiencetotheCompany’sboardaswellasauniqueunderstandingoftheglobalandEuropeanenergymarkets.Withmorethan30yearsofexperienceintheenergysectorcombinedwithherfinancialexpertiseandherinternationalleadershipexperience,Ms.Dubinisavaluablememberofourboardofdirectors.
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VintageCapitalManagementAgreement
OnJanuary3,2018,theCompanyenteredintoanagreement(the“Agreement”)withVintageCapitalManagement,LLC(“Vintage”)andcertainrelatedparties(eacha“VintageShareholder”and,collectively,the“VintageShareholders”).PursuanttotheAgreement,theCompanyagreed,amongotherthings,toincreasethesizeoftheBoardtotenmembersbyaddingthreeadditionaldirectorstotheBoard,andtoappointeachofHenryE.Bartoli,MatthewE.AvrilandBrianR.Kahn(collectively,the“VintageShareholderNominees”)totheBoardtoserveasClassI,ClassIIandClassIIIdirectors,respectively.PursuanttotheAgreement,theCompanyalsoappointedeachofMessrs.Bartoli,AvrilandKahntotheGovernanceCommittee,theAuditandFinanceCommitteeandtheCompensationCommitteeoftheBoard,respectively.PursuanttotheAgreement,andsolongasVintage’sbeneficialownershiphasnotdecreasedbelow5%ofthethen-outstandingsharesofcommonstockoftheCompany(otherthanasaresultofanincreaseinthenumberofsharesofoutstandingcommonstock),ifanyVintageShareholderNomineeisunableorunwillingtoserveasadirector,resignsasadirectororisremovedasadirectorpriortotheexpirationoftheNominationPeriod(asdefinedbelow),Vintagemayrecommendasubstitutepersontofilltheresultingvacancy,andtheappointmentofanysuchpersontotheBoardwillbesubjecttotheapprovaloftheGovernanceCommittee.
PursuanttotheAgreement,untilthefirstdateonwhichCompanyshareholdersmaynominateindividualsforelectiontotheBoardattheCompany’s2019annualmeetingofshareholdersor,ifearlier,thefirstdateonwhichCompanyshareholdersmaynominateindividualsforelectiontotheBoardiftheCompanyannouncesthatitwillholdashareholdermeetingatwhichdirectorswillbeelectedotherthantheannualmeetingsofshareholdersin2018and2019(the“NominationPeriod”),theVintageShareholderswillnotengageincertainproxysolicitations,makecertainshareholderproposals,callmeetingsofshareholdersorsolicitorpubliclycommentoncertainproposalsorconsentsfromshareholdersregardinganymerger,acquisition,recapitalization,restructuring,dispositionorotherbusinesscombinationwithrespecttotheCompany.
TheAgreementfurtherprovidesthat,duringtheNominationPeriod,eachVintageShareholderwillcauseCommonSharesthenbeneficiallyownedbysuchVintageShareholderoritsaffiliatestoappearinpersonorbyproxyatallannualmeetingsandtobevotedinfavoroftheBoard’snomineesfordirector,inaccordancewiththeBoard’srecommendationwithrespecttotheratificationoftheCompany’sindependentregisteredpublicaccountingfirm,inaccordancewiththeBoard’srecommendationwithrespecttotheCompany’s“say-on-pay”proposal,inaccordancewiththeBoard’srecommendationwithrespecttothefrequencyoftheCompany’s“say-on-pay”proposalsandinfavorofthedeclassificationofBoardterms.
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SummaryofDirectorCoreCompetenciesandAttributes
OurBoardofDirectorsprovideseffectiveandstrategicoversighttosupportthebestinterestsofourCompanyanditsstockholders.ThefollowingchartsummarizesthecorecompetenciesandattributesrepresentedbythedirectornomineesandthedirectorswhowillcontinuetoserveaftertheAnnualMeetingonourBoard.Moredetailsoneachdirector’scompetenciesareincludedinthedirectorprofilesonthepreviouspages.
Competencies / Attributes Matthew E.Avril
Henry E.Bartoli
Thomas A.Christopher
Cynthia S.Dubin
Brian R.Kahn
Leslie C.Kass
Anne R.Pramaggiore
COMPLIANCE CONSIDERATIONS IndependentDirector ● ● ● ● ● ●
Financialexpertise ● ● ● ● ● ●
CORE COMPETENCIES RecentorcurrentpubliccompanyCEO/COO/CFO/GC ● ● ●
FossilFuelPowerGeneration ● ● ● ● ●
Manufacturing ● ● ● EngineeringandConstruction ● ● ● Utility/PowerTransmissionDistribution ● ● ●
InternationalOperations ● ● ● ● ●
STRATEGIC COMPETENCIES Financial(Reporting,Auditing,InternalControls) ● ● ● ● ● ● ●
Strategy/BusinessDevelopment/M&A ● ● ● ● ● ● ●
HumanResources/OrganizationalDevelopment ● ● ● ● ● ●
Legal/Governance/BusinessConduct ● ● ● ● ● ●
RiskManagement ● ● ● ● ● PublicPolicy/RegulatoryAffairs ● ● ● ● ●
PUBLIC COMPANY BOARDEXPERIENCE Boardofsimilarorlargersizeenergycompany ● ●
Audit/Finance(Boardcommitteeexperiencewithothercompanies) ● Compensation(Boardcommitteeexperiencewithothercompanies) ● ●
Nomination/Governance(Boardcommitteeexperiencewithothercompanies) ●
PERSONAL Age(asofMay1,2018) 57 71 73 56 44 47 59
Gender M M M F M F F
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CORPORATE GOVERNANCE
OurCorporateGovernancepoliciesandstructuresprovidethegeneralframeworkforhowwerunourbusiness.Theydemonstrateourcommitmenttoethicalvalues,tostrongandeffectiveoperationsandtoassuringcontinuedgrowthandfinancialstabilityforourstockholders.
ThecorporategovernancesectiononourWebsitecontainscopiesofourprincipalgovernancedocuments.Itisfoundatwww.babcock.comat“Investors—CorporateGovernance”andcontainsthefollowingdocuments:
AmendedandRestatedBylaws
CorporateGovernancePrinciples
CodeofBusinessConduct
CodeofEthicsforChiefExecutiveOfficerandSeniorFinancialOfficers
AuditandFinanceCommitteeCharter
CompensationCommitteeCharter
GovernanceCommitteeCharter
ConflictMineralsPolicy
RelatedPartyTransactionsPolicy
ModernSlaveryTransparencyStatement
DirectorIndependence
TheNewYorkStockExchange(“NYSE”)listingstandardsrequireourBoardtoconsistofatleastamajorityofindependentdirectors.Foradirectortobeconsideredindependent,theBoardmustdeterminethatthedirectordoesnothaveanydirectorindirectmaterialrelationshipwithus.TheBoardhasestablishedcategoricalstandards,whichconformtotheindependencerequirementsintheNYSElistingstandardstoassistitindeterminingdirectorindependence.ThesestandardsarecontainedintheCorporateGovernancePrinciplesfoundonourWebsiteatwww.babcock.comunder“Investors—CorporateGovernance—GovernanceDocuments.”
Basedontheseindependencestandards,ourBoardhasdeterminedthatthefollowingdirectorsareindependentandmeetourcategoricalstandards:
MatthewE.Avril CynthiaS.DubinHenryE.Bartoli BrianR.KahnThomasA.Christopher AnneR.Pramaggiore
Aspreviouslydisclosed,effectiveMarch2,2018,E.JamesFerland,StephenG.Hanks,BrianK.FerraioliandLarryL.WeyersresignedasdirectorsoftheCompany.TheBoardpreviouslydeterminedthateachofStephenG.Hanks,BrianK.FerraioliandLarryL.Weyerswasindependentandmetourcategoricalstandardsduring2017.
Indeterminingtheindependenceofthedirectors,ourBoardconsideredordinarycoursetransactionsbetweenusandotherentitieswithwhichthedirectorsareassociated.Thosetransactionsaredescribedbelow,althoughnoneweredeterminedtoconstituteamaterialrelationshipwithus.AlthoughMr.WeyershadnorelationshipwiththeCompanyduring2017,exceptasadirectorandstockholder,heistheformerchairmanoftheboardofdirectorsofIntegrysEnergyGroup,Inc.,withwhichwehavetransactedbusinessintheordinarycourseduringthelastthreeyears.Mr.Ferraioliwasformerlyanofficerofanentitywithwhichwehavetransactedbusinessintheordinarycourseduringthelastthreeyears,andMs.Pramaggioreiscurrentlyanofficerofanentitywithwhichwehavetransactedbusinessintheordinarycourseduringthelastthreeyears.Mr.Hanksisadirectorofanentitywithwhichwetransactbusinessintheordinarycourse.
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BoardFunction,LeadershipStructureandExecutiveSessions
OurBoardoversees,counselsanddirectsmanagementinthelong-terminterestoftheCompanyandourstockholders.TheBoard’sresponsibilitiesinclude:
• overseeingtheconductofourbusinessandassessingourbusinessandenterpriserisks;• reviewingandapprovingourkeyfinancialobjectives,strategicandoperatingplans,andothersignificantactions;• overseeingtheprocessesformaintainingtheintegrityofourfinancialstatementsandotherpublicdisclosures,andourcompliancewithlawandethics;
• evaluatingCEOandseniormanagementperformanceanddeterminingexecutivecompensation;• planningforCEOsuccessionandmonitoringmanagement’ssuccessionplanningforotherkeyexecutiveofficers;and• establishingoureffectivegovernancestructure,includingappropriateboardcompositionandplanningforboardsuccession.
OurBoarddoesnothaveapolicyrequiringeitherthatthepositionsoftheChairmanandtheChiefExecutiveOfficershouldbeseparateorthattheyshouldbeoccupiedbythesameindividual.OurBoardbelievesthatthisissueisproperlyaddressedaspartofthesuccessionplanningprocessandthatitisinthebestinterestsoftheCompanyfortheBoardtomakeadeterminationonthesematterswhenitelectsanewChiefExecutiveOfficerorChairmanoftheBoardoratothertimesconsiderationiswarrantedbycircumstances.Intherecentpast,theBoardhasbeenstructuredwithacombinedChairmanandChiefExecutiveOfficer.InconnectionwithourrecentChiefExecutiveOfficersuccessioninJanuary2018,Ms.KasswasappointedasourPresidentandChiefExecutiveOfficer,whileMr.AvrilcurrentlyservesasourChairman.
PursuanttoourCorporateGovernancePrinciples,intheeventtheChairmanoftheBoardisnotanindependentdirector,theindependentdirectorswillannuallyappointaLeadIndependentDirectorwithsuchresponsibilitiesastheBoardshalldeterminefromtimetotime.Ifappointed,theLeadIndependentDirectorhasthefollowingresponsibilities:
• presidesoverallBoardmeetingsatwhichtheChairmanoftheBoardisnotpresentandallexecutivesessionsattendedonlybyindependentdirectors;
• servesasliaisonbetweentheindependentdirectorsandtheChairmanoftheBoardandChiefExecutiveOfficer(includingadvisingtheChairmanoftheBoardandChiefExecutiveOfficerofdiscussionsheldduringexecutivesessionsofthenon-employeeandindependentdirectors,asappropriate);
• reviewsandapprovestheBoardmeetingagendasandmeetingschedulestoassurethatthereissufficienttimefordiscussionofallagendaitems;
• advisestheChairmanoftheBoardandChiefExecutiveOfficerregardingthequality,quantityandtimelinessofinformationsentbymanagementtothedirectors;
• hastheauthoritytocallmeetingsoftheindependentdirectors;and• ifrequestedbymajorstockholders,ensuresthatheorsheisavailableforconsultationanddirectcommunication.
Mr.AvrilandMs.KasscurrentlyserveasourChairmanandChiefExecutiveOfficer,respectively.SolongastheBoardChairmanisanindependentdirector,theBoardpresentlyexpectsthatitwouldnotdesignateanotherdirectorasLeadIndependentDirector.TheBoardbelievesthatthisleadershipstructureisappropriateforusatthistimebecauseitprovidesourChairmanwiththereadilyavailableresourcestomanagetheaffairsoftheBoard.OurChairmanworkscloselyandcollaborativelywithourChiefExecutiveOfficertoensurethattheviewsoftheBoardaretakenintoaccountasmanagementcarriesoutthebusinessoftheCompany.Ourindependentdirectors,ledbyourChairman,meetinexecutivesessionwithoutmanagementattheconclusionofeachBoardandcommitteemeeting.
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DirectorNominationProcess
OurGovernanceCommitteeisresponsibleforassessingthequalifications,skillsandcharacteristicsofcandidatesforelectiontotheBoard.Inmakingthisassessment,theGovernanceCommitteegenerallyconsidersanumberoffactors,includingeachcandidate’s:
• professionalandpersonalexperiencesandexpertiseinrelationto(1)ourbusinessesandindustries,and(2)theexperiencesandexpertiseofotherBoardmembers;
• integrityandethicsinhisorherpersonalandprofessionallife;• professionalaccomplishmentinhisorherfield;• personal,financialorprofessionalinterestsinanycompetitor,customerorsupplierofours;• preparednesstoparticipatefullyinBoardactivities,includingactivemembershiponatleastoneBoardcommitteeandattendanceat,andactiveparticipationin,meetingsoftheBoardandthecommittee(s)ofwhichheorsheisamember,andlackofotherpersonalorprofessionalcommitmentsthatwould,intheGovernanceCommittee’ssolejudgment,interferewithorlimithisorherabilitytodoso;and
• abilitytocontributepositivelytotheBoardandanyofitscommittees.
TheBoardrecognizesthebenefitsofadiverseboardandbelievesthatanysearchforpotentialdirectorcandidatesshouldconsiderdiversityastogender,ethnicbackground,education,viewpointandpersonalandprofessionalexperiences.
Ourbylawsprovidethat(1)apersonwillnotbenominatedforelectionorreelectiontoourBoardifsuchpersonwillhaveattainedtheageof75priortothedateofelectionorre-electionand(2)anydirectorwhoattainstheageof75duringhisorhertermwillbedeemedtohaveresignedandretiredatthefirstAnnualMeetingfollowinghisorherattainmentoftheageof75.Accordingly,adirectornomineemaystandforelectionifheorshehasnotattainedtheageof75priortothedateofelectionorreelection.
TheGovernanceCommitteesolicitsideasforpossiblecandidatesfromanumberofsources—includingmembersoftheBoard,ourChiefExecutiveOfficerandothersenior-levelexecutiveofficers,individualspersonallyknowntothemembersoftheBoardandindependentdirectorcandidatesearchfirms.
Inaddition,anystockholdermaynominateoneormorepersonsforelectionasoneofourdirectorsatanannualmeetingofstockholdersifthestockholdercomplieswiththenotice,informationandconsentprovisionscontainedinourbylaws.See“Stockholders’Proposals”inthisproxystatementandourbylaws.
TheGovernanceCommitteewillevaluateproperlyidentifiedcandidates,includingnomineesrecommendedbystockholders.TheGovernanceCommitteealsotakesintoaccountthecontributionsofincumbentdirectorsasBoardmembersandthebenefitstousarisingfromtheexperienceofincumbentdirectorsontheBoard.Inaddition,theGovernanceCommitteewillconsiderwhetheracandidatemeetstheCompany’sCorporateGovernanceGuidelines.
Ourbylawsprovideforamajorityvotingstandardfordirectorsinuncontestedelections.Anynomineefordirectorisrequiredtosignanirrevocablecontingentresignationletter.Ifanomineefordirectordoesnotreceiveamajorityofthevotescast"FOR"hisorherelection(notcountinganyabstentionsorbrokernon-votesasbeingcast),theBoardwillactonanexpeditedbasistodeterminewhethertoaccepttheresignation.
CommunicationwiththeBoard
OurstockholdersorotherinterestedpersonsmaycommunicatedirectlywithourBoardoritsindependentmembers.WrittencommunicationstotheindependentmembersofourBoardcanbesenttothefollowing:BoardofDirectors(independentmembers),c/oBabcock&WilcoxEnterprises,Inc.,CorporateSecretary’sOffice,13024BallantyneCorporatePlace,Suite700,Charlotte,NorthCarolina28277.Allsuchcommunicationsareforwardedtotheindependentdirectorsfortheirreview,exceptforcommunicationsthat(1)containmaterialthatisnotappropriateforreviewbytheBoardbasedupontheCompany’sbylawsandtheestablishedpracticeandprocedureoftheBoard,or(2)containimproperorimmaterialinformation.InformationregardingthisprocessispostedonourWebsiteatwww.babcock.comunder“Investors—CorporateGovernance—GovernanceDocuments.”
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BoardOrientationandContinuingEducation
EachnewdirectorparticipatesinanorientationprogramdevelopedandimplementedwiththeoversightoftheGovernanceCommittee.ThisorientationincludesinformationtofamiliarizenewdirectorswiththeCompany’soperations,significantfinancial,accountingandriskmanagementissues,complianceprograms,CodeofBusinessConduct,principalofficersandinternalandindependentauditors.
Directorsareencouragedtoparticipateincontinuingeducationprograms.TheBoardbelievesitisappropriatefordirectors,attheirdiscretion,tohaveaccesstoeducationalprogramsrelatedtotheirdutiesasdirectorsonanongoingbasistoenablethemtobetterperformtheirdutiesandtorecognizeanddealappropriatelywithissuesastheyarise.
TheCompanyprovidesappropriatefundingforanysuchprograminwhichadirectorwishestoparticipate.
BoardAssessments
TheBoardconductsanannualself-evaluationtodeterminewhetheritanditscommitteesarefunctioningeffectively.TheGovernanceCommitteeoverseesthisevaluation,solicitscommentsfromalldirectorsandreportsannuallytotheBoardwithanassessmentoftheperformanceoftheBoardanditscommittees.
TheRoleoftheBoardinSuccessionPlanning
TheBoardbelieveseffectivesuccessionplanning,particularlyfortheChiefExecutiveOfficer,isimportanttothecontinuedsuccessoftheCompany.Asaresult,theBoardperiodicallyreviewsanddiscussessuccessionplanningwiththeChiefExecutiveOfficerduringexecutivesessionsofBoardmeetings.TheCompensationCommitteeassiststheBoardintheareaofsuccessionplanningbyreviewingandassessingthemanagementsuccessionplanningprocessandreportingtotheBoardwithrespecttosuccessionplanningfortheChiefExecutiveOfficerandourotherexecutiveofficers.
TheRoleoftheBoardinRiskOversight
Aspartofitsoversightfunction,theBoardmonitorsvariousrisksthatweface.WemaintainanenterpriseriskmanagementprogramadministeredbyourCorporateStrategygroup.Thisprogramfacilitatestheprocessofreviewingkeyexternal,strategic,operational(e.g.,cybersecurity)andfinancialrisks,aswellasmonitoringtheeffectivenessofriskmitigation.InformationontheenterpriseriskmanagementprogramispresentedtoseniormanagementandtheBoard.TheAuditandFinanceCommitteeassiststheBoardinfulfillingitsoversightresponsibilityforfinancialreporting,andmeetsperiodicallywithmanagementtoreviewfinancialriskexposuresandtheCompany’spoliciesandguidelinesconcerningriskassessmentandriskmanagement.TheCompensationCommitteealsoassiststheBoardwiththisfunctionbyassessingrisksassociatedwithourcompensationprogramsinconsultationwithmanagementanditsoutsidecompensationconsultant,asmorefullydescribedin“CompensationDiscussionandAnalysis-CompensationPhilosophyandProcess.”
BoardofDirectorsandItsCommittees
OurBoardmet21timesduring2017.Alldirectorsattended75%ormoreofthemeetingsoftheBoardandofthecommitteesonwhichtheyservedduring2017.AlldirectorsthenservingontheBoardattendedour2017AnnualMeeting.
OurBoardcurrentlyhas,andappointsthemembersof,standingAuditandFinance,CompensationandGovernanceCommittees.EachofthosecommitteeshasawrittencharterapprovedbytheBoard.ThecurrentcharterforeachstandingBoardcommitteeispostedonourWebsiteatwww.babcock.comunder“Investors—CorporateGovernance—GovernanceDocuments.”
Thecurrentmembersofthecommitteesareidentifiedbelow.NYSElistingstandardsrequirethatallmembersofourAuditandFinance,CompensationandGovernanceCommitteesbeindependent.OurBoardhasaffirmativelydeterminedthateachmemberofsuchcommitteesisindependentinaccordancewiththeNYSElistingstandards.
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COMMITTEECOMPOSITION:
Committee Member Audit & Finance Compensation Governance
MatthewE.Avril ● ●
CynthiaS.Dubin ●
AnneR.Pramaggiore ● ●
ThomasA.Christopher ●
BrianR.Kahn ● ●
HenryE.Bartoli ●
●-Chair●-Member
AUDIT AND FINANCE COMMITTEE:
Ms.Dubin(Chair)Mr.Avril(joinedMarch2,2018)Ms.Pramaggiore
TheAuditandFinanceCommitteemetfivetimesduring2017.TheAuditandFinanceCommittee’sroleisfinancialoversight.Ourmanagementisresponsibleforpreparingfinancialstatements,andourindependentregisteredpublicaccountingfirmisresponsibleforauditingthosefinancialstatements.
TheAuditandFinanceCommitteeisdirectlyresponsiblefortheappointment,compensation,retentionandoversightofourindependentregisteredpublicaccountingfirm.Thecommittee,amongotherthings,alsoreviewsanddiscussesourauditedfinancialstatementswithmanagementandtheindependentregisteredpublicaccountingfirm.TheAuditandFinanceCommitteeprovidesoversightof:(1)ourfinancialreportingprocessandinternalcontrolsystem;(2)theintegrityofourfinancialstatements;(3)ourcompliancewithlegalandregulatoryrequirements;(4)theindependence,qualificationsandperformanceofourindependentauditors;(5)theperformanceofourinternalauditfunction;and(6)ourfinancialstructureandstrategy.TheAuditandFinanceCommitteealsohasoversightoftheCompany’sethicsandcomplianceprogram,andreceivesregularreportsonprogrameffectiveness.
OurBoardhasdeterminedthatMr.AvrilandMmes.DubinandPramaggioreallqualifyasan“auditcommitteefinancialexpert”withinthedefinitionestablishedbytheSecuritiesandExchangeCommission(“SEC”).Formoreinformationonthebackgroundsofthesedirectors,seetheirbiographicalinformationunder“ElectionofDirectors.”
COMPENSATION COMMITTEE:
Mr.Avril(Chair)Mr.Kahn(joinedJanuary3,2018)Ms.Pramaggiore
TheCompensationCommitteemetsixtimesduring2017.TheCompensationCommitteehasoverallresponsibilityforourexecutiveandnon-employeedirectorcompensationplans,policiesandprogramsincludingourExecutiveIncentiveCompensationPlan(the“EICP”)andourAmendedandRestated2015Long-TermIncentivePlan(the“2015LTIP”).
TheCompensationCommitteehastheauthoritytoretain,terminate,compensateandoverseeanycompensationconsultantorotheradvisorstoassistthecommitteeinthedischargeofitsresponsibilities.TheCompensationCommitteemayformanddelegateauthoritytosubcommitteesconsistingofoneormoreindependentdirectorsastheCompensationCommitteedeemsappropriate.TheCompensationCommitteehasengagedKornFerryHayGroup,Inc.(“HayGroup”)asitsoutsidecompensationconsultant.Seethe“CompensationDiscussionandAnalysis–CompensationPhilosophyand
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Process"and"–2017CompensationDecisions”sectionsofthisproxystatementforinformationaboutour2017namedexecutiveofficercompensation,includingadiscussionoftheroleofmanagementandthecompensationconsultant.
Compensation Committee Interlocks and Insider Participation
NodirectorwhoservedasamemberoftheCompensationCommitteeduringtheyearendedDecember31,2017(Messrs.Christopher,HanksandWeyers,andMs.Pramaggiore)(1)wasduringsuchyear,orhadpreviouslybeen,anofficeroremployeeoftheCompanyoranyofitssubsidiaries,or(2)otherthantransactionsintheordinarycourse,hadanymaterialinterestinatransactionoftheCompanyorabusinessrelationshipwith,oranyindebtednessto,theCompany.Noneofourexecutiveofficershaveservedasmembersofacompensationcommittee(orotherboardcommitteeperformingequivalentfunctions)ortheboardofdirectorsofanyotherentitythathasanexecutiveofficerservingasamemberofourBoard.
GOVERNANCE COMMITTEE:
Mr.Christopher(Chair) Mr.Bartoli(joinedJanuary3,2018) Mr.Kahn(joinedJanuary3,2018)
TheGovernanceCommitteemetfivetimesduring2017.Thiscommittee,inadditiontoothermatters,hasoverallresponsibilityto(1)establishandassessdirectorqualifications;(2)recommendnomineesforelectiontoourBoard;and(3)overseetheannualevaluationofourBoardandmanagement,includingtheChiefExecutiveOfficerinconjunctionwithourCompensationCommittee.Thiscommitteewillconsiderindividualsrecommendedbystockholdersfornominationasdirectorsinaccordancewiththeproceduresdescribedunder“Stockholders’Proposals.”ThiscommitteealsoassistsourBoardwithmanagementsuccessionplanninganddirectorandofficerinsurancecoverage.
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COMPENSATION OF DIRECTORS
Thecompensationreflectedbelowsummarizesthecompensationearnedbyorpaidtoournon-employeedirectorsforservicesasmembersofourBoardduringfiscalyear2017.Directorswhoarealsoouremployeesdonotreceiveanycompensationfortheirserviceasdirectors.Messrs.Avril,BartoliandKahnwereappointedtotheBoardonJanuary3,2018andthereforearenotincludedinthetablebelow.
NAME FEES EARNED OR PAIDIN CASH($)
STOCKAWARDS($) TOTAL($)
ThomasA.Christopher $85,000 $94,991 $179,991CynthiaS.Dubin $85,000 $94,991 $179,991BrianK.Ferraioli $100,000 $94,991 $194,991StephenG.Hanks $115,000 $94,991 $209,991AnneR.Pramaggiore $85,000 $94,991 $179,991LarryL.Weyers $95,000 $94,991 $189,991
FEES EARNED OR PAID IN CASH
Underourcurrentdirectorcompensationprogram,whichisrecommendedbytheCompensationCommitteeandapprovedbytheBoard,non-employeedirectorsareeligibletoreceiveanannualretainerof$85,000,paidinquarterlyinstallmentsandproratedforpartialterms.
ThechairsofBoardcommitteesandanyLeadIndependentDirector(Mr.Hanksin2017)receiveadditionalannualretainers,paidinquarterlyinstallments,asfollows(proratedforpartialterms):
• thechairoftheAuditandFinanceCommittee:$15,000;• thechairofeachoftheCompensationandGovernanceCommittees:$10,000;and• theLeadIndependentDirector:$20,000.
UnderourSupplementalExecutiveRetirementPlan(the“SERP”),eachdirectormayelecttodeferthepaymentofupto100%ofhisorherannualretainerandfees.Amountselectedtobedeferredarecreditedasabookkeepingentryintoanotionalaccount,whichwerefertoasadeferralaccount.Thebalanceofadirector’sdeferralaccountconsistsofdeferralcontributionsmadebythedirectorandhypotheticalcreditedgainsorlossesattributabletoinvestmentselectedbythedirector,orbyourCompensationCommitteeifthedirectorfailstomakeinvestmentelections.Directorsare100%vestedintheirdeferralaccountsatalltimes.Nodirectormadeadeferralelectionwithrespecttohisorhercashretainersin2017.
STOCK AWARDS
Ourstockownershipguidelinesrequirethatnon-employeedirectorsownstockvaluedatfivetimestheirannualretainer,andtheyhavefiveyearsfromthedateofjoiningtheBoardtoacquiretherequirednumberofshares.Alldirectorsarecurrentlyincompliancewithourstockownershipguidelines.Inadditiontothecashpaymentsprovidedtoourdirectors,eachnon-employeedirectorisentitledtoreceiveastockawardintheformofanumberoffullyvestedsharesequalto$95,000dividedbytheclosingpriceofourcommonstockonthegrantdate,roundeddowntothenearestwholeshare.Mr.ChristopherandMr.Ferraiolieachelectedtodefer100%ofhisstockawardin2017.
Theamountsreportedinthe“StockAwards”columnrepresentthegrantdatefairvaluecomputedinaccordancewithFinancialAccountingStandardsBoardAccountingStandardsCodification(“FASBASC”)Topic718forthesegrantsmadein2017.Grantdatefairvaluesforthestockawardsweredeterminedusingtheclosingpriceofourcommonstock($10.41)onthedateofgrant(May12,2017).Underour2015LTIP,directorsmayelecttodeferpaymentofalloraportionoftheirstockawards.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Thefollowingtablesetsforthinformationwithrespecttothebeneficialownershipofourcommonstockbythefollowing:
• eachstockholderwhobeneficiallyownsmorethan5%ofourcommonstock;• eachcurrentexecutiveofficernamedinthe2017SummaryCompensationTable;• eachofourdirectors;and• allofourexecutiveofficersanddirectorsasagroup.
Fortheinstitutionalbeneficialownerslistedbelow,wehavebasedtheirrespectivenumberofsharesofCompanycommonstockbeneficiallyownedandthepercentageofclassamountsonthemostrecentlyreportedSchedule13Gfiledbysuchowners.
Fortheexecutiveofficersanddirectorslistedbelow,wehavebasedtheirrespectivenumberofsharesofCompanycommonstockbeneficiallyownedandpercentageofclassamountsasofMarch1,2018.Thenumberofsharesbeneficiallyownedbyeachstockholder,directororofficerisdeterminedaccordingtotherulesoftheSECandtheinformationisnotnecessarilyindicativeofbeneficialownershipforanyotherpurpose.Themailingaddressforeachofthedirectorsandexecutiveofficersis13024BallantyneCorporatePlace,Suite700,Charlotte,NC28277.
NAME OF BENEFICIAL OWNERCOMMON STOCK:
NUMBER OF SHARESBENEFICIALLY OWNED
PERCENT OFCLASS 1
OWNERSHIP OFOTHER
SECURITIESPERCENT OF
CLASS 1
5% Stockholders:
VintageCapitalManagement,LLC2 6,600,000 14.9% - *
SteelPartnersHoldings,L.P.3 5,621,962 12.8% - *
BlackRock,Inc.4 3,433,801 7.8% - *
LonestarPartners,L.P.5 3,264,000 7.4% - *
VIEXCapitalAdvisors,LLC6 2,815,302 6.4% - *
D.E.Shaw&Co.,L.P.7 2,390,562 5.4% - *Executive Officers, Directors and Director Nominees:
LeslieC.Kass8 33,969 * - *
E.JamesFerland9 912,989 2.0% 32,614 *MatthewE.Avril 169,363 * - *HenryE.Bartoli 8,232 * - *
ThomasA.Christopher10 4,426 * 21,624 *CynthiaS.Dubin 19,680 * - *
BrianR.Kahn11 8,232 * - *AnneR.Pramaggiore 26,721 * - *
JennyL.Apker12 90,553 * - *
EliasGedeon13 49,030 * 2,317 *
MarkA.Carano14 76,131 * 9,888 *
MarkS.Low15 58,210 * - *
AllDirectors,DirectorNomineesandExecutiveOfficersasagroup(15persons)16 1,525,064 3.6% 66,433 **Representslessthan1.0percent
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1PercentisbasedonoutstandingsharesofourcommonstockonMarch1,2018.2AsreportedonSchedule13D/AfiledwiththeSEConFebruary2,2018.TheSchedule13D/Areportsbeneficialownershipof6,600,000sharesofourcommonstockbyVintageCapitalManagement,LLCwhichhassolevotingpoweroverzeroshares,sharedvotingpowerover6,600,000sharesandshareddispositivepowerover6,600,000shares.TheSchedule13D/Areportsbeneficialownershipof6,600,000sharesbybothKahnCapitalManagement,LLCandBrianR.Kahn,whicheachhavesolevotingpoweroverzeroshares,sharedvotingpowerover6,600,000sharesandshareddispositivepowerover6,600,000shares.Thereportingperson'saddressis4705S.ApopkaVinelandRoad,Suite206,Orlando,FL32819.
3AsreportedonSchedule13D/AfiledwiththeSEConFebruary13,2018.TheSchedule13D/Areportsbeneficialownershipof5,621,962sharesofourcommonstockbySteelPartnersHoldingsL.P.,SPHGroupLLC,SPHGroupHoldingsLLC,SteelPartnersHoldingsGPInc.,SteelExcelInc.andSteelPartnersLtd.whicheachhavesharedvotinganddispositivepowerover5,621,962shares.TheSchedule13D/Areportsbeneficialownershipof75,000sharesofourcommonstockbyWarrenG.Lichtensteinwhohassharedvotinganddispositivepowerover75,000shares.Thereportingperson'saddressis590MadisonAvenue,32ndFloor,NewYork,NewYork10022.
4AsreportedonSchedule13G/AfiledwiththeSEConJanuary29,2018.TheSchedule13G/Areportsbeneficialownershipof3,433,801sharesofourcommonstockbyBlackRock,Inc.whichhassolevotingpowerover3,339,993shares,sharedvotingpoweroverzeroshares,andsoledispositivepowerover3,433,801shares.Thereportingperson'saddressis55East52ndStreet,NewYork,NY10055.
5AsreportedonSchedule13GfiledwiththeSEConSeptember8,2017.TheSchedule13Greportsbeneficialownershipof3,264,000sharesofourcommonstockbyLonestarPartners,L.P.,CottonwoodCapitalGPLLC,LonestarCapitalManagementLLC,JeromeL.SimonandYediWongwhicheachhavesharedvotinganddispositivepowerover3,264,000shares.Thereportingperson'saddressisOneMaritimePlaza,Suite1106,SanFrancisco,CA94111.
6AsreportedonSchedule13D/AfiledwiththeSEConOctober27,2017.TheSchedule13D/Areportsbeneficialownershipof2,815,302sharesofourcommonstockbyVIEXOpportunitiesFund,LP-SeriesOneandVIEXGP,LLCwhicheachhavesharedvotinganddispositivepowerover2,815,302shares.Thereportingperson'saddressis825ThirdAvenue,33rdFloor,NewYork,NewYork10022.
7AsreportedonSchedule13G/AfiledwiththeSEConFebruary14,2018.TheSchedule13G/Areportsbeneficialownershipof2,390,562sharesofourcommonstockbyD.E.Shaw&Co.,L.P.andDavidE.Shawwhicheachhavesharedvotinganddispositivepowerover2,390,562shares.Thereportingperson'saddressis1166AvenueoftheAmericas,9thFloor,NewYork,NY10036.
8SharesownedbyMs.Kassinclude26,481sharesofcommonstockthatshemayacquireontheexerciseofstockoptionsand240sharesofcommonstockheldonourThriftPlan.
9SharesownedbyMr.Ferlandinclude661,131sharesofcommonstockthathemayacquireontheexerciseofstockoptionsand532sharesofcommonstockheldinourThriftPlan.OthersecuritiesownedbyMr.Ferlandinclude32,614sharesofcommonstockunderlyingrestrictedstockunitsthatheelectedtodeferunderour2015LTIP.
10OthersecuritiesownedbyMr.Christopherinclude21,624sharesofcommonstockunderlyingvestedrestrictedstockunitsthatheelectedtodeferunderour2015LTIP.
11SharesownedbyMr,KahndonotincludebeneficiallyownedsharesheldbyVintageCapitalManagement,LLCofwhichheisaprincipal.
12SharesownedbyMs.Apkerinclude58,505sharesofcommonstockthatshemayacquireontheexerciseofstockoptionsand539sharesofcommonstockheldinourThriftPlan.
13SharesownedbyMr.Gedeoninclude37,363sharesofcommonstockthathemayacquireontheexerciseofstockoptionsand189sharesofcommonstockheldinourThriftPlan.OthersecuritiesownedbyMr.Gedeoninclude2,317sharesofcommonstockunderlyingrestrictedstockunitsthatheelectedtodeferunderour2015LTIP.
14SharesownedbyMr.Caranoinclude63,050sharesofcommonstockthathemayacquireontheexerciseofstockoptionsand262sharesofcommonstockheldinourThriftPlan.OthersecuritiesownedbyMr.Caranoinclude9,888sharesofcommonstockunderlyingrestrictedstockunitsthatheelectedtodeferunderour2015LTIP.
15SharesownedbyMr.Lowinclude45,329sharesofcommonstockthathemayacquireontheexerciseofstockoptionsand663sharesofcommonstockheldonourThriftPlan.
16Sharesownedbyalldirectorsandofficersasagroupinclude944,630sharesofcommonstockthatmaybeacquiredontheexerciseofstockoptionsand2,586sharesofcommonstockheldinourThriftPlan.
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SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section16(a)oftheSecuritiesExchangeActof1934,asamended(the"ExchangeAct")requiresourdirectorsandexecutiveofficers,andpersonswhoownmorethan10%ofourvotingstock,tofilereportsofownershipandchangesinownershipofourequitysecuritieswiththeSECandtheNYSE.Directors,executiveofficersandmorethan10%holdersarerequiredbySECregulationstofurnishuswithcopiesofallSection16(a)formstheyfile.Basedsolelyonareviewofthecopiesofthoseformsfurnishedtous,orwrittenrepresentationsthatnoformswererequired,webelievethat,duringtheyearendedDecember31,2017,allSection16(a)filingrequirementsapplicabletoourdirectors,executiveofficersand10%ormorebeneficialownersweresatisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PursuanttoourCodeofBusinessConduct,allemployees(includingournamedexecutiveofficers)whohave,orwhoseimmediatefamilymembershave,anydirectorindirectfinancialorotherparticipationinanybusinessthatcompeteswithus,suppliesgoodsorservicestous,orisourcustomer,arerequiredtodisclosetousandreceivewrittenapprovalfromourCorporateEthicsandCompliancedepartmentpriortotransactingsuchbusiness.Ouremployeesareexpectedtomakereasonedandimpartialdecisionsintheworkplace.Asaresult,approvalofthebusinessisdeniedifwebelievethattheemployee’sinterestinsuchbusinesscouldinfluencedecisionsrelativetoourbusiness,orhavethepotentialtoadverselyaffectourbusinessortheobjectiveperformanceoftheemployee’swork.OurCorporateEthicsandCompliancedepartmentimplementsourCodeofBusinessConductandrelatedpoliciesandtheAuditandFinanceCommitteeofourBoardisresponsibleforoverseeingourEthicsandComplianceProgram,includingcompliancewithourCodeofBusinessConduct.OurBoardmembersarealsoresponsibleforcomplyingwithourCodeofBusinessConduct.Additionally,ourGovernanceCommitteeisresponsibleforreviewingtheprofessionaloccupationsandassociationsofourBoardmembers.OurAuditandFinanceCommitteealsoreviewstransactionsbetweenusandothercompanieswithwhichourBoardmembersareaffiliated.ToobtainacopyofourCodeofBusinessConduct,pleaseseethe“CorporateGovernance”sectionaboveinthisproxystatement.
Weenterintoanindemnificationagreementwitheachofourdirectorsandexecutiveofficers.Underthetermsoftheagreement,weagreetoindemnifytheindemnifiedperson,tothefullestextentpermittedbyDelawarelaw,fromclaimsandlossesarisingfromtheirservicetotheCompany(otherthancertainclaimsbroughtbytheindemnifiedpartyagainstusoranyofourofficersanddirectors).Theagreementalsoprovideseachindemnifiedpersonwithexpenseadvancementtotheextenttheexpensesarisefrom,ormightreasonablybeexpectedtoarisefrom,anindemnifiableclaimandcontainsadditionaltermsmeanttofacilitateadeterminationoftheindemnifiedperson’sentitlementtosuchbenefits.
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NAMED EXECUTIVE OFFICER PROFILESThefollowingprofilesprovidesummaryinformationregardingtheexperienceofourformerChiefExecutiveOfficer,ourChiefFinancialOfficerandourthreeothermosthighlycompensatedexecutiveofficerswhowereemployedbytheCompanyasofDecember31,2017.Thenamedexecutiveofficerprofilesprovidebiographicalinformation,includingageasofMay1,2018.Unlessotherwiseindicated,allpositionsdescribedbelowarepositionswithBabcock&WilcoxEnterprises,Inc.sincetheeffectivedateofthespin-off.
E. James Ferland ,age51,servedasourExecutiveChairmanuntilMarch2018.Fromthespin-offtoJanuary2018,Mr.FerlandservedasourChiefExecutiveOfficer.Priortothespin-off,Mr.FerlandwasBWC’sPresidentandChiefExecutiveOfficersinceApril2012.PriortojoiningBWC,Mr.FerlandservedasPresidentoftheAmericasdivisionforWestinghouseElectricCompany,LLC,anuclearenergycompanyandgroupcompanyofToshibaCorporation,from2010throughMarch2012.From2007to2010,Mr.FerlandworkedforPNMResources,Inc.,aholdingcompanyofutilitiesprovidingelectricityandenergyproductsandservices,whereheheldpositionsasSeniorVicePresidentofUtilityOperationsandSeniorVicePresidentofEnergyResources.Previously,Mr.FerlandheldvariousseniormanagementandengineeringpositionsatWestinghouseElectricCompany,LouisianaEnergyServices/URENCO,DukeEngineeringandServices,CarolinaPower&LightandGeneralDynamics.Mr.FerlandhasalsoservedontheboardofdirectorsofActuantCorporationsinceAugust2014.
Jenny L. Apker ,age60,servesasourSeniorVicePresidentandChiefFinancialOfficer.Priortothespin-off,Ms.ApkerservedasBWC’sVicePresident,TreasurerandInvestorRelationssinceAugust2012and,priortothattime,servedasBWC’sVicePresidentandTreasurersincejoiningBWCinJune2010.Previously,Ms.ApkerservedasVicePresidentandTreasurerwithDexOneCorporation(formerlyR.H.DonnelleyCorporation),amarketingservicescompany,fromMay2003untilJune2010.
Mark A. Carano ,age48,servesasourSeniorVicePresident,IndustrialandCorporateDevelopment.HeservedasSeniorVicePresident,CorporateDevelopmentandIndustrialFinancefromAugust2017toFebruary2018,andSeniorVicePresident,CorporateDevelopmentandTreasurerfromthespin-offuntilJanuary2017.Priortothespin-off,Mr.CaranoservedasSeniorVicePresidentandChiefCorporateDevelopmentOfficerofBWCsinceAugust2013.PriortojoiningBWCinJune2013,Mr.CaranoservedasaManagingDirectorintheInvestmentBankingGroupofBankofAmericaMerrillLynch,afinancialservicescompany,since2006.Mr.CaranoalsopreviouslyheldpositionswiththeInvestmentBankingGroupofDeutscheBank.
Elias Gedeon ,age58,servedasourSeniorVicePresidentandChiefBusinessDevelopmentOfficeruntilMarch2018,apositionheheldsincejoiningBWCinMay2014.Mr.Gedeonhasmorethan30yearsofexperienceinthepowergenerationindustryandhasheldvarioussales,operationsandP&LleadershippositionsintheU.S.andoverseas.HejoinedBWCfromAlstomPower,Inc.,asubsidiaryofenergyandtransportmanufacturerAlstom,whereheservedasVicePresident,GlobalSalesandMarketing–BoilerGroupsince2009andpreviouslyasVicePresidentofSales,Americas.PriortojoiningAlstom,Mr.GedeonservedinsalesandoperationsrolesofincreasingresponsibilitywithFosterWheelerPowerGroup,Inc.,includingExecutiveVicePresident,GlobalSales&Marketing.
Mark S. Low , age61,servesasourSeniorVicePresident,Power,apositionhehasheldsinceJune2016.Mr.LowservedasourSeniorVicePresident,GlobalServicessegmentfollowingthespin-offuntilJune2016.From2013toMarch2015,hewasVicePresidentandGeneralManagerofourEnvironmentalProductsandServicesDivision,responsibleforallaspectsofourenvironmentalproductsandservicesbusiness.From2007to2012,Mr.LowservedasVicePresident,ServiceProjects,inwhichheledalltechnicalandcommercialaspectsofourserviceprojectsbusinessincludingprojectmanagement,forecasting,costing,costforecasting,andwarrantyresolution.
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APPROVAL OF AMENDMENTS TO THE COMPANY’S CERTIFICATE OF INCORPORATION TOREMOVE PROVISIONS THAT REQUIRE THE AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST80% OF THE VOTING POWER TO APPROVE CERTAIN AMENDMENTS TO THE CERTIFICATEOF INCORPORATION AND THE BYLAWS (PROPOSAL 4)General
OurBoardhasrecommendedandisseekingstockholderapprovalforamendmentstoourCertificateofIncorporationthatwouldremoveprovisionsthatrequiretheaffirmativevoteofholdersofatleast80%ofthevotingpoweroftheCompany’soutstandingstocktoapprovecertainamendmentstotheCertificateofIncorporationandtheBylaws(the“supermajorityvoterequirement”)describedbelow,andreplacethisrequirementwithamajorityvoterequirement.Currently,ArticleFifthofourCertificateofIncorporationrequirestheaffirmativevoteoftheholdersofatleast80%ofthevotingpoweroftheCompany’soutstandingstockentitledtovotethereontoamend,modifyorrepealArticleFifthorArticleSixthofourCertificateofIncorporation.Inaddition,ArticleFifth(e)ofourCertificateofIncorporationrequirestheaffirmativevoteoftheholdersofatleast80%ofthevotingpoweroftheCompany’soutstandingstockentitledtovotegenerallyintheelectionofdirectorstoamend,modifyorrepealtheCompany’sBylawsortoadoptnewbylaws.
OurBoardrecognizesthatamajorityvotingstandardforeffectingchangestotheCertificateofIncorporationandtheBylawsincreasestheabilityofstockholderstoparticipateingovernanceoftheCompanyandalignstheCompanywithrecognizedbestpracticesincorporategovernance.
Summary of Principal Changes
Iftheproposalisapproved,theCompanyintendstofileanamendmenttotheCertificateofIncorporationwiththeSecretaryofStateofDelaware,reflectingtheeliminationofallsupermajorityvoterequirementsforamendingtheCertificateofIncorporationandtheBylaws.Asaresult,atfuturemeetingsofstockholders,theaffirmativevoteoftheholdersofamajorityofthevotingpoweroftheCompany’soutstandingstockentitledtovoteonthematterwillberequiredtoamendallprovisionsoftheCertificateofIncorporationandtheBylaws.ThisdescriptionoftheproposedamendmentstoourCertificateofIncorporationisonlyasummaryofthoseamendmentsandisqualifiedinitsentiretybyreferenceto,andshouldbereadinconjunctionwith,thefulltextofArticleFIFTHoftheCertificateofIncorporation,markedtoshowtheproposedamendment,acopyofwhichisattachedtothisproxystatementasAppendixB.Ifadopted,theamendmentstotheCertificateofIncorporationwillbecomeeffectiveuponfilingoftheamendedCertificateofIncorporationwiththeSecretaryofStateofDelaware,whichisexpectedtooccurpromptlyfollowingthestockholdervote.IftheamendmentstotheCertificateofIncorporationareapprovedbystockholdersandbecomeeffective,theBoardexpectstoapprovecertainconformingamendmentstoourBylawstoremoveallsupermajorityvoterequirementsforamendingtheBylaws.
RecommendationandVoteRequired
Our Board recommends that stockholders vote “FOR” the approval of amendments to our Certificate of Incorporation that would removethe supermajority voting requirements to approve certain amendments to our Certificate of Incorporation and our Bylaws. Theproxyholderswillvoteallproxiesreceivedforapprovalofthisproposalunlessinstructedotherwise.Approvaloftheproposalrequirestheaffirmativevoteofatleast80%oftheoutstandingsharesofourcommonstock.Accordingly,abstentionsandbrokernon-voteswillhavetheeffectofavoteagainstthisproposal.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM FOR YEAR ENDING DECEMBER 31, 2018 (PROPOSAL 5)
OurBoardhasratifiedthedecisionoftheAuditandFinanceCommitteetoappointDeloitte&ToucheLLP(“Deloitte”)toserveastheindependentregisteredpublicaccountingfirmtoauditourfinancialstatementsfortheyearendingDecember31,2018.Althoughwearenotrequiredtoseekstockholderapprovalofthisappointment,weintendtoseekstockholderapprovalofourregisteredpublicaccountingfirmannually.NodeterminationhasbeenmadeastowhatactiontheAuditandFinanceCommitteeandtheBoardwouldtakeifourstockholdersfailtoratifytheappointment.Eveniftheappointmentisratified,theAuditandFinanceCommitteeretainsdiscretiontoappointanewindependentregisteredpublicaccountingfirmatanytimeiftheAuditandFinanceCommitteeconcludessuchachangewouldbeinourbestinterests.WeexpectthatrepresentativesofDeloittewillbepresentattheAnnualMeetingandwillhaveanopportunitytomakeastatementiftheydesiretodosoandtorespondtoappropriatequestions.
FortheyearsendedDecember31,2017andDecember31,2016,wepaidDeloittefees,includingexpensesandtaxes,totaling$4,609,745and$3,424,534,respectively,whicharecategorizedbelow.
2017 2016
Audit TheAuditfeeswereforprofessionalservicesrenderedfortheauditsofthecombinedandconsolidatedfinancialstatementsoftheCompany,theauditoftheCompany’sinternalcontroloverfinancialreporting,statutoryandsubsidiaryaudits,reviewsofthequarterlycombinedandconsolidatedfinancialstatementsoftheCompanyandassistancewithreviewofdocumentsfiledwiththeSEC. $4,550,750 $3,329,250
Audit-Related TherewerenoAudit-Relatedfees. $0 $0
Tax TheTaxfeeswereforprofessionalservicesrenderedforconsultationsonvariousU.S.federal,stateandinternationaltaxcompliancematters,aswellasconsultationandadviceonvariousforeigntaxmatters. $58,995 $95,284
All Other Therewerenootherfeesforservices. $0 $0TOTAL $4,609,745 $3,424,534
ItisthepolicyofourAuditandFinanceCommitteetopre-approveallauditengagementfees,termsandservicesandpermissiblenon-auditservicestobeperformedbyourindependentregisteredpublicaccountingfirm.
Annually,theindependentregisteredpublicaccountingfirmandtheVicePresident,ControllerandChiefAccountingOfficerpresenttotheAuditandFinanceCommitteetheanticipatedservicestobeperformedbythefirmduringtheyear.TheAuditandFinanceCommitteereviewsand,asitdeemsappropriate,pre-approvesthoseservices.TheseparateAudit,Audit-Related,TaxandAllOtherservicesandestimatedfeesarepresentedtotheAuditandFinanceCommitteeforconsideration.TheAuditandFinanceCommitteereviewsonatleastaquarterlybasistheproposedservicesandfeesforadditionalservicesthathaveoccurredandareoutsidethescopeoftheservicesandfeesinitiallypre-approvedbytheAuditandFinanceCommittee.Inordertorespondtotime-sensitiverequestsforservicesthatmayarisebetweenregularlyscheduledmeetings,theAuditandFinanceCommitteehaspre-approvedspecificaudit,audit-related,taxandotherservicesandindividualandaggregatefeesforsuchservices.TheAuditandFinanceCommitteedidnotapproveanyaudit,audit-related,taxorotherservicespursuanttothedeminimisexceptiondescribedinSection10A(i)(1)(B)oftheExchangeAct.
RecommendationandVoteRequired
Our Board recommends that stockholders vote “FOR” the ratification of the decision of our Audit and Finance Committee to appointDeloitte as our independent registered public accounting firm for the year ending December 31, 2018. Theproxyholderswillvoteallproxiesreceivedforapprovalofthisproposalunlessinstructedotherwise.Approvalofthisproposalrequirestheaffirmativevoteofamajorityofthesharescastonthematter.Abstentionswillnotbeconsideredascastand,asaresult,willnothaveanyeffectontheproposal.Becausetheratificationoftheappointmentoftheindependentauditorisconsidereda“routine”matter,therewillbenobrokernon-voteswithrespecttothisproposal.
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AUDIT AND FINANCE COMMITTEE REPORT
ThefollowingreportoftheAuditandFinanceCommitteeshallnotbedeemedtobe“solicitingmaterial”ortootherwisebeconsidered“filed”withtheSECorbesubjecttoRegulation14Aor14C(otherthanasprovidedinItem407ofRegulationS-K)ortotheliabilitiesofSection18oftheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”),norshallsuchinformationbeincorporatedbyreferenceintoanyfuturefilingundertheSecuritiesActof1933,asamended,ortheExchangeAct,excepttotheextentthattheCompanyspecificallyincorporatesitbyreferenceintosuchfiling.
Asdescribedmorefullyinitscharter,thepurposeoftheAuditandFinanceCommitteeistoassisttheBoardinitsoversightoftheCompany’sfinancialreportingprocess,internalcontrolsystemandauditfunctions.TheAuditandFinanceCommitteealsoprovidesoversightof(i)theCompany’scompliancewithlegalandregulatoryfinancialrequirements;(ii)theCompany’sguidelines,policiesandprocessestoassessandmanagetheCompany’sexposuretorisksingeneral,includingfinancialrisks;(iii)theCompany’sfinancialstrategiesandcapitalstructure;and(iv)theCompany’sethicsandcomplianceprogram.Ourprincipalresponsibilityisoneofoversight.TheCompany’smanagementisresponsibleforthepreparation,presentationandintegrityofitsfinancialstatementsandDeloitte&ToucheLLP(“Deloitte”),theCompany’sindependentregisteredpublicaccountingfirm,isresponsibleforauditingandreviewingthosefinancialstatements.DeloittereportsdirectlytotheAuditandFinanceCommittee,whichisresponsiblefortheappointment,compensation,retentionandoversightoftheindependentregisteredpublicaccountingfirm.
Inthiscontext,wehavereviewedanddiscussedtheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2017withtheCompany’smanagementandDeloitte.ThisreviewincludeddiscussionswithDeloitteregardingthosemattersrequiredtobediscussedbyAuditingStandardNo.1301,CommunicationswithAuditCommittees,issuedbythePublicCompanyAccountingOversightBoard.Inaddition,wereceivedfromDeloittethewrittendisclosuresandtheletterrequiredbytheapplicablerequirementsofthePublicCompanyAccountingOversightBoardregardingDeloitte’scommunicationswiththeAuditandFinanceCommitteeconcerningindependenceanddiscussedwithDeloittetheirindependencefromtheCompanyanditsmanagement.Wealsoconsideredwhethertheprovisionofnon-auditservicestotheCompanyiscompatiblewithDeloitte’sindependence.
BasedonthesereviewsanddiscussionsandthereportsofDeloitte,theAuditandFinanceCommitteerecommendedtotheBoardthattheauditedfinancialstatementsbeincludedintheCompany’sAnnualReportonForm10-KfortheyearendedDecember31,2017,forfilingwiththeSecuritiesandExchangeCommission.
THE AUDIT AND FINANCE COMMITTEE
CynthiaS.Dubin(Chair)MatthewE.Avril(joinedMarch2,2018)AnneR.Pramaggiore
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APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF NAMED EXECUTIVE OFFICERCOMPENSATION (PROPOSAL 6)
AsrequiredbySection14AoftheExchangeAct,weareaskingstockholderstoapproveanadvisoryresolutiontoapproveournamedexecutiveofficercompensationasreportedinthisproxystatement.
Itisourbeliefthatourabilitytohire,retainandmotivateemployeesisessentialtothesuccessoftheCompanyanditsstockholders.Therefore,wegenerallyseektoprovidereasonableandcompetitivecompensationforourexecutiveswithasubstantialportionintheformofperformance-basedcompensation.
Asaresult,ourexecutivecompensationisstructuredinthemannerthatwebelievebestservestheinterestsoftheCompanyanditsstockholders.WeencouragestockholderstoreadtheCompensationDiscussionandAnalysissectionofthisproxystatement,whichprovidesamorethoroughreviewofourexecutivecompensationphilosophyandhowthatphilosophyhasbeenimplemented.Wehavegivenconsiderableattentiontohow,whyandwhatwepayourexecutives,andduring2017havecontactedormetwithstockholderswhocollectivelyheldapproximately47%ofouroutstandingsharestosolicitfeedbackonthebestwaytoalignourexecutivecompensationprogramandstrategiestostrengthentheCompanyandbetterpositionitforsuccess.Recognizingthatnosinglecompensationstructurewillmatchperfectlywithallstockholders,webelievethatourexecutivecompensationisreasonableandprovidesappropriateincentivestoourexecutivestoachieveresultsthatweexpecttodrivestockholdervaluewithoutencouragingthemtotakeexcessiverisksintheirbusinessdecisions.
EffectofProposal
Theresolutiontoapproveournamedexecutiveofficercompensationisnotbindingonus,ourBoardorourCompensationCommittee.Accordingly,eveniftheresolutionisapproved,theBoardandCompensationCommitteeretaindiscretiontochangeexecutivecompensationfromtimetotimeifitconcludesthatsuchachangewouldbeinthebestinterestoftheCompanyanditsstockholders.Nodeterminationhasbeenmadeastowhataction,ifany,wouldbetakenifourstockholdersfailtoapprovenamedexecutiveofficercompensation.However,ourBoardanditsCompensationCommitteevaluetheopinionsofstockholdersonimportantmatterssuchasexecutivecompensationandexpecttocarefullyconsidertheresultsofthisadvisoryvotewhenevaluatingourexecutivecompensationprograms.
Advisoryvotestoapprovenamedexecutiveofficercompensationarescheduledtobeheldonceeveryyear.Thenextadvisoryvotetoapprovenamedexecutiveofficercompensationisexpectedtooccuratour2019AnnualMeetingofStockholders.
RecommendationandVoteRequired
Our Board recommends that stockholders vote “FOR” the approval of named executive officer compensation. The proxy holders will voteall proxies received for approval of this proposal unless instructed otherwise. ApprovalofthisproposalrequirestheaffirmativevoteofamajorityoftheoutstandingsharesofcommonstockpresentinpersonorrepresentedbyproxyandentitledtovoteonthisproposalattheAnnualMeeting.Becauseabstentionsarecountedaspresentforpurposesofthevoteonthismatterbutarenotvotes“FOR”thisproposal,theyhavethesameeffectasvotes“AGAINST”thisproposal.Brokernon-voteswillnothaveanyeffectonthisproposal.
Accordingly,wesubmitthefollowingresolutiontostockholdersattheAnnualMeeting:
RESOLVED,thatthestockholdersofBabcock&WilcoxEnterprises,Inc.approve,onanadvisorybasis,thecompensationofitsnamedexecutiveofficers,assuchcompensationisdisclosedpursuanttoItem402ofRegulationS-Kinthisproxystatement,includingunderthesectionsentitled“CompensationDiscussionandAnalysis”and“CompensationofNamedExecutiveOfficers.”
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COMPENSATION DISCUSSION AND ANALYSIS
TableofContents• ExecutiveSummary• WeareCommittedtoCompensationBestPractices• PeerGroup• CompensationPhilosophyandProcess• 2017CompensationDecisions• OtherCompensationPracticesandPolicies
ExecutiveSummary
2017 PERFORMANCE
Wemadesubstantialstridesinaddressingchallengesthatburdenedourbusinessesandimpactedourfinancialperformancein2017.ProjectexecutionissuesinourEuropeanrenewableenergybusinessaccountedforthelargestportionofourlossesbuttheimplementationofourmore-focusedbusinessmodel,newleadershipandsignificantprogresstowardcompletionofourchallengedprojectspositionsusforimprovedfinancialperformancein2018.
InourPowersegment,closeattentiontocontrollingcostsandhighlyeffectiveprojectexecutionallowedustoachieveexcellentmarginsinadifficultmarketenvironment.Thoughtheglobalcoalpowermarketsremainuncertain,B&Wiswell-positionedtoserveourcustomersbothintheU.S.andabroadforyearstocome.
OurIndustrialsegmentunderperformedourexpectationsin2017,andasaresult,wehaveimplementedkeychangesinourbiddingandprojectmanagementstrategiesaswellasourmanagementstructurethatwillserveuswellin2018andthefuture.
2017 PAY-FOR-PERFORMANCE
Ourexecutivecompensationprogramsarebasedonastrongalignmentbetweenpayandperformance,andthisireflectedinthepayoutamountsunderourannualincentiveplanandthevalueofawardsgrantedunderourlong-termincentiveplan.DecisionsbytheCompensationCommitteein2017alsotookintoaccountfeedbackfromourstockholdersandconcernforretentionofkeyemployeeswhileweaddressoperationalissues.
Wedidnotperformasexpectedin2017;consequently,thepayoutunderourannualincentiveplanwas10%ofthetargetawardopportunities.Oursafetymetrics,whichareevaluatedindependentlyfromourfinancialperformance,accountfor10%ofthetargetawards.SolelyasaresultoftheCompany’ssignificantimprovementinsafetyperformanceover2016andthepriorthree-yearaverage,thepayoutpercentageforeachofourNEOswas10%ofthetargetannualincentiveaward.Forthesecondyearinarow,nopaymentwasearnedunderthefinancialorindividualcomponentsoftheannualincentiveaward.See"2017SummaryCompensationTable"foracomparisonofthetotalcompensationreceivedbyourNEOsin2017versus2016and2015,asapplicable.
Ourlong-termincentivecompensationmetrics(earningspershare,relativetotalstockholderreturnandreturnoninvestedcapital),aredesignedtodriveperformanceandaligntheinterestsofemployeeswiththoseofstockholders.Inlightofourrecentfinancialperformance,however,thecurrentprojectedvalueoftheperformance-basedshareawardsgrantedin2017and2016underourlong-termincentiveplanissignificantlyimpaired.
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EXECUTIVE COMPENSATION PROGRAM
Babcock&WilcoxEnterprises,Inc.("B&W"orthe"Company")becameapubliccompanyonJuly1,2015asaspin-offfromTheBabcock&WilcoxCompany("BWC").Inthisdocument,BWCreferstoTheBabcock&WilcoxCompanypriortothespin-off.Compensation-relateddecisionsforourNEOsbeforethespin-offweremadebythecompensationcommitteeoftheBoardofDirectorsofBWC.CompensationdecisionsforB&W’sNEOsfromandafterthespin-offweremadebytheCompensationCommitteeofourBoard,whichwerefertointhisdiscussionasthe“CompensationCommittee.”Keyfeaturesofourexecutivecompensationprogramforthefollowingexecutiveofficers(theNEOs)areoutlinedinthisdocument:
NAME TITLE (AS OF LAST DAY OF 2017)E.JamesFerland ChairmanandChiefExecutiveOfficer
JennyL.Apker SeniorVicePresidentandChiefFinancialOfficer
MarkA.Carano SeniorVicePresident,CorporateDevelopmentandIndustrialFinance
EliasGedeon SeniorVicePresidentandChiefBusinessDevelopmentOfficer
MarkS.Low SeniorVicePresident,Power
MANAGEMENT OVERVIEWOurNEOsandothermembersofourseniorleadershipteamincludeindividualswhohavebroadexperienceinthepowergenerationbusiness.Aspreviouslydisclosed,onJanuary31,2018,theBoardappointedLeslieC.KassasPresidentandChiefExecutiveOfficeroftheCompanyandelectedMs.KasstotheBoard.Mr.FerlandcontinuedtoserveasExecutiveChairmanoftheBoarduntilMarch2,2018.Mr.GedeonwasterminatedfromhisrolewiththeCompanyasofMarch5,2018.
Ms.Kass,age47,hasservedinavarietyofseniormanagementroleswithboththeCompanyanditspredecessor,includingmostrecentlyasourSeniorVicePresident,Industrial.Previously,sheheldengineeringandprojectmanagement-relatedpositionsofincreasingresponsibilitywithWestinghouseElectricCompany,EntergyCorporationandDukeEnergyCorporation.TheinitialcompensationpackageforMs.Kassisbelowmedianforacompanyofoursizeandscope,reflectingtheCompensationCommittee’santicipationofmovinghertowardthemedianofthemarketovertimeasshebecomesmoretenuredinhernewrole.Inconnectionwithherappointment,theCompanywillinitiallyprovideMs.Kassthefollowingkeyelementsofcompensation:
• abasesalaryof$750,000peryear;• atargetannualbonusof100%ofbasesalary,subjecttocertainperformancecriteriaestablishedbytheCompensationCommittee;and• equityawardswithanaggregategrantdatevalueof$1,500,000.
2017 SAY-ON-PAY VOTE
In2017,wereceivednearly97%approvalonouradvisoryvotetoapproveNEOcompensation.Weconsideredthisresultinexaminingcompensationpoliciesanddecisionsfor2017,anddeterminedthatitdemonstratedstrongsupportforourexecutivecompensationprogram.Wedidnotmakeanychangestoourcompensationpoliciesandpracticesthatwereprimarilydrivenbytheresultofthisvote.
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WE ENGAGED WITH OUR STOCKHOLDERS
During2017,ourLeadIndependentDirectorandseniormanagementcontactedormetwithinstitutionalstockholderswhocollectivelyheldapproximately47%ofouroutstandingsharestosolicitfeedbackonthebestwaytoalignourexecutivecompensationprogramandstrategiestostrengthentheCompany.Generally,investorssupportedourexecutivecompensationprogramgoals,encouragedustofocusonpayingfordemonstrableperformance,andaskedthatwecarefullyconsidereliminatingourclassifiedboardstructure.
Inresponsetothefeedbackfromourstockholderoutreach,theBoardunanimouslyapproved,andrecommendsthatourstockholdersapprove,amendmentstoourCertificateofIncorporationandBylawsthat,ifadopted,wouldeliminatetheclassifiedstructureoftheBoardoveratwo-yearperiodandallowforremovalofdirectorswithorwithoutcausebyamajorityofthestockholders.Thephasinginofannualelectionsofdirectorsoveratwo-yearperiodisdesignedtoensureasmoothtransitiontoasystemofannualelectionsofallofourdirectors.
WealsoaddedBrianR.Khan(managingpartnerofVintage),MatthewE.AvrilandHenryR.BartolitotheBoard.Messrs.Kahn,AvrilandBartolirepresentVintageandtheVintageShareholders,whichcollectivelyown14.9%ofouroutstandingcommonstock.Formoreinformation,see“VintageCapitalManagementAgreement.”
2017 COMPENSATION PROGRAM DESIGN
ConsideringthestockholderfeedbackandotherfactorsdescribedinthisCompensationDiscussionandAnalysis,theCompensationCommitteetookthefollowingkeyactionswithrespecttothe2017executivecompensationprogram:
• Establishedourannualandlong-termincentivecompensationprogramdesignfor2017toreflectourpay-for-performanceculture;and• Maintainedemphasisonperformanceinourlong-termincentivecompensationprogrambyweightingperformance-basedrestrictedstockunits(“PSUs”)at60%ofthetotallong-termincentiveawardmix.TheCompensationCommitteealsodeterminedtoincluderelativetotalstockholderreturn,alongwithearningspershareandreturnoninvestedcapital,tomeasureperformanceforthePSUs.Inlieuofstockoptions(whichpreviouslycomprised20%ofthetotallong-termincentiveaward),theCompensationCommitteedeterminedtograntrestrictedstockunits(“RSUs”)fortheentiretyoftheremaining40%ofthetotallong-termincentiveaward,thevalueofwhichistieddirectlytoimprovementsinthepriceoftheCompany’sstock.TheCompensationCommitteeutilizedRSUsinsteadofstockoptionsspecificallytomanageourlong-termplanreserveandreducethedilutionimpactsofthelong-termincentiveprogram.
2017 COMPENSATION MIX
Thefollowingchartsillustratethetargetmixofbasesalary,annualincentiveawardsandlong-termincentiveawardsforourFormerChiefExecutiveOfficerandotherNEOsin2017,highlightingtheperformance-drivenfocusofthecompensationopportunities:
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KEY 2017 PROGRAM ELEMENTS
ThemainelementsoftheCompany’s2017executivecompensationprogram,adescriptionofeachelement,andanexplanationastowhywepayeachelement,areprovidedbelow:
Compensation Element Description Objectives
Base Salary Fixedcashcompensation;reviewedannuallyandsubjecttoadjustment Attract,retainandmotivateourNEOs
Annual Cash IncentiveCompensation
Short-termcashincentivecompensationpaidbasedonperformanceagainstannuallyestablishedfinancial,safetyandindividualperformancegoals
RewardandmotivateourNEOsforachievingkeyshort-termperformanceobjectives
Long-Term EquityCompensation
Annualequitycompensationawardsof time-vestingRSUsandperformance-vestingPSUs
AlignNEOinterestswiththoseofourstockholdersbyrewardingthecreationoflong-termstockholdervalueandencouragingstockownership
Health, Welfare and RetirementBenefits
Qualifiedandnonqualifiedretirementplansandhealthcareandinsurancebenefits
AttractandretainNEOsbyprovidingmarket-competitivebenefits
Severance and Change inControl Arrangements
Reasonableseverancepaymentsandbenefitsprovideduponaninvoluntarytermination,includinganinvoluntaryterminationfollowingachangeincontroloftheCompany
Helpattractandretainhighqualitytalentbyprovidingmarket-competitiveseveranceprotection,andhelpencourageNEOstodirecttheirattentiontostockholders’interests,notwithstandingthepotentialforlossofemploymentinconnectionwithachangeincontrol
Limited Perquisites Financialplanningservices,executivephysicalsandairlineclubmemberships Attractandretainhighqualitytalent
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WeAreCommittedtoCompensationBestPractices
TheCompensationCommitteebelievesthatourexecutivecompensationprogramfollowsbestpracticesalignedtolong-termstockholderinterests,summarizedbelow:
WHAT WE DO WHAT WE DON’T DO
Pay-for-performance philosophyemphasizescompensationtiedtocreationofstockholdervalue No excise tax gross-ups uponachangeincontrol
Robust compensation governance practices ,includingannualCEOperformanceevaluationprocessbyindependentdirectors,thoroughprocessforsettingrigorousperformancegoalsanduseofanindependentcompensationconsultant
No discounting, reloading or re-pricing of stock options withoutstockholderapproval
Multiple performance metrics forannualandlong-termincentivecompensationplans;differentmetricsusedforeachplan
No single-trigger vesting ofequity-basedawardsuponchangeincontrol
60%oflong-termincentiveawardsgrantedasperformance-basedPSUs
Limited perquisites andreasonableseveranceandchangeincontrolprotectionthatrequiresinvoluntarytermination
Clawback provisions inannualandlong-termincentivecompensationplans
Policies prohibiting executives from hedging or pledging Companystock
Strong stock ownership guidelines forexecutives(fivetimesbasesalaryforCEOandthreetimesbasesalaryforotherNEOs)
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PeerGroup
PEER GROUP DESIGN
Tohelpensurethatourexecutivecompensationprogramprovidescompetitivecompensationopportunitiesthatarenecessarytoattractandretainwell-qualifiedexecutives,theCompensationCommitteereviewsthelevelandmixofcompensationforourCEOandCFOagainstthecompensationprovidedbyagroupofpeercompanies(inadditiontosurveydataprovidedbyHayGroupwhichisusedtoreviewthecompensationforallofourNEOs).TheCompensationCommitteealsousesthesepeercompaniestoconsidertherelativeperformanceofourCompanywithrespecttotherelativetotalstockholderreturnperformancemeasureinour2017long-termincentiveprogram(asfurtherdiscussedbelow)andtoevaluatetheCompany'sincentiveprogramdesignsagainstmarketpractice.
TheCompensationCommittee,withadvicefromHayGroup,consideredcompaniesacrossanumberofrelevantfactors,includingcompanieswithinaspecifiedsizerangebasedprimarilyonrevenuesandmarketcapitalization,companieswithinsimilarindustrygroupsandwithsimilardegreesofbusinesscomplexity,andcompanieswithwhichwecompeteforexecutivetalent.TheCompensationCommitteegenerallyconsideredcompanieswithtotalrevenuesinarangefrom0.4xto2.5xofoursize,althoughsomeexceptionsweremadetakingintoaccountotherfactors(suchasindustry,complexityandcompetitionfortalent)andinordertocreateagroupwithasufficientnumberofcompaniestoprovidemeaningfulcomparativedata.
Basedonthisreview,theCompensationCommitteeapprovedthefollowingcompensationpeergroupfor2017:
Actuant Corp.IndustrialMachinery
Crane Co.IndustrialMachinery
MasTec Inc.Construction&Engineering
AMETEK Inc.ElectronicComponents&Equipment
Curtiss-Wright Corp.Aerospace&Defense
Primoris Services Corp.Construction&Engineering
CECO Environmental Corp.Environmental&FacilitiesServices
Dycom Industries Inc.Construction&Engineering
SPX Corp.IndustrialMachinery
Chart Industries Inc.IndustrialMachinery
Flowserve Corp.IndustrialMachinery
Tetra Tech, Inc.*ElectronicEquipment&Instruments
CIRCOR Intl. Inc.IndustrialMachinery
Harsco Corp.IndustrialMachinery
Covanta Holding Corp.Environmental&FacilitiesServices
Idex Corp.IndustrialMachinery
*For2017,TetraTech,Inc.(“TetraTech”)replacedItron,Inc.(“Itron”)asbeingaclosermatchtoB&W.WhileItronoperateswithintheelectricity,naturalgasandwatermarkets,itismoreofaninformationtechnologycompanythananindustrialcompany.TetraTechprovidesconsultingandengineeringservicesworldwideandoperatestwosegments:Water,EnvironmentandInfrastructure,andResourceManagementandEnergy.Inaddition,TetraTechisalsocitedbyourpeersasapeercompanymoreoftenthanItron.
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CompensationPhilosophyandProcess
OUR COMPENSATION PHILOSOPHY
B&Woperatesinachallenging,continuallychangingandhighlycompetitivemarket.Weknowthatattracting,developingandretainingqualifiedexecutiveswhoincreasestockholdervaluebyachievingourfinancialandstrategicgrowthplansremainskeytooursuccess.Weemphasizepay-for-performance,rewardingthosewhoachieveorexceedtheirgoals,andweuseshort-andlong-termincentivestodrivecontinuedstrongresultsforourstockholders.
Ourcompensationprogramisdesignedto:• Incentandrewardannualandlong-termperformance;• AligninterestsofB&Wexecutiveswithstockholders;and• Attractandretainwell-qualifiedexecutives.
TheCompensationCommitteeworkswithmanagementandHayGroup,anexternaladvisoryfirm,tohelpensurethecompensationprogramalignswithindustrystandardsandhasabalanceddesignthatwillachievethedesiredobjectives.
TherolesandtheresponsibilitiesoftheCompensationCommittee,B&WmanagementandHayGrouparesummarizedhere.
Compensation Committee (ThreeIndependentDirectors)• Establishesandimplementsourexecutivecompensationphilosophy;• AimstoensurethetotalcompensationpaidtoourNEOsandotherexecutivesisfairandcompetitive,andmotivateshighperformance;• Subscribestoa“pay-for-performance”philosophywhendesigningexecutivecompensationprogramsthatplaceasubstantialportionofanexecutive’stargetcompensation“atrisk”andperformance-based,wherethevalueofoneormoreelementsofcompensationistiedtotheachievementoffinancialand/orothermeasurestheCompanyconsidersimportantdriversinthecreationofstockholdervalue;
• EngagesHayGroupasitsoutsideconsultantforexecutiveanddirectorcompensationmatterstoregularlyreviewthedesignofourexecutivecompensationprograms;and
• WorksdirectlywithHayGroupontheCEO’scompensation.
B&W Management• PreparesinformationandmaterialsfortheCompensationCommitteerelevanttomattersunderconsiderationbytheCompensationCommittee;• TheCEOprovidesrecommendationsregardingcompensationoftheotherNEOs;and• TheCEOandseniorHRpersonnelattendCompensationCommitteemeetingsand,asrequestedbytheCompensationCommittee,participateindeliberationsonexecutivecompensation(otherthantheirown).
Hay Group ( ConsultanttoourCompensationCommittee)• ProvidestheCompensationCommitteewithinformationandadviceonthedesign,structureandlevelofexecutiveanddirectorcompensation;• AttendsCompensationCommitteemeetings,includingexecutivesessions,toadviseoncompensationdiscussions;• Reviewsmarketsurveyandproxycompensationdataforcomparativemarketanalysis;• AdvisestheCompensationCommitteeonselectinganappropriatepeergroup;• AdvisestheCompensationCommitteeonexternalmarketfactorsandevolvingcompensationtrends;and• ProvidestheCompanyassistancewithregulatorycomplianceandchangesregardingcompensationmatters.
AlthoughHayGroupworkswithourmanagementonvariousmattersforwhichtheCompensationCommitteeisresponsible,ourmanagementdoesnotdirectoroverseetheretentionoractivitiesofHayGroup.FollowingareviewandassessmentoftheindependenceofHayGroup,theCompensationCommitteeconcluded,afterconsiderationofallrelevantfactors,specificallyincludingsixconsultantindependencefactorsunderRule10C-1(b)(4)(i)through(vi)undertheExchangeAct,thatnoconflictofinteresthasbeenraisedbytheworkofHayGroup.TheaggregateamountpaidbyB&WtoHayGroupin2017forexecutiveanddirectorcompensationserviceswas$133,136,andforadditionalserviceswas
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$350,440.Theadditionalservices,whichconsistedofleadershipdevelopmentprograms,wererecommendedbymanagementandwerepre-approvedbytheCompensationCommittee.
Plan Design and Risk Management
B&Wsubscribestoa“pay-for-performance”philosophy.Assuch:• IncentiveCompensationTiedtoPerformance--AsubstantialportionofNEOs’targetcompensationis“atrisk,”withthevalueofoneormoreelementsofcompensationtiedtotheachievementoffinancialand/orothermeasurestheCompanyconsidersimportantdriversofstockholdervalue.
• EmphasisonLong-TermIncentiveOverAnnualIncentiveCompensation—Long-termincentivecompensationforourNEOsmakesupalargerpercentageoftargettotaldirectcompensationthanannualincentivecompensation.Incentivecompensationhelpsdriveperformanceandaligntheinterestsofemployeeswiththoseofstockholders.Bytyingasignificantportionoftotaldirectcompensationtolong-termincentivesoverathree-yearperiod,wepromotelonger-termperspectivesregardingCompanyperformance.
• Long-TermIncentiveCompensationSubjecttoForfeitureforBadActs—TheCompensationCommitteemayterminateanyoutstandingequityawardiftherecipient(1)isconvictedofamisdemeanorinvolvingfraud,dishonestyormoralturpitudeorafelony,or(2)engagesinconductthatadverselyaffectsormayreasonablybeexpectedtoadverselyaffectthebusinessreputationoreconomicinterestsoftheCompany.
• AnnualandLong-TermIncentiveCompensationSubjecttoClawbacks—Incentivecompensationawardsincludeprovisionsallowingustorecoverexcessamountspaidtoindividualswhoknowinglyengagedinafraudresultinginarestatement.
• LinearandCappedIncentiveCompensationPayouts—TheCompensationCommitteeestablishesfinancialperformancegoalsthatareusedtoplotalinearpayoutformulaforannualandlong-termincentivecompensationtoavoidanover-emphasisonshort-termdecisionmaking.Themaximumpayoutforeachoftheannualandlong-termincentivecompensationprogramsiscappedat200%oftarget.
• UseofMultipleandAppropriatePerformanceMeasures—Weusemultipleperformancemeasurestoavoidhavingcompensationopportunitiesoverlyweightedtowardtheperformanceresultofasinglemeasure.Ingeneral,ourincentiveprogramsarebasedonamixoffinancial,safetyandindividualgoals.Ourfinancialperformancemeasuresarebasedonoperatingincome,freecashflow,returnoninvestedcapital,relativetotalstockholderreturnandearningspershare.Operatingincomeandfreecashflowmaintainthefocusonoperationalperformancewhileearningspershare,returnoninvestedcapitalandrelativetotalstockholderreturnmaintainafocusonlonger-termmetricsthathelpdrivestockholdervalue.
• StockOwnershipGuidelines—Ourexecutiveofficersanddirectorsaresubjecttostockownershipguidelines,whichhelptopromotelonger-termperspectivesandaligntheinterestsofourexecutiveofficersanddirectorswiththoseofourstockholders.
TheCompensationCommitteereviewstherisksandrewardsassociatedwithouremployeecompensationprograms.Theprogramsaredesignedwithfeaturesthatmitigateriskwithoutdiminishingtheincentivenatureofthecompensation.Webelieveourcompensationprogramsencourageandrewardprudentbusinessjudgmentandappropriaterisk-takingovertheshorttermandthelongterm.ManagementandtheCompensationCommitteedonotbelieveanyofourcompensationpoliciesandpracticescreaterisksthatarereasonablylikelytohaveamaterialadverseeffectontheCompany.
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2017CompensationDecisions
BASE SALARIES
WegenerallytargetbasesalariesforourNEOsatmedian(+/-15%)ofasurveygroupusingdatafurnishedbyourindependentcompensationconsultant,HayGroup.TheCompensationCommitteeusedHayGroup’sIndustrialExecutiveCompensationSurveyforthispurpose.Italsoconsideredpubliclyavailablecompensationdatafromthecustompeergroupdescribedabovecomprisedof16companieswithwhomwecompeteforexecutivetalentfromtheengineeringandconstruction,aerospaceanddefense,heavyelectricalequipmentandindustrialmachineryindustries.InthecaseofMr.FerlandandMs.Apker,theCompensationCommitteeusedthepeergroupdatatovalidatetherangesestablishedusingthesurveydataprovidedbyHayGrouptoevaluatetheirbasesalaries.Forpurposesofthisevaluation,itwassurveyresultsthemselves,andnottheidentitiesoftheparticularentitiessurveyed,thatwasmaterial.Formoreinformationregardingthiscomparativecompensationinformation,see"PeerGroup"above.
WefollowedournormalcompensationprocessandmadecertainadjustmentstobasesalaryrateseffectiveasofApril1,2017,asfollows:
2017BASESALARYADJUSTMENTS
NAME BASE SALARY AT JAN. 1,2017
BASE SALARY AT APRIL1, 2017 PERCENTAGE INCREASE
E.JamesFerland $978,500 $978,500 0%
JennyL.Apker $435,000 $435,000 0%
MarkA.Carano $425,000 $425,000 0%
EliasGedeon $390,000 $398,000 2.1%
MarkS.Low $325,000 $340,000 4.6%
ANNUAL CASH INCENTIVES
WeprovideourNEOswithanannualincentivecompensationprogramthatrewardsparticipatingexecutivesforthreeareasofperformance:
• 70%basedonachievementofpre-establishedfinancialgoals;• 10%basedonachievementofpre-establishedsafetygoals;and• 20%basedonanassessmentofpre-establishedindividualperformancegoals.
EachNEOhadatargetannualincentiveawardbasedonapercentageofbasesalary(referredtoasthe“targetawardpercentage”).Thefinalawardcouldrangefrom0%to200%ofthetargetbasedonactualperformanceresults.ThetargetawardpercentageswereestablishedbytheCompensationCommitteebasedonareviewofHayGroup’ssurveydata,andtakingintoaccounteachNEO’sexperience,roleandscopeofduties.InthecaseofMr.FerlandandMs.Apker,thereviewalsoincludedHayGroup'speergroupdata.WegenerallytargetannualincentivesforourNEOsatmedian(+/-15%)ofmarket.However,Mr.Gedeon’stargetannualincentiverepresentedabout118%ofthemedianofmarketinrecognitionofhisexperienceintheindustryandthesubstantialresponsibilitiesthathispositionentailed.Mr.Low’stargetannualincentivewasfifteenpercentagepointsbelowthetargetedrangeforhisposition,reflectingtheincreasedscopeofresponsibilitiesMr.Lowassumedinlate2016.ThefollowingtablesummarizesthetargetawardpercentagesforeachNEO:
TARGETAWARD%FOR2017ANNUALINCENTIVEAWARD
NAME TARGET AWARD %
E.JamesFerland 100%
JennyL.Apker 70%
MarkA.Carano 60%
EliasGedeon 60%
MarkS.Low 60%
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2017ANNUALINCENTIVEPAYOUTAsdescribedinmoredetailbelow,basedonour2017performance,theannualincentivepayoutpercentageforourNEOswas10%ofthetargetaward.
2017ANNUALINCENTIVEAWARDDESIGNTheCompensationCommitteedeterminedthatthe2017annualincentiveawardwouldbemadeupofthreecomponents,asfollows:
COMPONENT WEIGHTING MEASURES PAYOUT CALCULATION
Financial 70%Operatingincome(45%)Freecashflow(25%)
Rangefrom0%–200%basedonachievementagainstgoalsResultreferredtoas“FinancialMultiplier”
Safety 10% Totalrecordableincidentrate(5%);Daysaway,restrictedortransferredrate(5%)
Rangefrom0%–100%multipliedby“FinancialMultiplier”(ifgreaterthan0)
Individual 20% Assessmentofpre-establishedindividualperformancegoals
Rangefrom0%–100%multipliedby“FinancialMultiplier”
Forthefinancialperformancecomponent,ourCompensationCommitteedeterminedthatoperatingincomeandfreecashflowgoalsalignedourNEOswithourkeybusinessgoalsrelatedtocreatingprofitableorganicgrowthandenhancedfreecashflowacrossourrangeofglobalmarkets.Forthispurpose:
• Operating income meansrevenuelesscostofoperations,researchanddevelopmentcosts,selling,generalandadministrativeexpenses,lossesonassetdisposalsandimpairments.Operatingincomealsoincludesthenetimpactofequityinincomeofinvestees.
• Free cash flow meansournetcashflowfromoperatingactivities(operatingcashflow)lesscapitalexpenditures.
Inorderforthesemeasurestoreflectcoreoperatingresults,theCompensationCommitteedeterminedthatthemeasuresshouldbeadjustedforthefollowingitems:pensionandotherpost-retirementbenefitmark-to-marketgainsandlosses,restructuringcharges,expensesrelatedtothespin-offtransaction,assetimpairments,lossesinrespectoflegalproceedingsanddisputeresolutionsandothernon-recurringorunusualitemsthatwouldhavethepotentialtocreatemisalignmentbetweenourannualincentiveprogramandlong-termoperatingobjectives.Forpurposesoffreecashflow,theCompensationCommitteealsodeterminedthatvariancesfromthebudgetedincometaxrateshouldalsobeexcluded.Withouttheseadjustments,incentivepayoutsmaynotaccuratelyreflectmanagement’sperformance.
TheCompensationCommitteebelievesthatourforecastingprocessproducesrigorousgoalsthatarereasonablyachievableifthebusinessesperformedasexpected.Asaresult,theCompensationCommitteegenerallysetstargetlevelfinancialperformancebasedonforecast.ThetargetlevelsofoperatingincomeperformanceandfreecashflowperformancewerebasedonaforecastthatanticipatedsubstantiallosseswouldbeincurredontheCompany’srenewableenergyprojectsinEurope.Asaresultoftheseanticipatedlosses,freecashflowwasforecastedtobenegativethroughout2017.Becausefreecashflowwasforecastedtobenegativefor2017,theCompensationCommitteeusedthefreecashflowforecasttosetthethresholdlevelperformancegoal,ratherthanthetargetlevelgoal,forfreecashflow.Performancebelowthisthresholdlevelwouldresultinnoannualincentiveawardbeingearnedwithrespecttothefinancialmetrics.TheCompensationCommitteealsoestablishedamaximumlevelofperformanceabovewhichnomorethan200%ofthetargetawardamountwouldbeearned.Thereisnoannualincentivepayout(otherthanwithrespecttothesafetycomponentoftheaward)ifoperatingincomeisbelowthethresholdlevel.
ThefollowingtablesummarizesthefinancialgoalsthattheCompensationCommitteeestablishedfor2017:
2017FINANCIALPERFORMANCEGOALS
PERFORMANCE LEVEL
INCENTIVE PAYOUT%*
OPERATING INCOME
FREE CASH FLOW
Belowthreshold 0% Lessthan$44.2million Lessthan$(124.0)million
Threshold 50% $44.2million $(124.0)million
Target 100% $55.3million $(95.4)million
Maximum 200% $66.4millionormore $(66.8)millionormore
*Thepayoutpercentageisproratedonastraight-linebasisforresultsbetweenthresholdandtargetorbetweentargetandmaximum.
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TheCompensationCommitteealsoapprovedsafetygoalsfor2017.Thesegoalsemphasizeourstrategicbusinessgoalofmaintainingourcommitmenttosafety.Thegoalsrelatetotwocomponentsofmeasuringsafetyresults:
• TotalRecordableIncidentRate(“TRIR”),whichmeasurestherateofrecordableworkplaceinjuries;and• DaysAway,RestrictedorTransferred(“DART”),whichmeasuresinjuriesresultinginlostorrestricteddays.
TRIRandDARTeachaccountfor5%ofthetotalannualincentivepayout.For2017,theCompensationCommitteeestablishedthethresholdandtargetforTRIRat1.29and1.09,respectively,andthethresholdandtargetforDARTat0.55and0.40,respectively.Ineachcase,thetargetlevelsrepresenta5%improvementovertheaverageofthepriorthreeyears.
Foreachsafetygoal,thereisathresholdlevelofperformanceatwhich50%ofthetargetincentiveisearned(andbelowwhichnoincentiveisearned),andatargetlevelofperformanceatwhich100%ofthetargetincentiveisearned.UnlesstheFinancialMultiplieris0%,thefinallevelofsafetyachievementismultipliedbytheFinancialMultiplier.
IndividualperformanceisgenerallyassessedagainstindividualgoalsandperformanceprioritiesestablishedearlyintheyearforeachNEO.IndividualperformancegoalsallowtheCompensationCommitteetodifferentiatefinalannualincentiveawardsforeachNEObasedontheCommittee’sinformedjudgment,takingintoaccountindividualeffortsandachievementsintheirrespectiveareasofresponsibility.Theperformanceassessmentmayresultinanindividualperformanceresultthatrangesfrom0%to100%oftarget.EachNEO’sindividualperformanceresultismultipliedbytheFinancialMultiplier,sothattheportionearnedbasedonindividualperformanceistiedtoourfinancialperformance.
2017FINANCIALPERFORMANCERESULTS
Inearly2018,ourCompensationCommitteereviewedthe2017financialandsafetyperformanceresults.For2017annualincentivecompensationpurposes,ourconsolidatedoperatingincomewas$(163.9)million.Inaccordancewithour2017annualincentiveplandesign,thisamountincludedanetupwardadjustmentfromour2017GAAPoperatingincomeresult,largelytoexcludetheeffectofamark-to-marketpensionaccountingloss,aswellasrestructuringcharges,assetimpairmentsandothernon-recurringorunusualitemsthathadthepotentialtocreateamisalignmentbetweenourannualincentiveprogramandlong-termoperatingobjectives,orotherwisemaynothaveaccuratelyreflectedmanagement’s2017operatingperformance.For2017forincentivecompensationpurposes,wegeneratedadjustedfreecashflowof$(181.7)million.
Wedidnotachieveourthresholdoperatingincomegoal,andasaresult,thefinancialpayoutpercentagewasdeterminedtobe0%.Thispayoutpercentageisalsothe“FinancialMultiplier”usedfortheindividualperformanceportionoftheawardasdescribedbelow.Thefollowingtable,whichsummarizeshowtheCompanyperformedrelativetothefinancialgoalsestablishedbytheCompensationCommittee,showsthefinalFinancialMultiplier.
2017FINANCIALPERFORMANCEPAYOUTPERCENTAGE
METRIC THRESHOLD TARGET MAX ACTUAL WEIGHTING RESULT
OperatingIncome (45%)
Goal $44.2million $55.3million $66.4million $(163.9)million Payout% 50% 100% 200% 45/70 0%
Free Cash Flow(25%)
Goal $(124.0)million $(95.4)million $(66.8)million $(181.1)million Payout% 50% 100% 200% 25/70 0%
FinancialPayout% 0%
WithrespecttotheperformanceoftheNEOsrelativetotheirindividualgoals,theCompensationCommitteedeterminedthattheannualincentivepayoutwas$0forthismetricbecausetheFinancialMultiplierwas0%.TheCompensationCommitteealsoreviewedourperformancerelativetothesafetygoalsfor2017,anddeterminedthattheCompanysignificantlyimproveditssafetyperformanceasmeasuredbybothTRIRandDART.TheCompany’scalculatedTRIRfor2017was0.67(animprovementof33%overtheprioryearand39%overthe2017goal),anditscalculatedDARTwas0.21(animprovementof42%overtheprioryearand48%overthe2017goal).Asnotedabove,iftheFinancialMultiplieris0%,itdoesnotapplytothesafetymetrics.Asaresult,theCompensationCommitteedeterminedthatthepayoutpercentageforthesafetymetricswas10%ofthetargetannualincentiveaward.
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Thefollowingtablesummarizesthe2017awardcalculation.ThetotalamountforeachNEOappearsinthe"2017SummaryCompensationTable"as2017compensationunder“Non-EquityIncentivePlanCompensation."
2017TOTALANNUALINCENTIVEAWARD
NAME TOTAL AWARD
E.JamesFerland $97,850
JennyL.Apker $30,450
MarkA.Carano $25,500
EliasGedeon $23,760
MarkS.Low $20,175
LONG-TERM INCENTIVE AWARDS
Weprovidedlong-termincentivecompensationawardsinamixofperformance-vestingPSUsandtime-vestingRSUsgrantedduringthefirstquarterof2017inthefollowingproportions:
• 60%PSUs;and• 40%time-vestingRSUs.
TheaggregatevalueoftheawardsgrantedeachyearisgenerallybasedontheCompensationCommittee'sreviewoflong-termincentivecompensationawardopportunitiesbasedonHayGroup’ssurveydatadescribedabove,andtakingintoaccounteachNEO’sexperience,roleandscopeofduties,inordertoprovidecompetitivelong-termincentiveopportunities.InthecaseofMr.FerlandandMs.Apker,thereviewalsoincludedHayGroup'speergroupdata.Wegenerallytargetlong-termincentivesforourNEOsatmedian(+/-15%)ofmarket.Themixofawardtypesisintendedtobalancethecompensationobjectivesofencouragingsustainable,long-termfinancialperformancewithexecutiveretention.Useofequity-basedawards,togetherwithourmeaningfulstockownershiprequirements,isalsointendedtoaligntheinterestsofourNEOswiththelong-terminterestsofourstockholders,whichisanotherimportantobjectiveofourexecutivecompensationprogram.
2017PSUawardsgenerallyvestfrom0%to200%oftheamountofinitialsharesgranteddepending60%onthelevelofcumulativeadjusteddilutedearningspershare,20%onaverageannualreturnoninvestedcapital(“ROIC”)and20%onrelativetotalshareholderreturnattainedfromJanuary1,2017toDecember31,2019(the“PerformancePeriod”).Webelievethatoverthelong-term,thereisahighdegreeofcorrelationbetweenadjustedearningspershareandstockprice.Accordingly,weuseadjustedearningspershareinlong-termstock-basedcompensationtomorecloselyalignourgoalswithstockholderinterests.Wealsouserelativetotalshareholderreturn(“TSR”)asaperformancemetrictopromotemanagementfocusonourCompany’sperformancerelativetopeercompaniesintheindustriesinwhichweoperate.ThisperformancemetriccomparestheCompany’saveragequarterlyTSRoverthePerformancePeriodtothatofthecompaniesinourcustompeergroup(asdescribedunder"PeerGroup"above).Finally,includingROIChelpspromotefocusonassetutilization.Webelieveusingdifferentperformancemeasuresforlong-termincentivecompensationratherthanintheannualincentivecompensationprogramreducesthefocusonasinglemetricattheexpenseofothers,therebyhelpingtomitigateriskrelatedtoincentivecompensation.
Foreachperformancemeasure,resultsatthethreshold,targetandmaximumgoalsproducevestingat50%,100%and200%,respectively,oftheportionofthePSUsgrantedthataresubjecttothatperformancemeasure.Vestingforperformanceresultsbetweenthresholdandtargetortargetandmaximumisdeterminedbylinearinterpolation.Noamountwillvestwithrespecttoanyperformancemeasureunlessatleastthresholdresultsareattained.TheCompensationCommitteesettargetandmaximumgoalsbasedonthesumofadjustedearningspershareestimatesforeachyearofthePerformancePeriod.Tocomplementandleveragefinancialresultsthatmaybeachievedundertheannualincentivecompensationelement,wederivedthethresholdforcumulativeadjusteddilutedearningspersharefromtheoperatingincometargetgoalusedin2017annualincentivecompensationandassumedsubstantialoperatingincomegrowthfortargetandmaximumgoals.Wesetthreshold,targetandmaximumgoalsforaverageROICatlevelsthattheCompensationCommitteedeterminedtobeappropriatebasedonmanagement’sprojectionsofourfinancialresultsforthePerformancePeriod.
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Wedonotdisclosethespecific,forward-lookingdilutedearningspershareorROICgoalsthatweestablishedforthePSUawardsgrantedin2017inthisproxystatementbecause(1)thesegoalsrelatetoexecutivecompensationtobeearnedand/orpaidinfutureyearsanddonotaffectafairunderstandingoftheNEOs’compensationfor2017,and(2)webelievethatdisclosureofsuchgoalswhiletheapplicableperformanceperiodisongoingwouldcauseuscompetitiveharm.However,weexpecttodisclosesuchgoalsinfutureproxystatementsoncetheapplicableperformanceperiodhasendedaspartofourdiscussionandanalysisabouttheamountsearnedbytheNEOsundertheseawards.Insettingtheapplicabletargetlevels,theCompensationCommitteeconsideredhowachievementoftheperformancegoalscouldbeimpactedbyeventsexpectedtooccurinthecomingyears.Webelievethatthethresholdgoalshavebeenestablishedatlevelsthatshouldbeappropriatelydifficulttoattain,andthatthetargetgoalswillrequireconsiderableandincreasingcollectiveeffortonthepartofouremployees,includingourNEOs,toachieve.Achievementofthemaximumgoalisconsideredtobeastretchgoalgivencurrentmarketconditions.ThePSUgrantsmadein2017fortheNEOsaresetforthinthe"2017GrantsofPlan-BasedAwards"tableofthisproxystatement.
WithrespecttotherelativeTSRperformancemetric,wesetthresholdperformanceatthe25thpercentileofourcustompeergroup,targetperformanceatthe50thpercentile,andmaximumperformanceatthe75thpercentileofourcustompeergroup.Payoutsbetweentheselevelswillbebasedonlinearinterpolation.
RSUsgenerallyvestratablyoverthreeyears.
Thefollowingtablesummarizestheaggregatetarget2017long-termincentiveawardsforeachNEO:
2017LONG-TERMINCENTIVEAWARDS
NAME TARGET VALUE LTI 1
E.JamesFerland $3,200,000
JennyL.Apker $750,000
MarkA.Carano $600,000
EliasGedeon $345,000
MarkS.Low $400,000
1Thevalueofthetargetlong-termincentiveawardsrepresentsthenominalvalueusedtodeterminethenumberofPSUsandRSUsgranted,takingintoaccountthevestingscheduleoftheawards,ratherthanthegrantdatefairvaluecomputedforfinancialreportingpurposes.Seethe“2017GrantsofPlan-BasedAwards”tableformoreinformationregardingthestockawards.
Ascomparedtothelong-termincentiveawardsgrantedin2016,theCompensationCommitteeandMr.FerlandmutuallyagreedtoreduceMr.Ferland’sawardfrom$4,200,000in2016to$3,200,000in2017inlightoftheCompany’srecentfinancialperformance.Mr.Ferland’stargetawardvaluesforlong-termincentiveawardsrepresentedapproximately62%ofhistotal2017salaryandtargetannualandlong-termcompensationopportunity,placingsignificantemphasisforhimoncreationoflong-termstockholdervalue.TheCompensationCommitteedeterminedtoincreaseMs.Apker’slong-termincentiveawardfrom$600,000in2016to$750,000in2017tomorecloselyalignherlong-termincentivecompensationwiththemarketmedianforherposition.Basedonpeerdata,Ms.Apker’slong-termincentiveawardin2016wasinthe25thpercentile,andher2017long-termincentiveawardisstillbelowmedianforachieffinancialofficer.TheCompensationCommitteealsodeterminedtoincreasethelong-termincentiveawardsfortheotherNEOsasfollows:forMr.Carano,from$450,000to$600,000;forMr.Gedeon,from$325,000to$345,000;andforMr.Low,from$325,000to$400,000.Increasesinthelong-termincentiveawardsforMessrs.CaranoandGedeonwerewithinthetargetedrangesfortheirrespectivepositions.Mr.Low’s2017targetlong-termincentiverepresentedanincreaseofapproximately25%overhis2016targetaward,althoughitwasthirteenpercentagepointsbelowthetargetedrangeforhisposition,reflectingtheincreasedscopeofresponsibilitiesMr.Lowassumedin2016.
2017LONG-TERMINCENTIVEPERFORMANCEUPDATE
Our2016and2017financialresults(asapplicable)willmakeitdifficulttoachieveathresholdlevelofperformanceforour2016and2017long-termincentiveawardswhenperformanceismeasuredattheendofeachthree-yearperformancecycle,whichisafurtherreflectionofourstrongpay-for-performancephilosophy.
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RETENTION PROGRAM
Inordertomaintaincontinuityofmanagementwebelieveisneededtoworkthroughoperationalchallenges,theCompensationCommitteeimplementedaspecialretentionprogramin2017.Participationinthespecialretentionprogramislimitedtoasmallnumberofseniorexecutives,whoseleadershipandcontinuedcontributionsarevitallyimportanttothecompletionoftheCompany’srenewableenergyprojectsandoureffortstostabilizeandstrengthenourbusinesses,includingourNEOsotherthanMr.Ferland.Athisrequest,Mr.Ferlanddidnotparticipateinthespecialretentionprogram.Mr.Ferlandwasapartytoaretentionarrangemententeredintoinconnectionwiththespin-offin2015.See“OutstandingSpin-offAwards–Long-TermPerformanceandRetention”foradditionalinformation.
Specialretentionprogramparticipantsreceivedbothcash-settledandstock-settledawards,whichareintendedtobalancenear-andlong-termperformanceandretentionrisks.Thecash-settledcomponentincorporatesstockpriceperformancetomaintainimportantnear-termalignmentwiththeCompany’sstockholdersaswellasincorporateaperformanceelementintheretentionprogram.Keyelementsofthespecialretentionprogramawardsareasfollows:
CASH-SETTLEDPERFORMANCEUNITS
Thecash-settledcomponentofthespecialretentionprogramiscomprisedofanawardofcash-settledperformanceunits(“CPUs”).EachCPUrepresentstherighttoreceiveanamountincashequaltothe“measurementvalue”ofourstockatthetimeofvesting.Generally,themeasurementvalueisdeterminedbasedontheaveragefairmarketvalueofourstockforthe30-dayperiodimmediatelyprecedingthevestingdate.However,themeasurementvaluewillbenolessthan75%ofthemarketvalueofourstockdeterminedasofthegrantdateofAugust14,2017,andnogreaterthan150%ofthevalueofourstockdeterminedasofthegrantdate.Ingeneral,40%oftheCPUgrantvestssixmonthsafterthegrantdate,andtheremaining60%vests12monthsafterthegrantdate.TheCPUawardsaresubjecttorepayment(adjustedfortaxespaidbythegrantee)ifthegrantee’semploymentisterminatedbetweenthefirstandsecondvestingdatesotherthanduetodeathordisability,aterminationbytheCompanywithoutcause(asdefinedintheCPUawardagreement)oraterminationforgoodreason(asdefinedintheCPUawardagreement)followingachangeincontrol(asdefinedinthe2015LTIP).
TIME-VESTINGRESTRICTEDSTOCKUNITS
Thestock-settledcomponentofthespecialretentionprogramiscomprisedofanawardoftime-vestingRSUsthatgenerallyvestinequalinstallmentsonthesecondandthirdanniversaryofthegrantdate(whichwasAugust14,2017).However,uponthevestingoftheRSUs,thenumberofRSUsvestingatsuchtimewillbereduced(butnotbelowzero)bythenumberofPSUsgrantedtothegranteein2016and2017thatvestpriorto(orthatarevestingasof)thevestingeventforthespecialretentionprogramRSUaward.
Thefollowingtablesummarizesthe2017specialretentionprogramawardsforeachparticipatingNEO.
SPECIALRETENTIONPROGRAMAWARDS
NAME CPU AWARD 1 RSU AWARD 1
JennyL.Apker $282,750 $649,800
MarkA.Carano $233,750 $518,700
EliasGedeon $218,900 $341,400
MarkS.Low $187,000 $361,200
1ThevalueofthetargetspecialretentionprogramawardsrepresentsthenominalvalueusedtodeterminethenumberofCPUsandRSUsgranted,takingintoaccountthevestingscheduleoftheawards,ratherthanthefairvaluecomputedforfinancialreportingpurposes.
Seethe“2017SummaryCompensationTable"andthe“2017GrantsofPlan-BasedAwards”tableformoreinformationregardingthesecashandequityawards.
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OUTSTANDING SPIN-OFF AWARDS – LONG-TERM PERFORMANCE AND RETENTION
In2015,BWCapprovedcertainlong-termarrangementsdesignedtoensuremanagementcontinuitythroughandafterthespin-offthatwereinadditiontothelong-termincentiveawardsdescribedabove.Amongotherthings,BWCapprovedaRestructuringTransactionRetentionAgreementwithMr.Ferland.Pursuanttohisretentionagreement,inrecognitionofMr.Ferland’suniqueskillsandindustrybackground,andtofurtherencouragehiscontinuedservicetoourCompanyafterthespin-off,BWCgrantedhimacashretentionawardequaltotwotimesthesumofhis2014annualbasesalaryrateandtargetannualincentiveaward(atotalof$3,800,000),50%ofwhichvestedonthesecondanniversaryofthespin-offin2017and50%ofwhichwillgenerallyvestonthethirdanniversaryofthespin-offin2018.Becausethisisacash-basedaward,amountswillappearintheSummaryCompensationTableintheyearearnedandpaid,ratherthanintheyearofgrant.Tothatend,thetotalamountreportedintheSummaryCompensationTablefor2017wouldhavebeenlowerthanthetotalamountreportedin2016.BWCbelievedthisarrangementwasfairandreasonable,especiallyinlightofthefactthattheBoardaskedMr.Ferlandtoremainwiththesmallerofthetwocompaniesfollowingthespin-off.BWCalsobelievedthatthesearrangementswouldresultinthebestopportunitiestocreateshareholdervalueinthefuture.
OtherCompensationPracticesandPolicies
BENEFITS
NEOsparticipateintheCompany’stax-qualified401(k)planandvarioushealthandwelfareplansonthesamebasisasothereligibleemployeesoftheCompany.The401(k)planincludesemployermatchingcontributionsandservice-basedemployercontributions,rangingfrom3%to8%ofeligiblecompensation,forparticipantswhoarenoteligibleforadefinedbenefitpensionplan.NEOsalsoreceivelimitedperquisitesforitemssuchasfinancialplanning,anannualexecutivephysicalandannualairlineclubmemberships.TheCompensationCommitteeviewsthesebenefitsascustomaryarrangementsandastandardpartofacompetitivetotalcompensationpackage.
NEOsarealsoeligibletoparticipateintwonon-qualifieddefinedcontributionretirementplans,referredtoasthe“RestorationPlan”andthe“SupplementalExecutiveRetirementPlan”(or“SERP”).BothplanspermitourNEOstochoosetodefereligiblecompensationabovethelimitedamountspermittedunderthe401(k)plan.TheRestorationPlanalsoprovidesforanemployermatchandservice-basedemployercontributiononthesamebasisasunderthe401(k)planbutwithoutregardtocertainlimitsthatotherwiseapplytothe401(k)planunderU.S.InternalRevenueCoderules.TheSERPalsoprovidesforanadditionaldiscretionaryemployercontributionforeligibleemployees,whichinrecentyearshasequaled5%ofprioryearsalaryandbonus.TheCompensationCommitteebelievesthattheopportunitiestodefercompensationandreceiveemployercontributionsunderboththeRestorationPlanandtheSERPreflectcompetitivemarketpracticesandprovideourNEOswithreasonableretirementbenefitopportunitiesgiventheircompensationandgiventhattheydonotparticipateinanyqualifiedornon-qualifieddefinedbenefitpensionplans.NeithertheRestorationPlannortheSERPprovidesforabove-marketearningsonanydeferredamounts.See“2017Non-qualifiedDeferredCompensation”foradditionalinformationabouttheseplans.
Severance and Change in Control Protection
NEOsareeligibletoreceivecertainseverancebenefitsincaseofaninvoluntaryterminationwithout"cause,"includingaterminationfor"goodreason."DifferentprovisionsapplyforaninvoluntaryterminationthatoccursbeforeorfollowingachangeincontroloftheCompany.SeverancebenefitsforaterminationoccurringbeforeachangeincontrolwouldgenerallybeprovidedforMr.Ferlandunderanemploymentagreementthatbecameeffectiveuponthespin-off,andfortheotherNEOsinaccordancewiththeCompany’sExecutiveSeverancePlan.Severancebenefitsforaninvoluntaryterminationduringa2-yearprotectedperiodfollowingachangeincontrolareprovidedunderaseparatechangeincontrolagreementwitheachNEO.Theseagreements,whichwereamendedin2016tomakecertainclarifyingchangesandtoprovideforanadditionalairlineclubmembership,requirebothachangeincontrolanda"CoveredTermination"(inotherwords,adoubletrigger)foranypaymentsthereunder.TheCompensationCommitteebelievestheamountsofseverancepayablearereasonableinbothamountandtype.Thechangeincontrolagreementsdonotprovideforanytaxgross-ups.Mr.Ferland’semploymentagreementandthechangeincontrolagreementswitheachNEOincludecovenantsregardingprotectionofconfidentialinformation,non-solicitationofemployeesandcustomersandnon-competitionasaconditiontotheseverancebenefits.Ourequitygrantagreementsalsoprovidefordouble-triggervestinguponachangeincontrol.See“PotentialPaymentsUponTerminationorChangeinControl”foradditionaldetails.
TheCompensationCommitteebelievesthattheseagreementsserveanumberofimportantpurposesforourstockholders.Theyhelpusattractandretaintopqualityexecutivesandrepresentstandardarrangementsatmostpubliccompaniesaspartofacompetitivetotalcompensationpackage.Thechangeincontrolagreementsalsobetterallowexecutivestoobjectivelyevaluatepotentialtransactions.
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Effectiveasofthespin-off,ouremploymentagreementwithMr.Ferlandwentintoeffect.TheemploymentagreementgovernsthebasictermsandconditionsofMr.Ferland’semployment.Theagreementprovidesforaminimumlevelofbasesalary,participationinourannualandlong-termincentiveprograms,andcertainothercustomarybenefits.Theemploymentagreementhasaninitialtermofoneyear,butwillgenerallyautomaticallyrenewforadditionalone-yeartermsunlessnoticeofterminationisgivenbyeitherparty.Intheeventofaterminationofemployment,Mr.Ferlandwouldbeentitledtoseverancecompensationundertheemploymentagreement,asfurtherdescribedunder“PotentialPaymentsUponTerminationorChangeinControl.”
Stock Ownership Requirements
TheCompanymaintainsstockownershipguidelinesforexecutives.Theseguidelinesestablishminimumstockownershiplevelsoftwotofivetimesannualbasesalaryforexecutives.TheownershipmultiplesapplicabletoourNEOsare:
• CEO–Five(5)xbasesalary;and• OtherNEOs–Three(3)xbasesalary.
NEOshavefiveyearstoachievetheirrespectiveminimumownershiplevels.TheGovernanceCommitteeannuallyreviewsthecompliancewiththeseguidelinesandhasdiscretiontowaiveormodifythestockownershipguidelines.AllcontinuingNEOsarecurrentlyincompliancewithourstockownershipguidelines.NEOsareexpectedtohold100%ofthenetsharesissuedtothemunderourlong-termincentiveplan,andshouldnotsellorotherwisedisposeofanyothersharesofCompanycommonstockunlesstheyhavemettheirrespectiveguideline.
No Hedging or Pledging Transactions
TheCompanymaintainsapolicythatprohibitsalldirectors,officersandemployeesfromtradinginputs,callsorotheroptionsonCompanycommonstockorotherwiseengaginginhedgingtransactionsthataredesignedtohedgeoroffsetanydecreaseinthemarketvalueofCompanycommonstock.Thedirectors,officersandemployeesarealsoprohibitedfrompledgingCompanysecuritiesandengaginginshortsalesofCompanysecurities.
Compensation Recovery (Clawback) Policy
Allannualandlong-termincentivecompensationawardsgenerallyincludeprovisionsallowingtheCompanytorecoverexcessamountspaidtoindividualswhoknowinglyengagedinafraudresultinginarestatement.
Timing of Equity Award Approvals
Toavoidtimingstockawardsaheadofthereleaseofmaterialnonpublicinformation,theCompensationCommitteegenerallyapprovestheannualstockoptionandotherstockawardseffectiveasofthethirddayfollowingthefilingoftheCompany’sannualreportonForm10-KorquarterlyreportonForm10-QwiththeSecuritiesandExchangeCommission.
Tax Considerations
Section162(m)oftheInternalRevenueCode(“Section162(m)”)generallydisallowsafederaltaxdeductionbytheCompanyforcompensationpaidtocertainexecutiveofficers(and,beginningin2018,certainformerexecutiveofficers)inexcessof$1million.Historically,compensationthatqualifiesas“performance-basedcompensation”underSection162(m)couldbeexcludedfromthis$1millionlimit,butthisexceptionhasnowbeenrepealed,effectivefortaxableyearsbeginningafterDecember31,2017,unlesscertaintransitionreliefforcertaincompensationarrangementsinplaceasofNovember2,2017isavailable.
CompensationdecisionsforourNEOspriorto2018weregenerallymadeafterconsiderationoftheSection162(m)implications,buttheCompensationCommitteeretaineddiscretiontomakecompensationdecisionsinlightofavarietyofconsiderations.BasedontherepealdescribedaboveandtheoperationofSection162(m),compensationgrantedbytheCompensationCommitteemaynotqualifyas“performance-basedcompensation”undercertaincircumstances.TheCompensationCommitteeretainstheflexibilitytoawardcompensationthatisconsistentwithourobjectivesandphilosophyevenifitdoesnotqualifyforataxdeduction.TheCompensationCommitteebelievesthatthetaxdeductionlimitationshouldnotbepermittedtocompromiseourabilitytodesignandmaintainexecutivecompensationarrangementsthatwillattractandretaintheexecutivetalenttocompetesuccessfully.Accordingly,achievingthedesiredflexibilityinthedesignanddeliveryofcompensationmayresultincompensationthatincertaincasesisnotdeductibleforfederalincometaxpurposes,anditispossiblethatawardsintendedtoqualifyas“performance-basedcompensation”maynotsoqualify.Moreover,eveniftheCompensationCommitteeintendedtograntcompensationthatqualifiesas“performance-based
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compensation”forpurposesofSection162(m),wecannotguaranteethatsuchcompensationwillsoqualifyorultimatelyisorwillbedeductible.
COMPENSATION COMMITTEE REPORT
ThefollowingreportoftheCompensationCommitteeshallnotbedeemedtobe“solicitingmaterial”ortootherwisebeconsidered“filed”withtheSECorbesubjecttoRegulation14Aor14C(otherthanasprovidedinItem407ofRegulationS-K)ortotheliabilitiesofSection18oftheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”),norshallsuchinformationbeincorporatedbyreferenceintoanyfuturefilingundertheSecuritiesActof1933,asamended,ortheExchangeAct,excepttotheextentthattheCompanyspecificallyincorporatesitbyreferenceintosuchfiling.
WehavereviewedanddiscussedtheCompensationDiscussionandAnalysiswiththeCompany’smanagementand,basedonsuchreviewanddiscussions,werecommendedtotheBoardthattheCompensationDiscussionandAnalysisbeincludedinthisproxystatementandtheCompany’sAnnualReportonForm10-KfortheyearendedDecember31,2017.
THE COMPENSATION COMMITTEE
MatthewE.Avril(Chair)(joinedMarch2,2018)BrianR.KahnAnneR.Pramaggiore
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COMPENSATION OF NAMED EXECUTIVE OFFICERS
Thefollowingtablesummarizesthe2017,2016and2015(asapplicable)compensationofourformerChiefExecutiveOfficer(“CEO”),ChiefFinancialOfficer(“CFO”)andthreehighest-paidexecutiveofficersotherthantheCEOandCFOwhowerestillservingasexecutiveofficersasofDecember31,2017.WerefertothesepersonsasourNamedExecutiveOfficersorNEOs.Asapplicable,theinformationincludedinthesetablesforfiscalyear2015reflectscompensationearnedbytheindividualsforservicewithBWCandus.Asdiscussedbelow,referencesinthefollowingtablestostockawardsandoptionawardsrelatetoeitherBWCstockorourstock,dependingonthetimingofthegrantandthereferencedatefortheparticulardisclosure.
2017SummaryCompensationTable
NAME AND PRINCIPALPOSITION YEAR SALARY ($) BONUS ($) STOCK
AWARDS ($)OPTION
AWARDS ($)NON-EQUITY INCENTIVEPLAN COMPENSATION($)
CHANGE IN PENSIONVALUE AND NON-
QUALIFIED DEFERREDCOMPENSATION
EARNINGS ($)
ALL OTHERCOMPENSATION ($) TOTAL ($)
E.JamesFerland 2017 $978,821 $1,900,000 $3,323,550 — $97,850 N/A $186,469 $6,486,690
FormerExecutiveChairman&ChiefExecutiveOfficer
2016 $978,500 — $3,769,685 $758,464 $0 N/A $178,670 $5,685,319
2015 $971,375 — $6,155,436 $1,428,006 $1,187,770 N/A $154,759 $9,897,346
JennyL.Apker 2017 $435,321 — $1,852,883 — $30,450 N/A $69,270 $2,387,924
SeniorVicePresident&ChiefFinancialOfficer
2016 $420,000 — $538,498 $108,357 $0 N/A $63,895 $1,130,750
2015 $335,000 — $976,692 $153,012 $228,634 N/A $44,692 $1,738,030
MarkA.Carano 2017 $425,321 — $1,492,483 — $25,500 N/A $75,776 $2,019,080
SeniorVicePresident,Industrial&CorporateDevelopment
2016 $424,325 — $403,874 $81,259 $0 N/A $77,970 $987,428
2015 $419,225 — $1,040,650 $144,507 $307,570 N/A $68,580 $1,980,532
EliasGedeon 2017 $396,321 — $1,028,059 — $23,760 N/A $60,031 $1,508,171
FormerSeniorVicePresident&ChiefBusinessDevelopmentOfficer
2016 $389,050 — $291,723 $58,691 $0 N/A $54,219 $793,683
2015 $383,400 — $888,362 $101,993 $281,285 N/A $26,924 $1,681,964
MarkS.LowSeniorVicePresident,Power
2017 $336,571 — $1,057,136 — $20,175 $33,328 $74,784 $1,521,994
Salary
Amountsreportedinthe“Salary”columnabovefor2017includeamountsthathavebeendeferredunderqualifiedandnon-qualifieddeferredcompensationplans.Seethe“CompensationDiscussionandAnalysis”formoreinformationregardingthebasesalariesfortheNEOsin2017.
Bonus
Amountreportedinthe“Bonus”columnabovefor2017represents50%ofMr.Ferland’scashretentionawardunderhisRestructuringTransactionRetentionAgreement(enteredintoasofNovember5,2014inconnectionwiththespin-off),whichamountvestedandwaspaidduring2017.
Stock and Option Awards
Theamountsreportedfor2017inthe“StockAwards”columnsforeachNamedExecutiveOfficerrepresenttheaggregategrantdatefairvalueofallstockawardsgrantedtotheNamedExecutiveOfficersin2017computedinaccordancewithFASBASCTopic718,excludingtheeffectofestimatedforfeitures.Theseawardsconsistof(1)time-basedRSUs,(2)cash-settledCPUs,plus(3)performance-basedPSUs.Foradiscussionofthevaluationassumptionsusedindeterminingthegrantdatefairvalues,seeNote9tothefinancialstatementsincludedinourAnnualReportonForm10-KfortheyearendedDecember31,2017.Seethe“2017GrantsofPlan-BasedAwards”tableandthe“CompensationDiscussionandAnalysis”formoreinformationregardingthestockawardsgrantedtotheNamedExecutiveOfficersin2017.
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WithrespecttothePSUs,theamountsreportedinthistablerepresentthegrantdatefairvaluesbasedontheprobableoutcomeoftheapplicableperformanceormarketconditionswhichare$1,923,428forMr.Ferland,$450,802forMs.Apker,$360,637forMr.Carano,$207,362forMr.Gedeon,and$240,426forMr.Low.Assumingthehighestleveloftheapplicableperformanceconditionsisachieved,suchamountswouldbe$3,846,856forMr.Ferland,$901,604forMs.Apker,$721,274forMr.Carano,$414,724forMr.Gedeon,and$480,852forMr.Low.
TheCompanydidnotgrantanystockoptionsin2017.
Non-Equity Incentive Plan Compensation
Theamountsarereportedinthe“Non-EquityIncentivePlanCompensation”columnfor2017areattributabletotheachievementofsafetygoalsundertheEICP.Thepayoutpercentageforthesafetygoalsis100%oftarget.Seethe“2017GrantsofPlan-BasedAwards”tableandthe“CompensationDiscussionandAnalysis”formoreinformationregardingtheannualincentiveawardopportunitiesfortheNamedExecutiveOfficersin2017.
Change in Pension Value and Non-qualified Deferred Compensation Earnings
Theamountreportedinthe"ChangeinPensionValueandNon-qualifiedDeferredCompensationEarnings"columnfor2017forMr.Lowrepresentsthechangesinactuarialpresentvaluesofhisaccumulatedbenefitsunderourdefinedbenefitplans,determinedbycomparingthepriorcompletedfiscalyearendamounttothecoveredfiscalyearendamount.Thediscountrateapplicabletosuchpensionplanswas3.69%fortheQualifiedPlanand3.62%fortheExcessPlans(eachasdescribedunderthe"2017PensionBenefits"table)atDecember31,2017.ThediscountrateapplicabletotheQualifiedPlanwas4.20%and4.30%atDecember31,2016and2015,respectively.ThediscountrateapplicabletotheExcessPlanswas4.11%and4.25%atDecember31,2016and2015,respectively.Reductionsinthediscountrate,amongotherfactors,resultinanincreaseinthepresentvalueofthepensionbenefits.Noportionofthisamountrepresentsabove-marketorpreferentialearningsundernon-qualifieddeferredcompensationplans.
All Other Compensation
Theamountsreportedfor2017inthe“AllOtherCompensation”columnareattributabletothefollowing:
ALLOTHERCOMPENSATION
MR. FERLAND MS. APKER MR. CARANO MR. GEDEON MR. LOW
SERPContribution $106,275 $31,525 $35,709 $32,704 $26,117401(k)PlanContributions $16,200 $16,238 $15,860 $16,200 $27,012
RestorationPlanContributions $49,441 $6,600 $9,300 $7,560 $7,287
Perquisites $14,553 $14,907 $14,907 $3,567 $14,368
SERP Contribution
Seethe“2017Non-qualifiedDeferredCompensation”tableformoreinformationregardingtheseCompanycontributionamountsandtheSERP.
401(k) Plan Contributions and Restoration Plan Contributions
Theamountsreportedinthesecolumnsrepresentthetotalamountofmatchingandservice-basedcontributionsmadetoeachNamedExecutiveOfficerundertheCompany’s401(k)planandRestorationPlan,respectively.UndertheCompany’s401(k)plan,theCompanywillmatch50%ofanemployee’scontributions,upto6%.UndertheCompany’sRestorationPlan,theCompanywillmatch50%ofthefirst6%ofanemployee’sdeferralcontributions.
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Perquisites
PerquisitesandotherpersonalbenefitsreceivedbyaNamedExecutiveOfficerareincludedeveniftheiraggregatevaluedoesnotexceed$10,000.ThevaluesoftheperquisitesandotherpersonalbenefitsreportedforourNamedExecutiveOfficersin2017areasfollows:
• The$14,553reportedforMr.Ferlandisattributabletofinancialplanningservicesandanannualexecutivephysical.• The$14,907reportedforMs.Apkerisattributabletofinancialplanningandanannualexecutivephysical.• The$14,907reportedforMr.Caranoisattributabletofinancialplanningservicesandanannualexecutivephysical.• The$3,567reportedforMr.Gedeonisattributabletoanannualexecutivephysicalandtwoairlineclubmemberships.• The$14,368reportedforMr.Lowisattributabletofinancialplanningservicesandanannualexecutivephysical.
TheCompanycalculatesallperquisitesandpersonalbenefitsbasedontheincrementalcostitincurstoprovidesuchbenefits.Forannualphysicals,theCompanycomputesincrementalcostbasedontheactualcostincurredbyitforthephysical.Forfinancialplanningservices,theCompanycomputesincrementalcostbasedonthesumof(1)theactualcostincurredbyitforthefinancialplanningservicefortheapplicableNamedExecutiveOfficerand(2)apro-ratedportionofthefeepaidtothethirdpartyfirmthatprovidesthefinancialplanningservices.
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2017GrantsofPlan-BasedAwards
Thefollowingtableprovidesadditionalinformationonstockawardsandoptionawards,plusnon-equityincentiveplanawards,madetoourNamedExecutiveOfficersbyusduringtheyearendedDecember31,2017.
NAME GRANT DATE COMMITTEEACTION DATE
ESTIMATED POSSIBLE PAYOUTS UNDER NON-EQUITYINCENTIVE PLAN AWARDS (1)
ESTIMATED FUTURE PAYOUTS UNDER EQUITYINCENTIVE PLAN AWARDS
ALL OTHER STOCKAWARDS: NUMBER
OF SHARES OFSTOCK OR UNITS
(#)(2)
GRANT DATE FAIRVALUE OF STOCK
AND OPTIONAWARDS ($)THRESHOLD($) TARGET($) MAXIMUM($) THRESHOLD(#) TARGET(#) MAXIMUM(#)
Mr. Ferland — — $24,463 $978,500 $1,957,000 — — — — —
03/03/17 2/20/2017 — — — — — — 133,473 $1,400,122
03/03/17 2/20/2017 — — — 19,895 198,947 397,894 — $1,923,428
Ms. Apker — — $7,613 $304,500 $609,000 — — — — —
03/03/17 2/20/2017 — — — — — — 31,283 $328,159
03/03/17 2/20/2017 — — — 4,663 46,628 93,256 — $450,802
08/14/17 08/01/17 — — — — — — 97,500 $424,125
08/14/17 08/01/17 — — — — — — 224,068 $649,797
Mr. Carano — — $6,375 $255,000 $510,000 — — — — —
03/03/17 2/20/2017 — — — — — — 25,026 $262,523
03/03/17 2/20/2017 — — — 3,730 37,302 74,604 — $360,637
08/14/17 08/01/17 — — — — — — 80,603 $350,623
08/14/17 08/01/17 — — — — — — 178,862 $518,700
Mr. Gedeon — — $5,940 $237,600 $475,200 — — — — —
03/03/17 2/20/2017 — — — — — — 14,390 $150,951
03/03/17 2/20/2017 — — — 2,145 21,448 42,896 — $207,362
08/14/17 08/01/17 — — — — — — 75,482 $328,347
08/14/17 08/01/17 — — — — — — 117,724 $341,400
Mr. Low — — $5,044 $201,750 $403,500 — — — — —
03/03/17 02/20/17 — — — — — — 16,683 $175,015
03/03/17 02/20/17 — — — 2,487 24,868 49,736 — $240,426
08/14/17 08/01/17 — — — — — — 64,482 $280,497
08/14/17 08/01/17 — — — — — — 124,551 $361,198
1AmountsshownrepresenttherangeofpotentialpayoutsunderourEICPfor2017.TheactualamountspaidtoourNamedExecutiveOfficersareincludedinthe"Non-EquityIncentivePlanCompensation"columnofthe“2017SummaryCompensationTable”above.2Amountsshownrepresentsharesofourcommonstockunderlyingtime-basedRSUs.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
Theamountsshowninthiscolumnreflectthethreshold,targetandmaximumpayopportunitiesforeachNamedExecutiveOfficerunderourEICPfor2017.Generally,withrespecttoourEICP,payoutdependsonthreeprincipalfactors:(1)theCompany’sfinancialperformance,safetyperformance,andtheNamedExecutiveOfficer’sindividualperformance,(2)theNamedExecutiveOfficer’stargetpercentage,and(3)theNamedExecutiveOfficer’searningsfrombasesalary.
Theamountsreflectedinthe“target”columnunder"EstimatedPossiblePayoutsUnderNon-EquityIncentivePlanAwards"representthevalueofthepayoutopportunityundertheEICPattargetfinancialperformancelevels.ThisamountwascalculatedbymultiplyingtheNamedExecutiveOfficer’stargetpercentagebytheamountofbasesalaryearnedbyeachNamedExecutiveOfficerfor2017.
Theamountsshowninthe“maximum”columnrepresentthemaximumpayoutopportunityfor2017,whichforallNamedExecutiveOfficerswas200%ofthetargetamount.Theamountsshowninthe“threshold”columnrepresenttheminimumpayoutopportunityfor2017,whichforallNamedExecutiveOfficerswas2.5%ofthetargetamount,ifthethresholdlevelofeitherofthesafetymetrics(TRIRandDART)wasattained.
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Allthreshold,targetandmaximumamountsreportedinthetableaboveassumethattheCompensationCommitteedoesnotexercisediscretionwithrespecttotheannualincentivecompensationawardultimatelypaid.
See“CompensationDiscussionandAnalysis—2017CompensationDecisions”onthepreviouspagesformoreinformationabouttheannualincentiveawardsandperformancegoalsfor2017.
Estimated Future Payouts Under Equity Incentive Plan Awards
TheamountsshownwithagrantdateofMarch3,2017reflectthethreshold,targetandmaximumpayoutopportunitiesofPSUsgrantedin2017underthe2015LTIP.EachPSUrepresentsarighttoreceiveoneshareofourcommonstockifperformancetargetsaremet.Uponvesting,thePSUsareconvertedintosharesofourcommonstock.TheamountofPSUsthatvest,ifany,isdeterminedbased(1)60%ontheCompany’scumulativeearningspershareduringthethree-yearperformanceperiod,(2)20%ontheaverageannualROICduringthesameperiod,and(3)20%onrelativeTSRcomparedtothecompaniesintheCompany’scustompeergroup.Theamountsshowninthe“target”columnrepresentthenumberofPSUsthatwillvest,whichis100%oftheamountgranted,ifthetargetlevelsofaverageannualROIC,cumulativedilutedearningspershareandrelativeTSRareattained.Theamountsshowninthe“maximum”columnrepresentthenumberofPSUsthatwillvest,whichis200%oftheamountgranted,ifthemaximumlevelofaverageannualROIC,cumulativeearningspershareandrelativeTSRareattained.Theamountsshowninthe“threshold”columnrepresenttheminimumnumberofPSUsthatwillvest,whichis10%oftheamountgranted,ifthethresholdlevelofeitherofthelowestweightedmetrics(averageannualROICorrelativeTSR)isattained.NoamountofPSUswillvestifthelevelsofallthreesuchperformancemetricsarelessthanthethresholdperformancelevel.See“CompensationDiscussionandAnalysis—2017CompensationDecisions—Long-TermIncentiveAwards”aboveformoreinformationregardingthe2017PSUs.
All Other Stock Awards
Theamountsshownreflect2017grantsoftime-basedRSUsandCPUsgrantedbytheCompanyunderour2015LTIP.RSUawardswithgrantdatesofMarch3,2017aregenerallyscheduledtovestratablyoneachofthefirstthreeanniversariesofthegrantdate.ForRSUawardswithgrantdatesofAugust14,2017(asshowninthesecondrowwithsuchgrantdate),50%oftheawardwillvestonAugust14,2019,andtheremaining50%willvestonAugust14,2020.ForCPUawards(asshowninthefirstrowwithagrantdateofAugust14,2017),40%oftheawardvestssixmonthsafterthegrantdate,andtheremaining60%vests12monthsafterthegrantdate.
EachRSUgrantedbytheCompanyrepresentstherighttoreceiveoneshareofourcommonstock,andeachCPUrepresentstherighttoreceiveanamountincashbasedonthevalueofourcommonstock.See“CompensationDiscussionandAnalysis—2017CompensationDecisions”aboveformoreinformationregardingthe2017RSUandCPUawards.
Grant Date Fair Value of Stock and Option Awards
Theamountsincludedinthe“GrantDateFairValueofStockandOptionAwards”columnforeachNamedExecutiveOfficerrepresentthegrantdatefairvaluesoftheequityawardscomputedinaccordancewithFASBASCTopic718.UnderFASBASCTopic718,thefairvalueofequityawardsisdeterminedusingtheclosingpriceoftheCompany’scommonstockonthedateofgrantforRSUs,PSUsandCPUs.
Thegrantdatefairvaluesreportedinthetableabovedifferfromthe"target"valuesdiscussedinthe"CompensationDiscussionandAnalysis,"becausesuch"target"valueswereconvertedintothenumberofsharesgrantedtakingintoaccountthevestingscheduleoftheawards,asdeterminedbyHayGroup.Formoreinformationregardingthecompensationexpenserelatedtotheawards,seetheinformationsetforthundertheheading“CompanyStockOptions”inNote9, “Stock-BasedCompensation,”tothecombinedfinancialstatementsincludedinItem8ofourAnnualReportonForm10-KfortheyearendedDecember31,2017.
Narrative Disclosure Relating to the "2017 Summary Compensation Table" and the "2017 Grants of Plan-Based Awards" Table
FormoreinformationregardingthechangeincontrolseveranceagreementswiththeNamedExecutiveOfficersandtheemploymentagreementwithMr.Ferland,referto"PotentialPaymentsUponTerminationorChangeinControl”below.Forinformationregardingtheamountofsalaryandbonuscompensationinproportiontototalcompensation,see"2017CompensationMix"above.
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OutstandingEquityAwardsat2017FiscalYear-End
Thefollowing"OutstandingEquityAwardsat2017FiscalYear-End"tablesummarizestheequityawardswithrespecttosharesofourcommonstockthatwereheldbyourNamedExecutiveOfficersandoutstandingasofDecember31,2017.
NAMEGRANT
DATE (1)
OPTION AWARDS STOCK AWARDS
NUMBER OFSECURITIES
UNDERLYINGUNEXERCISED
OPTIONS(#)EXERCISABLE
NUMBER OFSECURITIES
UNDERLYINGUNEXERCISED
OPTIONS(#)UNEXERCISABLE
OPTIONEXERCISEPRICE ($)
OPTIONEXPIRATION
DATE
NUMBER OFSHARES OR UNITS
OF STOCK THATHAVE NOT VESTED
(#)
MARKET VALUEOF SHARES OR
UNITS OF STOCKTHAT HAVE NOT
VESTED ($)(2)
EQUITY INCENTIVEPLAN AWARDS:
NUMBER OFUNEARNED SHARES,
UNITS OR OTHERRIGHTS THAT HAVE
NOT VESTED (#)
EQUITY INCENTIVEPLAN AWARDS:
MARKET OR PAYOUTVALUE OF
UNEARNED SHARES,UNITS OR OTHER
RIGHTS THAT HAVENOT VESTED ($)(2)
Mr. Ferland StockOptions 04/19/12 42,592 — $13.88 04/19/19 — — — —
StockOptions 04/19/12 34,373 — $13.88 04/19/19 — — — —
StockOptions 03/04/13 72,341 — $15.88 03/04/20 — — — —
StockOptions 03/03/14 86,933 — $19.37 03/03/21 — — — —
StockOptions 03/02/15 299,332 149,6663 $18.32 03/02/25 — — — —
StockOptions 03/01/16 62,780 125,56010 $19.00 03/01/26 — — — —
RSU 03/02/15 — — — — 83,1924 $472,531 — —
RSU 03/02/15 — — — — 26,8623 $152,576 — —
RSU 03/01/16 — — — — 32,2207 $183,010 — —
RSU 03/03/17 — — — — 133,4728 $758,121 PSU 03/01/16 — --- --- --- --- --- 14,5759 $82,786
PSU 03/03/17 — --- --- --- --- --- 19,89510 $113,004
Ms. Apker StockOptions 03/04/11 1,777 — $20.47 03/04/18 — — — —
StockOptions 03/05/12 1,957 — $15.75 03/05/19 — — — —
StockOptions 03/04/13 3,726 — $15.88 03/04/20 — — — —
StockOptions 03/03/14 4,449 — $19.37 03/03/21 — — — —
StockOptions 03/02/15 15,324 7,6623 $18.32 03/02/25 — — — —
StockOptions 07/01/15 10,384 5,1925 $19.90 07/01/25 — — — —
StockOptions 03/01/16 8,969 17,9387 $19.00 03/01/26 — — — —
RSU 03/02/15 — — — — 4,2584 $24,185 — —
RSU 03/02/15 — — — — 1,3743 $7,804 — —
RSU 07/01/15 — — — — 4,2826 $24,322 — —
RSU 07/01/15 — — — — 1,3835 $7,855 — —
RSU 03/01/16 — — — — 4,6027 $26,139 — —
RSU 03/03/17 — — — — 31,2838 $177,676 — —
RSU 08/14/17 — — — — 224,06811 $1,272,706 — —
PSU 03/01/16 — — — — — — 2,0829 $11,826
PSU 03/03/17 — — — — — — 4,66310 $26,486
CPU 08/14/17 — — — — 97,50012 $553,800 — —
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NAMEGRANT
DATE (1)
OPTION AWARDS STOCK AWARDS
NUMBER OFSECURITIES
UNDERLYINGUNEXERCISED
OPTIONS(#)EXERCISABLE
NUMBER OFSECURITIES
UNDERLYINGUNEXERCISED
OPTIONS(#)UNEXERCISABLE
OPTIONEXERCISEPRICE ($)
OPTIONEXPIRATION
DATE
NUMBER OFSHARES OR UNITS
OF STOCK THATHAVE NOT VESTED
(#)
MARKET VALUEOF SHARES OR
UNITS OF STOCKTHAT HAVE NOT
VESTED ($)(2)
EQUITY INCENTIVEPLAN AWARDS:
NUMBER OFUNEARNED SHARES,
UNITS OR OTHERRIGHTS THAT HAVE
NOT VESTED (#)
EQUITY INCENTIVEPLAN AWARDS:
MARKET OR PAYOUTVALUE OF
UNEARNED SHARES,UNITS OR OTHER
RIGHTS THAT HAVENOT VESTED ($)(2)
Mr. Carano StockOptions 06/12/13 10,511 — $17.65 06/12/20 — — — —
StockOptions 03/03/14 8,797 — $19.37 03/03/21 — — — —
StockOptions 03/02/15 30,290 15,1463 $18.32 03/02/25 — — — —
StockOptions 03/01/16 6,726 13,4527 $19.00 03/01/26 — — — —
RSU 03/02/15 — — — — 8,4174 $47,809 — —
RSU 03/02/15 — — — — 2,7183 $15,438 — —
RSU 03/01/16 — — — — 3,4527 $19,607 — —
RSU 03/03/17 — — — — 25,0268 $142,148 — —
RSU 08/14/17 — — — — 178,86211 $1,015,936 — —
PSU 03/01/16 — — — — — — 1,5629 $8,872
PSU 03/03/17 — — — — — — 3,73010 $21,186
CPU 08/14/17 — — — — 80,60312 $457,825 — —
Mr. Gedeon StockOptions 05/15/14 6,269 — $19.18 05/15/21 — — — —
StockOptions 03/02/15 21,378 10,6903 $18.32 03/02/25 — — — —
StockOptions 03/01/16 4,858 9,7167 $19.00 03/01/26 — — — —
RSU 03/02/15 — — — — 5,9424 $33,751 — —
RSU 03/02/15 — — — — 1,9183 $10,894 — —
RSU 03/01/16 — — — — 2,4947 $14,166 — —
RSU 03/03/17 — — — — 14,3908 $81,724 — —
RSU 08/14/17 — — — — 117,72411 $668,672 — —
PSU 03/01/16 — — — — — — 1,1289 $6,407
PSU 03/03/17 — — — — — — 2,14510 $12,184
CPU 08/14/17 — — — — 75,48212 $428,738 — —
Mr. Low StockOptions 03/04/11 1,712 — $20.47 03/04/18 — — — —
StockOptions 03/05/12 1,943 — $15.75 03/05/19 — — — —
StockOptions 03/04/13 4,932 — $15.88 03/04/20 — — — —
StockOptions 03/03/14 4,657 — $19.37 03/03/21 — — — —
StockOptions 03/02/15 21,378 10,6903 $18.32 03/02/25 — — — —
StockOptions 03/01/16 4,858 9,7167 $19.00 03/01/26 — — — —
RSU 03/02/15 — — — — 5,9424 $33,751 — —
RSU 03/02/15 — — — — 1,9183 $10,894 — —
RSU 03/01/16 — — — 2,4947 $14,166 — —
RSU 03/03/17 — — — — 16,6838 $94,759 — —
RSU 08/14/17 — — — — 124,55111 $707,450 — —
PSU 03/01/16 — — — — — — 1,1289 $6,407
PSU 03/03/17 — — — — — — 2,48710 $14,126
CPU 08/14/17 — — — — 64,48212 $366,258 — —
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1Thedatespresentedinthiscolumnrepresentthedatestheawardsweregranted(a)byBWC(butconvertedintoawardscoveringourcommonstock)priortoJuly2015,and(b)bytheCompanyonorafterJuly1,2015.WearepresentingtheoriginalgrantdatesforBWCawardspriortoourspin-offtoassistinunderstandingthevestingdatesassociatedwiththoseawards.2MarketvaluesinthesecolumnsarebasedontheclosingpriceofourcommonstockasofDecember29,2017($5.68),asreportedontheNewYorkStockExchange.3ThesestockoptionsandRSUsvestedonMarch2,2018.4TheseRSUsvestedonMarch2,2018.5ThesestockoptionsandRSUsvestannuallyinthirdsbeginningonJuly1,2016.6TheseRSUsvestonJuly1,2018.7HalfoftheseRSUsandstockoptionsvestonMarch1,2018,andtheotherhalfvestonMarch1,2019.8One-thirdoftheseRSUsvestedonMarch3,2018,one-thirdvestonMarch3,2019,andone-thirdvestonMarch3,2020.9ThesePSUsrepresenttherighttoreceiveashareoftheCompany’scommonstockforeachPSUthatvests.ThenumberofPSUsthatvestdependsupontheattainmentofspecifiedperformancegoalsoveraperformanceperiodbeginningonJanuary1,2016andendingonDecember31,2018.ThenumberofPSUsreportedisbasedonachievingthresholdperformancelevels.
10ThesePSUsrepresenttherighttoreceiveashareoftheCompany’scommonstockforeachPSUthatvests.ThenumberofPSUsthatvestdependsupontheattainmentofspecifiedperformancegoalsoveraperformanceperiodbeginningonJanuary1,2017andendingonDecember31,2019.ThenumberofPSUsreportedisbasedonachievingthresholdperformancelevels.
11HalfoftheseRSUsvestonAugust14,2019,andtheremaininghalfvestonAugust14,2020.1240%oftheseCPUsvestsixmonthsafterthegrantdate,andtheremaining60%vest12monthsafterthegrantdate.
EachRSUandstockoptionawardsetforthinthetableabove(whichonlyshowsawardsbasedonorrelatedtosharesofourCompany)withagrantdatepriortoJuly1,2015isanawardresultingfromanadjustmentmadetoacorrespondingBWCawardinconnectionwiththespin-off.
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2017OptionExercisesandStockVested
Thefollowing"2017OptionExercisesandStockVested"tableprovidesadditionalinformationaboutthevaluerealizedbyourNamedExecutiveOfficersonexercisesofoptionawardsandvestingofstockawardswithrespecttoourcommonstockduringtheyearendedDecember31,2017.
NAME
OPTION AWARDS STOCK AWARDSNUMBER OF SHARES
ACQUIRED ON EXERCISE(#)
VALUE REALIZED ONEXERCISE ($)
NUMBER OFSHARES ACQUIRED
ON VESTING (#)
VALUE REALIZED ONVESTING ($)
Mr.Ferland — — 60,783 $637,454Ms.Apker — — 7,075 $75,729Mr.Carano — — 2,094 $21,712Mr.Gedeon — — 4,896 $51,617Mr.Low — — 5,276 $55,318
Stock Awards
ForeachNamedExecutiveOfficer,theamountsreportedinthenumberofsharesacquiredonvestingcolumninthetableaboverepresenttheaggregatenumberofsharesofcommonstockacquiredbytheNamedExecutiveOfficerinconnectionwithRSUsunderthe2015LTIPthatvestedin2017.Theamountsreportedinthevaluerealizedonvestingcolumnwerecalculatedbymultiplyingthenumberofsharesacquiredonthedateofvestingbytheclosingpriceofourcommonstockonthedateofvesting.
ThenumberofsharesacquiredinconnectionwiththevestingofRSUsincludesshareswithheldbyusintheamountsandfortheNamedExecutiveOfficersreportedbelowtosatisfytheminimumstatutorywithholdingtaxdueonvesting.
NAME SHARES WITHHELD ON VESTING OF RSUS
Mr.Ferland 29,407Ms.Apker 2,405Mr.Carano 1,028Mr.Gedeon 1,841Mr.Low 2,024
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2017PensionBenefits
Thefollowing"2017PensionBenefits"tableshowsthepresentvalueofaccumulatedbenefitspayabletoeachofourNamedExecutiveOfficersunderourqualifiedandnon-qualifiedpensionplans.
NAME PLAN NAME NUMBER OF YEARSCREDITED SERVICE (#)
PRESENT VALUE OFACCUMULATED BENEFIT
($)
PAYMENTS DURING 2017($) 1
Mr.Ferland N/A N/A N/A N/A
Ms.Apker N/A N/A N/A N/A
Mr.Carano N/A N/A N/A N/A
Mr.Gedeon N/A N/A N/A N/A
Mr.Low QualifiedPlan 29 $1,080,166 $7,475
ExcessPlan 29 $359,228 $0
1Representspaymentsmadein2017bytheQualifiedPlantrustonbehalfofMr.Low.
Overview of Qualified Plans
TheCompanymaintainsretirementplansthatarefundedbytrustsandcovercertaineligibleregularfull-timeemployees,describedbelowinthesectionentitled“ParticipationandEligibility.”Mr.LowparticipatesintheRetirementPlanforEmployeesofBabcock&WilcoxCommercialOperations(the“QualifiedPlan”).
Overview of Non-qualified Plans
TotheextentbenefitspayableundertheCompany’squalifiedplansarelimitedbySection415(b)or401(a)(17)oftheInternalRevenueCode,pensionbenefitswillbepaiddirectlybytheCompany’sapplicablesubsidiariesunderthetermsofunfundedexcessbenefitplans(the“ExcessPlans”)maintainedbythem.Mr.LowparticipatesintheExcessPlanforcertainemployeesofBabcock&WilcoxCommercialOperations.
DuetothedateofinitialemploymentofMs.Apker,andMessrs.Ferland,CaranoandGedeontheywerenoteligibletoparticipateintheCompany’sdefinedbenefitpensionplans.
Participation and Eligibility
Generally,certainsalariedemployeesovertheageof21yearsparticipateinthepensionplan,asfollows:
• ForsalariedparticipantshiredbeforeApril1,2001,benefitaccrualswerefrozenasofDecember31,2015.BeginningJanuary1,2016,affectedemployeeswillreceiveaservice-basedcashcontributiontotheir401(k)planaccount.
• ForsalariedparticipantshiredonorafterApril1,2001,benefitaccrualswerefrozenasofMarch31,2006,subjecttocostoflivingadjustments.BeginningJanuary1,2016,thecostoflivingadjustmentswerediscontinued.Affectedemployeesreceiveaservice-basedcashcontributiontotheir401(k)account.
Benefits
ForeligibleNamedExecutiveOfficers,benefitsundertheQualifiedPlanarebasedonyearsofcreditedserviceandfinalaveragecashcompensation(includingbonuses).
Thepresentvalueofaccumulatedbenefitsreflectedinthe"2017PensionBenefits"tableaboveisbasedonadiscountrateatDecember31,2017andtheRP2014mortalitytableprojectedwiththeMP2016mortalityimprovementscale.ThediscountrateapplicabletothepensionplansatDecember31,2017was3.69%fortheQualifiedPlanand3.62%fortheExcessPlans.ThediscountrateapplicabletothepensionplansatDecember31,2016was4.20%fortheQualifiedPlanand4.11%fortheExcessPlans.Additionalbenefitaccrualsoffsetbyreductionsinthediscountrate,amongotherfactors,resultinanincreaseinthepresentvalueofthepensionbenefits.
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RetirementUndertheQualifiedPlan,normalretirementisage65.Thenormalformofpaymentisasingle-lifeannuityora50%jointandsurvivorannuity,dependingontheemployee’smaritalstatuswhenpaymentsarescheduledtobegin.
2017Non-qualifiedDeferredCompensation
Thefollowing"2017Non-qualifiedDeferredCompensation"tablesummarizesourNamedExecutiveOfficers’compensationunderthenon-qualifieddefinedcontributionplans.
NAME PLAN NAMEEXECUTIVE
CONTRIBUTIONS IN2017 ($)(2)
REGISTRANTCONTRIBUTIONS IN
2017 ($)(2)
AGGREGATEEARNINGS IN 2017
($)(2)
AGGREGATEWITHDRAWALS/
DISTRIBUTIONS ($)
AGGREGATEBALANCE AT 12/31/17
($)(2)
SERP — $106,275 $41,159 — $463,636
Mr.Ferland RestorationPlan $42,510 $49,441 $67,490 — $604,386
LTIP1 — — — — $185,248
SERP — $31,525 $25,465 — $197,284
Ms.Apker RestorationPlan — $6,600 $3,092 — $27,325
LTIP1 — — — — —
SERP — $35,709 $965 — $110,986
Mr.Carano RestorationPlan $9,300 $9,300 $13,942 — $90,988
LTIP1 — — — — $119,416
SERP — $32,704 $27,752 — $419,412
Mr.Gedeon RestorationPlan $8,820 $7,560 $9,573 — $116,531
LTIP1 — — — — $84,530
SERP — $26,117 $4,763 — $32,844
Mr.Low RestorationPlan $3,975 $7,287 $315 — $23,307
LTIP1 — — — — —
1TheamountsreflectedintheserowsrepresentthevalueofRSUsdeferredbyeachNamedExecutiveOfficerunderthe2015LTIP.2Seethenarrativedisclosurethatfollowsforinformationregardingtheextenttowhichamountsreportedinthecontributionsandearningscolumnsarereportedas2017compensationinthe"2017SummaryCompensationTable"andamountsreportedinthe"AggregateBalanceat12/31/17"columnpreviouslywerereportedascompensationinourSummaryCompensationTablesforpreviousyears.
SERP
TheCompany’sSERPisanunfunded,non-qualifieddefinedcontributionplanthroughwhichtheCompanyprovidesannualcontributionstoaparticipant’snotionalaccount,whichisreferredtoasaparticipant’scompanyaccount.ParticipantsincludeofficersselectedbytheCompensationCommittee.BenefitsundertheSERParebasedontheparticipatingofficer’svestedpercentageinhisorhernotionalaccountbalanceatthetimeofdistribution.AnofficergenerallyvestsinhisorhercompanySERPaccount20%foreachyearofparticipationintheirrespectivecompanyaccount,subjecttoacceleratedvestingfordeath,disability,terminationbytheCompanywithoutcauseorretirement,oronachangeincontrol.
For2017,participantscouldelecttodeferthepaymentofcertaincompensationearnedfromtheCompany(asdescribedbelow)undertheSERP.AnyamountsdeferredbyaparticipantaremaintainedinanotionalaccountseparatefromtheaccountintowhichtheCompanymakesannualcontributions.Thisseparateaccountisreferredtoasaparticipant’sdeferralaccount.Participantsare100%vestedintheirdeferralaccountsatalltimes.
Restoration Plan
TheCompany’sRestorationPlanisanunfunded,non-qualifieddefinedcontributionplanthroughwhichtheCompanyprovidesannualcontributionstoeachparticipant’snotionalaccounts,whicharereferredtoasaparticipant’scompanymatchingaccountandcompanyservice-basedaccount.ParticipantsincludetheNamedExecutiveOfficersandotheremployeesoftheCompanywhosebasesalaryexceedscertaincompensationlimitsimposedbytheInternalRevenueCode.BenefitsundertheRestorationPlanarebasedonaparticipant’svestedpercentageinhisorhernotionalaccount
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balanceatthetimeofdistribution.Eachparticipantgenerallyvests100%inhisorhercompanymatchingaccountandcompanyservice-basedaccountuponcompletingthreeyearsofservicewiththeCompany,subjecttoacceleratedvestingfordeath,disability,terminationbytheCompanywithoutcauseorretirement,oronachangeincontrol.
ParticipantsmayelecttodeferthepaymentofcertaincompensationearnedfromtheCompanyoritssubsidiaries(asdescribedbelow)thatisinexcessoflimitsimposedbytheInternalRevenueCodeundertheCompany’sRestorationPlan.Participantsare100%vestedintheirdeferralaccountsatalltimes.
Executive Contributions in 2017
UndertheSERP,anofficerselectedbytheCompensationCommitteemayelecttodeferupto50%ofhisorherannualsalaryand/orupto100%ofanybonusearnedinanyplanyearandamemberoftheBoardmayelecttodeferupto100%ofhisorherretainersandfeesearnedinanyplanyear.Althoughparticipantswerepermittedtocontributealloraportionoftheir2017EICPbonusestotheirSERPaccounts,theamountsreportedinthistableas“ExecutiveContributionsin2017”donotincludeanycontributionsofany2017EICPawards.AmountsreportedinthiscolumnforeachNamedExecutiveOfficerarereportedas“Salary”foreachNamedExecutiveOfficerinthe"2017SummaryCompensationTable"above.
AllofourNamedExecutiveOfficerselectedtocontributetotheirRestorationPlandeferralaccountsin2017.TheCompany’sRestorationPlanallowsparticipantstodeferapercentageoftheirbasesalaryinexcessoftheInternalRevenueCodeSection401(a)(17)compensationlimit,andreceivecompanymatchingcontributionswithrespecttothosedeferrals.
Company Contributions in 2017
TheCompanymakesannualnotionalcontributionstoparticipatingemployees’SERPcompanyaccountsequaltoapercentageoftheemployee’sprior-yearcompensation,asdeterminedbytheCompensationCommittee.UnderthetermsoftheSERP,thecontributionpercentagemaynotbethesameforallparticipants.Additionally,theCompensationCommitteemayapproveadiscretionarycontributiontoaparticipant’saccountatanytime.
For2017,thecontributionsreportedinthetableabovefortheSERPreflectnotionalcontributionsmadebytheCompanytoeachparticipatingNamedExecutiveOfficer’scompanyaccount.TheCompany’s2017contributionsequaled5%oftheNamedExecutivesOfficers’basesalariesandEICPawardspaidin2016.All2017contributionsareincludedinthe"2017SummaryCompensationTable"as“AllOtherCompensation.”
UndertheCompany’sRestorationPlan,theCompanymakesnotionalmatchingandserviced-basedcontributionstoeacheligibleparticipant’sCompanymatchingaccountandserviced-basedaccount,respectively.AnyRestorationPlanparticipantswhohaveelectedtomakedeferralcontributionsundertheRestorationPlanarecreditedwithaCompanymatchingcontributionequalto50%ofthefirst6%oftheirdeferralcontribution.ForeachparticipantintheRestorationPlanwhoisnoteligibletoparticipateintheCompany’spensionplans,theCompanyalsomakesacashservice-basedcontributiontotheparticipant’scompanyservice-basedaccount.Theamountofthisservice-basedcontributionisbasedonapercentageoftheparticipant’seligiblecompensationinexcessoftheInternalRevenueCodelimitandrangesbetween3%and8%,dependingontheparticipant’syearsofservice.Thisservice-basedcontributionismaderegardlessofwhethertheparticipanthaselectedtomakedeferralcontributionsundertheCompany’sRestorationPlan.All2017Companycontributionsareincludedinthe"2017SummaryCompensationTable"as“AllOtherCompensation.”
Aggregate Earnings in 2017
TheamountsreportedinthiscolumnfortheSERPandRestorationPlanrepresenthypotheticalamountsofearningsorlossesanddividendscreditedduring2017onallaccountsforeachNamedExecutiveOfficerundertheCompany’sSERPandRestorationPlan.Undertheseplans,eachparticipantelectstohavehisorhernotionalaccountshypotheticallyinvestedinoneormoreoftheinvestmentfundsdesignatedbytheCompensationCommittee.Eachparticipant’snotionalaccountsarecreditedanddebitedtoreflectgainsandlossesonthehypotheticalinvestments.Thesegainsandlossesarenotreportedascompensationinthe"2017SummaryCompensationTable."
Aggregate Balance at December 31, 2017
Theaggregatebalanceofaparticipatingofficer’snotionalSERPaccountconsistsofcontributionsmadebytheCompanytotheofficer’sCompanyaccount,deferralsbytheofficertohisorherdeferralaccountandhypotheticalcreditedgainsorlossesonthoseaccounts.Theaggregatebalanceofaparticipatingofficer’snotionalRestorationPlanaccountconsistsofcontributionsmadebytheCompanytotheofficer’sCompanymatchingaccountandcompanyservice-basedaccount,
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deferralsbytheofficertohisorherdeferralaccount,andhypotheticalgainsorlossesonthoseaccounts.Thebalancesshownrepresenttheaccumulatedaccountvalues(includinggainsandlosses)foreachNamedExecutiveOfficerasofDecember31,2017.Ms.Apkerwas100%vestedonherSERPbalancesandMessrs.Ferland,Carano,Gedeon,andLowwere80%,60%,40%,and40%vested,respectively,intheirSERPbalancesasshownabove.EachoftheNamedExecutiveOfficersis100%vestedintheirRestorationPlanbalanceasshownabove.PortionsoftheamountsinthiscolumnwerereportedascompensationinourSummaryCompensationTablesforpreviousyears.
Deferred Restricted Stock Units Under LTIP
Underthetermsofthe2015LTIP,theCompensationCommitteehasthediscretiontopermitselectedparticipantstodeferalloraportionoftheirstockawards.ThesedeferredRSUswillbepaidbytheCompanyintheformofCompanycommonstock.Mr.Ferland’sdeferredRSUswillbedeliveredinfourannualinstallmentsbeginningtwoyearsafterhisterminationofemployment.Mr.Carano’sdeferredRSUswillbedeliveredinfiveannualinstallmentsbeginningsixmonthsfollowinghisterminationofemployment.Mr.Gedeon’sdeferredRSUswillbedeliveredinasinglelumpsumoneyearafterhisterminationofemployment. Alloftheamountsreportedforthe2015LTIPinthe“AggregateBalanceat12/31/17”columnwerereportedascompensationtothenamedexecutiveofficerinthe"2017SummaryCompensationTable"orinSummaryCompensationTablesforpreviousyears.
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PotentialPaymentsUponTerminationorChangeInControl
ThefollowingtablesshowpotentialpaymentstoourNamedExecutiveOfficersunderexistingcontracts,agreements,plansorarrangements,whetherwrittenorunwritten,forvariousscenariosunderwhichapaymentwouldbedueintheeventofachangeincontrolorterminationofemploymentofourNamedExecutiveOfficers,assumingaDecember29,2017terminationdate.Whereapplicable,theamountslistedbelowusetheclosingpriceoftheCompany’scommonstockof$5.68(asreportedontheNYSE)asofDecember29,2017.ThesetablesdonotreflectamountsthatwouldbepayabletotheNamedExecutiveOfficerspursuanttobenefitsorawardsthatarealreadyvested.
Exceptasotherwiseindicated,amountsreportedinthebelowtablesforstockoptions,RSUs,PSUsandCPUsrepresentthevalueofunvestedandacceleratedsharesorunits,asapplicable,calculatedby:
• forstockoptions:multiplyingthenumberofacceleratedoptionsbythedifferencebetweentheexercisepriceand$5.68(theclosingpriceoftheCompany’scommonstockonDecember29,2017);and
• forRSUs,PSUsandCPUs:multiplyingthenumberofacceleratedunitsby$5.68(theclosingpriceoftheCompany’scommonstockonDecember29,2017).
ESTIMATED VALUE OF BENEFITS TO BE RECEIVED UPON INVOLUNTARY TERMINATION WITHOUT CAUSEThefollowingtableshowstheestimatedvalueofpaymentsandotherbenefitsduetheNamedExecutiveOfficersassumingtheirinvoluntaryterminationwithoutcauseasofDecember29,2017.IntheeventofaNamedExecutiveOfficer’sterminationwithcause,noneofthesepaymentsandotherbenefitswouldbedue.
MR. FERLAND MS. APKER MR. CARANO MR. GEDEON MR. LOW
SeverancePayments $1,957,000 $435,000 $425,000 $398,000 $340,000
CashRetentionAward $1,900,000 — — — —
BenefitsPayment $61,801 $11,846 $16,005 $16,005 $5,595
EICP $97,850 — — — —
FinancialPlanning $6,000 $6,000 $6,000 — $6,000
OutplacementServices — $7,500 $7,500 $7,500 $7,500
SupplementalExecutiveRetirementPlan(SERP) $92,727 — — — —
RestorationPlan — — — — —
StockOptions(unvestedandaccelerated) $0 $0 $0 $0 $0
RestrictedStockUnits(unvestedandaccelerated) $913,474 $0 $0 $0 $0
PSUs(unvestedandaccelerated) $928,572 $0 $0 $0 $0
CPUs(unvestedandaccelerated) — $424,125 $350,625 $328,350 $280,500
Total $5,957,424 $884,471 $805,130 $749,855 $639,595
Severance Payment
TheseverancepaymentreportedforeachNamedExecutiveOfficerotherthanMr.Ferlandrepresentsalumpsumcashpaymentequalto52weeksofbasesalaryasineffectonthedateoftermination.ThisistheamountthatwouldhavebeenpayableundertheBabcock&WilcoxEnterprises,Inc.ExecutiveSeverancePlan(or“ExecutiveSeverancePlan”).TheExecutiveSeverancePlangenerallyprovidesforbenefitsintheeventaNamedExecutiveOfficeristerminatedbytheCompanyforreasonsotherthan“cause.”
TheseverancepaymentreportedforMr.Ferlandrepresentsalumpsumcashpaymentequaltohisannualizedbasesalaryandtargetbonusamountasineffectimmediatelypriortotermination.ThisistheamountthatwouldhavebeenpayableunderMr.Ferland’semploymentagreement.Mr.Ferland’semploymentagreementgenerallyprovidesforbenefitsintheeventMr.FerlandisterminatedbytheCompanyforreasonsotherthan“cause,”deathor“disability,”orby
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Mr.Ferlandfor“goodreason,”orifMr.Ferland'semploymentendsattheendoftheinitialtermorrenewaltermofhisemploymentagreementfollowingnoticeofnon-renewalbyeitherparty(a"Non-RenewalTermination").
ReceiptoftheseverancebenefitsundertheExecutiveSeverancePlanisgenerallysubjecttoexecutingageneralreleaseofclaimsandagreeingtocertainnon-compete,nondisclosureandotherrestrictivecovenants.ReceiptoftheseverancebenefitsunderMr.Ferland’semploymentagreementisgenerallysubjecttoexecutingageneralreleaseofclaims.
UndertheExecutiveSeverancePlanandMr.Ferland’semploymentagreement,“cause”generallymeans:
• thewillfulandcontinuedfailureoftheexecutivetoperformsubstantiallyhisorherduties(occasionedbyreasonotherthanphysicalormentalillnessordisability)afterawrittendemandforsubstantialperformanceisdeliveredtotheexecutivebytheCompensationCommitteeorthechiefexecutiveofficer(ortheBoard,inthecaseofMr.Ferland),whichspecificallyidentifiesthemannerinwhichthecompensationcommitteeorthechiefexecutiveofficer(ortheBoard,inthecaseofMr.Ferland)believesthattheexecutivehasnotsubstantiallyperformedhisorherduties,afterwhichtheexecutivewillhave30daystodefendorremedysuchfailuretosubstantiallyperformhisorherduties;
• thewillfulengagingbyanexecutiveinillegalconductorgrossmisconduct,whichismateriallyanddemonstrablyinjurioustotheCompany;or• theconvictionofanexecutivewithnofurtherpossibilityofappealfor,orpleaofnolocontenderebytheexecutiveto,anyfelony.
Exceptassetforthonthefollowingpages,theseverancepaymentsandbenefitspayabletoMr.Ferlandareinlieuofanyseverancepaymentsorbenefitspayableunderanyotherseveranceplan,benefitorprogramoftheCompany,includingtheCompany’sExecutiveSeverancePlan.
Cash Retention Award
Mr.Ferland’sretentionagreementprovidesaone-timecashretentionawardequaltotwotimesthesumofMr.Ferland’ssalaryineffectonthedateofhisretentionagreementplushis2014targetbonusunderBWC’sExecutiveIncentiveCompensationPlan,50%ofwhichwouldbepaidoneachofthesecondandthirdanniversariesofthespin-offifMr.FerlandremainscontinuouslyemployedwiththeCompanyateachsuchdate.50%ofMr.Ferland'scashretentionawardwouldvestonthedateofhistermination.
Benefits Payment
UponaterminationbytheCompanyotherthanduetocause,deathordisabilityunderMr.Ferland’semploymentagreement,Mr.Ferlandwouldalsobeentitledtoalumpsumpaymentequaltothreetimesthefullannualcostofcoverageforthemedical,dentaland/orvisionbenefitsineffectforMr.Ferlandandhiscovereddependentsasofthedateoftermination.TheamountreportedforMr.Ferlandwasdeterminedbymultiplyingtheannualcostof2017medical,dentaland/orvisionbenefitsforMr.Ferlandandhiscovereddependentsbythree.
UponaterminationbytheCompanyforanyreasonotherthancauseunderourExecutiveSeverancePlan,eachNamedExecutiveOfficerotherthanMr.FerlandwouldbeentitledtoalumpsumpaymentequaltoninemonthsofCOBRApremiumsforthemedical,dentaland/orvisionbenefitsineffectfortheNamedExecutiveOfficerandhisorherqualifiedbeneficiariesasofthedateoftermination.Theamountsreportedweredeterminedbymultiplyingtheannualcostof2017medical,dentaland/orvisionbenefitsfortheNamedExecutiveOfficerandhisorherqualifiedbeneficiariesby102%,andthenmultiplyingtheproductbythree-fourths.OurExecutiveSeverancePlanalsoprovidesforextendedavailabilityofCOBRAcoveragefrom18to24months.
ThesepaymentsaresubjecttothesameconditionsdescribedaboveforseverancepaymentsundertheExecutiveSeverancePlanandMr.Ferland’semploymentagreement,asapplicable.
EICP
UponaterminationbytheCompanyforanyreasonotherthancause,deathordisabilityunderhisemploymentagreement,Mr.Ferlandwouldbeentitledtotheamountofhisannualincentiveawardearnedin2017undertheEICPbasedonfull-yearperformance,pro-ratedbasedonaDecember29,2017terminationdate,contingentuponMr.Ferlandexecutingageneralreleaseofclaimsasdescribedabove.
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Financial Planning
IftheNamedExecutiveOfficeristerminatedforanyreasonotherthancauseandheorsheparticipatedintheCompany’sfinancialplanningservicesasofDecember29,2017,ouragreementwiththefinancialplanningserviceproviderprovidesforfinancialplanningbenefitsuntilJune30thoftheyearfollowingtheyearinwhichtheterminationwithoutcauseoccurred,solongastheservicesarenotearlierterminatedforallsimilarlysituatedemployees.AllNamedExecutiveOfficersotherthanMr.Gedeonparticipatedinthefinancialplanningbenefitduring2017.TheamountsreportedinthiscolumnrepresenttwotimesthemostrecentquarterlyfeepaidbytheCompanyfortheapplicableNamedExecutiveOfficertoreceivesuchbenefits.
Outplacement Services
TheNamedExecutiveOfficers(otherthanMr.Ferland)wouldbeentitledto12monthsofemployer-paidoutplacementservicesunderourExecutiveSeverancePlanfollowingtheirterminationbytheCompanyforreasonsotherthancause.TheamountreportedrepresentsthecosttheCompanywouldincurtoengageourthird-partyserviceproviderfor12monthsofexecutiveoutplacementservices.
SERP
PursuanttoMr.Ferland’semploymentagreement,hisCompanyaccountintheSERPwouldbecomefullyvestedon,amongotherevents,thedateofhisterminationbytheCompanyforanyreasonotherthancause,deathordisability.Mr.Ferlandwas80%vestedinhisCompanyaccountsasofDecember29,2017.Accordingly,20%oftheamountinhisCompanyaccountwouldbesubjecttoacceleratedvestinguponhisterminationwithoutcause.
Restoration Plan
Mr.Ferland’semploymentagreementprovidesthathisCompanymatchingaccountandCompanyservice-basedaccountbecomefullyvestedon,amongotherevents,thedateofhisterminationbytheCompanyforanyreasonotherthancause,deathordisability.Mr.Ferlandwas100%vestedinhisRestorationPlanaccountasofDecember29,2017.Accordingly,noneoftheamountsinhisCompanymatchingaccountandCompanyservice-basedaccountwouldbesubjecttoacceleratedvestinguponhisterminationwithoutcause.
Equity Awards
Mr.Ferland’semploymentagreementprovidesthatalloutstandingandunvestedequityawardsgrantedtoMr.FerlandonorafterJanuary1,2015willvestonapro-ratabasisbasedonthenumberofdaysduringtheapplicablevestingorperformanceperiodthatMr.FerlandwasemployedbytheCompany(includingdaysemployedbyBWCpriortothespin-off)(forPSUs,basedonachievementoftheapplicableperformanceconditionsforthefullperformanceperiod,whichisassumedforpurposesofthisdisclosuretobeata"target"levelofperformance).Inaddition,theCPUsheldbytheothernamedexecutiveofficerswouldbecomevesteduponaterminationbytheCompanywithoutcause.Forthetime-vestingRSUsgrantedunderthespecialretentionprogramin2017,iftheterminationweretooccuronorafterthefirstanniversaryofthegrantdate,then(1)25%ofthethen-remainingoutstandingRSUswouldvestonthedateofsuchterminationiftheterminationoccurspriortothesecondanniversaryofthegrantdateand(2)50%ofthethen-remainingoutstandingRSUswillvestonthedateofsuchterminationiftheterminationoccursonorafterthesecondanniversaryofthegrantdate.
ESTIMATED VALUE OF BENEFITS TO BE RECEIVED UPON VOLUNTARY TERMINATION
NopaymentsorotherbenefitswouldbeduetoourNamedExecutiveOfficersotherthanMr.FerlandassumingtheirvoluntaryterminationasofDecember29,2017(exceptforaccruedbutunpaidcompensation).However,certainpaymentsandbenefitswouldbecomepayabletoMr.Ferlandifhevoluntarilyterminatedhisemploymentfor“goodreason”asdefinedunderhisemploymentagreement.“Goodreason”generallymeans(subjectto"notice"and"cure"assetforthintheemploymentagreement):
• amaterialdiminutioninthedutiesorresponsibilitiesofMr.Ferlandfromthoseapplicableonandimmediatelyfollowingthespin-off;• amaterialbreachoftheemploymentagreementbytheCompany,includingabreachofthetermsgoverningMr.Ferland’scompensationandbenefits;
• thefailurebytheCompanytocontinueineffectanycompensationplaninwhichMr.Ferlandparticipatesimmediatelybeforethespin-offwhichismaterialtoMr.Ferland’stotalcompensation,unlessacomparablearrangement(embodiedinanongoingsubstituteoralternativeplan)hasbeenmadewithrespecttosuchplan,orthefailurebythe
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CompanytocontinueMr.Ferland’sparticipationtherein(orinsuchsubstituteoralternativeplan)onabasisnotmateriallylessfavorablethanexistedimmediatelybeforethespin-off,unlesstheactionbytheCompanyappliestoallsimilarlysituatedemployees;
• thefailurebytheCompanytocontinuetoprovideMr.FerlandwithmaterialbenefitsintheaggregatethataresubstantiallysimilartothoseenjoyedbyMr.FerlandunderanyoftheCompany’s(oritsaffiliates’)pension,savings,lifeinsurance,medical,healthandaccident,ordisabilityplansinwhichMr.Ferlandwasparticipatingimmediatelybeforethespin-offifsuchbenefitsarematerialtoMr.Ferland’stotalcompensation,thetakingofanyotheractionbytheCompanywhichwoulddirectlyorindirectlymateriallyreduceanyofsuchbenefitsordepriveMr.Ferlandofanyfringebenefitenjoyedbyhimorherimmediatelypriortothespin-offifsuchfringebenefitismaterialtoMr.Ferland’stotalcompensation,unlesstheactionbytheCompanyappliestoallsimilarlysituatedemployees;or
• achangeinthelocationofMr.Ferland’sprincipalplaceofemploymentwiththeCompanybymorethan50milesfromthelocationwhereMr.Ferlandwasprincipallyemployedimmediatelypriortothespin-offwithoutMr.Ferland’sconsent.
ThefollowingtableshowstheestimatedvalueofpaymentsandotherbenefitsduetheNamedExecutiveOfficersonavoluntaryterminationofemployment(assuming,inthecaseofMr.Ferland,histerminationofemploymentforgoodreasonunderhisemploymentagreementasofDecember29,2017).
MR. FERLAND MS. APKER MR. CARANO MR. GEDEON MR. LOW
SeverancePayments $1,957,000 — — — —
CashRetentionAward $1,900,000 — — — —
BenefitsPayment $61,801 — — — —
EICP $97,850 — — — —
FinancialPlanning $6,000 — — — —
SupplementalExecutiveRetirementPlan(SERP) $92,727 — — — —
RestorationPlan — — — — —
StockOptions(unvestedandaccelerated) $0 $0 $0 $0 $0
RestrictedStockUnits(unvestedandaccelerated) $913,474 $0 $0 $0 $0
PSUs(unvestedandaccelerated) $928,572 $0 $0 $0 $0
CPUs(unvestedandaccelerated) — — — — —
Total $5,957,424 $0 $0 $0 $0
Severance Payment
TheseverancepaymentreportedforMr.Ferlandrepresentsalumpsumcashpaymentequaltohisannualizedbasesalaryandtargetbonusamountasineffectimmediatelypriortotermination,whichwouldhavebeenpayablepursuanttohisemploymentagreementifheresignedfor“goodreason.”UndertheExecutiveSeverancePlan,theotherNamedExecutiveOfficerswouldnotbeentitledtosimilarseverancepaymentsuponaresignationfor“goodreason.”ReceiptoftheseverancebenefitsunderMr.Ferland'semploymentagreementonaresignationfor"goodreason"isgenerallysubjecttoexecutingageneralreleaseofclaims.
Cash Retention Award
Mr.Ferland’sretentionagreementprovidesforaone-timecashretentionawardequaltotwotimesthesumofMr.Ferland’ssalaryineffectonthedateofhisretentionagreementplushis2014targetbonusunderBWC’sEICP,50%ofwhichwouldbepaidoneachofthesecondandthirdanniversariesofthespin-offifMr.FerlandremainscontinuouslyemployedwiththeCompanyateachsuchdate.50%ofMr.Ferland'scashretentionawardwouldvestonthedateofhistermination.TheamountreportedassumesthatMr.FerlandterminatedhisemploymentforgoodreasononDecember29,2017withaneffectivedateasofJune30,2018(thethirdanniversaryofthespin-off).
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Benefits Payment
UponterminationbyMr.Ferlandfor“goodreason”underhisemploymentagreement,Mr.Ferlandwouldalsobeentitledtoalumpsumpaymentequaltothreetimesthefullannualcostofcoverageforthemedical,dentaland/orvisionbenefitsineffectforMr.Ferlandandhiscovereddependentsasofthedateoftermination.ThispaymentissubjecttothesameconditionsdescribedaboveforseverancepaymentsundertheMr.Ferland’semploymentagreement.TheamountreportedforMr.Ferlandwasdeterminedbymultiplyingtheannualcostof2017medical,dentaland/orvisionbenefitsforMr.Ferlandandhiscovereddependentsbythree.
EICP
Uponaterminationforgoodreasonunderhisemploymentagreement,Mr.Ferlandwouldbeentitledtotheamountofhisannualincentiveawardearnedin2017undertheEICPbasedonfull-yearperformance,pro-ratedbasedonaDecember29,2017terminationdate,contingentuponMr.Ferlandexecutingageneralreleaseofclaimsasdescribedabove.
Financial Planning
PursuanttoMr.Ferland’semploymentagreement,ifheterminateshisemploymentforgoodreasonandheparticipatedintheCompany’sfinancialplanningservicesasofDecember29,2017,ouragreementwiththefinancialplanningserviceproviderprovidesforfinancialplanningbenefitsuntilJune30thoftheyearfollowingtheyearinwhichtheterminationforgoodreasonoccurred,solongastheservicesarenotearlierterminatedforallsimilarlysituatedemployees.
SERP
PursuanttoMr.Ferland’semploymentagreement,hisCompanyaccountintheSERPbecomesfullyvestedon,amongotherevents,thedateofhisterminationforgoodreason.Mr.Ferlandwas80%vestedinhisCompanyaccountsasofDecember29,2017.Accordingly,20%oftheamountinhisCompanyaccountswouldbesubjecttoacceleratedvestinguponhisterminationforgoodreason.
Restoration Plan
Mr.Ferland’semploymentagreementprovidesthathisCompanymatchingaccountandCompanyservice-basedaccountbecomefullyvestedon,amongotherevents,thedateheterminateshisemploymentforgoodreason.Mr.Ferlandwas100%vestedinhisRestorationPlanaccountsasofDecember29,2017.Accordingly,noneoftheamountsinhisCompanymatchingaccountandCompanyservice-basedaccountwouldbesubjecttoacceleratedvestinguponhisterminationofemploymentforgoodreason.
Equity Awards
Mr.Ferland’semploymentagreementprovidesthatalloutstandingandunvestedequityawardsgrantedtoMr.FerlandonorpriortoDecember31,2014willbecomevestedupon,amongotherevents,terminationofemploymentforgoodreason(forPSUs,basedonachievementoftheapplicableperformanceconditionsforthefullperformanceperiod).AnyotherunvestedequityawardsgrantedtoMr.FerlandonorafterJanuary1,2015willvestonapro-ratabasisbasedonthenumberofdaysduringtheapplicablevestingperiodthatMr.FerlandwasemployedbytheCompany(includingdaysemployedbyBWCpriortothespin-off)(forPSUs,basedonachievementoftheapplicableperformanceconditionsforthefullperformanceperiod,whichisassumedforpurposesofthisdisclosuretobeata"target"levelofperformance).
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ESTIMATED VALUE OF BENEFITS TO BE RECEIVED UPON TERMINATION DUE TO DEATH OR DISABILITY
ThefollowingtableshowsthevalueofpaymentsandotherbenefitsduetotheNamedExecutiveOfficersassumingtheterminationoftheiremploymentbyreasonofdeathordisabilityasofDecember29,2017
MR. FERLAND MS. APKER MR. CARANO MR. GEDEON MR. LOW
SeverancePayments $978,500 $435,000 $425,000 $398,000 $340,000
CashRetentionAward $1,900,000 — — — —
BenefitPayments $61,801 $11,846 $16,005 $16,005 $5,595
EICP $97,850 — — — —
SupplementalExecutiveRetirementPlan(SERP) $92,727 $0 $44,394 $45,250 $19,707
RestorationPlan — — — — —
StockOptions(unvestedandaccelerated) $0 $0 $0 $0 $0
RestrictedStockUnits(unvestedandaccelerated) $913,474 $1,157,595 $940,375 $623,335 $655,716
PSUs(unvestedandaccelerated) $928,572 $383,110 $300,569 $185,884 $205,309
CPUs(unvestedandaccelerated) — $424,125 $350,625 $328,350 $280,500
Total $4,972,924 $2,411,677 $2,076,968 $1,596,823 $1,506,827
Severance Payment
TheseverancepaymentsreportedforeachNamedExecutiveOfficerrepresentlumpsumcashpaymentsequalto52weeksofbasesalaryasineffectonthedateoftermination.ThisistheamountthatwouldhavebeenpayableundertheExecutiveSeverancePlan.Throughthisplan,eligibleemployeesareentitledtoreceivespecifiedseverancebenefits,includingtheseverancepaymentreported,intheeventtheiremploymentisterminatedduetoaterminationbytheCompanybyreasonofaNamedExecutiveOfficerbeingunabletoperformhisorherdutiesduetotheirphysicalormentalillnessordisability.TheExecutiveSeverancePlangenerallyprovidesforbenefitsintheeventaNamedExecutiveOfficeristerminatedbytheCompanyforreasonsotherthan“cause.”“Cause”isdefinedtoexcludeinstanceswhereaneligibleemployeeisunabletoperformhisorherdutiesbyreasonofhisorherphysicalormentalillnessordisability.
Cash Retention Award
Mr.Ferland’sretentionagreementprovidesforaone-timecashretentionawardequaltotwotimesthesumofMr.Ferland’ssalaryineffectonthedateofhisretentionagreementplushis2014targetbonusunderBWC’sExecutiveIncentiveCompensationPlan,50%ofwhichwouldbepaidoneachofthesecondandthirdanniversariesofthespin-offifMr.FerlandremainscontinuouslyemployedwiththeCompanyateachsuchdate.AnyunvestedportionofthecashretentionawardispayableinfulluponMr.Ferland’sdeathor“disability”solongasheremainscontinuouslyemployedbytheCompanythroughthedateofdeathorlastdateofemploymentdueto“disability.”UnderthetermsofMr.Ferland’sretentionagreement,“disability”meansthecircumstancesthatwouldqualifyhimforlongtermdisabilitybenefitsundertheCompany’slongtermdisabilityplan(whetherornotheiscoveredbysuchplan).Thedisabilityplandefines“disability”togenerallymeanthat,duetosickness,pregnancyoraccidentalinjury,anemployeeisreceiving“appropriatecare”and“treatmentfromadoctor”(eachasdefinedinthelongtermdisabilityplan)onacontinuingbasis,andduringtheemployee’s“eliminationperiod”(asdefinedinthedisabilityplan)andthenext24monthperiod,theemployeeisunabletoearnmorethan80%ofhisorherpre-disabilityearningsorindexedpre-disabilityearningsathisorheroccupationforanyemployerinhisorherlocaleconomy;orafterthe24monthperiod,theemployeeisunabletoearnmorethan60%ofhisorherindexedpre-disabilityearningsfromanyemployerinhisorherlocaleconomy,andwhichprovidestheemployeewithsubstantiallythesameearningcapacityastheemployee’sformerearningcapacitypriortothestartofhisorherdisability.
Benefit Payments
UponaterminationbytheCompanyforanyreasonotherthancauseunderourExecutiveSeverancePlan,eachNamedExecutiveOfficerotherthanMr.FerlandwouldbeentitledtoalumpsumpaymentequaltoninemonthsofCOBRApremiumsforthemedical,dentaland/orvisionbenefitsineffectfortheNamedExecutiveOfficerandhisorherqualified
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beneficiariesasofthedateoftermination.Theamountsreportedweredeterminedbymultiplyingtheannualcostof2017medical,dentaland/orvisionbenefitsfortheNamedExecutiveOfficerandhisorherqualifiedbeneficiariesby102%,andthenmultiplyingtheproductbythreefourths.OurExecutiveSeverancePlanalsoprovidesforextendedavailabilityofCOBRAcoveragefrom18to24months.
UponterminationbyMr.Ferlandduetodeathordisabilityunderhisemploymentagreement,Mr.Ferlandwouldbeentitledtoalumpsumpaymentequaltothreetimesthefullannualcostofcoverageforthemedical,dentaland/orvisionbenefitsineffectforMr.Ferlandandhisorhercovereddependentsasofthedateoftermination.TheamountreportedforMr.Ferlandwasdeterminedbymultiplyingtheannualcostof2017medical,dentaland/orvisionbenefitsforMr.Ferlandandhiscovereddependentsbythree.UnderMr.Ferland’semploymentagreement,“disability”isdefinedascircumstanceswhichwouldqualifyMr.FerlandforlongtermdisabilitybenefitsundertheCompany’slongtermdisabilityplan(whetherornotheiscoveredundersuchplan).
EICP
UponaterminationofMr.Ferland’semploymentduetodeathordisabilityunderhisemploymentagreement,Mr.Ferlandwouldbeentitledtotheamountofhisannualincentiveawardearnedin2017undertheEICPbasedonfull-yearperformance,pro-ratedbasedonaDecember29,2017terminationdate.
SERP
UnderthetermsoftheSERP,anexecutive’sCompanyaccountfullyvestson,amongotherevents,theexecutive’sdeathordisability.Ms.Apkerwas100%vestedinherCompanyaccountsasofDecember29,2017.Messrs.Ferland,Carano,GedeonandLowwere80%,60%and40%and40%vested,respectively,intheirrespectivecompanyaccountsasofthesamedate.Accordingly,forMessrs.Ferland,CaranoandGedeon,20%,40%and60%and60%respectively,oftheamountintheirCompanyaccountswouldbesubjecttoacceleratedvestingupontheirterminationduetodeathordisability.
Restoration Plan
UnderourRestorationPlan,anexecutive’sCompanymatchingaccountandCompanyservice-basedaccountbecomefullyvestedon,amongotherevents,thedateoftheexecutive’sdeathordisability.EachoftheNamedExecutiveOfficersis100%vestedintheirRestorationPlanaccountsasofDecember29,2017.Accordingly,noneoftheamountsintheirCompanymatchingaccountsandCompanyservice-basedaccountswouldbesubjecttoacceleratedvestinguponhisterminationofemploymentduetodeathordisability.
Equity Awards
UnderthetermsoftheawardsoutstandingforeachNamedExecutiveOfficerasofDecember29,2017,allunvestedstockawardsbecomevestedandallunvestedoptionawardsbecomevested(forPSUs,atthe"target"level)andexercisableintheeventtheapplicableNamedExecutiveOfficer’semploymentterminatesbyreasonofhisorherdeath,oriftheNamedExecutiveOfficerbecomesdisabled(or,insomecases,experiencesaterminationofemploymentduetodisability).
Mr.Ferland’semploymentagreementprovidesthatalloutstandingandunvestedequityawardsgrantedtoMr.FerlandonorpriortoDecember31,2014willbecomevestedupon,amongotherevents,terminationofemploymentduetodeathordisability(forPSUs,basedonachievementoftheapplicableperformanceconditionsforthefullperformanceperiod,whichisassumedforpurposesofthisdisclosuretobeata"target"levelofperformance).AnyotherunvestedequityawardsgrantedtoMr.FerlandonorafterJanuary1,2015willvestonapro-ratabasisbasedonthenumberofdaysduringtheapplicableperformanceorserviceperiodthatMr.FerlandwasemployedbytheCompany(includingdaysemployedbyBWCpriortothespin-off).
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ESTIMATED VALUE OF BENEFITS TO BE RECEIVED IN CONNECTION WITH CHANGE IN CONTROL
ThefollowingtableshowstheestimatedvalueofpaymentsandotherbenefitsduetheNamedExecutiveOfficersassumingachangeincontrolandterminationasofDecember29,2017.
MR. FERLAND MS. APKER MR. CARANO MR. GEDEON MR. LOW
SeverancePayments $1,957,000 $1,479,000 $1,360,000 $1,273,600 $1,088,000
CashRetentionAward $1,900,000 — — — —
BenefitsPayment $63,036 $47,385 $64,020 $64,020 $22,379
EICP $978,500 $304,500 $255,000 $238,800 $204,000
FinancialPlanning $6,000 $6,000 $6,000 — $6,000
SupplementalExecutiveRetirementPlan(SERP) $92,727 $0 $44,394 $45,250 $19,707
RestorationPlan — — — — —
StockOptions(unvestedandaccelerated) $0 $0 $0 $0 $0
RestrictedStockUnits(unvestedandaccelerated) $913,474 $1,157,595 $940,375 $623,335 $655,716
PSUs(unvestedandaccelerated) $928,572 $383,110 $300,569 $185,884 $205,309
CPUs(unvestedandaccelerated) — $424,125 $350,625 $328,350 $280,500
ExciseTaxGross-Up — — — — —
Total $6,839,309 $3,801,715 $3,320,983 $2,759,238 $2,481,611
TheCompanyhaschangeincontrolagreementswithvariousofficers,includingeachofourNamedExecutiveOfficers.Generally,undertheCompany’schangeincontrolagreementsandcertainothercompensationarrangements,ifaNamedExecutiveOfficeristerminatedwithintwoyearsfollowingachangeincontroleither(1)bytheCompanyforanyreasonotherthancauseordeathordisability,or(2)bytheNamedExecutiveOfficerforgoodreason(ineachcase,a“qualifyingtermination”),theNamedExecutiveOfficerisentitledtoreceive:
• acceleratedvestingintheexecutive’sSERPandRestorationPlanaccounts;• acceleratedvestinginanyoutstandingequityawards;• acashseverancepayment;• aproratedtargetEICPpayment;• paymentoftheprioryear’sEICPpayment,ifunpaidattermination;• acashpaymentrepresentinghealthbenefitscoveragecosts;• continuedfinancialplanningservices;and• forMr.Ferland,fullvestingofhis2015cashretentionaward.
Inadditiontothesepayments,theNamedExecutiveOfficerwouldbeentitledtovariousaccruedbenefitsearnedthroughthedateoftermination,suchasearnedbutunpaidsalaryandearnedbutunusedvacationandreimbursements.
UndertheCompany’schangeincontrolagreements,a“changeincontrol”willbedeemedtohaveoccurredgenerallyuponanyofthefollowing(asfurtherclarifiedinthechangeincontrolagreements):
• anyperson,otherthananERISA-regulatedpensionplanestablishedbytheCompanyoritsaffiliatesmakesanacquisitionofoutstandingvotingstockandis,immediatelythereafter,thebeneficialownerof30%ormoreofthethenoutstandingvotingstock,unlesssuchacquisitionismadedirectlyfromtheCompanyinatransactionapprovedbyamajorityoftheincumbentdirectors;oranygroupisformedthatisthebeneficialownerof30%ormoreoftheoutstandingvotingstock(otherthanagroupformationforthepurposeofmakinganacquisitiondirectlyfromtheCompanyandapproved(priortosuchgroupformation)byamajorityoftheincumbentdirectors);
• individualswhoareincumbentdirectors(asdefinedinthechangeincontrolagreements)ceaseforanyreasontoconstituteamajorityofthemembersoftheBoard;
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• consummationofcertainbusinesscombinations(asfurtherdescribedintheagreements)unless,immediatelyfollowingsuchbusinesscombination,(i)allorsubstantiallyalloftheindividualsandentitiesthatwerethebeneficialownersoftheoutstandingvotingstockimmediatelybeforesuchbusinesscombinationbeneficiallyown,directlyorindirectly,morethan51%ofthethen-outstandingsharesofvotingstockoftheparentcorporationresultingfromsuchbusinesscombinationinsubstantiallythesamerelativeproportionsastheirownership,immediatelybeforesuchbusinesscombination,oftheoutstandingvotingstock,(ii)ifthebusinesscombinationinvolvestheissuanceorpaymentbytheCompanyofconsiderationtoanotherentityoritsstockholders,thetotalfairmarketvalueofsuchconsiderationplustheprincipalamountoftheconsolidatedlong-termdebtoftheentityorbusinessbeingacquired(ineachcase,determinedasofthedateofconsummationofsuchbusinesscombinationbyamajorityoftheincumbentdirectors)doesnotexceed50%ofthesumofthefairmarketvalueoftheoutstandingvotingstockplustheprincipalamountoftheCompany’sconsolidatedlong-termdebt(ineachcase,determinedimmediatelybeforesuchconsummationbyamajorityoftheincumbentdirectors),(iii)noperson(otherthananycorporationresultingfromsuchbusinesscombination)beneficiallyowns,directlyorindirectly,30%ormoreofthethen-outstandingsharesofvotingstockoftheparentcorporationresultingfromsuchbusinesscombinationand(iv)amajorityofthemembersoftheboardofdirectorsoftheparentcorporationresultingfromsuchbusinesscombinationwereincumbentdirectorsoftheCompanyimmediatelybeforeconsummationofsuchbusinesscombination;or
• consummationofcertainmajorassetdispositions(asfurtherdescribedintheagreements)unless,immediatelyfollowingsuchmajorassetdisposition,(i)individualsandentitiesthatwerebeneficialownersoftheoutstandingvotingstockimmediatelybeforesuchmajorassetdispositionbeneficiallyown,directlyorindirectly,morethan70%ofthethen-outstandingsharesofvotingstockoftheCompany(ifitcontinuestoexist)andoftheentitythatacquiresthelargestportionofsuchassets(ortheentity,ifany,thatownsamajorityoftheoutstandingvotingstockofsuchacquiringentity)and(ii)amajorityofthemembersoftheBoard(ifitcontinuestoexist)andoftheentitythatacquiresthelargestportionofsuchassets(ortheentity,ifany,thatownsamajorityoftheoutstandingvotingstockofsuchacquiringentity)wereincumbentdirectorsoftheCompanyimmediatelybeforeconsummationofsuchmajorassetdisposition.
Severance Payment
TheseverancepaymentmadetoeachNamedExecutiveOfficer,withtheexceptionofMr.Ferland,inconnectionwithaqualifyingterminationfollowingachangeincontrolisgenerallyacashpaymentequaltotwotimesthesumof(1)theexecutive’sannualbasesalarypriortoterminationand(2)thesameannualbasesalarymultipliedbytheexecutive’stargetannualincentivecompensationpercentagefortheyearinwhichtheterminationoccurs.TheseverancepaymentmadetoMr.Ferlandinconnectionwithaqualifyingterminationfollowingachangeincontrolisgenerallyacashpaymentequaltoonetimesthesumof(1)hisannualbasesalarypriortoterminationand(2)thesameannualbasesalarymultipliedbyhistargetannualincentivecompensationpercentagefortheyearinwhichtheterminationoccurs.AssumingaterminationasofDecember29,2017,theseverancepaymentonaqualifyingterminationfollowingachangeincontrolwouldhavebeencalculatedbasedonthefollowing:
• Mr.Ferland:$978,500basesalaryand$978,500targetannualincentivecompensation(100%ofhisannualbasesalary);• Ms.Apker:$435,000basesalaryand$304,500targetannualincentivecompensation(70%ofherannualbasesalary);• Mr.Carano:$425,000basesalaryand$255,000targetannualincentivecompensation(60%ofhisannualbasesalary);• Mr.Gedeon:$398,000basesalaryand$238,800targetannualincentivecompensation(60%ofhisannualbasesalary);and• Mr.Low:$340,000basesalaryand$204,000targetannualincentivecompensation(60%ofhisannualbasesalary).
Cash Retention Award
Mr.Ferland’sretentionagreementprovidesforaone-timecashretentionawardequaltotwotimesthesumofMr.Ferland’ssalaryineffectonthedateofhisretentionagreementplushis2014targetbonusunderBWC’sEICP,50%ofwhichwouldbepaidoneachofthesecondandthirdanniversariesofthespin-offifMr.FerlandremainscontinuouslyemployedwiththeCompanyateachsuchdate.Anyunvestedportionofthecashretentionawardispayableinfulluponachangeincontrol.
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Benefits
TheamountsreportedrepresentthreetimesthefullannualcostthatwouldbepayablebytheNEOforcontinuationofcoverageformedical,dentalandvisionbenefitsifelectedbytheNEOforhimself/herselfandhisorhereligibledependentsunderCOBRAfortheyearendedDecember29,2017,whichwouldbepaidinalumpsum.
EICP Payment
DependingonthetimingoftheterminationrelativetothepaymentofanEICPaward,theapplicableexecutivecouldreceiveuptotwoEICPpaymentsinconnectionwithterminationresultingfromachangeincontrol,asfollows:
• IfanEICPawardfortheyearpriortoterminationispaidtootherEICPparticipantsafterthedateoftheexecutive’stermination,theexecutivewouldbeentitledtoreceivetheactualamountoftheawarddeterminedundertheEICPforsuchprioryear(withouttheexerciseofanydownwarddiscretion).The2016EICPawardswerepaidbeforeDecember29,2017.Asaresult,nopaymentwouldhavebeenduetoourNamedExecutiveOfficersinthisrespect.
• TheexecutivewouldbeentitledtoanEICPpaymentequaltotheproductoftheNamedExecutiveOfficer’sannualbasesalarymultipliedbysuchNamedExecutiveOfficer'sEICPtargetpercentage,withtheproductproratedbasedonthenumberofdaystheNamedExecutiveOfficerwasemployedduringtheyearinwhichtheterminationoccurs.Wehaveassumedforpurposesofthisdisclosurethat,intheeventofaDecember29,2017terminationdate,eachNamedExecutiveOfficerwouldhavebeenentitledtoanEICPpaymentequalto100%ofhisorher2017targetEICP,asineffectimmediatelypriortothedateoftermination.
Financial Planning
UnderthetermsoftheagreementwiththeCompany’sfinancialplanningserviceprovider,eachNamedExecutiveOfficerisentitledtofinancialplanningbenefitsuntilJune30thoftheyearfollowingtheyearofachangeincontrol,solongastheagreementhasnotbeenearlierterminated.Mr.Gedeondidnotparticipateinthisbenefit.TheamountsreportedinthiscolumnrepresentthefeethatwouldberequiredtobepaidforeachsuchNamedExecutiveOfficertoreceivesuchbenefits.“Changeofcontrol”isnotdefinedundertheagreement.
SERP
UnderthetermsoftheCompany’sSERP,anexecutive’sCompanyaccountbecomesfullyvestedon,amongotherevents,thedateachangeincontroloccurs.Ms.Apkerwas100%vestedinherCompanyaccountsasofDecember29,2017andMessrs.Ferland,Carano,GedeonandLowwere80%,60%,40%and40%vested,respectively,intheirrespectiveCompanyaccountsasofthesamedate.Accordingly,forMessrs.Ferland,Carano,GedeonandLow20%,40%,60%and40%,respectively,oftheamountintheirCompanyaccountswouldbesubjecttoacceleratedvestinguponachangeincontrol.UndertheSERP,a“changeincontrol”occursunderthesamecircumstancesdescribedabovewithrespecttothechange-in-controlagreements.
Restoration Plan
UndertheCompany’sRestorationPlan,anexecutive’sCompanymatchingaccountandCompanyservice-basedaccountbecomefullyvestedon,amongotherevents,thedateachangeincontroloccurs.EachoftheNamedExecutiveOfficersiswere100%vestedintheirRestorationPlanaccountsasofDecember29,2017.Accordingly,noneoftheamountsintheirCompanymatchingaccountsandCompanyservice-basedaccountswouldbesubjecttoacceleratedvestingupontheirterminationofemploymentfollowingachangeofcontrol.
Tax Reimbursements
Thechangeincontrolagreementsdonotprovideforanytaxreimbursementonthebenefits.Instead,theagreementscontaina“modifiedcutback”provision,whichactstoreducethebenefitspayabletoaNEOtotheextentnecessarysothatnoexcisetaxwouldbeimposedonthebenefitspaid,butonlyifdoingsowouldresultintheNEOretainingalargerafter-taxamount.
Equity Awards
Underthetermsoftheawardsoutstanding,allunvestedrestrictedstockunit,PSU,CPUandoptionawardswouldbecomevestedonaqualifyingterminationfollowingachangeincontrol(forPSUs,attargetlevels,withareductionforthenumberofunvestedCPUsasofthedateofachanceincontrol).UndertheCompany’s2015LTIP,a“changeincontrol”occursunderthesamecircumstancesdescribedabovewithrespecttotheCompany’schangeincontrolagreements.
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CEO PAY RATIO
Weidentifiedouremployee(the“MedianEmployee”)whoweestimatereceivedthemedianof2017totalcompensationforallemployeesoftheCompanyanditsconsolidatedsubsidiaries,excludingourformerCEO,Mr.Ferland(the“MedianAnnualCompensation”)usingouremployeepopulationasofDecember31,2017(the“DeterminationDate”).AsoftheDeterminationDate,thisemployeepopulationconsistedof5,029globalfull-time,part-time,temporaryandseasonalemployeesemployedbyusorourconsolidatedsubsidiaries.AspermittedunderapplicableSECrules,weexcludedemployeesofourjointventuresinChinaandIndia(notunderthedeminimisexception),andindependentcontractorspaidbythirdparties.Wedidnotexcludeanyothernon-U.S.employeesanddidnotexcludeanyemployeesofbusinessesacquiredbyusorcombinedwiththeCompany.Inaddition,wedidnotutilizeanystatisticalsamplingorcost-of-livingadjustmentsforpurposesofthispayratiodisclosure.WeusedaconsistentlyappliedcompensationmeasureacrossthisemployeepopulationtoidentifytheMedianEmployee.Forourconsistentlyappliedcompensationmeasure,weusedtotalcashcompensation,whichconsistedofsalary,bonusandvestedincentivecompensationawardsbutexcludedthevalueofhealthandwelfarebenefits,fortheperiodbeginningonJanuary1,2017andendingonDecember31,2017.Themajorityofouremployeepopulationreceivebasesalary(paidonanhourly,weeklyorbiweeklybasis)alongwiththepotentialforanannualcashbonus.Asaresult,totalcashcompensationprovidesanaccuratedepictionoftotalearningsforthepurposeofidentifyingourMedianEmployee.Aportionofouremployeepopulationidentifiedaboveworkedforlessthanthefullfiscal2017duetocommencingemploymentafterJanuary1,2017orcommencinganunpaidleaveofabsenceduring2017.IndeterminingtheMedianEmployee,weannualizedthetotalcashcompensationforsuchindividuals(butavoidedcreatingfull-timeequivalencies).WethencalculatedtheMedianEmployee'scompensationinthesamemannerastheNEOsinthe"2017SummaryCompensationTable."
WeestimatethattheMedianAnnualCompensationwas$64,674.OurformerChiefExecutiveOfficer’s2017totalcompensationwas$6,486,690.Accordingly,theratioofourformerCEO’s2017totalcompensationtotheMedianAnnualCompensationisapproximately100:1.Wenotethat,duetoourpermitteduseofreasonableestimatesandassumptionsinpreparingthispayratiodisclosure,thedisclosuremayinvolveadegreeofimprecision,andthusthisratiodisclosureisareasonableestimatecalculatedinamannerconsistentwithItem402(u)ofRegulationS-Kusingthedataandassumptionsdescribedabove.
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APPROVAL OF THE BABCOCK & WILCOX ENTERPRISES, INC. AMENDED AND RESTATED2015 LONG-TERM INCENTIVE PLAN (PROPOSAL 7)
Introduction
OnJune8,2015,BWC,asoursolestockholderatthetime,approvedtheBabcock&WilcoxEnterprises,Inc.2015Long-TermIncentivePlan(the“2015LTIP”)inanticipationofourspinoffasanindependent,publiclytradedcompany.OurBoardalsoadoptedthe2015LTIPonthesamedate.OnFebruary23,2016,uponrecommendationbytheCompensationCommittee,ourBoardunanimouslyapprovedandadopted,subjecttotheapprovalofourstockholdersatthe2016AnnualMeetingofStockholders,theAmendedandRestated2015Long-TermIncentivePlan(the“AmendedandRestated2015LTIP”),andourstockholdersapprovedtheAmendedandRestated2015LTIPatthe2016AnnualMeetingofStockholders.
OnMarch6,2018,uponrecommendationbytheCompensationCommittee,ourBoardunanimouslyapprovedandadopted,subjecttotheapprovalofourstockholdersattheAnnualMeeting,afurtheramendmentandrestatement,initsentirety,oftheAmendedandRestated2015LTIP(the“SecondAmendedandRestated2015LTIP”).TheSecondAmendedandRestated2015LTIPcontinuestoaffordtheCompensationCommitteetheflexibilitytodesignequity-basedcompensatoryawardsthatareresponsivetotheCompany’sbusinessneedsandauthorizesavarietyofawardsdesignedtoadvancetheinterestsandlong-termsuccessoftheCompany.ThisdescriptionoftheSecondAmendedandRestated2015LTIPisonlyasummaryoftheproposedplanandisqualifiedinitsentiretybyreferencetoandshouldbereadinconjunctionwith,thefulltextoftheSecondAmendedandRestated2015LTIP,acopyofwhichisattachedtothisproxystatementasAppendixC.
TheSecondAmendedandRestated2015LTIPamendsandrestatesinitsentiretytheAmendedandRestated2015LTIP.IftheSecondAmendedandRestated2015LTIPisapprovedbystockholdersattheAnnualMeeting,itwillbeeffectiveasofthedateoftheAnnualMeeting.However,toclarify:thetermsandconditionsoftheSecondAmendedandRestated2015LTIP,totheextenttheydifferfromthetermsandconditionsofeitherthe2015LTIPortheAmendedandRestated2015LTIP,donotapplytoorotherwiseimpactpreviouslygrantedoroutstandingawardsunderthe2015LTIPortheAmendedandRestated2015LTIP,asapplicable.Outstandingawardsunderthe2015LTIPandtheAmendedandRestated2015LTIPwillcontinueineffectinaccordancewiththeirterms.IftheSecondAmendedandRestated2015LTIPisnotapprovedbyourstockholders,noawardswillbemadeundertheSecondAmendedandRestated2015LTIP,andtheAmendedandRestated2015LTIPwillremainineffect.
OurprincipalreasonforamendingandrestatingtheAmendedandRestated2015LTIPistoincreasethenumberofsharesofcommonstockavailableforissuance.TheSecondAmendedandRestated2015LTIPwillincreasethemaximumnumberofsharesavailableforawardsfrom8,300,000to9,300,000,anincreaseof1,000,000shares(or2.3%ofouroutstandingcommonstockasofMarch15,2018).TheCompanyisengaginginarightsofferinginwhichithasdistributedtoholdersofourcommonstocksubscriptionrightstopurchaseourcommonstockatasubscriptionpriceof$3.00pershare.SuchrightsweredistributedonMarch19,2018.Unlessextended,therightsofferingisexpectedtoexpireonApril10,2018.WecurrentlyanticipatethattheCompensationCommittee,inaccordancewiththetermsoftheAmendedandRestated2015LTIPandtheSecondAmendedandRestated2015LTIP,willapproveanequitableadjustmenttothenumberofsharesofcommonstockavailableforfutureawardsundertheplan,aswellascertainothersharelimitsundertheplan,plusthenumberofsharesofcommonstocksubjectto,andtheothertermsof,outstandingawards(includingthosecontingentonstockholderapprovaloftheSecondAmendedandRestated2015LTIP),toreflecttheeffectoftherightsoffering.TheseadjustmentsareexpectedtobeapprovedinApril2018andbememorializedinanamendmentto(oramendmentandrestatementof)theSecondAmendedandRestated2015LTIP.Tobeclear,theseadjustments,ifanyareexpectedtoimpactthenumberofsharesavailableundertheSecondAmendedandRestated2015LTIP,andtheoutstandingawardsapprovedthereunder,thatissubjecttostockholderapproval,butthequantitativeimpactofsuchadjustmentscannotbedeterminedatthistime.
WhiletheprimarypurposeofamendingtheAmendedandRestated2015LTIPistopermitanincreaseinthesharesavailableforawardsundertheAmendedandRestated2015LTIP,theCompanyisalsoproposingtomakecertainsubstantivechangesfromtheAmendedandRestated2015LTIPto,asfurtherdescribedbelow,inadditiontocertainotherconformingandnon-substantivechanges:
• extendthetermoftheplandocument;• clarifysomeofthesharecountingmechanics;• revisethenon-employeedirectorcompensationlimitincludedintheplandocument;
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• expandtheantidilutionadjustmentprovisions;• provideadditionalauthoritytotheCompensationCommitteefortreatingoutstandingawardsintheeventofachangeincontrol;• revisecertainprovisionsregardingthepaymentofdividendsanddividendequivalents;and• clarifytheplanamendment,modificationandterminationprovisions.
WHY WE BELIEVE YOU SHOULD VOTE FOR PROPOSAL 7
TheSecondAmendedandRestated2015LTIPauthorizesourCompensationCommitteetoprovideequity-basedcompensationintheformofoptions,appreciationrights,restrictedstock,restrictedstockunits,performanceshares,performanceunits,dividendequivalentsandotherawardsthatmaybedenominatedorpayablein,orbasedonorrelatedtocommonstock,forthepurposeofprovidingournon-employeedirectors,officersandotheremployees,andcertainconsultantsincentivesandrewardsforperformanceorservice.SomeofthekeyfeaturesoftheSecondAmendedandRestated2015LTIPthatreflectourcommitmenttoeffectivemanagementofequityandincentivecompensationaresetforthbelowinthissubsection.
Webelieveourfuturesuccessdependsinpartonourabilitytoattract,motivateandretainhighqualityemployeesanddirectorsandthattheabilitytoprovideequity-basedandincentive-basedawardsundertheSecondAmendedandRestated2015LTIPiscriticaltoachievingthissuccess.Wewouldbeataseverecompetitivedisadvantageifwecouldnotuseshare-basedawardstorecruitandcompensateourdirectors,officersandotheremployees.
Theuseofcommonstockaspartofourcompensationprogramisimportantbecauseitfostersapay-for-performanceculturethatisanimportantelementofouroverallcompensationphilosophy.Webelieveequitycompensationprovidesadditionalmotivationfordirectorsandemployeestocreatestockholdervaluebecausethevaluesuchindividualsrealizefromtheirequitycompensationisbasedonourstockpriceperformance.
Equitycompensationalsoalignsthecompensationinterestsofourdirectorsandemployeeswiththeinvestmentinterestsofourstockholdersandpromotesafocusonlong-termvaluecreation,becauseourequitycompensationawardsaresubjecttovestingand/orperformancecriteria.
AsofMarch15,2018,449,239sharesofcommonstockremainedavailableforissuanceundertheAmendedandRestated2015LTIP(notcounting1,022,982sharesofcommonstockthatareexpectedtobecomesubjecttoawardsthatweregrantedin2018contingentonstockholderapprovaloftheSecondAmendedandRestated2015LTIP,asfurtherdescribedbelowunder"NewPlanBenefits").IftheSecondAmendedandRestated2015LTIPisnotapproved,wemaybecompelledtoincreasesignificantlythecashcomponentofouremployeeanddirectorcompensation,whichmaynotnecessarilyaligncompensationinterestswiththeinvestmentinterestsofourstockholdersaswellasalignmentprovidedbyequity-basedawards.Replacingequityawardswithcashalsowouldincreasecashcompensationexpenseandusecashthatcouldbebetterutilizedifreinvestedinourbusinessesorreturnedtoourstockholders.
Thefollowingincludesaggregatedinformationregardingoverhanganddilutionassociatedwiththe2015LTIPandAmendedandRestated2015LTIPandthepotentialstockholderdilutionthatwouldresultiftheproposedshareincreaseundertheSecondAmendedandRestated2015LTIPisapproved.Thisinformationdoesnotincludegrantsthatweremadein2018subjecttostockholderapprovaloftheSecondAmendedandRestated2015LTIP,whichgrantsaredescribedbelowunder"NewPlanBenefits."ThisinformationisasofMarch15,2018.Asofthatdate,therewereapproximately44,377,243sharesofcommonstockoutstanding:
Underthe2015LTIPandAmendedandRestated2015LTIP:• Outstandingfull-valueawards(performance-andtime-basedrestrictedstockunits):4,172,401shares(9.4%ofouroutstandingcommonstock);
• Outstandingoptions:2,338,496shares(5.3%ofouroutstandingcommonstock)(outstandingoptionshaveanaverageexercisepriceof$17.97andanaverageremainingtermof3.8years);
• Totalsharesofcommonstocksubjecttooutstandingawards,asdescribedabove(full-valueawardsandoptions):6,510,897shares(14.7%ofouroutstandingcommonstock);
• TotalsharesofcommonstockavailableforfutureawardsundertheAmendedandRestated2015LTIP:449,239shares(1.0%ofouroutstandingcommonstock);and
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• Thetotalnumberofsharesofcommonstocksubjecttooutstandingawards(6,510,897shares),plusthetotalnumberofsharesavailableforfutureawardsundertheAmendedandRestated2015LTIP(449,239shares),representsacurrentoverhangpercentageof15.7%(inotherwords,thepotentialdilutionofourstockholdersrepresentedbytheAmendedandRestated2015LTIP).
UndertheSecondAmendedandRestated2015LTIP:• ProposedadditionalsharesofcommonstockavailableforfutureawardsundertheSecondAmendedandRestated2015LTIP:1,000,000shares(2.3%ofouroutstandingcommonstock-thispercentagereflectsthesimpledilutionofourstockholdersthatwouldoccuriftheSecondAmendedandRestated2015LTIPisapproved).
TotalpotentialoverhangordilutionundertheSecondAmendedandRestated2015LTIP:• ThetotalsharesofcommonstocksubjecttooutstandingawardsasofMarch15,2018(6,510,897shares),plusthetotalsharesofcommonstockavailableforfutureawardsundertheAmendedandRestated2015LTIPasofthatdate(449,239shares),plustheproposedadditionalcommonsharesavailableforfutureissuanceundertheSecondAmendedandRestated2015LTIP(1,000,000shares),representatotalfully-dilutedoverhangof7,960,136shares(17.9%)undertheSecondAmendedandRestated2015LTIP.
BasedontheclosingpriceontheNewYorkStockExchangeforourcommonstockonMarch15,2018of$4.48pershare,theaggregatemarketvalueasofMarch15,2018ofthe1,000,000additionalsharesofcommonstockrequestedundertheSecondAmendedandRestated2015LTIPwas$4,480,000.
In2015,2016and2017,wegrantedawardsunderthe2015LTIPorAmendedandRestated2015LTIPcovering3,551,032shares,1,027,289shares,and1,401,539shares,respectively.Approximately97%oftheawardsgrantedin2015were“replacementawards,”grantedasaresultoftheadjustmentofawardsoutstandingunderBWC’slong-termincentiveplanatthetimeofthespinoff.Basedonourbasicweightedaveragesharesofcommonstockoutstandingforthosethreeyearsof53,487,071,50,128,922and46,934,506,respectively,forthethree-yearperiod2015-2017,ouraverageburnrate,nottakingintoaccountforfeitures,was5%(ourindividualyears’burnrateswere7%for2015,2%for2016,and5%for2017).
IndeterminingthenumberofsharestorequestforapprovalundertheSecondAmendedandRestated2015LTIP,ourmanagementteamworkedwiththeCompensationCommitteetoevaluateanumberoffactors,includingourrecentshareusageandcriteriaexpectedtobeutilizedbyinstitutionalproxyadvisoryfirmsinevaluatingourproposalfortheSecondAmendedandRestated2015LTIP.
IftheSecondAmendedandRestated2015LTIPisapproved,weintendtoutilizethesharesauthorizedundertheSecondAmendedandRestated2015LTIPtocontinueourpracticeofincentivizingkeyindividualsthroughannualequitygrants.WecurrentlyanticipatethatthesharesrequestedinconnectionwiththeapprovaloftheSecondAmendedandRestated2015LTIPcombinedwiththesharesavailableforfutureawardswilllastforaboutoneyearbasedonourrecentgrantratesandtheapproximatecurrentshareprice,butcouldlastforashorterperiodoftimeifactualpracticedoesnotmatchrecentratesoroursharepricechangesmaterially.Werecognizethatequitycompensationawardsdilutestockholderequity,sowehavecarefullymanagedourequityincentivecompensation.Ourequitycompensationpracticesareintendedtobecompetitiveandconsistentwithmarketpractices,aswellasresponsibleandmindfulofstockholderinterests,asdescribedabove.
SUMMARY OF CERTAIN MATERIAL CHANGES FROM AMENDED AND RESTATED 2015 LTIP
IncreaseinSharesAvailableforAwards:TheSecondAmendedandRestated2015LTIPincreasesthenumberofsharesavailableforawardsby1,000,000sharestoatotalof9,300,000shares.Inaddition,theannuallimitsonthenumberofsharesthatmaybesubjecttocertainawardsduringanycalendaryeartoanindividualparticipanthavebeenincreased,asfurtherdescribedbelowundertheheading“SummaryofMaterialTermsoftheSecondAmendedandRestated2015LTIP.”
ExtensionofTerm.TheSecondAmendedandRestated2015LTIPextendsthetermunderwhichawardsmaybegranteduntilthetenthanniversaryofthedatestockholdersapprovetheSecondAmendedandRestated2015LTIP.
RevisionofDirectorCompensationLimit.TheSecondAmendedandRestated2015LTIPrevisesthenon-employeedirectorcompensationlimitsothat,subjecttoadjustmentasprovidedintheplan,nonon-employeedirector
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willbegrantedcompensation,inanyonecalendaryear,havinganaggregatemaximumvalueatthedateofgrant(calculatingthevalueofanyawardsbasedonthegrantdatefairvalueforfinancialreportingpurposes)inexcessof$500,000.ThecomparablelimitintheAmendedandRestated2015LTIPappliedonlytoawardsgrantedundersuchplan.
ExpansionofAdjustmentProvision.TheAmendedandRestated2015LTIPmandatesequitableadjustmentstotheavailableplanshares,certainawardlimitationsandcertaintermsofoutstandingawardsintheeventofcertaincorporatetransactionsorevents.TheSecondAmendedandRestated2015LTIPexpandsandrefinestheseprovisionstoprovideforabroadersetofcorporatetransactionsoreventsandstreamlinetheprovisions.
FlexibilityofChangeinControlAccelerationorContinuedVestingTreatmentProvisions.TheAmendedandRestated2015LTIPprovidesthattheCompensationCommitteemayprovideforacceleratedvestingofawardsintheeventofachangeincontrolonlywhereaparticipantexperiencesaqualifyingterminationwithinaparticularperiodoftimeafterthechangeincontrolorwheretheawardisnotassumedorconvertedintoareplacementawardinconnectionwiththechangeincontrol.TheSecondAmendedandRestated2015LTIPexpandstheseprovisionstogivetheCompensationCommitteetheabilitytodeterminethetreatmentofawardsintheeventofachangeincontrolwithinindividualgrantagreements,ratherthan“hardwiring”suchtreatmentintotheplandocumentitself.
RevisiontoCertainDividendsandDividendEquivalentsProvisions.TheAmendedandRestated2015LTIPprovidesthatdividendsonrestrictedstockmustbedeferredandpaidcontingentontheearningoftheunderlyingawardonlywithrespecttoperformance-basedawards.TheSecondAmendedandRestated2015LTIPextendsthisrequirementthatdividendsonrestrictedstockmustbedeferredandpaidcontingentontheearningoftheunderlyingawardtoservice-basedrestrictedstockawards(notjustperformance-basedawards),andappliesthissamerequirementtodividendsanddividendequivalentsoncertainotherawardsgrantedundertheSecondAmendedandRestated2015LTIP.
ClarificationofAmendment,ModificationandTerminationProvisions.TheSecondAmendedandRestated2015LTIPclarifiesthattheplanamendmentsthatrequireshareholderapproval(asenumeratedintheplandocument)areincludedforpurposesofapplicablestockexchangerulesanddonotprohibitequitableantidilutionadjustmentsasprovidedforundertheSecondAmendedandRestated2015LTIP.
SECTION 162(m)
Section162(m)oftheCodegenerallydisallowsadeductionforcertaincompensationpaidtocertainexecutiveofficers(and,beginningin2018,certainformerexecutiveofficers)totheextentthatcompensationtoacoveredemployeeexceeds$1millionforsuchyear.Compensationqualifyingforaperformance-basedexceptionas“qualifiedperformance-basedcompensation”underSection162(m)oftheCodehashistoricallynotbeensubjecttothedeductionlimitifthecompensationsatisfiestherequirementsofSection162(m)oftheCode.Thisexceptionhasnowbeenrepealed,effectivefortaxableyearsbeginningafterDecember31,2017,unlesscertaintransitionreliefforcertaincompensationarrangementsinplaceasofNovember2,2017isavailable.TheSecondAmendedandRestated2015LTIPretainscertainlegacyprovisionsthatwereoriginallyincludedinthe2015LTIPand/orAmendedandRestated2015LTIPtohelppotentiallyqualifyawardsgrantedunderthe2015LTIPortheAmendedandRestated2015LTIPfortheperformance-basedexceptiontothe$1milliontaxdeductibilitycapunderCodeSection162(m)(providedthatsuchawardswereintendedtoqualifyfortheperformance-basedexception).Tobeclear,stockholdersarenotbeingaskedtoapprovetheSecondAmendedandRestated2015LTIP(oranyofitsprovisions)forpurposesofSection162(m)oftheCodeortheperformance-basedexception.Currently,theCompanydoesnotanticipatethatitwillbeabletomakeanyfuturegrantsundertheSecondAmendedandRestated2015LTIPthatwillbeintendedtoqualifyfortheperformance-basedexception;thus,whilethosetermsaredescribedinthisproposal,unlessthetransitionreliefdescribedaboveshouldapply,theCompanydoesnotexpectthatsuchCodeSection162(m)-relatedprovisionswillbematerialoroperableforpurposesoffuturegrantsmadeundertheSecondAmendedandRestated2015LTIP.
AsummaryoftheSecondAmendedandRestated2015LTIPissetforthbelowandisqualifiedinitsentiretytothetextoftheSecondAmendedandRestated2015LTIP,whichisattachedasAppendixCtothisproxystatement.
SUMMARY OF MATERIAL TERMS OF THE SECOND AMENDED AND RESTATED 2015 LTIP
Administration.TheSecondAmendedandRestated2015LTIPisadministeredbytheCompensationCommittee,whichshallbecomposedofnotlessthanthreemembersofourBoardofDirectors,eachofwhomshall(a)meetallapplicableindependencerequirementsoftheNewYorkStockExchange,(b)bea“non-employeedirector”withinthe
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meaningofRule16b-3and(c)bean“outsidedirector”withinthemeaningofSection162(m)oftheCode.TheCompensationCommitteeselectstheparticipantsanddeterminesthetypeortypesofawardsandthenumberofsharesorunitstobeoptionedorgrantedtoeachparticipantundertheSecondAmendedandRestated2015LTIP.AllorpartoftheawardmaybesubjecttoconditionsestablishedbytheCompensationCommittee,whichmayincludecontinuedservicewiththeCompany,achievementofspecificbusinessobjectives,increasesinspecifiedindices,attainmentofspecifiedgrowthratesorothercomparablemeasuresofperformance.TheCompensationCommitteegenerallyhasfullandexclusivepowerandauthoritytoimplementandinterprettheSecondAmendedandRestated2015LTIPandmay,fromtimetotime,adoptrulesandregulationsinordertocarryoutthetermsoftheSecondAmendedandRestated2015LTIP.
TheCompensationCommitteemaydelegatealloranypartofitsauthorityundertheSecondAmendedandRestated2015LTIPtoasubcommittee.Further,aspermittedbylaw,theCompensationCommitteemaydelegateitsdutiesundertheSecondAmendedandRestated2015LTIPtoourChiefExecutiveOfficerandotherseniorofficers.However,(a)theCompensationCommitteemaynotdelegateanyauthoritytograntawardstoanon-employeedirectororanemployeewhoisanofficer,directorormorethan10%beneficialownerofanyclassofourequitysecuritiesthatisregisteredpursuanttoSection12oftheExchangeAct,asdeterminedbytheCompensationCommitteeinaccordancewithSection16oftheExchangeAct,oranypersonsubjecttoSection162(m)oftheCode,(b)theresolutionprovidingforsuchauthorizationtograntawardsmustsetforththetotalnumberofsharessuchofficer(s)maygrantandthetermsofanyawardthatsuchofficer(s)maygrant,and(c)theofficer(s)mustreportperiodicallytotheCompensationCommitteeregardingthenatureandscopeoftheawardsgrantedpursuanttotheauthoritydelegated.Allinterpretations,determinationsanddecisionsmadebytheCompensationCommitteepursuanttotheprovisionsoftheSecondAmendedandRestated2015LTIP,anyawardagreementandallrelatedordersandresolutionsoftheCompensationCommitteewillbefinal,conclusiveandbindingonallpersonsconcerned.
TheCompensationCommitteemay,initsdiscretion,acceleratethevestingorexercisabilityofanaward,eliminateorreducetherestrictionsonanaward,waiveanyrestrictionorotherprovisionoftheSecondAmendedandRestated2015LTIPoranyawardunderit,orotherwiseamendormodifyanyawardinanymannerthatiseithernotadversetotheparticipantholdingtheawardorisconsentedtoinwritingbysuchparticipant,andisconsistentwiththetermsoftheSecondAmendedandRestated2015LTIPandtherequirementsofSection409Aand162(m)oftheCode(ifapplicable).
Eligibility.Non-employeemembersoftheBoardofDirectors,officersandotheremployeesoftheCompany,aswellascertainconsultants,areeligibletoparticipateintheSecondAmendedandRestated2015LTIPifselectedbytheCompensationCommittee.AnyparticipantmayreceivemorethanoneawardundertheSecondAmendedandRestated2015LTIP.Presently,weanticipatethat9currentnon-employeemembersoftheBoardofDirectors,14officers,63otheremployeesand0consultantswillparticipateintheSecondAmendedandRestated2015LTIPgoingforward.IfaneligiblepersonisselectedbytheCompensationCommitteetoreceiveanawardundertheSecondAmendedandRestated2015LTIP,suchpersonisnotguaranteedtoreceiveanyfutureawardsundertheSecondAmendedandRestated2015LTIP.ThebasisforparticipationintheSecondAmendedandRestated2015LTIPbyeligiblepersonsistheselectionofsuchpersonsbytheCompensationCommitteeinitsdiscretion.
SharesAvailableforGrantsUndertheSecondAmendedandRestated2015LTIP.Subjecttotheprovisionswedescribebelow,9,300,000sharesofourcommonstockmaybeissuedundertheSecondAmendedandRestated2015LTIP(5,800,000ofwhichwereapprovedbyoursolestockholderpriortothespin-offin2015,2,500,000ofwhichwereapprovedbyourstockholdersin2016and1,000,000ofwhichwillbeaddeduponapprovalofourstockholdersin2018).Inaddition,shareswhicharesubjecttoawardsthatarecancelled,terminated,forfeitedorexpired,aresettledincash,orareunearned,inwholeorinpart,willbecomeavailableforissuanceundertheSecondAmendedandRestated2015LTIPtotheextentofsuchcancellation,termination,forfeiture,expiration,cashsettlementorunearnedamount.TheCompensationCommitteemayadoptandobservesuchproceduresconcerningthecountingofsharesagainsttheSecondAmendedandRestated2015LTIPmaximumasitmaydeemappropriate.However,thefollowingshareswillnotbeaddedtotheaggregatenumberofsharesavailableforawardsundertheSecondAmendedandRestated2015LTIP:(a)shareswithheldbyus,tenderedorotherwiseusedtopayanoptionpriceofanoption,(b)shareswithheldbyus,tenderedorotherwiseusedtosatisfyataxwithholdingobligation,(c)sharessubjecttoanappreciationrightthatarenotactuallyissuedinconnectionwithitssharesettlementonexercise,and(d)sharesreacquiredbyusontheopenmarketorotherwiseusingcashproceedsfromtheexerciseofoptions.SharesreservedforissuanceundertheSecondAmendedandRestated2015LTIPmaybesharesoforiginalissuanceorsharesheldintreasury,oracombinationthereof.Inaddition,theSecondAmendedandRestated2015LTIPcontainsabroad-basednon-employeedirectorcompensationlimit:subjecttoadjustmentasdescribedintheplandocument,innoeventwillanynon-employeedirectorinanyonecalendaryearbegrantedcompensationfordirectorservicehavinganaggregate
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maximumvalue(measuredatthedateofgrantandcalculatingthevalueofawardsundertheSecondAmendedandRestated2015LTIPbasedonthegrantdatefairvalueforfinancialreportingpurposes)inexcessof$500,000.
CommonstockissuedortransferredpursuanttoawardsgrantedundertheSecondAmendedandRestated2015LTIPinsubstitutionfororinconversionof,orinconnectionwiththeassumptionof,awardsheldbyawardeesofanentityengaginginacorporateacquisitionormergerwithusoranyofoursubsidiarieswillnotcountagainstthesharelimitsundertheSecondAmendedandRestated2015LTIP.Additionally,sharesavailableundercertainplansthatweoroursubsidiariesmayassumeinconnectionwithcorporatetransactionsfromanotherentitymaybeavailableforcertainawardsundertheSecondAmendedandRestated2015LTIP,butwillnotcountagainstthesharelimitsundertheSecondAmendedandRestated2015LTIP.SubjecttoadjustmentasdescribedintheSecondAmendedandRestated2015LTIP,themaximumnumberofsharesofcommonstockactuallyissuedpursuanttotheexerciseofincentivestockoptionsundertheSecondAmendedandRestated2015LTIPwillbe1,200,000.
TypesofAwardsUndertheSecondAmendedandRestated2015LTIP.UndertheSecondAmendedandRestated2015LTIP,theCompensationCommitteemayawardtoparticipantsincentiveandnonqualifiedstockoptions,appreciationrights,restrictedstock,restrictedstockunits,performanceshares,performanceunits,cashincentiveawardsandotherawards.Theformsofawardsaredescribedingreaterdetailbelow.Generally,agrantofanawardundertheSecondAmendedandRestated2015LTIPwillbeevidencedbyanawardagreementoragreementswhichwillcontainsuchtermsandprovisionsastheCompensationCommitteemaydetermine,consistentwiththeSecondAmendedandRestated2015LTIP.AbriefdescriptionofthetypesofawardsthatmaybegrantedundertheSecondAmendedandRestated2015LTIPissetforthbelow.
StockOptions.TheCompensationCommitteehasdiscretiontoawardincentivestockoptionsandnonqualifiedstockoptions.Astockoptionisarighttopurchaseaspecifiednumberofsharesofourcommonstockataspecifiedexerciseprice.AnincentivestockoptionisintendedtoqualifyassuchunderSection422oftheCode.UndertheSecondAmendedandRestated2015LTIP,noparticipantmaybegrantedoptionsand/orappreciationrightsduringanyfiscalyearthatareexercisableformorethan1,200,000sharesofourcommonstock,subjecttoadjustmentasdescribedintheSecondAmendedandRestated2015LTIP.Incentivestockoptionsmayonlybegrantedtoemployees.Exceptwithrespecttoawardsissuedinsubstitutionfor,inconversionof,orinconnectionwithanassumptionofstockoptionsheldbyawardeesofanentityengaginginacorporateacquisitionormergerwithusoranyofoursubsidiaries,theexercisepriceofanoptionmaynotbelessthanthefairmarketvalueofashareofourcommonstockonthedateofgrant,subjecttoadjustmentasdescribedintheSecondAmendedandRestated2015LTIP.SubjecttothespecifictermsoftheSecondAmendedandRestated2015LTIP,theCompensationCommitteehasdiscretiontodeterminethenumberofshares,theexerciseprice,thetermsandconditionsofexercise,whetheranoptionwillqualifyasanincentivestockoptionundertheCodeandsetsuchadditionallimitationsonandtermsofoptiongrantsasitdeemsappropriate.Moreover,agrantofoptionsmaybeexercisableearlyorsubjecttocontinuedvesting,includingonretirement,deathordisabilityorintheeventofachangeincontrol.TheAwardAgreementwillgenerallyspecify,amongotherthings,theexerciseprice,durationandnumberofsharesapplicabletotheawardaswellaswhethertheawardisofnonqualifiedorincentivestockoptions.
OptionsgrantedtoparticipantsundertheSecondAmendedandRestated2015LTIPwillexpireatsuchtimesastheCompensationCommitteedeterminesatthetimeofthegrant,butnooptionwillbeexercisablelaterthantenyearsfromthedateofgrant.EachAwardAgreementwillsetforththeextenttowhichtheparticipantwillhavetherighttoexercisetheoptionfollowingterminationoftheparticipant’semploymentorservice.TheterminationprovisionswillbedeterminedwithinthediscretionoftheCompensationCommittee,neednotbeuniformamongallparticipantsandmayreflectdistinctionsbasedonthereasonsforterminationofemploymentorservice.Dividendequivalentsdonotattachtostockoptions.
UpontheexerciseofanoptiongrantedundertheSecondAmendedandRestated2015LTIP,theoptionpriceispayableinfulltous,subjecttoapplicablelaw:(1)incashorbycheckacceptabletotheCompanyorbywiretransferofimmediatelyavailablefunds;(2)bytenderingpreviouslyacquiredsharesofourcommonstockhavingafairmarketvalueatthetimeofexerciseequaltothetotaloptionprice;(3)subjecttoanyconditionsorlimitationsestablishedbytheCompensationCommittee,byourwithholdingofsharesofcommonstockotherwiseissuableuponexerciseofanoptionpursuanttoa“netexercise”arrangement;(4)byacombinationof(1),(2)and(3);or(5)byanyothermethodapprovedbytheCompensationCommitteeinitssolediscretion.Further,totheextentpermittedbylaw,anygrantofoptionsmayprovidefordeferredpaymentoftheoptionpricefromtheproceedsofasalethroughabankorbrokerofsomeorallofthesharesofcommonstocktowhichtheexerciserelates.Agrantofoptionsmayspecifyperformancegoalsthatmustbeachievedasaconditiontotheexerciseofsuchoptions.Wedonotanticipategrantinganyfuture
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awardsofstockoptionsthatwillbedesignedtoqualifyfortheperformance-basedexceptionunderSection162(m)oftheCode.
AppreciationRights.TheSecondAmendedandRestated2015LTIPprovidesforthegrantofappreciationrights,whichmaybegrantedaseithertandemappreciationrightsorfree-standingappreciationrights.Atandemappreciationrightisanappreciationrightthatisgrantedintandemwithastockoption.Afree-standingappreciationrightisanappreciationrightthatisnotgrantedintandemwithastockoption.Anappreciationrightisaright,exercisablebythesurrenderofarelatedstockoption(ifatandemappreciationright)orbyitself(ifafree-standingappreciationright),toreceivefromusanamountequalto100%,orsuchlesserpercentageastheCompensationCommitteemaydetermine,ofthespreadbetweenthebaseprice(oroptionexercisepriceifatandemappreciationright)andthevalueofourcommonstockonthedateofexercise.Tandemappreciationrightsmaybegrantedatanytimepriortotheexerciseorterminationoftherelatedstockoptions,butatandemappreciationrightawardedinrelationtoanincentivestockoptionmustbegrantedconcurrentlywithsuchincentivestockoption.
EachAwardAgreementforappreciationrightswillspecifytheapplicabletermsandconditionsofsuchappreciationrights,includinganyvestingandforfeitureprovisions.Agrantofappreciationrightsmayprovideforearlierexerciseorbesubjecttocontinuedvesting,includinginthecaseofretirement,deathordisabilityoftheparticipantorintheeventofachangeincontrol.Anygrantofappreciationrightsmayspecifyperformancegoalsthatmustbeachievedasaconditionoftheexerciseofsuchappreciationrights.Anappreciationrightmaybepaidincash,sharesofcommonstockoranycombinationthereof.Exceptwithrespecttoawardsissuedinsubstitutionfor,inconversionof,orinconnectionwithanassumptionofappreciationrightsheldbyawardeesofanentityengaginginacorporateacquisitionormergerwithusoranyofoursubsidiaries,thebasepriceofafree-standingappreciationrightmaynotbelessthanthefairmarketvalueofashareofcommonstockonthedateofgrant.Thetermofanappreciationrightmaynotextendmorethantenyearsfromthedateofgrant.
TheAwardAgreementforappreciationrightswillsetforththeextenttowhichtheparticipantwillhavetherighttoexercisetheappreciationrightsfollowingterminationoftheparticipant’semploymentorservicewiththeCompanyoritssubsidiaries.SuchprovisionswillbedeterminedinthesolediscretionoftheCompensationCommittee,neednotbeuniformamongallappreciationrightsgrantedundertheSecondAmendedandRestated2015LTIPandmayreflectdistinctionsbasedonthereasonsfortermination.Tandemappreciationrightsmaybeexercisedonlyatatimewhentherelatedstockoptionsarealsoexercisableandthespread(theexcessofthefairmarketvalueofashareofcommonstockovertheexerciseprice)ispositiveandbysurrenderoftherelatedstockoptionforcancellation.AppreciationrightsgrantedundertheSecondAmendedandRestated2015LTIPmaynotprovidefordividendsordividendequivalents.Wedonotanticipategrantinganyfutureawardsofappreciationrightsthatwillbedesignedtoqualifyfortheperformance-basedexceptionunderSection162(m)oftheCode.
RestrictedStock.TheCompensationCommitteealsoisauthorizedtograntorsellrestrictedsharesofourcommonstockundertheSecondAmendedandRestated2015LTIPonsuchtermsandconditionsasitshallestablish.Althoughrecipientswillgenerallyhavetherighttovoterestrictedsharesfromthedateofgrant,theywillgenerallynothavetherighttosellorotherwisetransferthesharesduringtheapplicableperiodofrestrictionoruntilearliersatisfactionofotherconditionsimposedbytheCompensationCommitteeinitssolediscretion.TheAwardAgreementwillspecifytheperiodsofrestriction,anyrestrictionsbasedonachievementofspecificperformancegoals,restrictionsunderapplicablefederalorstatesecuritieslawsandsuchothertermstheCompensationCommitteedeemsappropriate.Agrantorsaleofrestrictedstockmayprovideforearlierterminationofrestrictionsorcontinuedvesting,includinginthecaseofretirement,deathordisabilityoftheparticipantorintheeventofachangeincontrol.However,nosuchadjustmentmaybemadeinthecaseofanawarddesignedtoqualifyfortheCodeSection162(m)performance-basedexception(otherthaninconnectionwiththedeathordisabilityoftheparticipantorachangeincontrolofus)whereitwouldresultinthelossoftheotherwiseavailableexemptionunderSection162(m)oftheCode.Wedonotanticipategrantinganyfutureawardsofrestrictedstockthatwillbedesignedtoqualifyfortheperformance-basedexception.
UnlesstheCompensationCommitteeotherwisedetermines,participantswillbecreditedwithcashdividendsontheirsharesofrestrictedstock.TheCompensationCommitteeinitsdiscretionmayapplyanyrestrictionstothedividendsthatitdeemsappropriate.Dividendsonsharesofrestrictedstockwillinallcasesbedeferreduntil,andpaidcontingentupon,thevestingoftherestrictedstock.
EachAwardAgreementforrestrictedstockwillsetforththeextenttowhichtheparticipantwillhavetherighttoretainunvestedsharesofrestrictedstockfollowingterminationoftheparticipant’semploymentorservice.TheseprovisionswillbedeterminedinthesolediscretionoftheCompensationCommittee,neednotbeuniformamongallparticipantsandmayreflectdistinctionsbasedonthereasonsforterminationofemploymentorservice.Nomorethan1,200,000
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sharesofourcommonstockmaybegrantedintheformofawardsofrestrictedstockandrestrictedstockunitsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiontoanyparticipantinanyfiscalyear,subjecttoadjustmentasdescribedintheplandocument.
PerformanceUnits,PerformanceSharesandCashIncentiveAwards.Performanceunits,performancesharesandcashincentiveawardsareformsofperformanceawardsthataresubjecttotheattainmentofoneormorepre-establishedperformancegoalsduringadesignatedperformanceperiod.Performanceunits,performancesharesandcashincentiveawardsmaybegrantedbytheCompensationCommitteeatanytimeinsuchamountsandonsuchtermsastheCompensationCommitteedetermines.EachperformanceunitwillhaveaninitialvaluethatisestablishedbytheCompensationCommitteeatthetimeofthegrant.Eachperformancesharewillbeabookkeepingentrythatrecordstheequivalentofoneshareofourcommonstockandhaveaninitialvalueequaltothefairmarketvalueofashareofourcommonstockonthedateofthegrant.TheCompensationCommitteeinitsdiscretionwilldeterminetheapplicableperformanceperiodandwillestablishperformancegoalsforanygivenperformanceperiod.Theperformanceperiodmaybesubjecttoearlierlapseormodification,includinginthecaseofretirement,deathordisabilityoftheparticipantorintheeventofachangeincontrol.However,nosuchadjustmentmaybemadeinthecaseofanawarddesignedtoqualifyfortheCodeSection162(m)performance-basedexception(otherthaninconnectionwiththedeathordisabilityoftheparticipantorachangeincontrolofus)whereitwouldresultedinthelossoftheotherwiseavailableexemptionunderSection162(m)oftheCode.Wedonotanticipategrantinganyfutureawardsofperformanceunits,performancesharesorcashincentiveawardsthatwillbedesignedtoqualifyfortheperformance-basedexception.
Duringtheapplicablevestingperiod,participantswillhavenovotingrightswithrespecttoanysharesofourcommonstockunderlyingaperformanceunitorperformanceshare.However,participantsshall,unlesstheCompensationCommitteeotherwisedetermines,receivedividendequivalentsonthesharesunderlyingtheirperformanceshareorperformanceunitgrantsintheformofcashoradditionalperformanceunitsorperformancesharesifacashdividendispaidwithrespecttosharesofourcommonstock.Suchdividendequivalentsaresubjecttothevestingrequirementsapplicabletotheaward.
Paymentofearnedperformancesharesorperformanceunitsmaybemadeincashorinsharesofourcommonstockthathaveanaggregatefairmarketvalueequaltotheearnedperformanceunitsorperformanceshares.EachAwardAgreementwillsetforththeextenttowhichtheparticipantwillhavetherighttoreceiveapayoutofperformanceshares,performanceunitsand/orcashincentiveawardsfollowingterminationoftheparticipant’semploymentorservice.TheterminationprovisionswillbedeterminedbytheCompensationCommitteeinitssolediscretion,neednotbeuniformamongallparticipantsandmayreflectdistinctionsbasedonthereasonsforterminationofemploymentorservice.
Subjecttoadjustmentasdescribedintheplandocument,(a)nomorethan1,200,000sharesofourcommonstockmaybegrantedintheformofperformancesharesdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiontoanyparticipantinanyfiscalyear,(b)nomorethan$6,000,000couldhavebeenpaidincashtoanyparticipantwithrespecttoperformanceunitsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiongrantedinanyfiscalyear,asvaluedonthedateofeachgrant,and(c)nomorethan$6,000,000couldhavebeenpaidincashtoanyparticipantwithrespecttocashincentiveawardsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiongrantedinanyfiscalyear.
RestrictedStockUnits.Anawardofarestrictedstockunitconstitutesanagreementbyustodeliversharesofourcommonstockortopayanamountincashequaltothefairmarketvalueofashareofourcommonstockforeachrestrictedstockunittoaparticipantinthefuture.RestrictedstockunitsmaybegrantedorsoldbytheCompensationCommitteeonsuchtermsandconditionsasitmayestablish.TherestrictedstockunitAwardAgreementwillspecifythevestingperiodorperiods,anyspecificperformanceobjectivesandsuchotherconditionsasmayapplytotheaward.Agrantofrestrictedstockunitsmayprovideforearlierterminationofrestrictionsorcontinuedvesting,includinginthecaseofretirement,deathordisabilityoftheparticipantorintheeventofachangeincontrol.However,nosuchadjustmentmaybemadeinthecaseofanawarddesignedtoqualifyfortheCodeSection162(m)performance-basedexception(otherthaninconnectionwiththedeathordisabilityoftheparticipantorachangeincontrolofus)totheextentitwouldcausesuchawardtofailtosoqualify.Wedonotanticipategrantinganyfutureawardsofrestrictedstockunitsthatwillbedesignedtoqualifyfortheperformance-basedexception.
Duringtheapplicablevestingperiod,participantswillhavenovotingrightswithrespecttothesharesofourcommonstockunderlyingarestrictedstockunitgrant.However,participantsshall,unlesstheCompensationCommitteeotherwisedetermines,becreditedwithdividendequivalentsonthesharesunderlyingtheirrestrictedstockunitgrants
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intheformofcashoradditionalrestrictedstockunitsifacashdividendispaidwithrespecttosharesofourcommonstock.Suchdividendequivalentsaresubjecttothevestingrequirementsapplicabletotheaward.
EachAwardAgreementforrestrictedstockunitswillsetforththeextenttowhichtheparticipantwillhavetherighttoretainunvestedrestrictedstockunitsfollowingterminationofemploymentorservice.TheseprovisionswillbedeterminedinthesolediscretionoftheCompensationCommittee,neednotbeuniformamongallparticipantsandmayreflectdistinctionsbasedonreasonsforterminationofemploymentorservice.Nomorethan1,200,000sharesofourcommonstockmaybegrantedintheformofawardsofperformance-basedrestrictedstockandperformance-basedrestrictedstockunitsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiontoanyparticipantinanyfiscalyear,subjecttoadjustmentasdescribedintheplandocument.
OtherAwards.SubjecttoapplicablelawandthelimitssetforthintheSecondAmendedandRestated2015LTIP,theCompensationCommitteemaygrantsuchotherawardsthatmaybedenominatedorpayablein,valuedinwholeorinpartbyreferenceto,orotherwisebasedon,orrelatedto,sharesofourcommonstockorfactorsthatmayinfluencethevalueofsuchshares,including,withoutlimitation,convertibleorexchangeabledebtsecurities,otherrightsconvertibleorexchangeableintosharesofcommonstock,purchaserightsforcommonstock,awardswithvalueandpaymentcontingentuponperformanceofusorspecifiedsubsidiaries,affiliatesorotherbusinessunitsoranyotherfactorsdesignatedbytheCompensationCommittee,andawardsvaluedbyreferencetothebookvalueofsharesofcommonstockorthevalueofsecuritiesof,ortheperformanceofthesubsidiaries,affiliatesorotherbusinessunitsofus.ThetermsandconditionsofanysuchawardswillbedeterminedbytheCompensationCommittee.SharesofcommonstockdeliveredunderanawardinthenatureofapurchaserightgrantedundertheSecondAmendedandRestated2015LTIPwillbepurchasedforsuchconsideration,paidforatsuchtime,bysuchmethods,andinsuchforms,including,withoutlimitation,sharesofcommonstock,otherawards,notesorotherproperty,astheCompensationCommitteedetermines.
Inaddition,theCompensationCommitteemaygrantcashawards,asanelementoforsupplementtoanyotherawardsgrantedundertheSecondAmendedandRestated2015LTIP.TheCompensationCommitteemayalsograntsharesofcommonstockasabonus,ormaygrantotherawardsinlieuofobligationsofusorasubsidiarytopaycashordeliverotherpropertyundertheSecondAmendedandRestated2015LTIPorunderotherplansorcompensatoryarrangements,subjecttotermsdeterminedbytheCompensationCommitteeinamannerthancomplieswithSection409AoftheCode.
Anygrantofanotherawardmayprovideforearliereliminationofrestrictionsapplicabletosuchawardorcontinuedvesting,includingintheeventoftheretirement,death,ordisabilityoftheparticipantorintheeventofachangeincontrol.However,nosuchadjustmentmaybemadeinthecaseofanawarddesignedtoqualifyfortheCodeSection162(m)performance-basedexception(otherthaninconnectionwiththedeathordisabilityoftheparticipantorachangeincontrolofus)totheextentitwouldcausesuchawardtofailtosoqualify.Wedonotanticipategrantinganyfuture“other”awardsthatwillbedesignedtoqualifyfortheperformance-basedexception.
TheCompensationCommitteemayauthorizethepaymentofdividendsordividendequivalentsonsuchotherawardsonadeferredandcontingentbasisintheformofcashoradditionalshares.Suchdividendequivalentsaresubjecttothevestingrequirementsapplicabletotheotheraward.
Subjecttoadjustmentasdescribedintheplandocument,(a)nomorethan$6,000,000maybepaidincashtoanyparticipantwithrespecttootherawardsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptiongrantedinanyfiscalyear,asvaluedonthedateofeachgrant,and(b)themaximumaggregatenumberofsharesofcommonstockthatmaybesubjecttootherawardsdesignedtoqualifyfortheCodeSection162(m)performance-basedexceptioninanyonefiscalyeartoanyoneparticipantis1,200,000.
PerformanceMeasures.TheCompensationCommitteemaygrantawardsundertheSecondAmendedandRestated2015LTIPtoeligibleemployeessubjecttotheattainmentofspecifiedperformancemeasures.Weexpectthatallfutureperformance-basedawardswilleithernotbeintendedtoqualify,orwillnotbeabletoqualify,forthehistoricalCodeSection162(m)performance-basedexception(a“QualifiedPerformance-BasedAward”).However,theperformancemeasuresapplicabletoanyawardthatisdesignedtobeaQualifiedPerformance-BasedAwardtoacoveredemployeemustbechosenfromamongthefollowingperformancemetrics(includingrelativeorgrowthachievementregardingsuchalternatives):(a)CashFlow(includingoperatingcashflowandfreecashflow);(b)CashFlowReturnonCapital;(c)CashFlowReturnonAssets;(d)CashFlowReturnonEquity;(e)NetIncome;(f)ReturnonCapital;(g)ReturnonInvestedCapital;(h)ReturnonAssets;(i)ReturnonEquity;(j)SharePrice;(k)EarningsPerShare(basicordiluted);(l)EarningsBeforeInterestandTaxes;(m)EarningsBeforeInterest,Taxes,Depreciationand
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Amortization;(n)TotalandRelativeShareholderReturn;(o)OperatingIncome;(p)ReturnonNetAssets;(q)GrossorOperatingMargins;(r)Safety;and(s)EconomicValueAddedorEVA.
TheperformancemeasuresdescribedabovecouldbedescribedintermsofCompany-wideobjectivesorobjectivesthatarerelatedtotheperformanceoftheindividualparticipantorofoneormoreofthesubsidiaries,divisions,departments,regions,functionsorotherorganizationalunitswithinusoroneofoursubsidiaries.Performancemeasuresmayalsobemaderelativetotheperformanceofothercompaniesorsubsidiaries,divisions,departments,regions,functionsorotherorganizationalunitswithinsuchothercompanies,andmaybemaderelativetoanindexoroneormoreoftheperformancemeasuresthemselves.Additionally,inthecaseofaQualifiedPerformance-BasedAward,eachperformancemeasuremustbeobjectivelydeterminabletotheextentrequiredunderSection162(m)oftheCode,and,unlessotherwisedeterminedbytheCompensationCommitteeandtotheextentconsistentwithSection162(m)oftheCode,theCompensationCommitteecouldincludeorexcludefromtheperformancemeasuresresearchanddevelopmentexpenses,acquisitioncosts,operatingexpensesfromacquiredbusinessesorcorporatetransactionsandotherunusualorinfrequentitemsidentifiedonthedateofgrant.
Followingtheendofaperformanceperiod,theCompensationCommitteedeterminesthevalueofanyQualifiedPerformance-BasedAwardsgrantedfortheperiodbasedonitsdeterminationofthedegreeofattainmentofthepre-establishedperformancegoals.TheCompensationCommitteewillhavethediscretiontoadjustdeterminationsofthedegreeofattainmentofthepre-establishedperformancegoals.However,exceptinconnectionwithachangeincontrol,aQualifiedPerformance-BasedAwardcouldnothavebeadjustedinamannerthatwouldresultintheawardnolongerqualifyingasaQualifiedPerformance-BasedAward.TheCompensationCommitteealsohasdiscretiontoreduce(butnottoincrease)thevalueofanyQualifiedPerformance-BasedAwards.
Deferrals.TheCompensationCommitteewillhavethediscretiontoprovideforthedeferralofanawardortopermitparticipantstoelecttodeferpaymentofsomeoralltypesofawardsinamannerconsistentwiththerequirementsofSection409AoftheCode.
ChangeinControl.Subjecttoapplicablelaw,regulationsorstockexchangerules,thetreatmentofoutstandingawardsupontheoccurrenceofachangeincontrol(asdefinedintheSecondAmendedandRestated2015LTIP)willbedeterminedinthesolediscretionoftheCompensationCommitteeinaccordancewiththetermsoftheSecondAmendedandRestated2015LTIP,willbedescribedintheapplicableAwardAgreementsandneednotbeuniformamongallawardsgrantedundertheSecondAmendedandRestated2015LTIP.
AdjustmentandAmendments.TheSecondAmendedandRestated2015LTIPprovidesforappropriateadjustmentsintermssuchasthenumberandkindofsharessubjecttoawardsandavailableforfutureawards,theexerciseorotherpriceapplicabletooutstandingawards,themaximumawardlimitationsundertheSecondAmendedandRestated2015LTIP(totheextentthatsuchadjustmentwouldnotcauseanyoptionintendedtoqualifyasanincentivestockoptiontofailtosoqualify),thefairmarketvalueofthecommonstock,cashincentiveawardsandothervaluedeterminationsandothertermsapplicabletooutstandingawards,intheeventofchangesinouroutstandingcommonstockbyreasonofamerger,stocksplit,orcertainotherevents.Further,intheeventofcertaincorporateevents,includingacorporatemerger,consolidation,acquisition,separation,reorganizationorliquidation,orachangeincontrol,theCompensationCommitteeisauthorized,initssolediscretion(butsubjecttocompliancewithSection409AoftheCodetotheextentapplicable),to:(a)grantorassumeawardsbymeansofsubstitutionofnewawardsforpreviouslygrantedawardsortoassumepreviouslygrantedawardsaspartofsuchadjustment;(b)makeprovision,priortothetransaction,fortheaccelerationofthevestingandexercisabilityof,orlapseofrestrictionswithrespectto,awardsandtheterminationofoptionsthatremainunexercisedatthetimeofsuchtransaction;or(c)providefortheaccelerationofthevestingandexercisabilityofoptionsandthecancellationofoptionsinexchangeforsuchpaymentastheCompensationCommittee,initssolediscretion,determinesisareasonableapproximationofthevaluethereof.Moreover,intheeventofanysuchtransactionoreventorintheeventofachangeincontroloftheCompany,theCompensationCommitteewillprovideinsubstitutionforanyoralloutstandingawardsundertheSecondAmendedandRestated2015LTIPsuchalternativeconsideration(includingcash),ifany,asit,ingoodfaith,determinestobeequitableinthecircumstancesandwillrequirethesurrenderofallawardssoreplacedinamannerthatcomplieswithSection409AoftheCode.Inaddition,foreachstockoptionorappreciationrightwithanoptionpriceorbasepricegreaterthantheconsiderationofferedinconnectionwithanysuchtransactionoreventofchangeincontrol,theCompensationCommitteemayinitsdiscretionelecttocancelsuchstockoptionorappreciationrightwithoutanypaymenttothepersonholdingsuchstockoptionorappreciationright.
TheSecondAmendedandRestated2015LTIPmaybemodified,altered,suspendedorterminatedbytheBoardofDirectorsatanytimeandforanypurposethattheBoardofDirectorsdeemsappropriate,but(subjecttocertain
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exceptions)noamendmenttotheSecondAmendedandRestated2015LTIPmayadverselyaffectanyoutstandingawardswithouttheaffectedparticipant’sconsent.Further,ifanamendmenttotheSecondAmendedandRestated2015LTIP(forpurposesofapplicablestockexchangerulesandexceptaspermittedundertheadjustmentprovisionsoftheSecondAmendedandRestated2015LTIP)(a)wouldmateriallyincreasethebenefitsaccruingtoparticipantsundertheSecondAmendedandRestated2015LTIP,(b)wouldmateriallyincreasethenumberofsecuritieswhichmaybeissuedundertheSecondAmendedandRestated2015LTIP,(c)wouldmateriallymodifytherequirementsforparticipationintheSecondAmendedandRestated2015LTIPor(d)mustotherwisebeapprovedbythestockholdersoftheCompanyinordertocomplywithapplicablelaworstockexchangerules,allasdeterminedbytheBoard,thensuchamendmentwillbesubjecttostockholderapprovalandwillnotbeeffectiveunlessanduntilsuchapprovalhasbeenobtained.Additionally,ifpermittedbySection409AoftheCodeandSection162(m)oftheCodeandsubjecttotheothertermsoftheSecondAmendedandRestated2015LTIP,theCompensationCommitteemaymakeadjustmentsintheterms,conditionsorcriteriaofanawardinrecognitionofcertainunusualornonrecurringeventsaffectingtheCompanyorthefinancialstatementsoftheCompanyorinrecognitionofchangesinapplicablelaws,regulationsoraccountingprinciples,whenevertheCompensationCommitteedeterminesthatsuchadjustmentsareappropriate.
ProhibitiononRepricing.ExceptinconnectionwithcertaincorporatetransactionsorchangesinthecapitalstructureoftheCompany,thetermsofoutstandingawardsmaynotbeamendedto(1)reducetheexercisepriceofoutstandingoptionsorappreciationrights,or(2)replaceorregrantoptionsthroughcancellation,inexchangeforotherawards,oriftheeffectofthereplacementorregrantwouldbetoreducetheoptionpriceoftheoptionsorwouldconstitutearepricingundergenerallyacceptedaccountingprinciples(asapplicable),withoutstockholderapproval.
Clawbacks.AnyAwardAgreementmayreferenceaclawbackpolicyoftheCompanyorprovideforthecancellationorforfeitureofanawardortheforfeitureandrepaymenttotheCompanyofanygainrelatedtoanaward,orotherprovisionsintendedtohaveasimilareffect,uponsuchtermsandconditionsasmaybedeterminedbytheCompensationCommitteefromtimetotime,ifaparticipantengagesincertaindetrimentalactivity.Inaddition,anyAwardAgreementorsuchclawbackpolicymayalsoprovideforthecancellationorforfeitureofanawardortheforfeitureandrepaymenttotheCompanyofanycommonstockissuedunderand/oranyotherbenefitrelatedtoanaward,orotherprovisionsintendedtohaveasimilareffect,uponsuchtermsandconditionsasmayberequiredbytheCompensationCommitteeorunderSection10DoftheExchangeActandanyapplicablerulesorregulationspromulgatedbytheSECoranynationalsecuritiesexchangeornationalsecuritiesassociationonwhichtheCompany’scommonstockmaybetraded.
Transferability.Exceptasotherwisespecifiedinaparticipant’sAwardAgreement,noawardgrantedpursuantto,andnorighttopaymentunder,theSecondAmendedandRestated2015LTIPwillbeassignableortransferablebyanSecondAmendedandRestated2015LTIPparticipantexceptbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorder,andanyrightgrantedtoaparticipantundertheSecondAmendedandRestated2015LTIPwillbeexercisablebyoravailabletoonlytheparticipantduringtheparticipant’slifetime.
Restrictions.SharesofourcommonstockdeliveredundertheSecondAmendedandRestated2015LTIP,ifany,maybesubjecttostop-transferordersandotherrestrictionsastheCompensationCommitteemaydeemadvisableundertherules,regulationsandotherrequirementsoftheSEC,anysecuritiesexchangeortransactionreportingsystemonwhichourcommonstockisthenlistedortowhichitisadmittedforquotationandanyapplicablefederalorstatesecuritieslaw.
GrantstoNon-U.S.BasedParticipants.InordertofacilitatethemakingofanygrantorcombinationofgrantsundertheSecondAmendedandRestated2015LTIP,theCompensationCommitteemayprovideforsuchspecialtermsforawardstoparticipantswhoareforeignnationals,whoareemployedbyusoranyofoursubsidiariesoutsideoftheUnitedStatesofAmericaorwhoprovideservicestousunderanagreementwithaforeignnationoragency,astheCompensationCommitteemayconsidernecessaryorappropriatetoaccommodatedifferencesinlocallaw,taxpolicyorcustom.TheCompensationCommitteemayapprovesuchsupplementsto,oramendments,restatementsoralternativeversionsof,theSecondAmendedandRestated2015LTIP(including,withoutlimitation,sub-plans)asitmayconsidernecessaryorappropriateforsuchpurposes,providedthatnosuchspecialterms,supplements,amendmentsorrestatementsmayincludeanyprovisionsthatareinconsistentwiththetermsoftheSecondAmendedandRestated2015LTIPasthenineffectunlesstheSecondAmendedandRestated2015LTIPcouldhavebeenamendedtoeliminatesuchinconsistencywithoutfurtherapprovalbyourstockholders.
TaxWithholding.Wehavetherighttodeductapplicabletaxesfromanyawardpaymentandwithhold,atthetimeofdeliveryorvestingofcashorsharesofourcommonstockundertheSecondAmendedandRestated2015LTIP,orat
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thetimeapplicablelawotherwiserequires,anappropriateamountofcashornumberofsharesofourcommonstockorcombinationthereofforpaymentoftaxesrequiredbylawortotakesuchotheractionasmaybenecessaryinouropiniontosatisfyallobligationsforwithholdingofthosetaxes.TheCompensationCommitteemaypermitwithholdingtobesatisfiedbythetransfertousofsharesofourcommonstockpreviouslyownedbytheholderoftheawardforwhichwithholdingisrequired.Ifsharesofcommonstockareusedtosatisfytaxwithholding,suchshareswillbevaluedattheirfairmarketvalueonthedatewhenthetaxwithholdingisrequiredtobemadeandthevaluewithheldshallnotexceedtheminimumamountoftaxesrequiredtobewithheld.
NoRighttoContinuedEmployment.TheSecondAmendedandRestated2015LTIPdoesnotconferuponanyparticipantanyrightwithrespecttocontinuanceofemploymentorservicewiththeCompanyoranyofitssubsidiariesoraffiliates.
UnfundedPlan.Insofarasitprovidesforawardsforcash,sharesofourcommonstockorrightsthereto,theSecondAmendedandRestated2015LTIPwillbeunfunded.Althoughwemayestablishbookkeepingaccountswithrespecttoplanparticipantswhoareentitledtocash,sharesofourcommonstockorrightstheretoundertheSecondAmendedandRestated2015LTIP,wewilluseanysuchaccountsmerelyasabookkeepingconvenience.
DurationoftheSecondAmendedandRestated2015LTIP.TheSecondAmendedandRestated2015LTIPwillremainineffectuntilalloptionsandrightsgrantedundertheplanhavebeensatisfiedorterminatedunderthetermsoftheSecondAmendedandRestated2015LTIP,subjecttotherightoftheBoardofDirectorstoamendorterminatetheSecondAmendedandRestated2015LTIPatanytimesubjecttothetermsoftheSecondAmendedandRestated2015LTIP.However,innoeventwillanyawardbegrantedundertheSecondAmendedandRestated2015LTIPonorafterthetenthanniversaryofthedatetheCompany’sstockholdersapprovetheSecondAmendedandRestated2015LTIP.
RegulationsNotApplicabletoPlan.TheSecondAmendedandRestated2015LTIPisnotintendedtobesubjecttotheprovisionsoftheEmployeeRetirementIncomeSecurityActof1974andisnotqualifiedunderSection401(a)oftheCode.
Material United States Federal Income Tax ConsequencesThefollowingisabriefsummaryofcertainofthefederalincometaxconsequencesofcertaintransactionsundertheSecondAmendedandRestated2015LTIPbasedonfederalincometaxlawsineffect.Thissummary,whichispresentedfortheinformationofstockholdersconsideringhowtovoteonthisproposalandnotforSecondAmendedandRestated2015LTIPparticipants,isnotintendedtobecompleteanddoesnotdescribefederaltaxesotherthanincometaxes(suchasMedicareandSocialSecuritytaxes),orstate,localorforeigntaxconsequences.
Tax Consequences to ParticipantsNon-QualifiedStockOptions.Aparticipantwillnotrecognizeincomeuponthegrantofanon-qualifiedstockoption.Ingeneral,theparticipantwillrecognizeordinaryincomeatthetimeofexerciseequaltotheexcessofthefairmarketvalueoftheunderlyingstockatthetimeofexerciseovertheexerciseprice.Uponasubsequentsaleofthesharesreceiveduponexercise,anydifferencebetweenthenetproceedsonthesaleandthefairmarketvalueofthesharesonthedateofexercisewillbetaxedascapitalgainorloss(long-orshort-term,dependingontheholdingperiod).
IncentiveStockOptions.Aparticipantwillnotrecognizeincomeuponthegrantofanincentivestockoption.Inaddition,aparticipantwillnotrecognizeincomeupontheexerciseofanincentivestockoptionifheorshesatisfiescertainemploymentandholdingperiodrequirements.Tosatisfytheemploymentrequirement,aparticipantmustexercisetheoptionnotlaterthanthreemonthsafterheorsheceasestobeanemployeeofours(oneyearifheorsheisdisabled).Tosatisfytheholdingperiodrequirement,aparticipantmustholdtheoptionedstockmorethantwoyearsfromthegrantoftheoptionandmorethanoneyearafterthetransferofthestocktohimorher.Iftheserequirementsaresatisfied,onthesaleofsuchstock,theparticipantwillbetaxedonanygain,measuredbythedifferencebetweentheparticipant’sbasisinsuchsharesandthenetproceedsofthesale,atlong-termcapitalgainsrates.
Ifsharesofcommonstockacquireduponthetimelyexerciseofanincentivestockoptionaresold,exchanged,orotherwisedisposedofwithoutsatisfyingtheholdingperiodrequirement(a“disqualifyingdisposition”),theparticipantwill,intheusualcase,recognizeordinaryincomeatthetimeofdispositionequaltotheexcessofthefairmarketvalueofthesharesofcommonstockatthetimeofexerciseovertheexerciseprice.Anygaininexcessofthatamountwilleitherbelong-termorshort-termcapitalgaindependingontheholdingperiod.Uponadisqualifyingdispositionthatconstitutesasaleorexchangewithrespecttowhichanyloss(ifsustained)wouldberecognized,theamountincludibleinordinaryincomewillbelimitedtotheexcess,ifany,ofthenetamountrealizedonthesaleorexchangeoverthe
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participant’sbasisinsuchshares.Ingeneral,suchadispositionisatransactionwithanunrelatedthirdpartythatisnotsubjecttothewash-saleprovisionsoftheCode.
AppreciationRights.Aparticipantwillnotrecognizeincomeuponthegrantofanappreciationright.Whentheappreciationrightisexercised,theparticipantwillgenerallyberequiredtoincludeastaxableordinaryincomeintheyearofexerciseanamountequaltotheamountofcashreceivedandthefairmarketvalueofanyunrestrictedsharesofcommonstockreceivedontheexercise.Theterm“unrestrictedshares”includessharesthataresubjectonlytorestrictionsontransfer.
RestrictedShares.Aparticipantwillnotrecognizeincomeuponthereceiptofrestrictedshares,unlesstheparticipantmakesanelectionunderSection83(b)oftheCode(a“Section83(b)Election”)within30daysafterthetransferofthesharestohimorhertohavesuchsharestaxedtohimorherasordinaryincomeattheirfairmarketvalueonthedateoftransferlesstheamount,ifany,paidbyhimorher.
IftheparticipantmakesaSection83(b)Election,heorshewillrecognizeordinaryincomeintheyearofreceiptinanamountequaltotheexcessofthefairmarketvalueofsuchshares(determinedwithoutregardtotherestrictionsimposed)atthetimeoftransferoveranyamountpaidbytheparticipanttherefor.IfaparticipantmakesaSection83(b)Electionwithrespecttocommonsharesthataresubsequentlyforfeited,heorshewillnotbeentitledtodeductanyamountpreviouslyincludedinincomebyreasonofsuchelection.IfaparticipantdoesnotmakeaSection83(b)Election,heorshewillrecognizeordinaryincomeintheyearoryearsinwhichtherestrictionsterminate,inanamountequaltotheexcess,ifany,ofthefairmarketvalueofsuchsharesonthedatetherestrictionsexpireorareremovedoveranyamountpaidbytheparticipanttherefor.IfaSection83(b)Electionhasnotbeenmade,anyunrestricteddividendsreceivedwithrespecttocommonsharessubjecttorestrictionswillbetreatedasadditionalcompensationincomeandnotasdividendincome.
RestrictedStockUnits.Noincomegenerallywillberecognizedupontheawardofrestrictedstockunits.Therecipientofsuchanawardgenerallywillrecognizeordinaryincomeinanamountequaltotheaggregateamountofanycashreceivedandthefairmarketvalueofunrestrictedsharesofcommonstockreceivedonthedatethatsuchcashandsharesaretransferredtotherecipientundertheaward(reducedbyanyamountpaidbytherecipientforsuchshares),andthecapitalgains/lossholdingperiodforanyshareswillalsocommenceonsuchdate.
PerformanceUnitsandPerformanceShares.Noincomegenerallywillberecognizedupontheawardofperformanceunitsorperformanceshares.Therecipientofsuchanawardgenerallywillrecognizeordinaryincomeinanamountequaltotheaggregateamountofanycashreceivedandthefairmarketvalueofunrestrictedsharesofcommonstockreceivedonthedatethatsuchcashandsharesaretransferredtotherecipientundertheaward,andthecapitalgains/lossholdingperiodforanysharesreceivedwillalsocommenceonsuchdate.
Tax Consequences to the Company or SubsidiaryTotheextentthataparticipantrecognizesordinaryincomeinthecircumstancesdescribedabove,theCompanyorsubsidiaryforwhichtheparticipantperformsserviceswillbeentitledtoacorrespondingdeduction;providedthat,amongotherthings,theincomemeetsthetestofreasonableness,isanordinaryandnecessarybusinessexpense,isnotan“excessparachutepayment”withinthemeaningofSection280GoftheCode,andisnotdisallowedbythe$1millionlimitationoncertainexecutivecompensationunderSection162(m)oftheCode.
New Plan BenefitsOnFebruary19,2018,theCompanyapprovedgrantsofstockoptionsthatwerecontingentonstockholderapprovaloftheSecondAmendedandRestated2015LTIP.Noneoftheseawardswereintendedordesignedtoqualifyfortheperformance-basedexceptiondescribedabove.Theseawards,whichwillbecanceledintheeventthatstockholdersdonotapprovethisProposal7,aresummarizedinthefollowingtable:
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NEWPLANBENEFITS
SecondAmendedandRestated2015LTIP
NAME AND POSITION DOLLAR VALUE(S) NUMBER OF UNITS
E.JamesFerland–FormerExecutiveChairmanandChiefExecutiveOfficer $450,000 124,653
JennyL.Apker–SeniorVicePresidentandChiefFinancialOfficer $250,000 69,252
MarkA.Carano–SeniorVicePresident,IndustrialandCorporateDevelopment $200,000 55,401
EliasGedeon–FormerSeniorVicePresidentandChiefBusinessDevelopmentOfficer — —
MarkS.Low–SeniorVicePresident,Power $156,667 43,397
ExecutiveGroup(8persons) $1,490,000 412,738
Non-ExecutiveDirectorGroup(6persons) — —
Non-ExecutiveOfficerEmployeeGroup(67persons) $2,253,083 624,095
Theamountsinthe"NumberofUnits"columninthetableaboverepresentthenumberofstockoptionsgrantedtoeachoftheindicatedindividualsandgroups,subjecttoandcontingentuponstockholderapprovaloftheSecondAmendedandRestated2015LTIP,withagrantdateofMarch6,2018.Eachstockoptionhasanexercisepriceof$5.76pershareandgenerallyvests,subjecttocontinuedemployment,onthefirstanniversaryofthegrantdate.Eachstockoptionwillexpirenolaterthan10yearsfromthegrantdate.Theamountsinthe"DollarValue"columnofthetableaboverepresentthegrantdatefairvaluesofthestockoptionawardscomputedinaccordancewithFASBASCTopic718.
Thefollowingtableshows,astoeachNamedExecutiveOfficerandthevariousindicatedgroups,theaggregatenumberofoptionawardsunderthe2015LTIPandtheAmendedandRestated2015LTIPfrominceptionofthe2015LTIPthroughMarch15,2018(whichdonotincludetheoptionawardsincludedinthe"NewPlanBenefits"tableabove):
NAME NUMBER OF OPTIONS GRANTED
Named Executive Officers: E.JamesFerlandFormerExecutiveChairmanandChiefExecutiveOfficer
873,577
JennyL.ApkerSeniorVicePresidentandChiefFinancialOfficer
75,601
MarkA.CaranoSeniorVicePresident,IndustrialandCorporateDevelopment
84,922
EliasGedeonFormerSeniorVicePresidentandChiefBusinessDevelopmentOfficer
50,482
MarkS.LowSeniorVicePresident,Power
58,174
All current executive officers as a group 334,148
All current non-employee directors as a group —
Each nominee for election as a director —
Each associate of any of the foregoing —
Each other person who received at least 5% of all options granted —
All employees, excluding current executive officers 1,676,584
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Registration with the SECWeintendtofileaRegistrationStatementonFormS-8relatingtotheissuanceofadditionalcommonsharesundertheSecondAmendedandRestated2015LTIPwiththeSECpursuanttotheSecuritiesActassoonaspracticableafterapprovaloftheSecondAmendedandRestated2015LTIPbyourstockholders.
ThefollowingtableprovidesinformationonourequitycompensationplansasofDecember31,2017:
EQUITYCOMPENSATIONPLANINFORMATION
Plan Category
Number of securitiesto be issued upon
exercise ofoutstanding options, warrants
and rights (a)
Weighted-averageexercise price of
outstanding options, warrantsand rights (b)
Number of securitiesremaining availablefor future issuance
under equity compensation plans(excluding securities reflected in column
(a)) (c) (1)Equity compensation plans approvedby security holders 5,839,265 $13.15 247,310
Equity compensation plans notapproved by security holders — — —
Total 5,839,265 $13.15 247,310
(1)Allofthesecuritiesdisclosedinthiscolumnareavailableforfutureissuanceotherthanupontheexerciseofanoption,warrantorright.
RecommendationandVoteRequired
Our Board recommends that stockholders vote “FOR” the approval of the Second Amended and Restated 2015 LTIP. Approvalofthisproposalrequirestheaffirmativevoteofamajorityofthesharescastonthematter.Abstentionsareconsideredasvotescastand,asaresult,willhavetheeffectofan"against"vote.Ingeneral,brokersdonothavediscretionaryauthorityonproposalsrelatingtoequitycompensationplans.Therefore,absentinstructionsfromyou,yourbrokermaynotvoteoursharesonProposal7.Brokernon-voteswillhavenoeffectonthevoteonProposal7.
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STOCKHOLDERS’ PROPOSALS
Anystockholderwhowishestohaveaqualifiedproposalconsideredforinclusioninourproxystatementforour2019AnnualMeetingmustsendnoticeoftheproposaltoourCorporateSecretaryatourprincipalexecutiveofficenolaterthanDecember13,2018.Ifyoumakesuchaproposal,youmustprovideyourname,address,thenumberofsharesofcommonstockyouholdofrecordorbeneficially,thedateordatesonwhichsuchcommonstockwasacquiredanddocumentarysupportforanyclaimofbeneficialownership.
Inaddition,anystockholderwhointendstosubmitaproposalforconsiderationatour2019AnnualMeeting,butnotforinclusioninourproxymaterials,orwhointendstosubmitnomineesforelectionasdirectorsatthemeetingmustnotifyourCorporateSecretary.Underourbylaws,suchnoticemust(1)bereceivedatourprincipalexecutiveofficesnoearlierthancloseofbusinessonJanuary16,2019orlaterthanFebruary15,2019and(2)satisfyspecifiedrequirementssetforthinourbylaws.AcopyofthepertinentbylawprovisionscanbefoundonourWebsiteatwww.babcock.comat“Investors—CorporateGovernance—GovernanceDocuments.”
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 16, 2018.
TheProxyStatementand2017AnnualReportareavailableontheInternetatwww.proxyvote.com.
ThefollowinginformationapplicabletotheAnnualMeetingmaybefoundintheproxystatementandaccompanyingproxycard:• Thedate,timeandlocationoftheAnnualMeeting;• Alistofthemattersintendedtobeactedonandourrecommendationsregardingthosematters;• Anycontrol/identificationnumbersthatyouneedtoaccessyourproxycard;and• InformationaboutattendingtheAnnualMeeting.
GENERAL INFORMATION
OurBoardhasmadethesematerialsavailabletoyouovertheInternetandhasmailedyouaprintedversionofthesematerialsinconnectionwiththeAnnualMeeting,whichwilltakeplaceonMay16,2018.WemailedourproxymaterialstoourstockholdersbeginningonApril12,2018,andourproxymaterialswerepostedatwww.proxyvote.comonthatsamedate.
WehavesentandprovidedaccesstothematerialstoyoubecauseourBoardissolicitingyourproxytovoteyoursharesatourAnnualMeeting.Wewillbearallexpensesincurredinconnectionwiththisproxysolicitation.WehaveengagedD.F.King&Co.,Inc.toassistinthesolicitationforafeethatwillnotexceed$17,500.Inaddition,ourofficersandemployeesmaysolicityourproxybytelephone,byfacsimiletransmissionorinpersonandtheywillnotbeseparatelycompensatedforsuchservices.WesolicitproxiestogiveallstockholdersanopportunitytovoteonmattersthatwillbepresentedattheAnnualMeeting.Inthisproxystatement,youwillfindinformationonthesematters,whichisprovidedtoassistyouinvotingyourshares.Ifyoursharesareheldthroughabrokerorothernominee(i.e.,in“streetname”)andyouhaverequestedprintedversionsofthesematerials,wehaverequestedthatyourbrokerornomineeforwardthisproxystatementtoyouandobtainyourvotinginstructions,forwhichwewillreimbursethemforreasonableout-of-pocketexpenses.IfyoursharesareheldthroughtheB&WThriftPlanandyouhaverequestedprintedversionsofthesematerials,thetrusteeofthatplanhassentyouthisproxystatementandyoushouldinstructthetrusteeonhowtovoteyourplanshares.
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VOTING INFORMATION
RecordDateandWhoMayVote
OurBoardselectedApril5,2018astherecorddatefordeterminingstockholdersentitledtovoteattheAnnualMeeting.Thismeansthatifyouwerearegisteredstockholderwithourtransferagentandregistrar,ComputershareTrustCompany,N.A.,ontherecorddate,youmayvoteyoursharesonthematterstobeconsideredattheAnnualMeeting.Ifyourshareswereheldinstreetnameonthatdate,youshouldrefertotheinstructionsprovidedbyyourbrokerornomineeforfurtherinformation.Theyareseekingyourinstructionsonhowyouwantyoursharesvoted.Brokersholdingsharesinstreetnamecanvotethosesharesonroutinemattersifthebeneficialownerhasnotprovidedvotinginstructionsatleast10daysbeforeameeting.UndertherulesoftheNewYorkStockExchange,theelectionofdirectorsandtheadvisoryvoteoncompensationofournamedexecutiveofficersarenotconsideredroutinematters.Thatmeansthatbrokersmaynotvoteyoursharesintheelectionofdirectorsortheadvisoryvoteoncompensationofournamedexecutiveofficersifyouhavenotgivenyourbrokerspecificinstructionsastohowtovoteandyourshareswillnotberepresentedinthosematters.Pleasebesuretogivespecificvotinginstructionstoyourbroker.
Ontherecorddate,44,381,104sharesofourcommonstockwereoutstanding.EachoutstandingshareofcommonstockentitlesitsholdertoonevoteoneachmattertobeactedonattheAnnualMeeting.
HowtoVote
Moststockholderscanvotebyproxyinthreeways:
• byInternetatwww.proxyvote.com;• bytelephone;or• bymail.
Ifyouareastockholderofrecord,youcanvoteyoursharesbyvotingbyInternet,telephone,mailinginyourproxyorvirtuallyattheAnnualMeeting.Youmaygiveusyourproxybyfollowingtheinstructionsincludedintheenclosedproxycard.
Bygivingusyourproxy,youwillbedirectingushowtovoteyoursharesatAnnualMeeting.Evenifyouplanonattendingthemeeting,weurgeyoutovotenowbygivingusyourproxy.Thiswillensurethatyourvoteisrepresentedatthemeeting.Ifyoudoattendthemeeting,youcanchangeyourvoteatthattime,ifyouthendesiretodoso.
Ifyouarethebeneficialownerofsharesheldinstreetname,themethodsbywhichyoucanaccesstheproxymaterialsandgivethevotinginstructionstothebrokerornomineemayvary.Accordingly,beneficialownersshouldfollowtheinstructionsprovidedbytheirbrokersornomineestovotebyInternet,telephoneormail.IfyouwanttovoteyoursharesvirtuallyattheAnnualMeeting,youmustobtainavalidproxyfromyourbrokerornominee.Youshouldcontactyourbrokerornomineeorrefertotheinstructionsprovidedbyyourbrokerornomineeforfurtherinformation.Additionally,theavailabilityofInternetortelephonevotingdependsonthevotingprocessusedbythebrokerornomineethatholdsyourshares.
Youmayreceivemorethanoneproxystatementandproxycardorvotinginstructionformifyoursharesareheldthroughmorethanoneaccount(e.g.,throughdifferentbrokersornominees).Eachproxycardorvotinginstructionformonlycoversthosesharesheldintheapplicableaccount.Ifyouholdsharesinmorethanoneaccount,youwillhavetoprovidevotinginstructionsastoallyouraccountstovoteallyourshares.
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HowtoChangeYourVoteorRevokeYourProxy
Forstockholdersofrecord,youmaychangeyourvoteorrevokeyourproxybywrittennoticetoourCorporateSecretaryat13024BallantyneCorporatePlace,Suite700,Charlotte,NorthCarolina28277,grantinganewlaterdatedproxy,submittingalaterdatedvotebytelephoneorontheInternet,orbyvotingvirtuallyattheAnnualMeeting.Unlessyouattendthemeetingandvoteyourshares,youshouldchangeyourvoteusingthesamemethod(byInternet,telephoneormail)thatyoufirstusedtovoteyourshares.Thiswillhelptheinspectorofelectionforthemeetingverifyyourlatestvote.
Forbeneficialownersofsharesheldinstreetname,youshouldfollowtheinstructionsintheinformationprovidedbyyourbrokerornomineetochangeyourvoteorrevokeyourproxy.IfyouwanttochangeyourvoteastosharesheldinstreetnamebyvotingvirtuallyattheAnnualMeeting,youmustobtainavalidproxyfromthebrokerornomineethatholdsthosesharesforyou.
HowtoParticipateintheAnnualMeeting
Thisyear'sAnnualMeetingwillbeheldexclusivelyvialivewebcastenablingstockholdersfromaroundtheworldtoparticipate,submitquestionsinwritingandvote.StockholdersofrecordasofthecloseofbusinessonApril5,2018,areentitledtoparticipateinandvoteattheAnnualMeetingbyvisitingwww.virtualshareholdermeeting.com/BW2018.ToparticipateintheAnnualMeetingvialivewebcast,youwillneedthe16-digitcontrolnumberincludedonyourproxycardandontheinstructionsthataccompaniedyourproxymaterials.TheAnnualMeetingwillbeginpromptlyat9:30a.m.EasternTime.Onlinecheck-inwillbeginat9:25a.m.EasternTime.Pleaseallowampletimefortheonlinecheck-inprocedures.
Howtolocateyour16-digitcontrolnumberpriortothedayoftheAnnualMeeting
PriortothedayoftheAnnualMeeting,ifyouneedassistancewithyour16-digitcontrolnumberandyouholdyoursharesinyourownname,pleaseemailinvestors@babcock.com.Ifyouholdyoursharesinthenameofabankorbrokeragefirm,youwillneedtocontactyourbankorbrokeragefirmforassistancewithyour16-digitcontrolnumber.
Quorum
TheAnnualMeetingwillbeheldonlyifaquorumexists.ThepresenceattheAnnualMeeting,inpersonorbyproxy,oftheholdersofsharesofstockhavingamajorityofthevotestheholdersofalloutstandingsharesofcapitalstockoftheCompanyentitledtovoteattheAnnualMeetingcouldcastwillbenecessaryandsufficienttoconstituteaquorum.IfyouattendthemeetingorvoteyoursharesbyInternet,telephoneormail,yourshareswillbecountedtowardaquorum,evenifyouabstainfromvotingonaparticularmatter.Sharesheldbybrokersandothernomineesastowhichtheyhavenotreceivedvotinginstructionsfromthebeneficialownersandlackthediscretionaryauthoritytovoteonaparticularmatterarecalled“brokernon-votes”andwillcountforquorumpurposes.
ProposalsPresentedforVote
Weareaskingyoutovoteonthefollowing:
• Proposal1:theapprovalofamendmentstotheCertificateofIncorporationtodeclassifytheBoardandprovideforannualelectionsofalldirectorsbeginningatthe2020annualmeetingofstockholders;
• Proposal2:ifProposal1isapproved,theelectionofThomasA.Christopher,BrianR.KahnandLeslieC.KassasClassIdirectorsoftheCompany;
• Proposal3:ifProposal1isnotapproved,theelectionofThomasA.Christopher,BrianR.KahnandLeslieC.KassasClassIIIdirectorsoftheCompany;
• Proposal4:theapprovalofamendmentstotheCertificateofIncorporationtoremoveprovisionsthatrequiretheaffirmativevoteofholdersofatleast80%ofthevotingpowertoapprovecertainamendmentstotheCertificateofIncorporationandtheBylaws;
• Proposal5:theratificationofourAuditandFinanceCommittee’sappointmentofDeloitte&ToucheLLPasourindependentregisteredpublicaccountingfirmfortheyearendingDecember31,2018;
• Proposal6:theapproval,onanon-bindingadvisorybasis,ofthecompensationofournamedexecutiveofficers;and• Proposal7:theapprovaloftheBabcock&WilcoxEnterprises,Inc.AmendedandRestated2015Long-TermIncentivePlan.
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VoteRequired
ForProposal1,youmayvote“FOR”or“AGAINST”orabstainfromvoting.Thisproposalrequirestheaffirmativevoteofatleast80%oftheoutstandingsharesofourcommonstock.Accordingly,abstentionsandbrokernon-voteswillhavetheeffectofavoteagainstProposal1.
InProposal2,youmayvote“FOR”alldirectornomineesorwithholdyourvoteforanyoneormoreofthedirectornominees.InProposal3youmayvote“FOR”alldirectornomineesorwithholdyourvoteforanyoneormoreofthedirectornominees.Subjecttoourmajorityvotingrequirementsdescribedbelow,directornomineesareelectedbyapluralityofthevotescastbythesharesofourcommonstockentitledtovoteintheelectionofdirectorsatameetingofstockholdersatwhichaquorumispresent.Abstentionsandbrokernon-voteswillhavenoeffectontheelectionofdirectors.ThismeansthattheindividualsnominatedforelectiontotheBoardwhoreceivethemost“FOR”votes(amongvotesproperlycastinpersonorbyproxy)willbeelected.However,underourbylaws,anynomineefordirectorisrequiredtosubmitanirrevocablecontingentresignationletter.Ifanomineefordirectordoesnotreceiveamajorityofthevotescast"FOR"hisorherelection(notcountinganyabstentionsorbrokernon-votesasbeingcast),theBoardwillactonanexpeditedbasistodeterminewhethertoaccepttheresignation.
ForProposal4,youmayvote“FOR”or“AGAINST”orabstainfromvoting.Thisproposalrequirestheaffirmativevoteofatleast80%oftheoutstandingsharesofourcommonstock.Accordingly,abstentionsandbrokernon-voteswillhavetheeffectofavoteagainstProposal4.
ForProposal5,youmayvote“FOR”or“AGAINST”orabstainfromvoting.Thisproposalrequirestheaffirmativevoteofamajorityofthesharescastonthematter.Abstentionswillnotbeconsideredascastand,asaresult,willnothaveanyeffectontheproposal.Becausetheratificationoftheappointmentoftheindependentauditorisconsidereda“routine”matter,therewillbenobrokernon-voteswithrespecttoProposal5.
ForProposal6,youmayvote“FOR”or“AGAINST”orabstainfromvoting.Proposal6requirestheaffirmativevoteofamajorityofthesharesofourcommonstockpresentinpersonorrepresentedbyproxyattheAnnualMeetingandentitledtovoteonthematterinordertobeadopted.AbstentionsarecountedforpurposesofdeterminingaquorumandareconsideredpresentandentitledtovoteonProposal6.Asaresult,abstentionshavetheeffectofan“AGAINST”vote.Brokernon-voteswillnotbeconsideredasentitledtovoteonProposal6,eventhoughtheyareconsideredpresentforpurposesofdeterminingaquorumandmaybeentitledtovoteonothermatters.Asaresult,brokernon-voteswillnothaveanyeffectonProposal6.
ForProposal7,youmayvote“FOR”or“AGAINST”orabstainfromvoting.Proposal7requirestheaffirmativevoteofamajorityofthesharescastonthematter.AbstentionsareconsideredasvotescastonProposal7.Asaresult,abstentionshavetheeffectofan“AGAINST”vote.Ingeneral,brokersdonothavediscretionaryauthorityonproposalsrelatingtoequitycompensationplans.Therefore,absentinstructionsfromyou,yourbrokermaynotvoteoursharesonProposal7.Brokernon-voteswillhavenoeffectonthevoteonProposal7.
HowVotesareCounted
Forstockholdersofrecord,allsharesrepresentedbytheproxieswillbevotedattheAnnualMeetinginaccordancewithinstructionsgivenbythestockholders.Whereastockholderreturnstheirproxyandnoinstructionsaregivenwithrespecttoagivenmatter,theshareswillbevoted:(1)“FOR”theapprovalofamendmentstotheCertificateofIncorporationtodeclassifytheBoardandprovideforannualelectionsofalldirectorsbeginningatthe2020annualmeetingofstockholders;(2)IfProposal1isapproved,“FOR”theelectionoftheBoard’snomineesasClassIdirectors;(3)IfProposal1isnotapproved,“FOR”theelectionoftheBoard’snomineesasClassIIIdirectors;(4)“FOR”theapprovalofamendmentstotheCertificateofIncorporationtoremoveprovisionsthatrequiretheaffirmativevoteofholdersofatleast80%ofthevotingpowertoapprovecertainamendmentstotheCertificateofIncorporationandtheBylaws;(5)“FOR”theratificationoftheappointmentofDeloitteasourindependentregisteredpublicaccountingfirm;(6)“FOR”theapprovalofthecompensationofournamedexecutiveofficers;(7)“FOR”theapprovaloftheBabcock&WilcoxEnterprises,Inc.AmendedandRestated2015Long-TermIncentivePlan;and(8)inthediscretionoftheproxyholdersuponsuchotherbusinessasmayproperlycomebeforetheAnnualMeeting.Ifyouareastockholderofrecordandyoudonotreturnyourproxy,novoteswillbecastonyourbehalfonanyoftheitemsofbusinessattheAnnualMeeting.
Forbeneficialownersofsharesheldinstreetname,thebrokers,banks,ornomineesholdingsharesforbeneficialownersmustvotethosesharesasinstructed.Absentinstructionsfromyou,brokers,banksandnomineesmayvoteyoursharesonlyastheydecideastomattersforwhichtheyhavediscretionaryauthorityundertheapplicableNewYorkStockExchangerules.Abroker,bankornomineedoesnothavediscretiontovoteontheelectionofdirectorsorapprovalof
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executivecompensation.Ifyoudonotinstructyourbroker,bankornomineehowtovoteonthosematters,novoteswillbecastonyourbehalfontheelectionofdirectorsortheadvisoryvoteonexecutivecompensation.Yourbrokerwillbeentitledtovoteyoursharesinitsdiscretion,absentinstructionsfromyou,ontheratificationoftheappointmentofDeloitteasourindependentregisteredpublicaccountingfirm.
AnysharesofourcommonstockheldintheThriftPlanthatarenotvotedorforwhichVanguarddoesnotreceivetimelyvotinginstructions,willbevotedinthesameproportionasthesharesforwhichVanguardreceivestimelyvotinginstructionsfromotherparticipantsintheThriftPlan.
WearenotawareofanyothermattersthatmaybepresentedoractedonattheAnnualMeeting.IfyouvotebysigningandreturningtheenclosedproxycardorusingtheInternetortelephonevotingprocedures,theindividualsnamedasproxiesonthecardmayvoteyourshares,intheirdiscretion,onanyothermatterrequiringastockholdervotethatcomesbeforetheAnnualMeeting.
ConfidentialVoting
Allvotedproxiesandballotswillbehandledtoprotectyourvotingprivacyasastockholder.Yourvotewillnotbedisclosedexcept:
• tomeetanylegalrequirements;• inlimitedcircumstancessuchasaproxycontestinoppositiontoourBoard;• topermitindependentinspectorsofelectiontotabulateandcertifyyourvote;or• toadequatelyrespondtoyourwrittencommentsonyourproxycard.
ByOrderoftheBoardofDirectors,
J.AndréHallCorporateSecretaryDated:April12,2018
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APPENDIX A*IfProposal1isapproved,ArticleFifthoftheCompany'sRestatedCertificateofIncorporationwillbeamendedassetforthinthisAppendixA.IfProposal4isalsoapproved,ArticleFifthoftheCompany'sRestatedCertificateofIncorporationwillbefurtheramendedassetforthinAppendixB.
FIFTH: (a)Directors.ThebusinessandaffairsoftheCorporationwillbemanagedbyorunderthedirectionoftheBoardofDirectors.InadditiontotheauthorityandpowersconferredontheBoardofDirectorsbytheDGCLorbytheotherprovisionsofthisCertificateofIncorporation,theBoardofDirectorsherebyisauthorizedandempoweredtoexerciseallsuchpowersanddoallsuchactsandthingsasmaybeexercisedordonebytheCorporation,subjecttotheprovisionsoftheDGCL,thisCertificateofIncorporationandanyBylawsoftheCorporation;provided,however,thatnoBylawshereafteradopted,oranyamendmentsthereto,willinvalidateanyprioractoftheBoardofDirectorsthatwouldhavebeenvalidifsuchBylawsoramendmenthadnotbeenadopted.
(b)Number,Election,ClassificationandTermsofDirectors.ThenumberofthedirectorswhichwillconstitutethewholeoftheCompanywillbedeterminedsolelybyresolutionoftheBoardofDirectorsshallbefixedfromtimetotimeexclusivelyby,andmaybeincreasedordecreasedfromtimetotimeexclusivelyby,theaffirmativevoteofatleastamajorityofthedirectorstheninoffice(subjecttosuchrightsofholdersofaclassorseriesofsharesofPreferredStocktoelectoneormoredirectorspursuanttoanyprovisionscontainedinaDirectors’Resolutionwithrespecttosuchseries),butinanyeventwillnotbelessthanthree.Thedirectors,otherthanthosewhomaybeelectedby.SubjecttosuchrightsoftheholdersofanyaclassorseriesofPreferredStock:
,willbe(i)
Priortotheelectionofdirectorsatthe2018annualmeetingofstockholders(the“2018AnnualMeeting”),theBoardDirectorswasdividedintothreeclasses:,ClassI,ClassIIandClassIII.EachdirectorwillserveforatermendingonthethirdannualmeetingofstockholdersoftheCorporationfollowingtheannualmeetingofstockholdersatwhichthatdirectorwaselected;provided,however,that,withthedirectorsfirstdesignatedasinClassIdirectorswillserveforhavingatermexpiringattheannualmeeting2019AnnualMeetingofstockholdersnextfollowingtheendofthecalendaryear2015(the“2019AnnualMeeting”),thedirectorsfirstdesignatedasinClassIIdirectorswillserveforhavingatermexpiringatthe2020annualmeetingofstockholdersnextfollowingtheendofthecalendaryear2016,(the“2020AnnualMeeting”)andthedirectorsfirstdesignatedasinClassIIIdirectorswillserveforhavingatermexpiringattheannualmeetingofstockholdersnextfollowingtheendofthecalendaryear2017.Eachdirectorwillholdofficeuntiltheannualmeetingofstockholdersatwhichthatdirector’stermexpiresand,theforegoingnotwithstanding,eachdirectorwillserveuntilhisorhersuccessorshallhavebeendulyelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.2018AnnualMeeting.
(ii) Followingtheelectionofdirectorsatthe2018AnnualMeeting,theBoardofDirectorswillbedividedintotwoclasses,ClassIandClassII,withthedirectorsinClassIhavingatermexpiringatthe2020AnnualMeetingandthedirectorsinClassIIhavingatermexpiringatthe2019AnnualMeeting.ThedirectorsinClassIwillbethedirectorselectedtotheBoardofDirectorsatthe2018AnnualMeetingandthedirectorsinClassIIwillbethedirectorselectedtotheBoardofDirectorspriortothe2018AnnualMeeting.
(iii) Commencingwiththeelectionofdirectorsatthe2019AnnualMeeting,thedirectorsinClassIIwillbeupforelectionforaone-yeartermendingatthe2020AnnualMeetingand,commencingwiththeelectionofdirectorsatthe2020AnnualMeeting,theBoardofDirectorswillnolongerhaveclassifiedtermsandalldirectorswillbeelectedforatermexpiringatthefollowingannualmeetingofstockholders,orifearlier,theirdeathorresignationandmayberemovedwithorwithoutcauseasprovidedintheDGCL.
Ateachannualelectionpriortothe2020AnnualMeeting,thedirectorschosentosucceedthosewhosetermsthenexpirewillbeofthesameclassasthedirectorstheysucceed,unless,byreasonofanyinterveningchangesintheauthorizednumberofdirectors,theBoardofDirectorsshallhavehasdesignatedoneormoredirectorshipswhosetermthenexpiresasdirectorshipsofanotherclassinordermorenearlytoachieveequalityofnumberofdirectorsamongtheclasses.
Priortothe2020AnnualMeeting,(i)inIntheeventofanychangeintheauthorizednumberofdirectors,eachdirectorthencontinuingtoserveassuchwillneverthelesscontinueasadirectoroftheclassofwhichheorsheisamemberuntiltheexpirationofhisorhercurrentterm,orhisorherpriordeath,resignationorremoval.The,and(ii)theBoardofDirectorswillspecifytheclasstowhichanewlycreateddirectorshipwillbeallocated.
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ElectionofdirectorsneednotbebywrittenballotunlesstheBylawsoftheCorporationsoprovide.
(c)RemovalofDirectors.NodirectoroftheCorporationmayberemovedfromofficeasadirectorbyvoteorotheractionofthestockholdersorotherwise,exceptforcauseoraBoardDetermination(asdefinedbelow),andthenonlybytheaffirmativevoteoftheholdersofatleasteightypercent(80%)ofthevotingpowerofallthenoutstandingsharesofcapitalstockoftheCorporationgenerallyentitledtovoteintheelectionofdirectors,votingtogetherasasingleclass.ExceptasapplicablelawotherwiseprovidesandunlesstheBoardofDirectorshasmadeadeterminationthatremovalisinthebestinterestsoftheCorporation(inwhichcaseafindingofcauseisnotrequiredforremoval),whichdeterminationshallrequiretheaffirmativevoteofatleasteightypercent(80%)ofthedirectorstheninofficeatanymeetingoftheBoardofDirectorscalledforthatpurpose(a“BoardDetermination”),“cause”fortheremovalofadirectorwillbedeemedtoexistonlyifthedirectorwhoseremovalisproposed:(i)hasbeenconvicted,orhasbeengrantedimmunitytotestifyinanyproceedinginwhichanotherhasbeenconvicted,ofafelonybyacourtofcompetentjurisdictionandthatconvictionisnolongersubjecttodirectappeal;(ii)hasbeenfoundtohavebeengrosslynegligentorguiltyofmisconductintheperformanceofhisdutiestotheCorporationinanymatterofsubstantialimportancetotheCorporationby(A)theaffirmativevoteofatleasteightypercent(80%)ofthedirectorstheninofficeatanymeetingoftheBoardofDirectorscalledforthatpurposeor(B)acourtofcompetentjurisdiction;or(iii)hasbeenadjudicatedbyacourtofcompetentjurisdictiontobementallyincompetent,whichmentalincompetencydirectlyaffectshisabilitytoserveasadirectoroftheCorporation.Notwithstandingtheforegoing,wheneverholdersofoutstandingsharesofoneormoreseriesofPreferredStockareentitledtoelectmembersoftheBoardofDirectorsvotingseparatelyasaclasspursuanttotheprovisionsapplicableinthecaseofarrearagesinthepaymentofdividendsorotherdefaultscontainedintheDirectors’ResolutionprovidingfortheestablishmentofanyseriesofPreferredStock,anysuchdirectoroftheCorporationsoelectedmayberemovedinaccordancewiththeprovisionsofthatDirectors’Resolution.TheforegoingprovisionsofthisArticleFIFTHaresubjecttothetermsofanyseriesofPreferredStockwithrespecttothedirectorstobeelectedsolelybytheholdersofsuchseriesofPreferredStock.
(dc)Vacancies.ExceptasaDirectors’ResolutionprovidingfortheestablishmentofanyseriesofPreferredStockmayprovideotherwise,newlycreateddirectorshipsresultingfromanyincreaseinthenumberofdirectorsandanyvacanciesontheBoardofDirectorsresultingfromdeath,resignation,removalorothercausewillbefilledbytheaffirmativevoteofatleastamajorityoftheremainingdirectorstheninoffice,eventhoughlessthanaquorumoftheBoardofDirectors,orbythesoleremainingdirector.Anydirectorelectedinaccordancewiththeprecedingsentencewillholdofficefortheremainderofthefulltermoftheclassofdirectorsinwhichthenewdirectorshipwascreatedorthevacancyoccurredanduntilthatdirector’ssuccessorshallhavebeenelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.ExceptasaDirectors’ResolutionprovidingfortheestablishmentofanyseriesofPreferredStockmayprovideotherwisewithrespecttodirectorselectedpursuanttoanyprovisionscontainedinaDirectors’Resolutionwithrespecttosuchseries,nodecreaseinthenumberofdirectorsconstitutingtheBoardofDirectorswillshortenthetermofanyincumbentdirector.
(ed)AmendmentofBylaws.TheBoardofDirectorsshallhavethepowertoadopt,amendorrepealtheBylawsoftheCorporation.Anyadoption,amendmentorrepealoftheBylawsoftheCorporationbytheBoardofDirectorsshallrequiretheapprovalofatleastamajorityofthedirectorstheninoffice.Thestockholdersshallalsohavethepowertoadopt,amendorrepealtheBylawsoftheCorporationatanyannualmeetingbeforewhichsuchmatterhasbeenproperlybroughtinaccordancewiththeBylawsoftheCorporation,oratanyspecialmeetingifnoticeoftheproposedamendmentiscontainedinthenoticeofsaidspecialmeeting;provided,however,that,inadditiontoanyvoteoftheholdersofanyclassorseriesofcapitalstockoftheCorporationrequiredbylaworbythisCertificateofIncorporation,theaffirmativevoteoftheholdersofatleasteightypercent(80%)ofthevotingpowerofallthenoutstandingsharesofthecapitalstockoftheCorporationentitledtovotegenerallyintheelectionofdirectors,votingtogetherasasingleclass,shallberequiredtoadopt,amendorrepealanyprovisionoftheBylawsoftheCorporation.
(fe)CertainAmendments.NotwithstandinganythinginthisCertificateofIncorporationortheBylawsoftheCorporationtothecontrary,theaffirmativevoteoftheholdersofatleast80%ofthevotingpowerofallthenoutstandingsharesofcapitalstockoftheCorporationentitledtovotegenerallyintheelectionofdirectors,votingtogetherasasingleclass,shallberequiredtoalter,amendoradoptanyprovisioninconsistentwith,ortorepeal,thisArticleFIFTHorArticleSIXTH.
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APPENDIX B*IfProposal4isapproved,ArticleFifthoftheCompany'sRestatedCertificateofIncorporationwillbeamendedassetforthinthisAppendixB.IfProposal1isalsoapproved,ArticleFifthoftheCompany'sRestatedCertificateofIncorporationwillbefurtheramendedassetforthinAppendixA.
FIFTH: (a)Directors.ThebusinessandaffairsoftheCorporationwillbemanagedbyorunderthedirectionoftheBoardofDirectors.InadditiontotheauthorityandpowersconferredontheBoardofDirectorsbytheDGCLorbytheotherprovisionsofthisCertificateofIncorporation,theBoardofDirectorsherebyisauthorizedandempoweredtoexerciseallsuchpowersanddoallsuchactsandthingsasmaybeexercisedordonebytheCorporation,subjecttotheprovisionsoftheDGCL,thisCertificateofIncorporationandanyBylawsoftheCorporation;provided,however,thatnoBylawshereafteradopted,oranyamendmentsthereto,willinvalidateanyprioractoftheBoardofDirectorsthatwouldhavebeenvalidifsuchBylawsoramendmenthadnotbeenadopted.
(b)Number,Election,ClassificationandTermsofDirectors.ThenumberofdirectorswhichwillconstitutethewholeBoardofDirectorsshallbefixedfromtimetotimeexclusivelyby,andmaybeincreasedordecreasedfromtimetotimeexclusivelyby,theaffirmativevoteofatleastamajorityofthedirectorstheninoffice(subjecttosuchrightsofholdersofaseriesofsharesofPreferredStocktoelectoneormoredirectorspursuanttoanyprovisionscontainedinaDirectors’Resolutionwithrespecttosuchseries),butinanyeventwillnotbelessthanthree.Thedirectors,otherthanthosewhomaybeelectedbytheholdersofanyseriesofPreferredStock,willbedividedintothreeclasses:ClassI,ClassIIandClassIII.EachdirectorwillserveforatermendingonthethirdannualmeetingofstockholdersoftheCorporationfollowingtheannualmeetingofstockholdersatwhichthatdirectorwaselected;provided,however,thatthedirectorsfirstdesignatedasClassIdirectorswillserveforatermexpiringattheannualmeetingofstockholdersnextfollowingtheendofthecalendaryear2015,thedirectorsfirstdesignatedasClassIIdirectorswillserveforatermexpiringattheannualmeetingofstockholdersnextfollowingtheendofthecalendaryear2016,andthedirectorsfirstdesignatedasClassIIIdirectorswillserveforatermexpiringattheannualmeetingofstockholdersnextfollowingtheendofthecalendaryear2017.Eachdirectorwillholdofficeuntiltheannualmeetingofstockholdersatwhichthatdirector’stermexpiresand,theforegoingnotwithstanding,eachdirectorwillserveuntilhisorhersuccessorshallhavebeendulyelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.
Ateachannualelection,thedirectorschosentosucceedthosewhosetermsthenexpirewillbeofthesameclassasthedirectorstheysucceed,unless,byreasonofanyinterveningchangesintheauthorizednumberofdirectors,theBoardofDirectorsshallhavedesignatedoneormoredirectorshipswhosetermthenexpiresasdirectorshipsofanotherclassinordermorenearlytoachieveequalityofnumberofdirectorsamongtheclasses.
Intheeventofanychangeintheauthorizednumberofdirectors,eachdirectorthencontinuingtoserveassuchwillneverthelesscontinueasadirectoroftheclassofwhichheorsheisamemberuntiltheexpirationofhisorhercurrentterm,orhisorherpriordeath,resignationorremoval.TheBoardofDirectorswillspecifytheclasstowhichanewlycreateddirectorshipwillbeallocated.
ElectionofdirectorsneednotbebywrittenballotunlesstheBylawsoftheCorporationsoprovide.
(c)RemovalofDirectors.NodirectoroftheCorporationmayberemovedfromofficeasadirectorbyvoteorotheractionofthestockholdersorotherwise,exceptforcauseoraBoardDetermination(asdefinedbelow),andthenonlybytheaffirmativevoteoftheholdersofatleasteightypercent(80%)ofthevotingpowerofallthenoutstandingsharesofcapitalstockoftheCorporationgenerallyentitledtovoteintheelectionofdirectors,votingtogetherasasingleclass.ExceptasapplicablelawotherwiseprovidesandunlesstheBoardofDirectorshasmadeadeterminationthatremovalisinthebestinterestsoftheCorporation(inwhichcaseafindingofcauseisnotrequiredforremoval),whichdeterminationshallrequiretheaffirmativevoteofatleasteightypercent(80%)ofthedirectorstheninofficeatanymeetingoftheBoardofDirectorscalledforthatpurpose(a“BoardDetermination”),“cause”fortheremovalofadirectorwillbedeemedtoexistonlyifthedirectorwhoseremovalisproposed:(i)hasbeenconvicted,orhasbeengrantedimmunitytotestifyinanyproceedinginwhichanotherhasbeenconvicted,ofafelonybyacourtofcompetentjurisdictionandthatconvictionisnolongersubjecttodirectappeal;(ii)hasbeenfoundtohavebeengrosslynegligentorguiltyofmisconductintheperformanceofhisdutiestotheCorporationinanymatterofsubstantialimportancetotheCorporationby(A)theaffirmativevoteofatleasteightypercent(80%)ofthedirectorstheninofficeatanymeetingoftheBoardofDirectorscalledforthatpurposeor(B)acourtofcompetentjurisdiction;or(iii)hasbeenadjudicatedbyacourtofcompetentjurisdictiontobementallyincompetent,whichmentalincompetencydirectlyaffectshisabilitytoserveasadirectoroftheCorporation.Notwithstandingtheforegoing,wheneverholdersofoutstandingsharesofoneormoreseriesofPreferredStockareentitledtoelectmembersoftheBoardofDirectorsvotingseparatelyasaclasspursuanttotheprovisionsapplicableinthecaseofarrearagesinthepaymentofdividendsorotherdefaultscontainedintheDirectors’Resolution
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providingfortheestablishmentofanyseriesofPreferredStock,anysuchdirectoroftheCorporationsoelectedmayberemovedinaccordancewiththeprovisionsofthatDirectors’Resolution.TheforegoingprovisionsofthisArticleFIFTHaresubjecttothetermsofanyseriesofPreferredStockwithrespecttothedirectorstobeelectedsolelybytheholdersofsuchseriesofPreferredStock.
(d)Vacancies.ExceptasaDirectors’ResolutionprovidingfortheestablishmentofanyseriesofPreferredStockmayprovideotherwise,newlycreateddirectorshipsresultingfromanyincreaseinthenumberofdirectorsandanyvacanciesontheBoardofDirectorsresultingfromdeath,resignation,removalorothercausewillbefilledbytheaffirmativevoteofatleastamajorityoftheremainingdirectorstheninoffice,eventhoughlessthanaquorumoftheBoardofDirectors,orbythesoleremainingdirector.Anydirectorelectedinaccordancewiththeprecedingsentencewillholdofficefortheremainderofthefulltermoftheclassofdirectorsinwhichthenewdirectorshipwascreatedorthevacancyoccurredanduntilthatdirector’ssuccessorshallhavebeenelectedandqualifiedoruntilhisorherearlierdeath,resignationorremoval.ExceptasaDirectors’ResolutionprovidingfortheestablishmentofanyseriesofPreferredStockmayprovideotherwisewithrespecttodirectorselectedpursuanttoanyprovisionscontainedinaDirectors’Resolutionwithrespecttosuchseries,nodecreaseinthenumberofdirectorsconstitutingtheBoardofDirectorswillshortenthetermofanyincumbentdirector.
(e)AmendmentofBylaws.TheBoardofDirectorsshallwillhavethepowertoadopt,amendorrepealtheBylawsoftheCorporation.Anyadoption,amendmentorrepealoftheBylawsoftheCorporationbytheBoardofDirectorsshallwillrequiretheapprovalofatleastamajorityofthedirectorstheninoffice.Thestockholdersshallwillalsohavethepowertoadopt,amendorrepealtheBylawsoftheCorporationatanyannualmeetingbeforewhichsuchmatterhasbeenproperlybroughtinaccordancewiththeBylawsoftheCorporation,oratanyspecialmeetingifnoticeoftheproposedamendmentiscontainedinthenoticeofsaidspecialmeeting;meeting;provided,however,that,inadditiontoanyvoteoftheholdersofanyclassorseriesofcapitalstockoftheCorporationrequiredbylaworbythisCertificateofIncorporation,theaffirmativevoteoftheholdersofatleasteightypercent(80%)amajorityofthevotingpowerofallthenoutstandingsharesofthecapitalstockoftheCorporationentitledtovotegenerallyintheelectionofdirectors,votingtogetherasasingleclass,shallwillberequiredtoadopt,amendorrepealanyprovisionoftheBylawsoftheCorporation.
(f)CertainAmendments.NotwithstandinganythinginthisCertificateofIncorporationortheBylawsoftheCorporationtothecontrary,theaffirmativevoteoftheholdersofatleast80%ofthevotingpowerofallthenoutstandingsharesofcapitalstockoftheCorporationentitledtovotegenerallyintheelectionofdirectors,votingtogetherasasingleclass,shallberequiredtoalter,amendoradoptanyprovisioninconsistentwith,ortorepeal,thisArticleFIFTHorArticleSIXTH.
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APPENDIX C
BABCOCK & WILCOX ENTERPRISES, INC.
AMENDED AND RESTATED 2015 LONG-TERM INCENTIVE PLAN(Amended and Restated as of May [__], 2018)
ARTICLE 1
Establishment, Objectives and Duration
1.1 EstablishmentofthePlan. Babcock&WilcoxEnterprises,Inc.,acorporationorganizedandexistingunderthelawsoftheStateofDelaware(hereinafterreferredtoasthe“Company”),establishedtheBabcock&WilcoxEnterprises,Inc.2015Long-TermIncentivePlanasofJune1,2015(the“2015Plan”).TheCompanyamendedandrestatedinitsentiretythe2015Plan,asofMay6,2016,intheformoftheAmendedandRestatedBabcock&WilcoxEnterprises,Inc.2015Long-TermIncentivePlan(the“AmendedandRestated2015Plan”).TheCompanyherebyagainamendsandrestatesinitsentirety,asoftheShareholderApprovalDate,theAmendedandRestatedBabcock&WilcoxEnterprises,Inc.2015Long-TermIncentivePlanintheformofthisdocument(the“SecondAmendedandRestated2015Plan”).Hereinafter,the2015Plan,asamendedandrestatedbytheAmendedandRestated2015PlanandtheSecondAmendedandRestated2015Plan,isreferredtoasthis“Plan”).ThisPlanpermitsthegrantof,amongotherpermittedawards,NonqualifiedStockOptions,IncentiveStockOptions,AppreciationRights,RestrictedStock,RestrictedStockUnits,PerformanceShares,PerformanceUnits,andCashIncentiveAwards(eachashereinafterdefined).Forclarificationpurposes,thetermsandconditionsoftheSecondAmendedandRestated2015Plan,totheextenttheydifferfromthetermsandconditionsofeitherthe2015PlanortheAmendedandRestated2015Plan,shallnotapplytoorotherwiseimpactpreviouslygrantedoroutstandingawardsunderthe2015PlanortheAmendedandRestated2015Plan,asapplicable.
1.2 Objectives. ThisPlanisdesignedtopromotethesuccessandenhancethevalueoftheCompanybylinkingthepersonalinterestsofParticipants(ashereinafterdefined)tothoseoftheCompany’sstockholders,andbyprovidingParticipantswithanincentiveforperformance.ThisPlanisfurtherintendedtoprovideflexibilitytotheCompanyinitsabilitytomotivate,attractandretaintheemploymentand/orservicesofParticipants.
1.3 Duration. The2015PlancommencedonJune1,2015andtheAmendedandRestated2015PlancommencedonMay6,2016.TheSecondAmendedandRestated2015PlanshallcommenceontheShareholderApprovalDate,andthenthisPlanshallremainineffect,subjecttotherightoftheBoardofDirectors(ashereinafterdefined)toamendorterminatethisPlanatanytimepursuanttoArticle16hereof,untilallShares(ashereinafterdefined)subjecttoitshallhavebeenpurchasedoracquiredaccordingtothisPlan’sprovisions;provided,however,thatinnoeventmayanAward(ashereinafterdefined)begrantedunderthisPlanonorafterthetenthanniversaryoftheShareholderApprovalDate,butallgrantsmadepriortosuchdatewillcontinueineffectthereaftersubjecttothetermsthereofandofthisPlan.
ARTICLE 2
DefinitionsAsusedinthisPlan,thefollowingtermsshallhavetherespectivemeaningssetforthbelow:
2.1 “ AppreciationRight” meansarightgrantedpursuanttoArticle7ofthisPlan,andwillincludebothFree-StandingAppreciationRightsandTandemAppreciationRights.
2.2 “ Award” meansagrantunderthisPlanofanyNonqualifiedStockOption,IncentiveStockOption,AppreciationRight,RestrictedStock,RestrictedStockUnit,CashIncentiveAward,PerformanceShareorPerformanceUnit,dividendequivalentsthataresettledinShares,orotherawardgrantedpursuanttoArticle11ofthePlan.
2.3 “ AwardAgreement” meansanagreement,certificate,resolutionorothertypeorformofwritingorotherevidenceapprovedbytheCommitteethatsetsforththetermsandprovisionsapplicabletoanAwardgrantedunderthisPlan.AnAwardAgreementmaybeinanelectronicmedium,maybelimitedtonotationonthebooksandrecordsofthe
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Companyand,unlessotherwisedeterminedbytheCommittee,neednotbesignedbyarepresentativeoftheCompanyoraParticipant.
2.4 “ AwardLimitations” hasthemeaningascribedtosuchterminSection4.2.
2.5 “ BasePrice” meansthepricetobeusedasthebasisfordeterminingtheSpreadupontheexerciseofaFree-StandingAppreciationRight.
2.6 “ BeneficialOwner” or“ BeneficialOwnership” shallhavethemeaningascribedtosuchterminRule13d-3oftheGeneralRulesandRegulationsundertheExchangeAct.
2.7 “ Board” or“ BoardofDirectors” meanstheBoardofDirectorsoftheCompany.
2.8 “ CashIncentiveAward” meansacashawardgrantedpursuanttoArticle9ofthisPlan.
2.9 “ ChangeinControl” means,forpurposesofthisPlanandanyAwards,unlessotherwisesetforthinanapplicableAwardAgreementbytheCommittee,theoccurrenceofanyofthefollowing:
(a)30%OwnershipChange:AnyPerson,otherthananERISA-regulatedpensionplanestablishedbytheCompany,makesanacquisitionofOutstandingVotingStockandis,immediatelythereafter,thebeneficialownerof30%ormoreofthethenOutstandingVotingStock,unlesssuchacquisitionismadedirectlyfromtheCompanyinatransactionapprovedbyamajorityoftheIncumbentDirectors;oranygroupisformedthatisthebeneficialownerof30%ormoreoftheOutstandingVotingStock(otherthanagroupformationforthepurposeofmakinganacquisitiondirectlyfromtheCompanyandapproved(priortosuchgroupformation)byamajorityoftheIncumbentDirectors);or
(b)BoardMajorityChange:IndividualswhoareIncumbentDirectorsceaseforanyreasontoconstituteamajorityofthemembersoftheBoard;or
(c)MajorMergersandAcquisitions:ConsummationofaBusinessCombinationunless,immediatelyfollowingsuchBusinessCombination,(i)allorsubstantiallyalloftheindividualsandentitiesthatwerethebeneficialownersoftheOutstandingVotingStockimmediatelybeforesuchBusinessCombinationbeneficiallyown,directlyorindirectly,morethan51%ofthethenoutstandingsharesofvotingstockoftheparentcorporationresultingfromsuchBusinessCombinationinsubstantiallythesamerelativeproportionsastheirownership,immediatelybeforesuchBusinessCombination,oftheOutstandingVotingStock,(ii)iftheBusinessCombinationinvolvestheissuanceorpaymentbytheCompanyofconsiderationtoanotherentityoritsshareholders,thetotalfairmarketvalueofsuchconsiderationplustheprincipalamountoftheconsolidatedlong-termdebtoftheentityorbusinessbeingacquired(ineachcase,determinedasofthedateofconsummationofsuchBusinessCombinationbyamajorityoftheIncumbentDirectors)doesnotexceed50%ofthesumofthefairmarketvalueoftheOutstandingVotingStockplustheprincipalamountoftheCompany’sconsolidatedlong-termdebt(ineachcase,determinedimmediatelybeforesuchconsummationbyamajorityoftheIncumbentDirectors),(iii)noPerson(otherthananycorporationresultingfromsuchBusinessCombination)beneficiallyowns,directlyorindirectly,30%ormoreofthethenoutstandingsharesofvotingstockoftheparentcorporationresultingfromsuchBusinessCombinationand(iv)amajorityofthemembersoftheboardofdirectorsoftheparentcorporationresultingfromsuchBusinessCombinationwereIncumbentDirectorsoftheCompanyimmediatelybeforeconsummationofsuchBusinessCombination;or
(d)MajorAssetDispositions:ConsummationofaMajorAssetDispositionunless,immediatelyfollowingsuchMajorAssetDisposition,(i)individualsandentitiesthatwerebeneficialownersoftheOutstandingVotingStockimmediatelybeforesuchMajorAssetDispositionbeneficiallyown,directlyorindirectly,morethan70%ofthethenoutstandingsharesofvotingstockoftheCompany(ifitcontinuestoexist)andoftheentitythatacquiresthelargestportionofsuchassets(ortheentity,ifany,thatownsamajorityoftheoutstandingvotingstockofsuchacquiringentity)and(ii)amajorityofthemembersoftheBoard(ifitcontinuestoexist)andoftheentitythatacquiresthelargestportionofsuchassets(ortheentity,ifany,thatownsamajorityoftheoutstandingvotingstockofsuchacquiringentity)wereIncumbentDirectorsoftheCompanyimmediatelybeforeconsummationofsuchMajorAssetDisposition.
Forpurposesofthisdefinitionof“ChangeinControl”,(1) “ Person” meansanindividual,entityorgroup;
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(2) “ group” isusedasitisdefinedforpurposesofSection13(d)(3)oftheExchangeAct;
(3) “ beneficialowner” isusedasitisdefinedforpurposesofRule13d-3undertheExchangeAct;
(4) “ OutstandingVotingStock” meansoutstandingvotingsecuritiesoftheCompanyentitledtovotegenerallyintheelectionofdirectors;andanyspecifiedpercentageorportionoftheOutstandingVotingStock(orofothervotingstock)isdeterminedbasedonthecombinedvotingpowerofsuchsecurities;
(5) “ IncumbentDirector” meansadirectoroftheCompany(x)whowasadirectoroftheCompanyontheEffectiveDateor(y)whobecomesadirectoraftersuchdateandwhoseelection,ornominationforelectionbytheCompany’sshareholders,wasapprovedbyavoteofamajorityoftheIncumbentDirectorsatthetimeofsuchelectionornomination,exceptthatanysuchdirectorwillnotbedeemedanIncumbentDirectorifhisorherinitialassumptionofofficeoccursasaresultofanactualorthreatenedelectioncontestorotheractualorthreatenedsolicitationofproxiesbyoronbehalfofaPersonotherthantheBoard;
(6) “ BusinessCombination” means:
(x)amergerorconsolidationinvolvingtheCompanyoritsstock;or(y)anacquisitionbytheCompany,directlyorthroughoneormoresubsidiaries,ofanotherentityoritsstockorassets.
(7) “ parentcorporationresultingfromaBusinessCombination” meanstheCompanyifitsstockisnotacquiredorconvertedintheBusinessCombinationandotherwisemeanstheentitywhichasaresultofsuchBusinessCombinationownstheCompanyorallorsubstantiallyalltheCompany’sassetseitherdirectlyorthroughoneormoresubsidiaries;and
(8) “ MajorAssetDisposition” meansthesaleorotherdispositioninonetransactionoraseriesofrelatedtransactionsof70%ormoreoftheassetsoftheCompanyanditssubsidiariesonaconsolidatedbasis;andanyspecifiedpercentageorportionoftheassetsoftheCompanywillbebasedonfairmarketvalue,asdeterminedbyamajorityoftheIncumbentDirectors.
However,innoeventshallaChangeinControlbedeemedtohaveoccurredunderthisPlanwithrespecttoaParticipantiftheParticipantispartofapurchasinggroupwhichconsummatesatransactionresultinginaChangeinControl.AParticipantshallbedeemed“partofapurchasinggroup”forpurposesoftheprecedingsentenceiftheParticipantisanequityparticipantinthepurchasingcompanyorgroup(exceptfor:(x)passiveownershipoflessthanthreepercent(3%)ofthestockofthepurchasingcompany;or(y)ownershipofequityparticipationinthepurchasingcompanyorgroupwhichisotherwisenotsignificant,asdeterminedpriortotheChangeinControlbyamajorityofthenon-employeecontinuingdirectors).
2.10 “ Code” meanstheInternalRevenueCodeof1986,asamendedfromtimetotime.
2.11 “ Committee” meanstheCompensationCommitteeoftheBoard,orsuchothercommitteeoftheBoardappointedbytheBoardtoadministerthisPlan,asspecifiedinArticle3hereof.
2.12 “ Consultant” meansanaturalperson(qualifyingasan“employee”forpurposesofFormS-8)whoisneitheranEmployeenoraDirectorandwhoperformsservicesfortheCompanyoraSubsidiarypursuanttoacontract,providedthatthoseservicesarenotinconnectionwiththeofferorsaleofsecuritiesinacapital-raisingtransactionanddonotdirectlyorindirectlypromoteormaintainamarketfortheCompany’ssecurities.
2.13 “ CoveredEmployee” meansaParticipantwhois,orisdeterminedbytheCommitteetobelikelytobecome,a“coveredemployee”withinthemeaningofSection162(m)oftheCode(oranysuccessorprovision).
2.14 “ DateofGrant” meansthedatespecifiedbytheCommitteeonwhichagrantofOptions,AppreciationRights,PerformanceShares,PerformanceUnits,orotherawardscontemplatedbyArticle11ofthisPlan,oragrantorsaleofRestrictedShares,RestrictedStockUnits,orotherawardscontemplatedbyArticle11ofthisPlan,willbecomeeffective(whichdatewillnotbeearlierthanthedateonwhichtheCommitteetakesactionwithrespectthereto).
2.15 “ Director” meansanyindividualwhoisamemberoftheBoardofDirectors;provided,however,thatanymemberoftheBoardofDirectorswhoisemployedbytheCompanyshallbeconsideredanEmployeeunderthisPlan.
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2.16 “ Disability” means,unlessotherwisesetforthinanapplicableAwardAgreementbytheCommitteeandasdeterminedbytheCommitteeinitssolediscretion,aParticipant’sinabilitytoengageinanysubstantialgainfulactivitybyreasonofanymedicallydeterminablephysicalormentalimpairmentthatcanbeexpectedtoresultindeathorcanbeexpectedtolastforacontinuousperiodofnotlessthantwelve(12)months.
2.17 “ EconomicValueAdded” meansnetoperatingprofitaftertaxminustheproductofcapitalandthecostofcapital.
2.18 “ EffectiveDate” shallmeanJune1,2015.
2.19 “ Employee” meansanypersonwhoisemployedbytheCompany.
2.20 “ ERISA” meanstheEmployeeRetirementIncomeSecurityActof1974,asamendedfromtimetotime.
2.21 “ ExchangeAct” meanstheSecuritiesExchangeActof1934,asamended,andtherulesandregulationsthereunder,assuchlaw,rulesandregulationsmaybeamendedfromtimetotime.
2.22 “ FairMarketValue” ofaShareshallmean,asofaparticulardate,(a)ifSharesarelistedonanationalsecuritiesexchange,theclosingsalespriceperShareontheconsolidatedtransactionreportingsystemfortheprincipalnationalsecuritiesexchangeonwhichSharesarelistedonthatdate,or,ifnosuchsaleissoreportedonthatdate,onthelastprecedingdateonwhichsuchasalewassoreported,(b)ifSharesarenotsolistedbutaretradedonanover-the-countermarket,themeanbetweentheclosingbidandaskedpricesforSharesonthatdate,or,iftherearenosuchquotationsavailableforthatdate,onthelastprecedingdateforwhichsuchquotationsareavailable,asreportedbytheNationalQuotationBureauIncorporated,or(c)ifnoSharesarepubliclytraded,avaluedeterminedingoodfaithbytheCommittee,providedthatsuchvalueisincompliancewiththefairmarketvaluepricingrulessetforthinSection409AoftheCode.
2.23 “ FiscalYear” meanstheyearcommencingJanuary1andendingDecember31.
2.24 “ Free-StandingAppreciationRight” meansanAppreciationRightgrantedpursuanttoArticle7ofthisPlanthatisnotgrantedintandemwithanOption.
2.25 “ IncentiveStockOption” or“ ISO” meansanOptiontopurchaseSharesgrantedunderArticle6hereofandwhichisdesignatedasanIncentiveStockOptionandisintendedtomeettherequirementsofCodeSection422,oranysuccessorprovision.
2.26 “ NonqualifiedStockOption” or“ NQSO” meansanoptiontopurchaseSharesgrantedunderArticle6hereofandwhichisnotanIncentiveStockOption.
2.27 “ Officer” meansanEmployeeoftheCompanyincludedinthedefinitionof“Officer”underSection16oftheExchangeActandrulesandregulationspromulgatedthereunderorsuchotherEmployeeswhoaredesignatedas“Officers”bytheBoard.
2.28 “ Option” meansanIncentiveStockOptionoraNonqualifiedStockOption.
2.29 “ OptionPrice” meansthepriceatwhichaSharemaybepurchasedbyaParticipantpursuanttoanOption,asdeterminedbytheCommittee.
2.30 “ Participant” meansaneligibleOfficer,Director,ConsultantorEmployeewhohasbeenselectedforparticipationinthisPlaninaccordancewithSection5.2.
2.31 “ Performance-BasedAward” meansanAward(otherthananOption)toaCoveredEmployeethatisdesignedtoqualifyforthePerformance-BasedException.
2.32 “ Performance-BasedException” meanstheperformance-basedexceptionfromthedeductibilitylimitationsofSection162(m)oftheCode.
2.33 “ PerformancePeriod” means,withrespecttoaPerformance-BasedAward,theperiodoftimeduringwhichtheperformancegoalsspecifiedinsuchAwardmustbemetinordertodeterminethedegreeofpayoutand/or
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vestingwithrespecttothatPerformance-BasedAward,andwithrespecttoanAwardthatisnotaPerformance-BasedAward,theperiodoftimeduringwhichtheperformancegoalsspecifiedinsuchAwardmustbemetinordertodeterminethedegreeofpayoutand/orvestingwithrespecttosuchAward.
2.34 “ PerformanceShare” meansabookkeepingentrythatrecordstheequivalentofoneShareawardedpursuanttoArticle9ofthisPlan.
2.35 “ PerformanceUnit” meansabookkeepingentryawardedpursuanttoArticle9ofthisPlanthatrecordsaunitequivalentto$1.00orsuchothervalueasisdeterminedbytheCommittee.
2.36 “ PeriodofRestriction” meanstheperiodduringwhichthetransferofSharesofRestrictedStockislimitedinsomeway(basedonthepassageoftime,theachievementofperformancegoals,orupontheoccurrenceofothereventsasdeterminedbytheCommittee,initssolediscretion)assetforthintherelatedAwardAgreement,and/ortheSharesaresubjecttoasubstantialriskofforfeiture(withinthemeaningofSection83oftheCode),asprovidedinArticle8hereof.
2.37 “ Person” shallhavethemeaningascribedtosuchterminSection3(a)(9)oftheExchangeActandusedinSection13(d)and14(d)thereof,includinga“group”(asthattermisusedinSection13(d)(3)thereof).
2.38 “ RestrictedStock” meansSharesgrantedorsoldpursuanttoArticle8ofthisPlanastowhichneitherthesubstantialriskofforfeiture(withinthemeaningofSection83oftheCode)northeprohibitionontransfershasexpired.
2.39 “ RestrictedStockUnit” or“ RSU” meansacontractualpromisetodistributetoaParticipantoneShareand/orcashequaltotheFairMarketValueofoneShare,determinedinthesolediscretionoftheCommittee,whichshallbedeliveredtotheParticipantuponsatisfactionofthevestingandanyotherrequirementssetforthintherelatedAwardAgreement.
2.40 “ Retirement” shallhavethemeaningascribedtosuchtermbytheCommittee,assetforthintheapplicableAwardAgreement.
2.41 “ ShareholderApprovalDate” meansMay4,2018,orsuchotherdateonwhichtheCompany’sstockholdersapprovetheSecondAmendedandRestated2015Plan.
2.42 “ Shares” meansthecommonstock,parvalue$0.01pershare,oftheCompany,oranysecurityintowhichsuchcommonstockmaybechangedbyreasonofanytransactionoreventofthetypereferredtoinSection4.4.
2.43 “Spread”meanstheexcessoftheFairMarketValueperShareonthedatewhenanAppreciationRightisexercisedovertheOptionPriceorBasePriceprovidedforintherelatedOptionorFree-StandingAppreciationRight,respectively.
2.44 “ Subsidiary” meansanycorporation,partnership,jointventure,affiliateorotherentityinwhichtheCompanyhasamajorityvotinginterest;provided,however,thatforpurposesofdeterminingwhetheranypersonmaybeaParticipantforpurposesofanygrantofIncentiveStockOptions,“Subsidiary”meansanycorporationinwhichatthetimetheCompanyownsorcontrols,directlyorindirectly,morethan50percentofthetotalcombinedvotingpowerrepresentedbyallclassesofstockissuedbysuchcorporation.
2.45 “ TandemAppreciationRight” meansanAppreciationRightgrantedpursuanttoArticle7ofthisPlanthatisgrantedintandemwithanOption.
2.46 “ VestingPeriod” meanstheperiodduringwhichanAwardgrantedhereunderissubjecttoaserviceorperformance-relatedrestriction,assetforthintherelatedAwardAgreement.
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ARTICLE 3
Administration
3.1 TheCommittee. ThisPlanshallbeadministeredbytheCommittee,asconstitutedfromtimetotime.ThemembersoftheCommitteeshallbeappointedfromtimetotimeby,andshallserveatthediscretionof,theBoardofDirectors.TheCommitteeshallbecomposedofnotlessthanthreemembersoftheBoard,eachofwhomshall(a)meetallapplicableindependencerequirementsoftheNewYorkStockExchange,oriftheSharesarenottradedontheNewYorkStockExchange,theprincipalnationalsecuritiesexchangeonwhichtheSharesaretraded,(b)bea“non-employeedirector”withinthemeaningofExchangeActRule16b-3and(c)bean“outsidedirector”withinthemeaningofSection162(m)oftheCode.TheCommitteemayfromtimetotimedelegatealloranypartofitsauthorityunderthisPlantoanysubcommitteethereof.Totheextentofanysuchdelegation,referencesinthisPlantotheCommitteewillbedeemedtobereferencestosuchsubcommittee.
3.2 AuthorityoftheCommittee. ExceptaslimitedbylaworbytheArticlesofIncorporationorBy-LawsoftheCompany(eachasamendedfromtimetotime),theCommitteeshallhavefullandexclusivepowerandauthoritytotakeallactionsspecificallycontemplatedbythisPlanorthatarenecessaryorappropriateinconnectionwiththeadministrationhereofandshallalsohavefullandexclusivepowerandauthoritytointerpretthisPlanandtoadoptsuchrules,regulationsandguidelinesforcarryingoutthisPlanastheCommitteemaydeemnecessaryorproper.TheCommitteeshallhavefullpowerandsolediscretionto:selectOfficers,Directors,ConsultantsandEmployeeswhoshallbegrantedAwardsunderthisPlan;determinethesizesandtypesofAwards;determinethetimewhenAwardsaretobegrantedandanyconditionsthatmustbesatisfiedbeforeanAwardisgranted;determinethetermsandconditionsofAwardsinamannerconsistentwiththisPlan;determinewhethertheconditionsforearninganAwardhavebeenmetandwhetheraPerformance-BasedAwardwillbepaidattheendofanapplicableperformanceperiod;determinetheguidelinesand/orproceduresforthepaymentorexerciseofAwards;anddeterminewhetheraPerformance-BasedAwardshouldqualify,regardlessofitsamount,asdeductibleinitsentiretyforfederalincometaxpurposes,includingwhetheraPerformance-BasedAwardgrantedtoanOfficershouldqualifyasperformance-basedcompensation.TheCommitteemay,initssolediscretion,acceleratethevestingorexercisabilityofanAward,eliminateormakelessrestrictiveanyrestrictionscontainedinanAward,waiveanyrestrictionorotherprovisionofthisPlanoranyAwardorotherwiseamendormodifyanyAwardinanymannerthatiseither(a)notadversetotheParticipanttowhomsuchAwardwasgrantedor(b)consentedtoinwritingbysuchParticipant,and(c)consistentwiththerequirementsofSection12.2and12.3hereof,andSection409Aand162(m)oftheCode,ifapplicable.TheCommitteemaycorrectanydefectorsupplyanyomissionorreconcileanyinconsistencyinthisPlanorinanyAwardinthemannerandtotheextenttheCommitteedeemsnecessaryordesirabletofurtherthisPlan’sobjectives.Further,theCommitteeshallmakeallotherdeterminationsthatmaybenecessaryoradvisablefortheadministrationofthisPlan.AspermittedbylawandthetermsofthisPlan,theCommitteemaydelegateitsauthorityasidentifiedherein.
3.3 DelegationofAuthority. Totheextentpermittedunderapplicablelaw,theCommitteemaydelegatetotheChiefExecutiveOfficerandtootherseniorofficersoftheCompanyitsdutiesunderthisPlanpursuanttosuchconditionsorlimitationsastheCommitteemayestablish;provided,however,that(a)theCommitteemaynotdelegateanyauthoritytograntAwardstoaDirectororanEmployeewhoisanofficer,directorormorethan10%beneficialownerofanyclassoftheCompany’sequitysecuritiesthatisregisteredpursuanttoSection12oftheExchangeAct,asdeterminedbytheCommitteeinaccordancewithSection16oftheExchangeAct,oranypersonsubjecttoSection162(m)oftheCode,(b)theresolutionprovidingforsuchauthorizationtograntAwardssetsforththetotalnumberofSharessuchofficer(s)maygrantandthetermsofanyAwardthatsuchofficer(s)maygrant,and(c)theofficer(s)shallreportperiodicallytotheCommitteeregardingthenatureandscopeoftheAwardsgrantedpursuanttotheauthoritydelegated.
3.4 DecisionsBinding. Allinterpretations,determinationsanddecisionsmadebytheCommitteepursuanttotheprovisionsofthisPlan,anyAwardAgreementandallrelatedordersandresolutionsoftheCommitteeshallbefinal,conclusiveandbindingonallpersonsconcerned,includingtheCompany,itsstockholders,Officers,Directors,Employees,Consultants,Participantsandtheirestatesandbeneficiaries.NomemberoftheCommitteeshallbeliableforanysuchactionordeterminationmadeingoodfaith.Inaddition,theCommitteeisauthorizedtotakeanyactionitdeterminesinitssolediscretiontobeappropriatesubjectonlytotheexpresslimitationscontainedinthisPlan,andnoauthorizationinanyprovisionofthisPlanisintendedormaybedeemedtoconstitutealimitationontheauthorityoftheCommittee.
3.5 Non-U.S.Participants. InordertofacilitatethemakingofanygrantorcombinationofgrantsunderthisPlan,theCommitteemayprovideforsuchspecialtermsforawardstoParticipantswhoareforeignnationalsorwhoareemployedbytheCompanyoranySubsidiaryoutsideoftheUnitedStatesofAmericaorwhoprovideservicestotheCompanyunderanagreementwithaforeignnationoragency,astheCommitteemayconsidernecessaryorappropriate
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toaccommodatedifferencesinlocallaw,taxpolicyorcustom.Moreover,theCommitteemayapprovesuchsupplementstooramendments,restatementsoralternativeversionsofthisPlan(including,withoutlimitation,sub-plans)asitmayconsidernecessaryorappropriateforsuchpurposes,withouttherebyaffectingthetermsofthisPlanasineffectforanyotherpurpose,andtheSecretaryorotherappropriateofficeroftheCompanymaycertifyanysuchdocumentashavingbeenapprovedandadoptedinthesamemannerasthisPlan.Nosuchspecialterms,supplements,amendmentsorrestatements,however,willincludeanyprovisionsthatareinconsistentwiththetermsofthisPlanasthenineffectunlessthisPlancouldhavebeenamendedtoeliminatesuchinconsistencywithoutfurtherapprovalbytheshareholdersoftheCompany.
ARTICLE 4
Shares Subject to this Plan
4.1 NumberofSharesAvailableforGrantsofAwards. SubjecttoadjustmentasprovidedinSection4.4hereofandtheSharecountingrulessetforthinthisPlan,therearereservedforAwardsunderthisPlan9,300,000Shares(consistingof5,800,000Sharesoriginallyapprovedin2015,2,500,000Sharesapprovedin2016,and1,000,000SharesanticipatedtobeapprovedbytheCompany’sstockholdersattheCompany’s2018AnnualMeetingofStockholders).SharessubjecttoAwardsunderthisPlanthatarecancelled,forfeited,terminatedorexpireunexercised,aresettledincash,orareunearned,inwholeorinpart,shallimmediatelybecomeavailableforthegrantingofAwardsunderthisPlantotheextentofsuchcancellation,forfeiture,termination,expiration,cashsettlementorunearnedamount.Additionally,theCommitteemayfromtimetotimeadoptandobservesuchproceduresconcerningthecountingofSharesagainstthisPlanmaximumasitmaydeemappropriate,providedthatnotwithstandinganythingtothecontrarycontainedherein,thefollowingShareswillnotbeaddedtotheaggregatenumberofSharesavailableforAwardsunderthisSection4.1:(a)ShareswithheldbytheCompany,tenderedorotherwiseusedinpaymentoftheOptionPriceofanOption,(b)ShareswithheldbytheCompany,tenderedorotherwiseusedtosatisfyataxwithholdingobligation,(c)SharessubjecttoanAppreciationRightthatarenotactuallyissuedinconnectionwithitsSharessettlementonexercisethereof,and(d)SharesreacquiredbytheCompanyontheopenmarketorotherwiseusingcashproceedsfromtheexerciseofOptions.TheSharesreservedforissuanceunderthisSection4.1maybeSharesoforiginalissuanceorSharesheldintreasury,oracombinationthereof.
4.2 LimitsonGrantsinAnyFiscalYear. SubjecttoadjustmentasprovidedinSection4.4andtheotherSharecountingrulessetforthinthisPlan,thefollowingrules(“AwardLimitations”)shallapplytograntsofAwardsunderthisPlan(orotherwisewithrespecttoDirectors):
(a)OptionandAppreciationRights.ThemaximumaggregatenumberofSharesissuablepursuanttoAwardsofOptionsand/orAppreciationRightsthatmaybegrantedinanyoneFiscalYearoftheCompanytoanyoneParticipantshallbeOneMillionTwoHundredThousand(1,200,000).
(b)RestrictedStockandRestrictedStockUnits.ThemaximumaggregatenumberofSharessubjecttoPerformance-BasedAwardsofRestrictedStockandRSUsthatmaybegrantedinanyoneFiscalYeartoanyoneParticipantshallbeOneMillionTwoHundredThousand(1,200,000).
(c)PerformanceShares.ThemaximumaggregatenumberofSharessubjecttoPerformance-BasedAwardsofPerformanceSharesthatmaybegrantedinanyoneFiscalYeartoanyoneParticipantshallbeOneMillionTwoHundredThousand(1,200,000).
(d)PerformanceUnits.ThemaximumaggregatecashpayoutwithrespecttoPerformance-BasedAwardsofPerformanceUnitsgrantedinanyoneFiscalYeartoanyoneParticipantshallbe$6,000,000,withsuchcashvaluedeterminedasoftheDateofGrant.
(e)CashIncentiveAwards.ThemaximumaggregatecashpayoutwithrespecttoPerformance-BasedAwardsofCashIncentiveAwardsgrantedinanyoneFiscalYeartoanyoneParticipantshallbe$6,000,000.
(f)OtherAwards.ThemaximumaggregatecashpayoutwithrespecttoPerformance-BasedAwardsofotherawardspayableincashunderArticle11grantedinanyoneFiscalYeartoanyoneParticipantshallbe$6,000,000,withsuchcashvaluedeterminedasoftheDateofGrant,andthemaximumaggregatenumberofSharessubjecttoPerformance-BasedAwardsofotherawardspayableinSharesunderArticle11grantedinanyoneFiscalYeartoanyoneParticipantshallbeOneMillionTwoHundredThousand(1,200,000).
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(g)DirectorCompensation.SubjecttoadjustmentasdescribedinSection4.4,innoeventwillanyDirectorinanyonecalendaryearbegrantedcompensationforsuchservicehavinganaggregatemaximumvalue(measuredattheDateofGrantasapplicable,andcalculatingthevalueofanyAwardsbasedonthegrantdatefairvalueforfinancialreportingpurposes)inexcessof$500,000.
4.3 LimitonIncentiveStockOptions.NotwithstandinganythinginthisArticle4orelsewhereinthisPlantothecontraryandsubjecttoadjustmentasprovidedinSection4.4,themaximumaggregatenumberofSharesactuallyissuedpursuanttotheexerciseofIncentiveStockOptionsshallbe1,200,000.
4.4 Adjustments. TheexistenceofoutstandingAwardsshallnotaffectinanymannertherightorpoweroftheCompanyoritsstockholderstomakeorauthorizeanyoralladjustments,recapitalizations,reorganizationsorotherchangesinthecapitalstockoftheCompanyoritsbusinessoranymergerorconsolidationoftheCompany,oranyissueofbonds,debentures,preferredorpriorpreferencestock(whetherornotsuchissueispriorto,onaparitywithorjuniortotheShares)orthedissolutionorliquidationoftheCompany,oranysaleortransferofalloranypartofitsassetsorbusinessoranyothercorporateactorproceedingofanykind,whetherornotofacharactersimilartothatoftheactsorproceedingsenumeratedabove.
IfthereshallbeanychangeintheSharesoftheCompanyorthecapitalizationoftheCompanythroughmerger,consolidation,reorganization,recapitalization,stockdividend,stocksplit,reversestocksplit,split-up,spin-off,combinationofshares,exchangeofshares,partialorcompleteliquidationorotherdistributionofassets,issuanceofrightsorwarrantstopurchasesecurities,dividendinkindorotherlikechangeincapitalstructureordistribution(otherthannormalcashdividends)tostockholdersoftheCompany,oranyothercorporatetransactionoreventhavinganeffectsimilartoanyoftheforegoing,theCommittee,initssolediscretion,inordertopreventdilutionorenlargementofParticipants’rightsunderthisPlan,shalladjust,insuchmannerasitdeemsequitableandthatcomplieswithSection409AoftheCode,asapplicable,thenumberandkindofSharesthatmaybegrantedasAwardsunderthisPlan,thenumberandkindofSharessubjecttooutstandingAwards,theexerciseorotherpriceapplicabletooutstandingAwards,theAwardLimitations(totheextentthatsuchadjustmentwouldnotcauseanyOptionintendedtoqualifyasanIncentiveStockOptiontofailtosoqualify),theFairMarketValueoftheShares,CashIncentiveAwardsandothervaluedeterminationsandothertermsapplicabletooutstandingAwards;provided,however,thatthenumberofSharessubjecttoanyAwardshallalwaysbeawholenumber.Intheeventofanysuchtransactionorevent,orintheeventofaChangeinControl,theCommitteeshallbeauthorized,initssolediscretion(butsubjecttocompliancewithSection409AoftheCodetotheextentapplicable),to:(a)grantorassumeAwardsbymeansofsubstitutionofnewAwards,asappropriate,forpreviouslygrantedAwardsortoassumepreviouslygrantedAwardsaspartofsuchadjustment;(b)makeprovision,priortothetransaction,fortheaccelerationofthevestingandexercisabilityof,orlapseofrestrictionswithrespectto,AwardsandtheterminationofOptionsthatremainunexercisedatthetimeofsuchtransaction;or(c)providefortheaccelerationofthevestingandexercisabilityofOptionsandthecancellationthereofinexchangeforsuchpaymentastheCommittee,initssolediscretion,determinesisareasonableapproximationofthevaluethereof.Moreover,intheeventofanysuchtransactionoreventorintheeventofaChangeinControl,theCommitteeshallprovideinsubstitutionforanyoralloutstandingAwardsunderthisPlansuchalternativeconsideration(includingcash),ifany,asit,ingoodfaith,shalldeterminetobeequitableinthecircumstancesandshallrequireinconnectiontherewiththesurrenderofallawardssoreplacedinamannerthatcomplieswithSection409AoftheCode.Inaddition,foreachOptionorAppreciationRightwithanOptionPriceorBasePricegreaterthantheconsiderationofferedinconnectionwithanysuchtransactionoreventorChangeinControl,theCommitteemayinitsdiscretionelecttocancelsuchOptionorAppreciationRightwithoutanypaymenttothepersonholdingsuchOptionorAppreciationRight.Notwithstandingtheforegoing,anyadjustmenttothenumberspecifiedinSection4.3inaccordancewiththisSection4.4willbemadeonlyifandtotheextentthatsuchadjustmentwouldnotcauseanyOptionintendedtoqualifyasanISOtofailtosoqualify.
ARTICLE 5
Eligibility and Participation
5.1 Eligibility. PersonseligibletoparticipateinthisPlanincludeallOfficers,Directors,EmployeesandConsultants,asdeterminedinthesolediscretionoftheCommittee.
5.2 ActualParticipation. SubjecttotheprovisionsofthisPlan,theCommitteemay,fromtimetotime,selectfromallOfficers,Directors,EmployeesandConsultantsthosepersonstowhomAwardsshallbegrantedandshalldeterminethenatureandamountofeachAward.NoOfficer,Director,EmployeeorConsultantshallhavetherighttobeselectedforparticipationinthisPlan,or,havingbeensoselected,tobeselectedtoreceiveafutureaward.
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ARTICLE 6
Options
6.1 GrantofOptions. SubjecttothetermsandprovisionsofthisPlan,OptionsmaybegrantedtoParticipantsinsuchnumber,uponsuchterms,atanytime,andfromtimetotime,asshallbedeterminedbytheCommittee;provided,however,thatISOsmaybeawardedonlytoEmployeeswhomeetthedefinitionof“employees”underSection3401(c)oftheCode.SubjecttothetermsofthisPlan,theCommitteeshallhavediscretionindeterminingthenumberofSharessubjecttoOptionsgrantedtoeachParticipant.
6.2 OptionAwardAgreement. EachOptiongrantshallbeevidencedbyanAwardAgreementthatshallspecifytheOptionPrice,thedurationoftheOption,thenumberofSharestowhichtheOptionpertains(subjecttothelimitationssetforthinArticle4ofthisPlan),andsuchotherprovisionsastheCommitteeshalldeterminethatarenotinconsistentwiththetermsofthisPlan.TheAwardAgreementalsoshallspecifywhethertheOptionisintendedtobeanISOoranNQSO(providedthat,intheabsenceofsuchspecification,theOptionshallbeanNQSO).
6.3 OptionPrice. TheOptionPriceforeachgrantofanOptionunderthisPlanshallbeasdeterminedbytheCommittee;provided,however,that,subjecttoanysubsequentadjustmentthatmaybemadepursuanttotheprovisionsofSectioný4.4hereof,theOptionPriceshallbenotlessthanonehundredpercent(100%)oftheFairMarketValueofaShareontheDateofGrant(exceptwithrespecttoawardsunderArticle22ofthisPlan).ExceptasotherwiseprovidedinSectioný4.4hereof,withoutpriorstockholderapproval,norepricingofOptionsawardedunderthisPlanshallbepermittedsuchthatthetermsofoutstandingOptionsmaynotbeamendedtoreducetheOptionPrice;further,exceptasotherwiseprovidedinSection4.4hereof,withoutpriorstockholderapproval,Optionsmaynotbereplacedorregrantedthroughcancellation,inexchangeforcashorotherAwards,oriftheeffectofthereplacementorregrantwouldbetoreducetheOptionPriceoftheOptionsorwouldconstitutearepricingundergenerallyacceptedaccountingprinciplesintheUnitedStates(asapplicabletotheCompany’spublicreporting).
6.4 DurationofOptions. SubjecttoanyearlierexpirationthatmaybeeffectedpursuanttotheprovisionsofSectioný4.4hereof,eachOptionshallexpireatsuchtimeastheCommitteeshalldetermineatthetimeofgrant;provided,however,thatanOptionshallnotbeexercisableonorafterthetenth(10th)anniversarydateofitsgrant.
6.5 ExerciseofOptions. OptionsgrantedunderthisPlanshallbeexercisableatsuchtimesandbesubjecttosuchrestrictionsandconditionsastheCommitteeshallineachinstanceapprove,whichneednotbethesameforeachgrantorforeachParticipant,andmayprovidethatsuchOptionsbeexercisableearlyorcontinuetovest,includingintheeventoftheretirement,deathordisabilityofaParticipantorintheeventofaChangeinControl.TheexerciseofanOptionwillresultinthecancellationonashare-for-sharebasisofanyTandemAppreciationRightauthorizedunderArticle7ofthisPlan.
6.6 Payment. (a)AnyOptiongrantedunderthisArticle6shallbeexercisedbythedeliveryofanoticeofexercisetotheCompanyinthemannerprescribedintherelatedAwardAgreement,settingforththenumberofShareswithrespecttowhichtheOptionistobeexercised,andeither(i)accompaniedbyfullpaymentoftheOptionPricefortheSharesissuableonsuchexerciseor(ii)exercisedinamannerthatisinaccordancewithapplicablelawandthe“cashlessexercise”procedures(ifany)approvedbytheCommitteeinvolvingabrokerordealer.
(b)TheOptionPriceuponexerciseofanyOptionshallbepayabletotheCompanyinfull,subjecttoapplicablelaw:(i)incashorbycheckacceptabletotheCompanyorbywiretransferofimmediatelyavailablefunds;(ii)bytenderingpreviouslyacquiredSharesownedbytheParticipantshavingavalueatthetimeofexerciseequaltothetotalOptionPrice;(iii)subjecttoanyconditionsorlimitationsestablishedbytheCommittee,bytheCompany’swithholdingofSharesotherwiseissuableuponexerciseofanOptionpursuanttoa“netexercise”arrangement;(iv)byacombinationofsuchmethodsofpayment;or(v)anyothermethodapprovedbytheCommittee,initssolediscretion.
(c)Subjecttoanygoverningrulesorregulations,assoonaspracticableafterreceiptofanotificationofexerciseandfullpayment,theCompanyshalldelivertotheParticipant,intheParticipant’sname,SharecertificatesinanappropriateamountbaseduponthenumberofSharespurchasedundertheOption.
6.7 RestrictionsonShareTransferability. TheCommitteemayimposesuchrestrictionsonanySharesacquiredpursuanttotheexerciseofanOptiongrantedunderthisPlanasitmaydeemadvisable,including,withoutlimitation,restrictionsunderapplicableU.S.federalsecuritieslaws,undertherequirementsofanystockexchangeor
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marketuponwhichsuchSharesarethenlistedand/ortraded,andunderanyblueskyorstatesecuritieslawsapplicabletosuchShares.
6.8 TerminationofEmployment,ServiceorDirectorship. EachOptionAwardAgreementshallsetforththeextenttowhichtheParticipantshallhavetherighttoexercisetheOptionfollowingterminationoftheParticipant’semployment,serviceordirectorshipwiththeCompanyand/oritsSubsidiaries.SuchprovisionsshallbedeterminedinthesolediscretionoftheCommittee,shallbeincludedineachAwardAgreemententeredintowithaParticipantwithrespecttoanOptionAward,neednotbeuniformamongallOptionsgrantedpursuanttothisArticle6andmayreflectdistinctionsbasedonthereasonsfortermination.
6.9 TransferabilityofOptions.
(a)IncentiveStockOptions.NoISOgrantedunderthisPlanmaybesold,transferred,pledged,assignedorotherwisealienatedorhypothecated,otherthanbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorderasdefinedbytheCodeorTitleIofERISA,ortheregulationsthereunder.Further,allISOsgrantedtoaParticipantunderthisPlanshallbeexercisableduringhisorherlifetimeonlybysuchParticipant.
(b)NonqualifiedStockOptions.ExceptasotherwiseprovidedinaParticipant’sAwardAgreement,NQSOsgrantedunderthisPlanmaynotbesold,transferred,pledged,assignedorotherwisealienatedorhypothecated,otherthanbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorderasdefinedbytheCodeorTitleIofERISA,ortheregulationsthereunder.Further,exceptasotherwiseprovidedinaParticipant’sAwardAgreement,allNQSOsgrantedtoaParticipantunderthisPlanshallbeexercisableduringhisorherlifetimeonlybysuchParticipant.
6.10 NoDividendRights. OptionsgrantedunderthisPlanmaynotprovideforanydividendordividendequivalentsthereon.
6.11 DeferredPayment. Totheextentpermittedbylaw,anygrantmayprovidefordeferredpaymentoftheOptionPricefromtheproceedsofsalethroughabankorbrokeronadatesatisfactorytotheCompanyofsomeorallofthesharestowhichsuchexerciserelates.
6.12 PerformanceGoals.AnygrantofOptionsmayspecifyperformancegoalsthatmustbeachievedasaconditiontotheexerciseofsuchOptions.
ARTICLE 7
Appreciation Rights
7.1 GrantofAppreciationRights. SubjecttothetermsandprovisionsofthisPlan,theCommitteemay,fromtimetotimeanduponsuchtermsandconditionsasitmaydetermine,authorizethegranting(a)toanyOptionee,ofTandemAppreciationRightsinrespectofOptionsgrantedhereunder,and(b)toanyParticipant,ofFree-StandingAppreciationRights.ATandemAppreciationRightwillbearightoftheOptionee,exercisablebysurrenderoftherelatedOption,toreceivefromtheCompanyanamountdeterminedbytheCommittee,whichwillbeexpressedasapercentageoftheSpread(notexceeding100percent)atthetimeofexercise.TandemAppreciationRightsmaybegrantedatanytimepriortotheexerciseorterminationoftherelatedOptions;provided,however,thataTandemAppreciationRightawardedinrelationtoanIncentiveStockOptionmustbegrantedconcurrentlywithsuchIncentiveStockOption.AFree-StandingAppreciationRightwillbearightoftheParticipanttoreceivefromtheCompanyanamountdeterminedbytheCommittee,whichwillbeexpressedasapercentageoftheSpread(notexceeding100percent)atthetimeofexercise.
7.2 AppreciationRightsAwardAgreement. EachAppreciationRightgrantshallbeevidencedbyanAwardAgreementthatshallspecifytheBasePrice(ifapplicable),thedurationoftheAppreciationRight,identifytherelatedOptions(ifapplicable),andsuchotherprovisionsastheCommitteeshalldeterminethatarenotinconsistentwiththetermsofthisPlan.
7.3 Payment. EachgrantofAppreciationRightsmayspecifythattheamountpayableonexerciseofanAppreciationRight(a)willbepaidbytheCompanyincash,Sharesoranycombinationthereofand(b)maynotexceedamaximumspecifiedbytheCommitteeattheDateofGrant.
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7.4 WaitingPeriodandExercisability.AnygrantofAppreciationRightsmayspecifywaitingperiodsbeforeexerciseandpermissibleexercisedatesorperiods.Furthermore,eachgrantmayspecifytheperiodorperiodsofcontinuousservicebytheParticipantwiththeCompanyoranySubsidiarythatisnecessarybeforetheAppreciationRightsorinstallmentsthereofwillbecomeexercisable.Moreover,anygrantofAppreciationRightsmayprovidethatsuchAppreciationRightsbeexercisableearlyorcontinuetovest,includingintheeventoftheretirement,deathordisabilityofaParticipantorintheeventofaChangeinControl.
7.5 PerformanceGoals.AnygrantofAppreciationRightsmayspecifyperformancegoalsthatmustbeachievedasaconditionoftheexerciseofsuchAppreciationRights.
7.6 TerminationofEmployment,ServiceorDirectorship. EachAppreciationRightsAwardAgreementshallsetforththeextenttowhichtheParticipantshallhavetherighttoexercisetheAppreciationRightsfollowingterminationoftheParticipant’semployment,serviceordirectorshipwiththeCompanyand/oritsSubsidiaries.SuchprovisionsshallbedeterminedinthesolediscretionoftheCommittee,shallbeincludedineachAwardAgreemententeredintowithaParticipantwithrespecttoanAppreciationRightsAward,neednotbeuniformamongallAppreciationRightsgrantedpursuanttothisArticle7andmayreflectdistinctionsbasedonthereasonsfortermination.
7.7 TandemAppreciationRights. AnygrantofTandemAppreciationRightswillprovidethatsuchTandemAppreciationRightsmaybeexercisedonlyatatimewhentherelatedOptionisalsoexercisableandatatimewhentheSpreadispositive,andbysurrenderoftherelatedOptionforcancellation.SuccessivegrantsofTandemAppreciationRightsmaybemadetothesameParticipantregardlessofwhetheranyTandemAppreciationRightspreviouslygrantedtotheParticipantremainunexercised.
7.8 NoDividendRights. AppreciationRightsgrantedunderthisPlanmaynotprovideforanydividendsordividendequivalentsthereon.
7.9 Transferability.ExceptasotherwiseprovidedinaParticipant’sAwardAgreement,AppreciationRightsgrantedunderthisPlanmaynotbesold,transferred,pledged,assignedorotherwisealienatedorhypothecated,otherthanbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorderasdefinedbytheCodeorTitleIofERISA,ortheregulationsthereunder.Further,exceptasotherwiseprovidedinaParticipant’sAwardAgreement,allAppreciationRightsgrantedtoaParticipantunderthisPlanshallbeexercisableduringhisorherlifetimeonlybysuchParticipant.
7.10 Free-StandingAppreciationRights.ThesetermsapplyonlytoFree-StandingAppreciationRights:
(a)BasePrice.EachgrantwillspecifyinrespectofeachFree-StandingAppreciationRightaBasePrice,which(exceptwithrespecttoawardsunderArticle22ofthisPlan)maynotbelessthantheFairMarketValueperShareontheDateofGrant.ExceptasotherwiseprovidedinSection4.4hereof,withoutpriorstockholderapproval,norepricingofAppreciationRightsawardedunderthisPlanshallbepermittedsuchthatthetermsofoutstandingAppreciationRightsmaynotbeamendedtoreducetheBasePrice;further,exceptasotherwiseprovidedinSection4.4hereof,withoutpriorstockholderapproval,AppreciationRightsmaynotbereplacedorregrantedthroughcancellation,inexchangeforcashorotherAwards,oriftheeffectofthereplacementorregrantwouldbetoreducetheBasePriceoftheAppreciationRightsorwouldconstitutearepricingundergenerallyacceptedaccountingprinciplesintheUnitedStates(asapplicabletotheCompany’spublicreporting).
(b)Duration. NoFree-StandingAppreciationRightgrantedunderthisPlanmaybeexercisedmorethan10yearsfromtheDateofGrant.
ARTICLE 8
Restricted Stock
8.1 GrantofRestrictedStock. SubjecttothetermsandprovisionsofthisPlan,theCommitteeatanytime,andfromtimetotime,maygrantorsellSharesasRestrictedStock(“SharesofRestrictedStock”)toParticipantsinsuchamountsastheCommitteeshalldetermine.
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8.2 RestrictedStockAwardAgreement. EachAwardofRestrictedStockshallbeevidencedbyanAwardAgreementthatshallspecifythePeriodofRestriction,thenumberofSharesofRestrictedStockgrantedortobesold,andsuchotherprovisionsastheCommitteeshalldetermine.
8.3 Transferability. ExceptasprovidedintheParticipant’srelatedAwardAgreementand/orthisArticle8,theSharesofRestrictedStockgrantedorsoldtoaParticipantunderthisPlanmaynotbesold,transferred,pledged,assignedorotherwisealienatedorhypothecateduntiltheendoftheapplicablePeriodofRestrictionestablishedbytheCommitteeandspecifiedintherelatedAwardAgreemententeredintowiththatParticipant,oruponearliersatisfactionofanyotherconditions,asspecifiedbytheCommitteeinitssolediscretionandsetforthintheAwardAgreement.DuringtheapplicablePeriodofRestriction,allrightswithrespecttotheRestrictedStockgrantedtoaParticipantunderthisPlanshallbeavailableduringhisorherlifetimeonlytosuchParticipant.AnyattemptedassignmentofRestrictedStockinviolationofthisSection8.3shallbenullandvoid.
8.4 OtherRestrictions. (a)TheCommitteemayimposesuchotherconditionsand/orrestrictionsonanySharesofRestrictedStockgrantedpursuanttothisPlanasitmaydeemadvisable,including,withoutlimitation,arequirementthatParticipantspayastipulatedpurchasepriceforeachShareofRestrictedStock,restrictionsbasedupontheachievementofspecificperformancegoals,time-basedrestrictionsonvestingfollowingtheattainmentoftheperformancegoalsand/orrestrictionsunderapplicableU.S.federalorstatesecuritieslaws.Further,agrantorsaleofSharesofRestrictedStockmayprovideforcontinuedvestingorearlierterminationofrestrictions,includingintheeventoftheretirement,deathordisabilityofaParticipantorintheeventofaChangeinControl;provided,thatnosuchadjustmentwillbemadeinthecaseofaPerformance-BasedAward(otherthaninconnectionwiththedeathordisabilityoftheParticipantoraChangeinControl)wheresuchactionwouldresultinthelossoftheotherwiseavailableexemptionoftheawardunderSection162(m)oftheCode.
(b)UnlessotherwisedirectedbytheCommittee,(i)allcertificatesrepresentingSharesofRestrictedStockwillbeheldincustodybytheCompanyuntilallrestrictionsthereonwillhavelapsed,togetherwithastockpowerorpowersexecutedbytheParticipantinwhosenamesuchcertificatesareregistered,endorsedinblankandcoveringsuchsharesor(ii)allSharesofRestrictedStockwillbeheldattheCompany’stransferagentinbookentryformwithappropriaterestrictionsrelatingtothetransferofsuchSharesofRestrictedStock.
8.5 RemovalofRestrictions. ExceptasotherwiseprovidedinthisArticle8,SharesofRestrictedStockcoveredbyeachRestrictedStockAwardmadeunderthisPlanshallbecomefreelytransferablebytheParticipantafterallconditionsandrestrictionsapplicabletosuchShareshavebeensatisfiedorhavelapsed.
8.6 VotingRights. TotheextentpermittedbytheCommitteeorrequiredbylaw,ParticipantsholdingSharesofRestrictedStockgrantedhereundermayexercisefullvotingrightswithrespecttothoseSharesduringtheapplicablePeriodofRestriction.
8.7 Dividends. DuringtheapplicablePeriodofRestriction,ParticipantsholdingSharesofRestrictedStockgrantedorsoldhereundershall,unlesstheCommitteeotherwisedetermines,becreditedwithcashdividendspaidwithrespecttotheShares,inamannerdeterminedbytheCommitteeinitssolediscretion.TheCommitteemayapplyanyrestrictionstothedividendsthatitdeemsappropriate;provided,however,thatdividendsorotherdistributionsonSharesofRestrictedStockwillinallcasesbedeferreduntilandpaidcontingentuponthevestingoftheRestrictedStock.
8.8 TerminationofEmployment,ServiceorDirectorship. EachRestrictedStockAwardAgreementshallsetforththeextenttowhichtheParticipantshallhavetherighttoreceiveunvestedSharesofRestrictedStockfollowingterminationoftheParticipant’semployment,serviceordirectorshipwiththeCompanyand/oritsSubsidiaries.SuchprovisionsshallbedeterminedinthesolediscretionoftheCommittee,shallbeincludedineachAwardAgreemententeredintowithaParticipantwithrespecttoSharesofRestrictedStock,neednotbeuniformamongallSharesofRestrictedStockgrantedpursuanttothisArticle8andmayreflectdistinctionsbasedonthereasonsfortermination.
ARTICLE 9
Performance Units, Performance Shares and Cash Incentive Awards
9.1 GrantofPerformanceUnits,PerformanceSharesandCashIncentiveAwards. SubjecttothetermsofthisPlan,PerformanceUnits,PerformanceSharesandCashIncentiveAwardsmaybegrantedtoParticipantsinsuchamountsanduponsuchterms,andatanytimeandfromtimetotime,asshallbedeterminedbytheCommittee.
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9.2 AwardAgreement. EachAwardofPerformanceUnits,PerformanceSharesorCashIncentiveAwardshallbeevidencedbyanAwardAgreementthatshallspecifythePerformancePeriod,thenumberofPerformanceUnitsorPerformanceSharesoramountofCashIncentiveAwardgranted,andsuchotherprovisionsastheCommitteeshalldetermine.Further,thePerformancePeriodmaybesubjecttoearlierlapseormodification,includingintheeventofretirement,deathordisabilityofaParticipantorintheeventofaChangeinControl;furtherprovided,thatnosuchadjustmentwillbemadeinthecaseofaPerformance-BasedAward(otherthaninconnectionwiththedeathordisabilityoftheParticipantoraChangeinControl)wheresuchactionwouldresultinthelossoftheotherwiseavailableexemptionoftheawardunderSection162(m)oftheCode.Insuchevent,theAwardAgreementwillspecifythetimeandtermsofdelivery.
9.3 ValueofPerformanceUnits,PerformanceSharesandCashIncentiveAwards. EachPerformanceUnitshallhaveaninitialvaluethatisestablishedbytheCommitteeatthetimeofgrant.EachPerformanceShareshallhaveaninitialvalueequaltoonehundredpercent(100%)oftheFairMarketValueofaShareonthedateofgrant.TheCommitteeshallsetperformancegoalsinitsdiscretionthat,dependingontheextenttowhichtheyaremet,willdeterminethenumberand/orvalueofPerformanceUnits,PerformanceSharesorCashIncentiveAwardswhichwillbepaidouttotheParticipant.
9.4 FormandTimingofPaymentofPerformanceUnits,PerformanceSharesandCashIncentiveAwards. SubjecttotheprovisionsofArticle13hereoforasotherwisedeterminedbytheCommitteeintheAwardAgreement,paymentofearnedPerformanceUnits,PerformanceSharesorCashIncentiveAwardstoaParticipantshallbemadenolaterthanMarch15followingtheendofthecalendaryearinwhichsuchPerformanceUnits,PerformanceSharesorCashIncentiveAwardsvest,orassoonasadministrativelypracticablethereafterifpaymentisdelayedduetounforeseeableevents.SubjecttothetermsofthisPlan,theCommittee,initssolediscretion,maypayearnedPerformanceUnitsorPerformanceSharesintheformofcashorinShares(orinacombinationthereof)thathaveanaggregateFairMarketValueequaltothevalueoftheearnedPerformanceUnitsorPerformanceSharesatthecloseoftheapplicablePerformancePeriod.AnySharesissuedortransferredtoaParticipantforthispurposemaybegrantedsubjecttoanyrestrictionsthataredeemedappropriatebytheCommittee.
9.5 TerminationofEmployment,ServiceorDirectorship. EachAwardAgreementprovidingforaPerformanceUnit,PerformanceShareorCashIncentiveAwardshallsetforththeextenttowhichtheParticipantshallhavetherighttoreceiveapayoutofcashorShareswithrespecttounvestedPerformanceUnits,PerformanceSharesorCashIncentiveAwardfollowingterminationoftheParticipant’semployment,serviceordirectorshipwiththeCompanyand/oritsSubsidiaries.SuchprovisionsshallbedeterminedinthesolediscretionoftheCommittee,shallbeincludedintheAwardAgreemententeredintowiththeParticipant,neednotbeuniformamongallAwardsofPerformanceUnits,PerformanceSharesorCashIncentiveAwardsgrantedpursuanttothisArticle9andmayreflectdistinctionsbasedonthereasonsfortermination.
9.6 Transferability. ExceptasotherwiseprovidedinaParticipant’srelatedAwardAgreement,PerformanceUnits,PerformanceSharesandCashIncentiveAwardsmaynotbesold,transferred,pledged,assignedorotherwisealienatedorhypothecated,otherthanbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorderasdefinedbytheCodeorTitleIofERISA,ortheregulationsthereunder.Further,exceptasotherwiseprovidedinaParticipant’srelatedAwardAgreement,aParticipant’srightswithrespecttoPerformanceUnits,PerformanceSharesorCashIncentiveAwardsgrantedtothatParticipantunderthisPlanshallbeavailableduringtheParticipant’slifetimeonlytotheParticipant.AnyattemptedassignmentofPerformanceUnits,PerformanceSharesorCashIncentiveAwardinviolationofthisSection9.6shallbenullandvoid.
9.7 VotingRightsandDividends. DuringtheapplicableVestingPeriod,ParticipantsholdingPerformanceUnitsorPerformanceSharesshallnothavevotingrightswithrespecttotheSharesunderlyingsuchunitsorshares.DuringtheapplicableVestingPeriod,ParticipantsholdingPerformanceUnitsorPerformanceSharesgrantedhereundershall,unlesstheCommitteeotherwisedetermines,becreditedwithdividendequivalents,intheformofcashoradditionalPerformanceUnitsorPerformanceShares(asdeterminedbytheCommitteeinitssolediscretion),ifacashdividendispaidwithrespecttotheShares.TheextenttowhichdividendequivalentsshallbecreditedshallbedeterminedinthesolediscretionoftheCommittee.SuchdividendequivalentsshallbesubjecttoaVestingPeriodequaltotheremainingVestingPeriodofthePerformanceUnitsorPerformanceShareswithrespecttowhichthedividendequivalentsarepaid.DividendequivalentscreditedwithrespecttoPerformanceUnitsorPerformanceSharesthatdonotvestshallbeforfeited.
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ARTICLE 10
Restricted Stock Units
10.1 GrantofRSUs. SubjecttothetermsandprovisionsofthisPlan,theCommitteeatanytime,andfromtimetotime,maygrantorsellRSUstoeligibleParticipantsinsuchamountsastheCommitteeshalldetermine.
10.2 RSUAwardAgreement. EachRSUAwardtoaParticipantshallbeevidencedbyanRSUAwardAgreemententeredintowiththatParticipant,whichshallspecifytheVestingPeriod,thenumberofRSUsgranted,thetimeandmannerofpaymentforearnedRSUs,andsuchotherprovisionsastheCommitteeshalldetermineinitssolediscretion.Further,anygrantorsaleofRestrictedStockUnitsmayprovideforcontinuedvestingortheearlyterminationofrestrictions,includingintheeventofretirement,deathordisabilityofaParticipantorintheeventofaChangeofControl;furtherprovided,thatnoawardofRestrictedStockUnitsintendedtobeaPerformance-BasedAwardwillprovideforsuchearlylapseormodificationoftheRestrictionPeriod(otherthaninconnectionwiththedeathordisabilityoftheParticipantoraChangeinControl)totheextentsuchprovisionswouldcausesuchawardtofailtobeaPerformance-BasedAward.
10.3 Transferability. ExceptasprovidedinaParticipant’srelatedAwardAgreement,RSUsgrantedhereundermaynotbesold,transferred,pledged,assignedorotherwisealienatedorhypothecated,otherthanbywillorbythelawsofdescentanddistributionorpursuanttoaqualifieddomesticrelationsorderasdefinedbytheCodeorTitleIofERISA,ortheregulationsthereunder.Further,exceptasotherwiseprovidedinaParticipant’srelatedAwardAgreement,aParticipant’srightswithrespecttoanRSUAwardgrantedtothatParticipantunderthisPlanshallbeavailableduringhisorherlifetimeonlytosuchParticipant.AnyattemptedassignmentofanRSUAwardinviolationofthisSection10.3shallbenullandvoid.
10.4 FormandTimingofDelivery. IfaParticipant’sRSUAwardAgreementprovidesforpaymentincash,paymentequaltotheFairMarketValueoftheSharesunderlyingtheRSUAward,calculatedasofthelastdayoftheapplicableVestingPeriod,shallbemadeinasinglelump-sumpayment.IfaParticipant’sRSUAwardAgreementprovidesforpaymentinShares,theSharesunderlyingtheRSUAwardshallbedeliveredtotheParticipant.SubjecttotheprovisionsofArticle13hereoforasotherwisedeterminedbytheCommitteeintheAwardAgreement,suchpaymentofcashorSharesshallbemadenolaterthanMarch15followingtheendofthecalendaryearduringwhichtheRSUAwardvests,orassoonaspracticablethereafterifpaymentisdelayedduetounforeseeableevents.SuchdeliveredSharesshallbefreelytransferablebytheParticipant.
10.5 VotingRightsandDividends. DuringtheapplicableVestingPeriod,ParticipantsholdingRSUsshallnothavevotingrightswithrespecttotheSharesunderlyingsuchRSUs.DuringtheapplicableVestingPeriod,ParticipantsholdingRSUsgrantedhereundershall,unlesstheCommitteeotherwisedetermines,becreditedwithdividendequivalents,intheformofcashoradditionalRSUs(asdeterminedbytheCommitteeinitssolediscretion),ifacashdividendispaidwithrespecttotheShares.TheextenttowhichdividendequivalentsshallbecreditedshallbedeterminedinthesolediscretionoftheCommittee.SuchdividendequivalentsshallbesubjecttoaVestingPeriodequaltotheremainingVestingPeriodoftheRSUswithrespecttowhichthedividendequivalentsarepaid.DividendequivalentscreditedwithrespecttoRSUsthatdonotvestshallbeforfeited.
10.6 TerminationofEmployment,ServiceorDirectorship. EachRSUAwardAgreementshallsetforththeextenttowhichtheapplicableParticipantshallhavetherighttoreceiveapayoutofcashorShareswithrespecttounvestedRSUsfollowingterminationoftheParticipant’semployment,serviceordirectorshipwiththeCompanyand/oritsSubsidiaries.SuchprovisionsshallbedeterminedinthesolediscretionoftheCommittee,shallbeincludedineachAwardAgreemententeredintowithaParticipantwithrespecttoRSUs,neednotbeuniformamongallRSUsgrantedpursuanttothisArticle10andmayreflectdistinctionsbasedonthereasonsfortermination.
ARTICLE 11
Other Awards
11.1 GrantofOtherAwards.SubjecttoapplicablelawandthelimitssetforthinArticle4ofthisPlan,theCommitteemaygranttoanyParticipantsuchotherawardsthatmaybedenominatedorpayablein,valuedinwholeorinpartbyreferenceto,orotherwisebasedon,orrelatedto,Sharesorfactorsthatmayinfluencethevalueofsuchshares,including,withoutlimitation,convertibleorexchangeabledebtsecurities,otherrightsconvertibleorexchangeableintoShares,purchaserightsforShares,awardswithvalueandpaymentcontingentuponperformanceoftheCompanyor
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specifiedSubsidiaries,affiliatesorotherbusinessunitsthereoforanyotherfactorsdesignatedbytheCommittee,andawardsvaluedbyreferencetothebookvalueoftheSharesorthevalueofsecuritiesof,ortheperformanceofspecifiedSubsidiariesoraffiliatesorotherbusinessunitsoftheCompany.TheCommitteewilldeterminethetermsandconditionsofsuchawards.SharesdeliveredpursuanttoanawardinthenatureofapurchaserightgrantedunderthisArticle11willbepurchasedforsuchconsideration,paidforatsuchtime,bysuchmethods,andinsuchforms,including,withoutlimitation,Shares,otherawards,notesorotherproperty,astheCommitteedetermines.
11.2 TandemAwards.Cashawards,asanelementof,orsupplementto,anyotherawardgrantedunderthisPlan,mayalsobegrantedpursuanttothisArticle11.
11.3 SharesasBonus.TheCommitteemaygrantSharesasabonus,ormaygrantotherawardsinlieuofobligationsoftheCompanyoraSubsidiarytopaycashordeliverotherpropertyunderthisPlanorunderotherplansorcompensatoryarrangements,subjecttosuchtermsaswillbedeterminedbytheCommitteeinamannerthatcomplieswithSection409AoftheCode.
11.4 EarlyTerminations.AnygrantofanawardunderthisArticle11mayprovideforcontinuedvestingortheearlyvestingorterminationofrestrictions,includingintheeventofretirement,deathordisabilityofaParticipantorintheeventofaChangeinControl;furtherprovided,thatnoawardgrantedunderthisArticle11thatisintendedtobeaPerformance-BasedAwardwillprovideforsuchearlylapseormodification(otherthaninconnectionwiththedeathordisabilityoftheParticipantoraChangeinControl)totheextentsuchprovisionswouldcausesuchawardtofailtobeaPerformance-BasedAward.Insuchevent,theAwardAgreementwillspecifythetimeandtermsofdelivery.
11.4 Dividends and Dividend Equivalents .TheCommitteemay,atoraftertheDateofGrant,authorizethepaymentofdividendsordividendequivalentsonAwardsgrantedunderthisArticle11onadeferredandcontingentbasis,eitherincashorinadditionalShares;provided,however,thatdividendequivalentsorotherdistributionsonSharesunderlyingAwardsgrantedunderthisArticle11willbedeferreduntilandpaidcontingentupontheearningofsuchAwards.
ARTICLE 12
Performance Measures
12.1 PerformanceMeasures. UnlessanduntiltheCommitteeproposesandstockholdersapproveachangeinthegeneralperformancemeasuressetforthinthisArticle12,theattainmentofwhichmaydeterminethedegreeofpayoutand/orvestingwithrespecttoAwardstoCoveredEmployeeswhicharedesignedtoqualifyforthePerformance-BasedException,theperformancemeasure(s)tobeusedforpurposesofsuchPerformance-BasedAwardsshallbechosenfromamongthefollowingalternatives(includingrelativeorgrowthachievementregardingsuchalternatives):(a)CashFlow(includingoperatingcashflowandfreecashflow);(b)CashFlowReturnonCapital;(c)CashFlowReturnonAssets;(d)CashFlowReturnonEquity;(e)NetIncome;(f)ReturnonCapital;(g)ReturnonInvestedCapital;(h)ReturnonAssets;(i)ReturnonEquity;(j)SharePrice;(k)EarningsPerShare(basicordiluted);(l)EarningsBeforeInterestandTaxes;(m)EarningsBeforeInterest,Taxes,DepreciationandAmortization;(n)TotalandRelativeShareholderReturn;(o)OperatingIncome;(p)ReturnonNetAssets;(q)GrossorOperatingMargins;(r)Safety;and(s)EconomicValueAddedorEVA.
SubjecttothetermsofthisPlan,eachofthesemeasuresmaybedescribedintermsofCompany-wideobjectivesorobjectivesthatarerelatedtotheperformanceoftheindividualParticipantorofoneormoreoftheSubsidiaries,divisions,departments,regions,functionsorotherorganizationalunitswithintheCompanyoritsSubsidiaries.Eachofthesemeasuresmaybemaderelativetotheperformanceofothercompaniesorsubsidiaries,divisions,departments,regions,functionsorotherorganizationalunitswithinsuchothercompanies,andmaybemaderelativetoanindexoroneormoreoftheperformanceobjectivesthemselves.Furthermore,inthecaseofaPerformance-BasedAward,eachperformancemeasurewillbeobjectivelydeterminabletotheextentrequiredunderSection162(m)oftheCode,and,unlessotherwisedeterminedbytheCommitteeandtotheextentconsistentwithSection162(m)oftheCode,mayincludeorexcludespecifiedresearchanddevelopmentexpenses,acquisitioncosts,operatingexpensesfromacquiredbusinessesorcorporatetransactions,andsuchotherunusualorinfrequentitemsasdefinedbytheCommitteeinitssolediscretionandasidentifiedontheDateofGrant.
12.2 Adjustments. TheCommitteeshallhavethesolediscretiontoadjustdeterminationsofthedegreeofattainmentofthepre-establishedperformancegoals;provided,however,that,exceptinconnectionwithaChangein
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Control,aPerformance-BasedAwardmaynotbeadjustedinamannerthatwouldresultintheAwardnolongerqualifyingforthePerformance-BasedException.TheCommitteeshallretainthediscretiontoadjustsuchAwardsdownward.
12.3 CompliancewithCodeSection162(m). Intheeventthatapplicabletaxand/orsecuritieslawsorregulationschangetopermitCommitteediscretiontoalterthegoverningperformancemeasureswithoutobtainingstockholderapprovalofsuchchanges,theCommitteeshallhavesolediscretiontomakesuchchangeswithoutobtainingstockholderapproval;providedthataftersuchchangeorchangestheAwardcontinuestoqualifyforthePerformance-BasedException.Inaddition,intheeventthattheCommitteedeterminesthatitisadvisabletograntAwardsthatwillnotqualifyforthePerformance-BasedException,theCommitteemaymakesuchgrantswithoutsatisfyingtherequirementsofSection162(m)oftheCodeandtheregulationsissuedthereunder.Anyperformance-basedAwardsgrantedtoOfficersorDirectorsthatarenotintendedtoqualifyasqualifiedperformance-basedcompensationunderSection162(m)oftheCodeshallbebasedonachievementofsuchperformancemeasure(s)andbesubjecttosuchterms,conditionsandrestrictionsastheCommitteeshalldetermine.
ARTICLE 13
DeferralsTheCommitteemay,initssolediscretion,permitselectedParticipantstoelecttodeferpaymentofsomeoralltypesofAwards,ormay
provideforthedeferralofanAwardinanAwardAgreement;provided,however,thatthetimingofanysuchelectionandpaymentofanysuchdeferralshallbespecifiedintheAwardAgreementandshallconformtotherequirementsofSection409A(a)(2),(3)and(4)oftheCodeandtheregulationsandrulingsissuedthereunder.Anydeferredpayment,whetherelectedbyaParticipantorspecifiedinanAwardAgreementorbytheCommittee,maybeforfeitedifandtotheextentthattheapplicableAwardAgreementsoprovides.
ARTICLE 14
Rights of Employees, Directors and Consultants
14.1 EmploymentorService. NothinginthisPlanshallinterferewithorlimitinanywaytherightoftheCompanytoterminateanyParticipant’semploymentorserviceatanytime,norconferuponanyParticipantanyrighttocontinueintheemployorserviceoftheCompany.
14.2 NoContractofEmployment. NeitheranAwardnoranybenefitsarisingunderthisPlanshallconstitutepartofaParticipant’semploymentcontractwiththeCompanyoranySubsidiary,andaccordingly,subjecttotheprovisionsofArticle16hereof,thisPlanandthebenefitshereundermaybeterminatedatanytimeinthesoleandexclusivediscretionoftheBoardwithoutgivingrisetoliabilityonthepartoftheCompanyoranySubsidiaryforseverancepayments.
14.3 TransfersBetweenParticipatingEntities. ForpurposesofthisPlan,atransferofaParticipant’semploymentbetweentheCompanyandaSubsidiary,orbetweenSubsidiaries,shallnotbedeemedtobeaterminationofemployment.Uponsuchatransfer,subjecttothetermsofthisPlan,theCommitteemaymakesuchadjustmentstooutstandingAwardsasitdeemsappropriatetoreflectthechangeinreportingrelationships.
ARTICLE 15
Change in ControlThetreatmentofoutstandingAwardsupontheoccurrenceofaChangeinControl,unlessotherwisespecificallyprohibitedunderapplicable
laws,orbytherulesandregulationsofanygoverninggovernmentalagenciesornationalsecuritiesexchanges,shallbedeterminedinthesolediscretionoftheCommitteeinaccordancewiththetermsofthisPlanandshallbedescribedintheAwardAgreementsandneednotbeuniformamongallParticipantsorAwardsgrantedpursuanttothisPlan.
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ARTICLE 16
Amendment, Modification and Termination
16.1 Amendment,Modification,andTermination. TheBoardmayatanytimeandfromtimetotime,alter,amend,suspendorterminatethisPlaninwholeorinpart;provided,however,ifanamendmenttothePlan,forpurposesofapplicablestockexchangerulesandexceptaspermittedunderSection4.4ofthisPlan,(a)wouldmateriallyincreasethebenefitsaccruingtoParticipantsunderthePlan,(b)wouldmateriallyincreasethenumberofsecuritieswhichmaybeissuedunderthePlan,(c)wouldmateriallymodifytherequirementsforparticipationinthePlanor(d)mustotherwisebeapprovedbythestockholdersoftheCompanyinordertocomplywithapplicablelawortherulesoftheNewYorkStockExchangeor,iftheSharesarenottradedontheNewYorkStockExchange,theprincipalnationalsecuritiesexchangeuponwhichtheSharesaretradedorquoted,allasdeterminedbytheBoard,thensuchamendmentwillbesubjecttostockholderapprovalandwillnotbeeffectiveunlessanduntilsuchapprovalhasbeenobtained.NoamendmentoralterationthatwouldadverselyaffecttherightsofanyParticipantunderanyAwardpreviouslygrantedtosuchParticipantshallbemadewithouttheconsentofsuchParticipant.NotwithstandinganythinginthisPlantothecontrary,ParticipantconsentshallnotberequiredforanyamendmenttoArticle20hereoforotherwisethatisdeemednecessaryorappropriatebytheCompanytoensurecompliancewithSection409AoftheCode,theDodd-FrankWallStreetReformandConsumerProtectionActorSection10DoftheExchangeAct,oranyrulesorregulationspromulgatedthereunder.
16.2 AdjustmentofAwardsUpontheOccurrenceofCertainUnusualorNonrecurringEvents. IfpermittedbySection409AoftheCodeandSection162(m)oftheCodeandsubjecttoSections4.4,6.3and7.10(a)ofthisPlan,theCommitteemaymakeadjustmentsinthetermsandconditionsof,andthecriteriaincludedin,Awardsinrecognitionofunusualornonrecurringevents(including,withoutlimitation,theeventsdescribedinSection4.4hereof)affectingtheCompanyorthefinancialstatementsoftheCompanyorinrecognitionofchangesinapplicablelaws,regulationsoraccountingprinciples,whenevertheCommitteedeterminesthatsuchadjustmentsareappropriate.
ARTICLE 17
WithholdingTheCompanyshallhavetherighttodeductapplicabletaxesfromanyAwardpaymentandwithhold,atthetimeofdeliveryorvestingofcash
orSharesunderthisPlan,oratthetimeapplicablelawotherwiserequires,anappropriateamountofcashornumberofSharesoracombinationthereofforpaymentoftaxesrequiredbylawortotakesuchotheractionasmaybenecessaryintheopinionoftheCompanytosatisfyallobligationsforwithholdingofsuchtaxes.TheCommitteemaypermitwithholdingtobesatisfiedbythetransfertotheCompanyofSharestheretoforeownedbytheholderoftheAwardwithrespecttowhichwithholdingisrequired.IfSharesareusedtosatisfytaxwithholding,suchSharesshallbevaluedattheirfairmarketvalueonthedatewhenthetaxwithholdingisrequiredtobemadeandthevaluewithheldshallnotexceedtheminimumamountoftaxesrequiredtobewithheld.
ARTICLE 18
IndemnificationEachpersonwhoisorshallhavebeenamemberoftheCommittee,oroftheBoard,oranofficeroftheCompanytowhomtheCommitteehas
delegatedauthorityinaccordancewithArticle3hereof,shallbeindemnifiedandheldharmlessbytheCompanyagainstandfrom:(a)anyloss,cost,liability,orexpensethatmaybeimposeduponorreasonablyincurredbyhimorherinconnectionwithorresultingfromanyclaim,action,suitorproceedingtowhichheorshemaybeapartyorinwhichheorshemaybeinvolvedbyreasonofanyactiontakenorfailuretoactunderthisPlan,exceptforanysuchactionorfailuretoactthatconstituteswillfulmisconductonthepartofsuchpersonorastowhichanyapplicablestatuteprohibitstheCompanyfromprovidingindemnification;and(b)anyandallamountspaidbyhimorherinsettlementofanyclaim,action,suitorproceedingastowhichindemnificationisprovidedpursuanttoclause(a)ofthissentence,withtheCompany’sapproval,orpaidbyhimorherinsatisfactionofanyjudgmentorawardinanysuchaction,suitorproceedingagainsthimorher,providedheorsheshallgivetheCompanyanopportunity,atitsownexpense,tohandleanddefendthesamebeforeheorsheundertakestohandleanddefenditonhisorherownbehalf.TheforegoingrightofindemnificationshallbeinadditiontoanyotherrightsofindemnificationtowhichsuchpersonsmaybeentitledundertheCompany’sArticlesofIncorporationorBy-Laws(each,asamendedfromtimetotime),asamatteroflaw,orotherwise.
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ARTICLE 19
SuccessorsAllobligationsoftheCompanyunderthisPlanwithrespecttoAwardsgrantedhereundershallbebindingonanysuccessortotheCompany,
whethertheexistenceofsuchsuccessoristhedirectorindirectresultofamerger,consolidation,purchaseofallorsubstantiallyallofthebusinessand/orassetsoftheCompanyorothertransaction.
ARTICLE 20
Clawback ProvisionsAnyAwardAgreementmayreferenceaclawbackpolicyoftheCompanyorprovideforthecancellationorforfeitureofanAwardorthe
forfeitureandrepaymenttotheCompanyofanygainrelatedtoanAward,orotherprovisionsintendedtohaveasimilareffect,uponsuchtermsandconditionsasmaybedeterminedbytheCommitteefromtimetotime,ifaParticipant,eitherduringemploymentorservicewiththeCompanyoritsSubsidiaries,orwithinaspecifiedperiodafterterminationofsuchemploymentorservice,shallengageinanydetrimentalactivity(asdescribedintheapplicableAwardAgreementorsuchclawbackpolicy).Inaddition,notwithstandinganythinginthisPlantothecontrary,anyAwardAgreementorsuchclawbackpolicymayalsoprovideforthecancellationorforfeitureofanAwardortheforfeitureandrepaymenttotheCompanyofanySharesissuedunderand/oranyotherbenefitrelatedtoanAward,orotherprovisionsintendedtohaveasimilareffect,uponsuchtermsandconditionsasmayberequiredbytheCommitteeorunderSection10DoftheExchangeActandanyapplicablerulesorregulationspromulgatedbytheSecuritiesandExchangeCommissionoranynationalsecuritiesexchangeornationalsecuritiesassociationonwhichtheSharesmaybetraded.
ARTICLE 21
General Provisions
21.1 RestrictionsandLegends. NoSharesorotherformofpaymentshallbeissuedortransferredwithrespecttoanyAwardunlesstheCompanyshallbesatisfiedthatsuchissuanceortransferwillbeincompliancewithapplicableU.S.federalandstatesecuritieslaws.TheCommitteemayrequireeachpersonreceivingSharespursuanttoanAwardunderthisPlantorepresenttoandagreewiththeCompanyinwritingthattheParticipantisacquiringtheSharesforinvestmentwithoutaviewtodistributionthereof.AnycertificatesevidencingSharesdeliveredunderthisPlan(totheextentthatsuchSharesaresoevidenced)maybesubjecttosuchstop-transferordersandotherrestrictionsastheCommitteemaydeemadvisableundertherules,regulationsandotherrequirementsoftheSecuritiesandExchangeCommission,anysecuritiesexchangeortransactionreportingsystemuponwhichtheSharesarethenlistedortowhichtheyareadmittedforquotationandanyapplicableU.S.federalorstatesecuritieslaw.InadditiontoanyotherlegendrequiredbythisPlan,anycertificatesforsuchSharesmayincludeanylegendthattheCommitteedeemsappropriatetoreflectanyrestrictionsontransferofsuchShares.
21.2 GenderandNumber. Exceptwhereotherwiseindicatedbythecontext,anymasculinetermusedhereinalsoshallincludethefeminine,thepluralshallincludethesingularandthesingularshallincludetheplural.
21.3 Severability. IfanyprovisionofthisPlanshallbeheldillegalorinvalidforanyreason,theillegalityorinvalidityshallnotaffecttheremainingpartsofthisPlan,andthisPlanshallbeconstruedandenforcedasiftheillegalorinvalidprovisionhadnotbeenincluded.
21.4 RequirementsofLaw. ThegrantingofAwardsandtheissuanceofSharesunderthisPlanshallbesubjecttoallapplicablelaws,rulesandregulations,andtosuchapprovalsbyanygovernmentalagenciesornationalsecuritiesexchangesasmayberequired.
21.5 UncertificatedShares. TotheextentthatthisPlanprovidesforissuanceofcertificatestoreflectthetransferofShares,thetransferofsuchSharesmaybeeffectedonanoncertificatedbasis,totheextentnotprohibitedbyapplicablelawortherulesofanystockexchangeortransactionreportingsystemonwhichtheSharesarelistedortowhichtheSharesareadmittedforquotation.
21.6 UnfundedPlan. InsofarasthisPlanprovidesforAwardsofcash,Sharesorrightsthereto,itwillbeunfunded.AlthoughtheCompanymayestablishbookkeepingaccountswithrespecttoParticipantswhoareentitledtocash,SharesorrightstheretounderthisPlan,itwilluseanysuchaccountsmerelyasabookkeepingconvenience.
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Participantsshallhavenoright,titleorinterestwhatsoeverinortoanyinvestmentsthattheCompanymaymaketoaiditinmeetingitsobligationsunderthisPlan.NothingcontainedinthisPlan,andnoactiontakenpursuanttoitsprovisions,shallcreateorbeconstruedtocreateatrustofanykind,orafiduciaryrelationshipbetweentheCompanyandanyParticipant,beneficiary,legalrepresentativeoranyotherperson.TotheextentthatanypersonacquiresarighttoreceivepaymentsfromtheCompanyunderthisPlan,suchrightshallbenogreaterthantherightofanunsecuredgeneralcreditoroftheCompany.AllpaymentstobemadehereundershallbepaidfromthegeneralfundsoftheCompanyandnospecialorseparatefundshallbeestablishedandnosegregationofassetsshallbemadetoassurepaymentofsuchamounts,exceptasexpresslysetforthinthisPlan.ThisPlanisnotintendedtobesubjecttoERISA.
21.7 NoFractionalShares. NofractionalSharesshallbeissuedordeliveredpursuanttothisPlanoranyAward.TheCommitteeshalldeterminewhethercash,AwardsorotherpropertyshallbedeliveredorpaidinlieuoffractionalSharesorwhethersuchfractionalSharesoranyrightstheretoshallbeforfeitedorotherwiseeliminated.
21.8 GoverningLaw. ThisPlanandalldeterminationsmadeandactionstakenpursuanthereto,totheextentnototherwisegovernedbymandatoryprovisionsoftheCodeorthesecuritieslawsoftheUnitedStates,willbegovernedbyandconstruedinaccordancewiththelawsoftheStateofDelaware,withoutgivingeffecttoanyconflictsoflawsprovisionsthereofthatwouldresultintheapplicationofthelawsofanyotherjurisdiction.
21.9 CompliancewithCodeSection409A. (a)Totheextentapplicable,itisintendedthatthisPlanandanygrantmadehereundercomplywithorbeexemptfromtheprovisionsofSection409AoftheCode,sothattheincomeinclusionprovisionsofSection409A(a)(1)oftheCodedonotapplytotheParticipants.ThisPlanandanygrantsmadehereundershallbeadministeredandinterpretedinamannerconsistentwiththisintent.AnyreferenceinthisPlantoSection409AoftheCodewillalsoincludeanyregulationsoranyotherformalguidancepromulgatedwithrespecttosuchSectionbytheU.S.DepartmentoftheTreasuryortheInternalRevenueService.
(b)NeitheraParticipantnoranyofaParticipant’screditorsorbeneficiarieswillhavetherighttosubjectanydeferredcompensation(withinthemeaningofSection409AoftheCode)payableunderthisPlanandgrantshereundertoanyanticipation,alienation,sale,transfer,assignment,pledge,encumbrance,attachmentorgarnishment.ExceptaspermittedunderSection409AoftheCode,anydeferredcompensation(withinthemeaningofSection409AoftheCode)payabletoaParticipantorforaParticipant’sbenefitunderthisPlanandgrantshereundermaynotbereducedby,oroffsetagainst,anyamountowingbyaParticipanttotheCompanyoranyofitsSubsidiaries.
(c)If,atthetimeofaParticipant’sseparationfromservice(withinthemeaningofSection409AoftheCode),(i)theParticipantwillbeaspecifiedemployee(withinthemeaningofSection409AoftheCodeandusingtheidentificationmethodologyselectedbytheCompanyfromtimetotime)and(ii)theCompanymakesagoodfaithdeterminationthatanamountpayablehereunderconstitutesdeferredcompensation(withinthemeaningofSection409AoftheCode)thepaymentofwhichisrequiredtobedelayedpursuanttothesix-monthdelayrulesetforthinSection409AoftheCodeinordertoavoidtaxesorpenaltiesunderSection409AoftheCode,thentheCompanywillnotpaysuchamountontheotherwisescheduledpaymentdatebutwillinsteadpayit,withoutinterest,onthefirstbusinessdayoftheseventhmonthaftersuchseparationfromservice.
(d)SolelywithrespecttoanyAwardthatconstitutesnonqualifieddeferredcompensationsubjecttoSection409AoftheCodeandthatispayableonaccountofaChangeinControl(includinganyinstallmentsorstreamofpaymentsthatareacceleratedonaccountofaChangeinControl),aChangeinControlshalloccuronlyifsucheventalsoconstitutesa“changeintheownership,”“changeineffectivecontrol,”and/ora“changeintheownershipofasubstantialportionofassets”oftheCompanyasthosetermsaredefinedunderTreasuryRegulation§1.409A-3(i)(5),butonlytotheextentnecessarytoestablishatimeandformofpaymentthatcomplieswithSection409AoftheCode,withoutalteringthedefinitionofChangeinControlforanypurposeinrespectofsuchAward.
(e)NotwithstandinganyprovisionofthisPlanandgrantshereundertothecontrary,inlightoftheuncertaintywithrespecttotheproperapplicationofSection409AoftheCode,theCompanyreservestherighttomakeamendmentstothisPlanandgrantshereunderastheCompanydeemsnecessaryordesirabletoavoidtheimpositionoftaxesorpenaltiesunderSection409AoftheCode.Inanycase,aParticipantwillbesolelyresponsibleandliableforthesatisfactionofalltaxesandpenaltiesthatmaybeimposedonaParticipantorforaParticipant’saccountinconnectionwiththisPlanandgrantshereunder(includinganytaxesandpenaltiesunderSection409AoftheCode),andneithertheCompanynoranyofitsaffiliateswillhaveanyobligationtoindemnifyorotherwiseholdaParticipantharmlessfromanyorallofsuchtaxesorpenalties.
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21.10 IncentiveStockOptionCompliance. TotheextentanyprovisionofthisPlanwouldpreventanyISOthatwasintendedtoqualifyasanISOfromqualifyingassuch,thatprovisionwillbenullandvoidwithrespecttosuchISO.Suchprovision,however,willremainineffectforotherOptionsandtherewillbenofurthereffectonanyprovisionofthisPlan.
ARTICLE 22
Stock-Based Awards in Substitution for Options or Awards Granted by Other Company
NotwithstandinganythinginthisPlantothecontrary:
(a)AwardsmaybegrantedunderthisPlaninsubstitutionfororinconversionof,orinconnectionwithanassumptionof,stockoptions,stockappreciationrights,restrictedstock,restrictedstockunitsorotherstockorstock-basedawardsheldbyawardeesofanentityengaginginacorporateacquisitionormergertransactionwiththeCompanyoranySubsidiary.Anyconversion,substitutionorassumptionwillbeeffectiveasofthecloseofthemergeroracquisition,and,totheextentapplicable,willbeconductedinamannerthatcomplieswithSection409AoftheCode.TheawardssograntedmayreflecttheoriginaltermsoftheawardsbeingassumedorsubstitutedorconvertedforandneednotcomplywithotherspecifictermsofthisPlan,andmayaccountforSharessubstitutedforthesecuritiescoveredbytheoriginalawardsandthenumberofsharessubjecttotheoriginalawards,aswellasanyexerciseorpurchasepricesapplicabletotheoriginalawards,adjustedtoaccountfordifferencesinstockpricesinconnectionwiththetransaction.
(b)IntheeventthatacompanyacquiredbytheCompanyoranySubsidiaryorwithwhichtheCompanyoranySubsidiarymergeshassharesavailableunderapre-existingplanpreviouslyapprovedbystockholdersandnotadoptedincontemplationofsuchacquisitionormerger,thesharesavailableforgrantpursuanttothetermsofsuchplan(asadjusted,totheextentappropriate,toreflectsuchacquisitionormerger)maybeusedforawardsmadeaftersuchacquisitionormergerunderthePlan;provided,however,thatawardsusingsuchavailablesharesmaynotbemadeafterthedateawardsorgrantscouldhavebeenmadeunderthetermsofthepre-existingplanabsenttheacquisitionormerger,andmayonlybemadetoindividualswhowerenotemployeesordirectorsoftheCompanyoranySubsidiarypriortosuchacquisitionormerger.
(c)AnySharesthatareissuedortransferredby,orthataresubjecttoanyawardsthataregrantedby,orbecomeobligationsof,theCompanyunderSections22(a)or22(b)abovewillnotreducetheSharesavailableforissuanceortransferunderthePlanorotherwisecountagainstthelimitscontainedinArticle4ofthePlan.Inaddition,noSharesthatareissuedortransferredby,orthataresubjecttoanyawardsthataregrantedby,orbecomeobligationsof,theCompanyunderSections22(a)or22(b)abovewillbeaddedtotheaggregateplanlimitcontainedinArticle4ofthePlan.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLYTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. E39031-P01527 ! !! !! !! !! !! !! !! ! ! ! ! !! ! !! ! !! ! BABCOCK & WILCOX ENTERPRISES, INC. 13024 BALLANTYNE CORPORATE PLACE, SUITE 700 CHARLOTTE, NORTH CAROLINA 28277 2. If proposal 1 is approved, the election of the nominees listed to Class I: 3. If proposal 1 is not approved, the election of the nominees listed to Class III: 1. Approval of amendment to Certificate of Incorporation to declassify Board of Directors and provide for annual elections of all directors beginning in 2020. Nominees: The Board of Directors recommends you vote FOR proposal 1. The Board of Directors recommends you vote FOR proposals 4, 5, 6 and 7. Vote on Directors For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 4. Approval of amendment to Certificate of Incorporation to remove provisions requiring affirmative vote of least 80% of voting power for certain amendments to our Certificate of Incorporation and Bylaws. 5. Ratification of Appointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for the year ending December 31, 2018. 6. Approval, on a non-binding advisory basis, of executive compensation. 7. Approval of Amended and Restated 2015 Long-Term Incentive Plan. 2a. Thomas A. Christopher 3a. Thomas A. Christopher 3b. Brian R. Kahn 3c. Leslie C. Kass 2b. Brian R. Kahn 2c. Leslie C. Kass Nominees: Vote on Proposal Vote on Proposals BABCOCK & WILCOX ENTERPRISES, INC. For Against Abstain For Withhold The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by the undersigned Stockholder(s). If no direction is made, this proxy will be voted FOR all nominees and FOR proposals 1, 4, 5, 6 and 7. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion. VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 15, 2018 (May 14, 2018 for participants in B&W's Thrift Plan). 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. During The Meeting - Go to www.virtualshareholdermeeting.com/BW2018 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 15, 2018 (May 14, 2018 for participants in B&W's Thrift Plan). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. For Against Abstain
E39032-P01527 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy Statement and Annual Report are available at www.proxyvote.com. Babcock & Wilcox Enterprises, Inc. Annual Meeting of Stockholders May 16, 2018 at 9:30 a.m. www.virtualshareholdermeeting.com/BW2018 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE BABCOCK & WILCOX ENTERPRISES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS May 16, 2018 The undersigned stockholder(s) hereby appoint(s) Matthew E. Avril and J. André Hall, or either of them, as proxies, each with the power to appoint his substitute, to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Babcock & Wilcox Enterprises, Inc. ("B&W") that the stockholders(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:30 a.m. Eastern Time on May 16, 2018, at www.virtualshareholdermeeting.com/BW2018, and any adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. ATTENTION PARTICIPANTS IN B&W'S THRIFT PLAN: If you held shares of B&W common stock through The B&W Thrift Plan (the "Thrift Plan"), this proxy covers all shares for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust Company ("Vanguard"), Trustee of the Thrift Plan. Your proxy must be received no later than 11:59 p.m. Eastern Time on May 14, 2018. Any shares of B&W common stock held inthe Thrift Plan that are not voted or for which Vanguard does not receive timely voting instructions, will be voted in the same proportion as the shares for which Vanguard receives timely voting instructions for other participants in the Thrift Plan. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPED Address Changes/Comments: _______________________________________________________________________________ ________________________________________________________________________________________________________ (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE SIDE