PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth certain information as of March 20, 2020 regarding persons or groups known to the Company who are, or may be deemed to be, the beneficial owner of more than five percent of the Company’s common stock. This information is based upon SEC filings by the individual and entities listed below, and the percentage given is based on 75,054,096 shares outstanding.
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Name and Address of Beneficial Owner
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Shares of Common Stock
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Percent of Class
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Mallika Srinivasan
Old No. 35, New No. 77, Nungambakkam High Road
Chennai 600 034, India
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12,167,373
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(1)
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16.2%
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Tractor and Farm Equipment Limited
Old No. 35, New No. 77, Nungambakkam High Road
Chennai 600 034, India
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12,150,152
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16.2%
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BlackRock, Inc.
55 East 52nd Street
New York, NY 10022
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6,226,657
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(2)
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8.3%
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The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
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5,905,651
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(3)
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7.9%
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(1)
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Includes shares held individually (17,221 shares) and through TAFE and TAFE Motors and Tractors Limited (12,150,152 shares). Based upon SEC filings made by Ms. Srinivasan.
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(2)
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BlackRock, Inc. has sole voting power with respect to 5,842,380 of its shares and sole dispositive power with respect to all 6,226,657 of its shares.
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(3)
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The Vanguard Group has sole voting power with respect to 32,182 of its shares, shared voting power with respect to 9,544 of its shares, sole dispositive power with respect to 5,872,145 of its shares and shared dispositive power with respect to 33,506 of its shares.
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The following table sets forth information regarding beneficial ownership of the Company’s common stock by the Company’s directors, the director nominees, the Chief Executive Officer of the Company, the Chief Financial Officer of the Company, the other NEOs and all executive officers and directors as a group, all as of March 20, 2020. Except as otherwise indicated, each such individual has sole voting and investment power with respect to the shares set forth in the table.
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Name of Beneficial Owner
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Shares of Common Stock(1)
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Shares That May be Acquired
Within 60 Days
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Percent of Class
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Roy V. Armes
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11,754
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—
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*
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Michael C. Arnold
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11,814
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—
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*
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Sondra L. Barbour
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—
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—
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*
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P. George Benson
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16,569
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—
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*
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Suzanne P. Clark
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2,846
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—
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*
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Wolfgang Deml
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23,689
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—
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*
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George E. Minnich
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19,160
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—
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*
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Gerald L. Shaheen
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17,380
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—
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*
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Mallika Srinivasan(2)
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12,167,373
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—
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16.2%
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Hendrikus Visser
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24,236
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—
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*
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Andrew H. Beck
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112,779
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—
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*
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Eric P. Hansotia
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31,566
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—
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*
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Martin H. Richenhagen
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527,398
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—
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*
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Rob Smith(3)
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90,796
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—
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*
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Hans-Bernd Veltmaat
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78,757
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—
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*
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All executive officers and directors as a group (24 persons)
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13,352,791
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—
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17.8%
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(1)
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Includes the following number of restricted shares of the Company’s common stock as a result of restricted stock grants under the Company’s incentive plans by the following individuals: Mr. Armes — 2,154; Mr. Arnold — 1,615; Mr. Benson — 1,292; Ms. Clark — 1,507; Mr. Deml — 1,292; Mr. Minnich — 1,292; Mr. Shaheen — 1,292; Ms. Srinivasan — 2,154; Mr. Visser — 1,507; All directors as a group — 14,105.
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(2)
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Includes shares held individually (17,221 shares) and through TAFE and TAFE Motors and Tractors Limited (12,150,152 shares). Ms. Srinivasan is the Chairman and Managing Director of TAFE and the Company owns a 23.75% interest in TAFE.
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(3)
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Mr. Smith resigned from the Company effective January 31, 2020. Mr. Smith’s beneficial ownership of the Company’s common stock is as of August 12, 2019, the date of his most recent Form 4 filing.
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EXECUTIVE COMPENSATION
The following table sets forth information as of March 20, 2020, with respect to each person who is an executive of the Company.
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Name
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Age
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Positions
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Martin H. Richenhagen
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67
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Chairman of the Board, President and Chief Executive Officer
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Bradley C. Arnold
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50
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Senior Vice President — Global Crop Cycle and Fuse Connected Services
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Roger N. Batkin
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51
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Senior Vice President — General Counsel and Corporate Secretary
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Andrew H. Beck
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56
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Senior Vice President — Chief Financial Officer
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Stefan Caspari
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42
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Senior Vice President and General Manager, Grain and Protein
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Gary L. Collar
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63
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Senior Vice President and General Manager, Asia/Pacific/Africa
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Robert B. Crain
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60
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Senior Vice President and General Manager, North America
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Torsten R.W. Dehner
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53
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Senior Vice President and General Manager, Europe/Middle East
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Helmut R. Endres
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64
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Senior Vice President — Engineering
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Luis F.S. Felli
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54
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Senior Vice President and General Manager, South America
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Eric P. Hansotia
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51
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Senior Vice President — Chief Operating Officer
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Lucinda B. Smith
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53
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Senior Vice President — Global Business Services
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Rob Smith
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54
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Former Senior Vice President and General Manager, Europe/Middle East
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Josip T. Tomasevic
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52
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Senior Vice President — Chief Procurement Officer
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Hans-Bernd Veltmaat
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65
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Senior Vice President — Chief Supply Chain Officer
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Bradley C. Arnold has been Senior Vice President — Global Crop Cycle and Fuse Connected Services since January 2020. Mr. Arnold was Vice President, Global Crop Cycle and Fuse from January 2019 to December 2019, General Manager of Precision Planting LLC from 2014 to 2019, Commercial Services Director from 2012 to 2014 and Director of International Business Development from 2009 to 2012. Prior to joining Precision Planting LLC, Mr. Arnold held various leadership positions at Caterpillar Inc.
Roger N. Batkin has been Senior Vice President — General Counsel and Corporate Secretary since January 2018. From 2013 to 2017, Mr. Batkin was Vice President, General Counsel and Corporate Secretary. Mr. Batkin was Vice President, Legal Services and Chief Compliance Officer for Europe/Africa/Middle East and Asia/Pacific from 2010 to 2013. Mr. Batkin was also Director of the Company’s U.K. Operations between 2009 and 2013. Prior to joining the Company, Mr. Batkin was an attorney with an international law firm.
Andrew H. Beck has been Senior Vice President — Chief Financial Officer since June 2002. Mr. Beck was Vice President, Chief Accounting Officer from January 2002 to June 2002, Vice President and Controller from 2000 to 2002, Corporate Controller from 1996 to 2000, Assistant Treasurer from 1995 to 1996 and Controller, International Operations from 1994 to 1995.
Stefan Caspari has been Senior Vice President and General Manager, Grain and Protein since January 2020. Mr. Caspari was Vice President and General Manager, Grain and Protein from April 2019 to December 2019, Vice President, Fuse Connected Services and Technology from 2017 to April 2019, Vice President, Global Strategy and Integration from 2015 to 2017 and Director, Strategy and Integration for Europe/Middle East from 2014 to 2016. Prior to joining the Company, Mr. Caspari held several leadership positions at Zurich Insurance Group Ltd. and Arthur D. Little consulting firm.
Gary L. Collar has been Senior Vice President and General Manager, Asia/Pacific/Africa since January 2017. Mr. Collar was Senior Vice President and General Manager, Asia/Pacific from 2012 to 2016. Mr. Collar was Senior Vice President and General Manager, Europe/Africa/Middle East and Australia/New Zealand from 2009 until 2011 and Senior Vice President and General Manager Europe/Africa/Middle East and Asia/Pacific from 2004 to 2008. Mr. Collar was Vice President, Worldwide Market Development for the Challenger Division from 2002 until 2004. Between 1994 and 2002, Mr. Collar held various senior executive positions with ZF Friedrichshaven A.G., including Vice President Business Development, North America, from 2001 until 2002, and President and Chief Executive Officer of ZF-Unisia Autoparts, Inc., from 1994 until 2001. In addition, Mr. Collar is a member of the Board of Directors for Hillenbrand, Inc., a publicly traded company in the United States that designs, develops and manufactures engineered industrial equipment and funeral service products.
Robert B. Crain has been Senior Vice President and General Manager, North America since January 2020. Mr. Crain was Senior Vice President and General Manager, Americas from 2015 to December 2019, and Senior Vice President and General Manager, North America from 2006 to 2014. Mr. Crain held several positions within CNH Global N.V. and its predecessors,
including Vice President of New Holland’s North America Agricultural Business, from 2004 to 2005, Vice President of CNH Marketing North America Agricultural business, from 2003 to 2004 and Vice President and General Manager of Worldwide Operations for the Crop Harvesting Division of CNH Global N.V. from 1999 to 2002. Mr. Crain is also an officer of the Association of Equipment Manufacturers.
Torsten R.W. Dehner has been Senior Vice President and General Manager, Europe/Middle East since January 2020. Mr. Dehner was Vice President, Global Parts and Europe/Middle East Parts and Services from 2018 to December 2019, Vice President, Purchasing and Materials, Europe/Middle East - Commodity Director Powertrain & Perifery from 2015 to 2018, and Vice President, Purchasing and Materials, Europe/Middle East from 2010 to 2015. Prior to joining the Company, Mr. Dehner held a number of leadership positions at Behr GmbH & Co. KG.
Helmut R. Endres has been Senior Vice President — Engineering since December 2011. Between 2006 and 2010, Mr. Endres was Chief Technological Officer and Vice President, Engineering, International Trucks and Engines for Navistar International Corporation. Between 1995 and 2006, Mr. Endres worked at Volkswagen (including the Audi division) in various roles, including Executive Director, Group Powertrain and Director, Gasoline Engines. He was a member of the Audi Executive Board’s product Strategy Committee and Chairman of the Volkswagen Group Powertrain Strategy Committee. Between 1982 and 1995, Mr. Endres was with FEV, Inc. in Germany serving in various gasoline and diesel engine engineering roles, including head of the European Business Unit, and leading the Combustion Technologies Divisions.
Luis F.S. Felli has been Senior Vice President and General Manager, South America since January 2020. Mr. Felli joined the Company in 2018 as President, AGCO, South America. Prior to joining AGCO, Mr. Felli held several leadership positions including General Director of Unipar Indupa S.A.I.C. from February 2017 to November 2017, Commercial Operations Director for Eldorado Brasil Celulose S.A. from 2013 to 2017, Operations Vice President for Atvos Agroindustrial Investimentos S.A. from 2008 to 2013, and Executive Vice President for Braskem S.A. from 2006 to 2008. Mr. Felli began his career at FMC Corporation.
Eric P. Hansotia has been Senior Vice President — Chief Operating Office since January 2019. He served as Senior Vice President, Global Crop Cycle and Fuse Connected Services, from 2015 to January 2019 and as Senior Vice President, Global Harvesting and Advanced Technology Solutions, from 2013 to 2015. Prior to joining AGCO, Mr. Hansotia held several positions within John Deere including Senior Vice President, Global Harvesting, from 2012 to 2013 and Vice President, Global Crop Care based in Mannheim, Germany from 2009 to 2012. Prior positions with John Deere include: from 2005 to 2009 — General Manager, Harvester Works; from 2004 to 2005 — Vice President, Global Forestry; and from 1993 to 2004 — various roles at John Deere.
Lucinda B. Smith has been Senior Vice President — Global Business Services since March 2013. She is responsible for the functional management of all Human Resources and Information Technology organizations worldwide as well as for AGCO’s Shared Services Center in Budapest, Hungary. Ms. Smith was Senior Vice President — Human Resources from 2009 to 2013; Vice President, Global Talent Management & Rewards from May 2008 to December 2008; and Director of Organizational Development and Compensation from 2006 to 2008. From 2005 to 2006, Ms. Smith was Global Director of Human Resources for AJC International, Inc. Ms. Smith also held various domestic and global human resource management positions at Lend Lease Corporation, Cendian Corporation and Georgia-Pacific Corporation.
Rob Smith was Senior Vice President and General Manager, Europe/Middle East from 2017 to January 2020. Mr. Smith was Senior Vice President and General Manager, Europe/Africa/Middle East from 2013 to 2016. Mr. Smith was the Vice President & General Manager of the global Engine Components Division for TRW Automotive from 2007 to 2013. He served as the Chairman of the Supervisory Board of TRW Automotive GmbH from 2009 to 2013. Prior to joining TRW, Mr. Smith served as Vice President of the Global Automotive Division at Tyco Electronics from 2005 to 2006, and Vice President & General Manager of Bombardier Transportation’s Aftermarket Parts and Material Repair and Overhaul business from 2002 to 2005. From 1993 to 2001, he served in various operations and supply chain roles in the global automotive industry with LucasVarity PLC, Lucas Industries PLC and BMW. Mr. Smith is a member of the Board of Directors and Chairman of the Technology Committee of FLSmidth & Co A/S in Copenhagen, Denmark.
Josip T. Tomasevic has been Senior Vice President — Chief Procurement Officer since January 2019. From 2011 to 2018, Mr. Tomasevic was Vice President — Global Purchasing Materials. Prior to joining the Company, Mr. Tomasevic was Head of Corporate Purchasing at Claas KGaA mbH.
Hans-Bernd Veltmaat has been Senior Vice President — Chief Supply Chain Officer since January 2012. Mr. Veltmaat serves on the Industry Executive Advisory Board for the Executive MBA in Supply Chain Management Program at the Swiss Federal Institute of Technology Zurich. Mr. Veltmaat was Senior Vice President — Manufacturing & Quality from 2008 to 2011. Mr. Veltmaat was Group Executive Vice President of Recycling Plants at Alba AG from 2007 to 2008. From 1996 to 2007, Mr. Veltmaat held various positions with Claas KGaA mbH in Germany, including Group Executive Vice President, a member of the Claas Group Executive Board and Chief Executive Officer of Claas Fertigungstechnik GmbH.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
The design and implementation of our compensation programs are intended to emphasize a strong pay-for-performance alignment, provide appropriate rewards and incentives to our NEOs at a reasonable cost to the Company and, at the same time, to do so in a manner consistent with the views expressed by our stockholders. We believe that our current programs, and the actions taken over the last several years, are consistent with this intent. Highlights include:
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A continuation of compensation that is highly weighted - on average, approximately 75% - to variable or “at risk” compensation;
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•
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Targeting compensation at the median (50th percentile) of our peer group;
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•
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A continued focus on aligning incentives with corporate strategy; and
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Extensive stockholder outreach and changes reflective of that process, including:
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◦
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Beginning in 2018, the implementation of “double trigger” vesting in connection with future equity awards;
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◦
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Elimination of excise tax gross-ups from future employment agreements; and
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◦
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Commencing in 2020, the addition of an adjustment to restricted stock unit (“RSU”) awards based upon operating margin improvement relative to an agricultural equipment and industrial company peer group and the addition of three-year cliff vesting (rather than annual vesting).
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Establishing appropriate executive compensation, particularly incentive compensation, is challenging due to the cyclical nature of the agricultural equipment industry. Our objective has been to provide targets that are achievable within the expected industry conditions during the performance period. We believe this approach maximizes our performance at all points in the cycle and, critically, supports retention of executives. We aim to establish performance targets for a fiscal year near the financial outlook communicated to investors at the start of that fiscal year. Over the past several years, agricultural equipment industry sales have stabilized and this has impacted our incentive compensation plan goal-setting process. The goals established reflect year-over-year increases, incorporating applicable rigor and stretch in incentive goal setting to ensure goals are aligned with current competitive market conditions.
Below we describe our compensation philosophy, the compensation programs provided to our NEOs and the decision-making process followed in setting compensation for our NEOs during 2019. This discussion should be read in conjunction with the tables and related narratives that follow. Our NEOs for these purposes are:
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Andrew H. Beck, Senior Vice President — Chief Financial Officer
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•
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Eric P. Hansotia, Senior Vice President — Chief Operating Officer
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•
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Martin H. Richenhagen, Chairman of the Board, President and Chief Executive Officer
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•
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Rob Smith, Former Senior Vice President and General Manager, Europe/Middle East
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•
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Hans-Bernd Veltmaat, Senior Vice President — Chief Supply Chain Officer
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At the 2019 Annual Meeting, our stockholders expressed disapproval of our executive compensation programs through their non-binding advisory vote, in which only 33% of shares voted in favor of our executive compensation policies and practices. Based upon our stockholder outreach and the recommendations of the major proxy advisory firms, we believe that this low level of support largely is responsive to the one-time retention award in 2018 for Mr. Richenhagen.
During each of the last several years, we engaged in an outreach program with stockholders to discuss our compensation philosophy and programs and to receive comments and feedback on a number of matters. We value and seriously consider feedback from our stockholders. Our Compensation Committee Chairman participated in a number of stockholder meetings to answer questions and to provide his perspective on our compensation plans. Many important topics were discussed, including target-setting and maintaining a competitive pay structure during the industry down cycles. As part of these outreach efforts, we held in-person or telephonic meetings with stockholders representing a significant portion of our outstanding shares. The majority of stockholder feedback was positive and provided support for our overall compensation policy and decisions. We did make several changes to our compensation policies based on stockholder feedback, such as eliminating from future employment agreements the gross-up for excise taxes on severance payments due to a change in control, adopting a “double trigger” equity vesting in connection with future equity awards, modifying our peer group to better align with our current revenue size and, beginning in 2020, the adjustment of RSU awards based on our achievement of operating margin improvement relative to an agricultural equipment and industrial company peer group in order to improve pay-for-performance alignment by putting a portion of the RSU award at-risk.
Consistent with our commitment to executive compensation best practices, some of which are discussed in Proposal Number 2 above, the following executive compensation practices are in place:
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The financial performance objectives in our annual and long-term incentive plans are reviewed and approved annually by the Compensation Committee;
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Our annual and long-term incentive plans consist of multiple performance objectives, mitigating focus on any one objective in particular;
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The vesting period for our NEOs’ stock-settled stock appreciation rights is 48 months, and the periods for performance shares and RSUs generally are 36 months;
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Our NEOs (and directors) are subject to stock ownership requirements;
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Compensation levels for our executives (including NEOs) generally are targeted at median levels of market competitiveness;
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Our compensation programs support a conservative approach to share usage associated with our stock compensation plans;
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The design of our compensation programs attempts to mitigate the possibility of excessive risk-taking that could harm the long-term value of AGCO;
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For new executive employment agreements beginning in 2017, there is no gross-up for excise taxes on severance payments due to a change in control;
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We adopted double-trigger equity vesting in the case of a change-in-control for equity awards made in 2018 and subsequent periods; and
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We have a clawback provision in place that can require the return of any bonus or incentive compensation.
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Compensation Philosophy and Governance
It is AGCO’s practice to compensate executive officers through a combination of cash and equity compensation, retirement programs and other benefits. Our primary objectives are to provide compensation programs that:
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Are aligned with median market levels and competitive with companies of similar revenue size and complexity;
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Align with stockholder interests;
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Attract and retain quality management;
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Encourage executive stock ownership;
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Mitigate excessive risk-taking; and
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Are substantially consistent among our locations worldwide.
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AGCO’s compensation philosophy is reviewed regularly and most recently was updated and approved by the Compensation Committee in July 2019. The philosophy is intended to articulate our principles and strategy for total compensation and specific pay program elements. It is closely aligned with our business strategy and reflects performance attributes and, as such, ties executives’ interests to those of our stockholders and other employees.
We implement this compensation philosophy through five primary elements of compensation:
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Component
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Philosophy
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Strategy/Competitive Positioning
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Base Salary
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• Establishes the foundation of total compensation and supports attraction and retention of qualified staff
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• Generally targeted at median levels of other industrial companies of similar revenue and complexity
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Annual Management Incentive Plan
(“IC Plan”)
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• Facilitates alignment of management with corporate objectives to achieve outstanding performance and meet specific AGCO financial goals
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• Target award opportunities competitive with median levels of other industrial companies of similar size and complexity, with minimum and maximum award opportunities ranging from 50% to 200% of target, respectively
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Long-Term Incentives
(“LTI Plan”)
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• Engages management in achieving longer-term performance goals and making decisions in the best interests of stockholders
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• Target award opportunities competitive with median levels of other industrial companies of similar size and complexity
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Retirement Benefits
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• Supports the attraction and retention of key executives
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• Competitive with general market practices; consists of 401(k) and non-qualified benefits
• For executives who became eligible to participate in the non-qualified benefits prior to August 1, 2015, these benefits consist of the Executive Nonqualified Pension Plan (“ENPP”), which for vesting requires executives to remain employed with the Company until attaining at least age 50 with ten years of service (five years of which must include participation in the ENPP)
• For executives promoted or hired after August 1, 2015, those benefits consist of a nonqualified defined contribution plan
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Perquisites
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• Supports the attraction and retention of key executives
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• Minimal use, as appropriate
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As discussed elsewhere, on occasion, we have concluded that varying or additional awards were appropriate in light of special circumstances.
We believe that as an executive’s responsibilities increase, so should the proportion of his or her total pay comprised of annual incentive cash bonuses and long-term incentive compensation. As illustrated below, on average over 75% of our NEO compensation was variable or “at risk” and tied to AGCO’s performance with the greatest portion associated with long-term incentives:
When establishing compensation and performance criteria, goals are set that we believe reflect key areas of performance supporting our long-term success. We consider factors such as our current performance compared to industry peers, desired levels of performance improvement, and industry trends and conditions when determining performance expectations within our compensation plans.
Compensation Consultant Independence
The Compensation Committee approves all compensation for executive officers, including the structure and design of the compensation programs. The Compensation Committee is responsible for retaining compensation consultants and determining the terms and conditions of their engagement, including fees. Since 2005, the Compensation Committee has engaged Willis Towers Watson, a globally recognized advisory, brokering and solutions company, to advise the Compensation Committee (and at times management) with respect to our compensation programs and to perform various related studies and projects, including market analysis and compensation program design. A Willis Towers Watson representative reports directly to the Compensation Committee as its compensation advisor.
The Compensation Committee annually reviews the role of its compensation advisor and believes that the advisor is fully independent for purposes of providing on-going recommendations regarding executive compensation. In addition, and in conjunction with the SEC requirements that public companies formally review advisor independence, the Compensation Committee concluded that the compensation advisor is independent and provides candid, direct and objective advice to the Compensation Committee. To ensure independence:
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The Compensation Committee directly hired and has the authority to terminate the compensation advisor;
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The compensation advisor reports directly to the Compensation Committee and the chairperson;
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The compensation advisor meets regularly and as needed with the Compensation Committee in executive sessions that are not attended by any of our officers;
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The compensation advisor and the team at Willis Towers Watson have direct access to all members of the Compensation Committee during and between meetings;
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No regular member of the Willis Towers Watson executive compensation team owns any stock of AGCO, other than possibly investments in mutual funds or other funds that are managed without the member’s input; and
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The executive compensation advisor and team at Willis Towers Watson do not have any personal or business relationships with any member of the Compensation Committee or executive officer of AGCO.
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Willis Towers Watson provides the Compensation Committee with an annual update on its services and related fees. The Compensation Committee determines whether Willis Towers Watson’s services are performed objectively and free from the influence of management. With the full knowledge of the Compensation Committee, AGCO has retained a distinct and separate unit of Willis Towers Watson for other services, including broad-based employee retirement and benefit services, and specific projects within multiple countries for various Company subsidiaries, consisting primarily of actuarial services for our defined benefit plans and pension administration services.
The Compensation Committee also closely examines the safeguards and steps Willis Towers Watson takes to ensure that its executive compensation consulting services are objective. For example:
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Willis Towers Watson has separated its executive compensation consulting services into a single, segregated business unit within Willis Towers Watson;
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Willis Towers Watson associates are subject to a comprehensive Code of Conduct and Ethics, which addresses issues including conflicts of interest and associates’ ownership and trading of client company stock, among other areas;
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The compensation advisor receives no direct incentives based on other services Willis Towers Watson provides to AGCO;
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The compensation advisor is not the Willis Towers Watson client relationship manager for AGCO; and
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Neither the compensation advisor nor any member of the advisor’s team participates in any activities related to the services provided to AGCO by other Willis Towers Watson business units.
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For these reasons, the Compensation Committee does not believe that Willis Towers Watson’s services for AGCO’s employee retirement and benefit plans, or its specific projects, compromise its compensation advisor’s ability to provide the Compensation Committee with perspective and advice that is independent and objective.
The total amount of fees for consulting services provided to the Compensation Committee in 2019 by its compensation advisor was approximately $300,000. The total amount of fees paid by AGCO to Willis Towers Watson in 2019 for all other services, excluding Compensation Committee services, was approximately $1,300,000. These other services are mainly related to actuarial services for our defined benefit plans and pension administration services and health and group benefits consulting.
Competitive Analyses
We perform competitive market analyses with respect to cash compensation, long-term equity incentives and executive retirement programs. These analyses are conducted periodically and include a comparison to nationally recognized compensation surveys, as well as a comparison to a peer group of other industrial companies. These competitive analyses provide us with information regarding ranges and median compensation levels, as well as the types of compensation practices followed at other companies. The analyses are used to review, monitor and establish appropriate and competitive compensation guidelines, determine the appropriate mix of compensation programs and establish the specific compensation levels for our executives.
The Compensation Committee performed an external market review in 2019 that examined the competitiveness of the Company’s NEOs’ total compensation. The analysis reviewed the dollar value of the compensation, as well as the mix of compensation between base salary, annual cash incentive bonus and LTI pay. The Compensation Committee’s goal is to provide base salary, target total cash compensation (e.g., base salary plus target bonus opportunity) and target total direct compensation (e.g., target total cash plus target LTI opportunity) for each NEO that is competitive with the market median, and the competitive market rate is based on published survey data for companies of similar revenue size and information from peer proxy statements, where applicable.
The Compensation Committee uses the external market review to help it make informed decisions regarding NEO compensation. For the Chief Executive Officer, the Compensation Committee recognizes the critical nature of this role, his higher level of responsibility within the Company and his more pervasive influence over our performance and, therefore, provides market competitive levels of compensation that differ from levels of compensation paid to other NEOs, based on median market information and benchmarking.
It is our philosophy to compensate Senior Vice Presidents (“SVPs”) relative to their particular function, scope and industry comparator.
The Compensation Committee, in recognition of the collaborative efforts of the General Managers operating not only their respective businesses, but also our worldwide business, sets the compensation of all General Managers at similar levels. In Mr. Beck’s case, the Compensation Committee’s view is that the Chief Financial Officer should not be paid significantly more than the General Managers, which is consistent with our compensation philosophy and reinforced by the internal grouping of the Company’s executives. However, in recognition that external market data for Mr. Beck’s position is higher than external market data for the General Managers, he received a slightly larger LTI award in 2019. In the case of Mr. Veltmaat, the pay positioning of his role is targeted to approximate the upper end of the grade range due to the criticality of his role within the organization.
As part of its regular process, the Compensation Committee reviewed our peer group in July 2019 to ensure that the included companies are appropriate comparators for determining whether total compensation for NEOs aligns with market. Industrial and other equipment manufacturers approximately one-half to two times AGCO’s revenue size are primarily considered by the Compensation Committee. No changes were made to the peer group. The Compensation Committee believes that the companies in the current peer group reflect AGCO’s size and align with our business and the markets in which we serve and operate as well as recruit talent. The composition of the current peer group (17 companies) is shown below:
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• BorgWarner Inc.
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• Masco Corporation
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• Rockwell Automation, Inc.
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• Cummins, Inc.
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• Navistar International Corporation
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• Stanley Black & Decker
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• Dover Corporation
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• Oshkosh Corporation
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• Terex Corporation
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• Flowserve Corporation
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• PACCAR Inc.
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• Trinity Industries, Inc.
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• Illinois Tool Works Inc.
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• Parker Hannifin Corporation
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• Textron Inc.
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• Ingersoll-Rand Company Limited
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• Pentair plc
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The Compensation Committee will continue to regularly review the composition of the peer group and make updates as needed.
Base Salary
In April 2019, the Compensation Committee provided market-aligned base salary increases to our NEOs. No base salary increase was provided to Mr. Richenhagen, our Chief Executive Officer. His base salary remained at $1,385,942. Base salary increases for Messrs. Beck, Hansotia, Smith and Veltmaat ranged from 3% to 10%.
Annual Cash Incentive Bonuses
Incentive compensation is based on AGCO’s performance, as well as the contribution of executive officers through the leadership of their respective regional or functional areas. For 2019, incentive compensation awards for all NEO’s and senior vice presidents were based 100% on corporate goals for global alignment purposes. Incentive compensation opportunities are expressed as a percentage of the executive officer’s base salary. The annual award opportunities for the NEOs in 2019, all of which relate to corporate goals, are shown in the chart below:
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Opportunity as a Percentage of Base Salary
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Name
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Minimum Award
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Target Award
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Maximum Award
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Mr. Beck
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50%
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100%
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200%
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Mr. Hansotia
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50%
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100%
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200%
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Mr. Richenhagen
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70%
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140%
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280%
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Mr. Smith
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50%
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100%
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200%
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Mr. Veltmaat
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45%
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90%
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180%
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In connection with the IC Plan, the Compensation Committee establishes three levels of performance (goals or objectives) at minimum, target and maximum levels, and final payout is based upon performance relative to these targets. The corporate objectives are set at the beginning of each year and approved by the Compensation Committee based upon a budget approved by the Finance Committee. However, unless a threshold adjusted earnings per share (“EPS”) goal is reached, no awards are paid regardless of performance relative to the other target goals. For the year ended December 31, 2019, the corporate objectives were based on targets for operating margin as a percentage of net sales and free cash flow. The calculation of these measures and corporate weightings are as follows:
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•
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Operating Margin as a Percentage of Net Sales: The percentage calculated when income from operations is divided by net sales (70% weight). This measure also excludes restructuring expenses and certain other approved items.
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•
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Free Cash Flow: Operating cash flow minus capital expenditures (30% weight).
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For 2019, targets for each of the measures for a 100% payout and AGCO’s performance are summarized below:
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Measure(1)
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Weight
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Bonus Objective
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Performance
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Percent Achieved
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Earned Award
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Adjusted Operating Margin as a Percentage of Net Sales
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70%
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6.0%
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6.0%
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100%
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100.0%
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Free Cash Flow
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30%
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$270.0
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$422.5
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156%
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200.0%
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(1)
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Dollar amounts stated in millions; performance amounts reflect adjustments made in accordance with the awards.
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From 2018 to 2019, adjusted operating margin as a percentage of net sales increased from 5.4% to 6.0%. In establishing performance goals each year, the Compensation Committee sets goals that are calibrated to company performance expectations, incorporating rigor and stretch in these goals in order to drive outstanding performance. Industry demand was projected to improve modestly in 2019 compared to 2018, and we set our 2019 target performance goals consistent with our forecast for 2019, which also projected improved performance. The agricultural equipment industry is cyclical, with sales largely dependent on the health of the overall farm economy, which is influenced by commodity prices and farm income. Industry demand in 2019 ultimately was lower than 2018. Although industry demand decreased, cost containment and other margin improvement programs implemented by management positively impacted our operating margins in 2019 compared to 2018. The Compensation Committee believes that this reflects strong performance by the Company relative to our key competitors, who experienced declines in their operating margins during 2019. For 2019, the Compensation Committee determined that we performed at target with respect to our adjusted operating margin as a percentage of net sales and above target with respect to free cash flow. As a result, the corporate portion of bonuses paid to NEOs reflects, overall, approximately 130% of the established target. All SVPs are measured on corporate goals.
For 2020, the Compensation Committee approved the continued use of operating margin as a percentage of net sales and free cash flow as the performance measures. The weighting of the operating margin metric reflects the importance the Company
has placed on margin improvement as a key to increasing Company performance and shareholder value. This approach is consistent with the feedback that we received from stockholders.
The IC Plan also provides for payment of a pro rata portion of the participant’s bonus upon a change of control, as well as additional bonus payments to certain participants terminated without cause within two years of a change of control. This is further explained in “Severance Benefits and Change of Control.”
Long-term Incentives
We provide performance- and retention-based equity opportunities to the NEOs. LTI represents a significant component of total compensation and weighs heavily in the overall pay mix for executives. The overarching principles of the LTI Plan are:
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LTI is performance-based and intended to engage executives in achieving longer-term goals and to make decisions in the best interests of stockholders;
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•
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Target award opportunities are generally competitive with median levels of other companies of similar size, industry and complexity;
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•
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Realizable gains with respect to each award are intended to vary with Company performance and stock price growth; and
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•
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Performance goals are aligned with stockholder interests and support the long-term success of AGCO.
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While awards under the LTI Plan generally are made annually, from time to time, the Compensation Committee may also utilize special incentives to support strategic initiatives and to strengthen retention of management.
The following table summarizes the mix, performance measurements and general terms for each form of equity awarded to our NEOs for 2019 under our LTI Plan:
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Performance Share Plan (“PSP”)
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Stock-Settled Stock Appreciation Rights (“SSARs”)
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Restricted Stock Units (“RSUs”)
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LTI Mix
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60%
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20%
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20%
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Description
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• Performance shares that are earned on the basis of AGCO’s performance versus pre-established goals for a three-year cycle
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• SSARs provide the right to receive share appreciation over the grant price, payable in whole shares of AGCO common stock
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• RSUs are full share equivalents, payable at the end of the vesting period
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Performance Measurements
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• 50% Operating Margin
• 50% Return on Invested Capital (“ROIC”)
• The percentage level achievement is determined annually, with the ultimate award earned based upon the results over the three-year cycle
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• Stock price appreciation
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• Stock price appreciation, as the total value of RSUs is influenced by stock price
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Vesting Period
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• Vest in full at the end of the three-year cycle
• Number of shares earned depends on performance
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• Vest in equal installments over four years
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• Vest in equal installments over three years
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Restrictions / Expiration
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• Converted to AGCO common stock upon vesting
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• Expire seven years from the grant date
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• N/A
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Competitive Positioning
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• Target award levels set at median level of market competitiveness
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• Median level of market competitiveness
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• Median level of market competitiveness
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In January 2019, the Compensation Committee approved long-term incentive awards for 2019 eligible plan participants. Long-term incentive awards for the NEOs in 2019 are summarized in the table below under the caption “2019 Grants of Plan-Based Awards.”
In part based upon input during our stockholder outreach and given the desire to improve the pay-for-performance alignment of RSUs, beginning with awards in 2020, the number of RSUs received under each award will be further adjusted within a range of -25% to +25% based upon the change in our operating margin relative to the changes in operating margins at
an 11-company agricultural equipment and industrial company peer group. In addition, rather than vesting ratable over a three-year cycle, RSUs now will cliff vest at the end of the three-year cycle to facilitate an emphasis on longer-term operating margin performance relative to peers.
For grants under the PSP, operating margin as a percentage of net sales and average ROIC were chosen as performance measures because they are meaningful measures of our performance and have a strong correlation to generating stockholder value over the long-term.
The Compensation Committee established three levels of performance for each measure: threshold, representing the minimum level of performance that warrants a payout; target, representing a level of performance where median target compensation levels are appropriate; and outstanding, representing a maximum realistic performance level where increased compensation levels are appropriate. The operating margin as a percentage of net sales and average ROIC goals are linked within a performance award matrix which is used to determine the number of shares earned in various combinations of performance. The award opportunity levels are expressed as multiples of the executive’s “target” award opportunity.
The matrix of award opportunities is illustrated below:
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Operating Margin as a percentage of Net Sales
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Below Threshold
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Threshold
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Target
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Outstanding
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ROIC
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Outstanding
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100.0%
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116.5%
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150.0%
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200.0%
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Target
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50.0%
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66.6%
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100.0%
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150.0%
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Threshold
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16.5%
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33.3%
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66.6%
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116.5%
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Below Threshold
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—%
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16.5%
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50.0%
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100.0%
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If the actual performance of the goal falls in between the established goals for threshold, target and outstanding performance, the associated payout factor will be calculated using a straight-line interpolation between the two goals. Unless the Compensation Committee determines otherwise, the Compensation Committee excludes restructuring and certain other items from the calculation of operating margin as a percentage of net sales and ROIC in order to ensure the calculations are equitable and appropriate decisions and actions are not discouraged by their projected impact on the awards.
For the awards granted in 2017 under the PSP, the Compensation Committee determined that, based on the Company’s performance for the applicable three-year PSP performance cycle (2017-2019), we achieved above “target” on both the cumulative EPS and ROIC goals, which were the measures at the time of the awards, thus producing a payout as shown in the chart below. The information provided below includes adjustments made by the Compensation Committee in accordance with the LTI Plan for certain items.
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Measure(1)
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Year
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Target
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Actual
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Earned Award
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EPS
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2017
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$2.50
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$3.02
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200%
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2018
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$2.75
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$3.89
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200%
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2019
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$3.03
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$4.44
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200%
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ROIC
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2017
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5.5%
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5.9%
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200%
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2018
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6.1%
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7.1%
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200%
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2019
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6.7%
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7.7%
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200%
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2017 Average
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200%
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2018 Average
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200%
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2019 Average
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200%
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Cumulative
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200%
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(1)
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Performance amounts reflect adjustments made in accordance with the awards.
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The average yearly performance for the 2017-2019 three-year PSP performance cycle was 200% for each of the three years. The goals were established during a low point in the global agricultural market, but we substantially outperformed the Company’s “outstanding” level performance goals for EPS and ROIC as a result of significant net sales growth and margin expansion driven by market recovery, new product introductions and cost reduction initiatives.
The target award and actual number of shares received by the NEOs for the three-year performance cycle covering 2017-2019 are shown below:
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Three-Year Performance Cycle (2017-2019)
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Name
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Target Award
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Actual Award
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Mr. Beck
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12,300 shares
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24,600 shares
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Mr. Hansotia
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4,600 shares
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9,200 shares
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Mr. Richenhagen
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69,500 shares
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139,000 shares
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Mr. Smith
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9,900 shares
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19,800 shares
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Mr. Veltmaat
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9,900 shares
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19,800 shares
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In 2019, the Compensation Committee established award opportunities for executives covering a new three-year PSP performance cycle (2019-2021), as well as a new grant of SSARs and RSUs. The Compensation Committee’s strategy is to regularly evaluate the size of award levels by taking into consideration market practices, the industry’s cyclicality and other appropriate factors. Targets covering the 2019-2021 performance cycle were established for operating margin as a percentage of sales, rather than the previously utilized earnings per share, and ROIC. This shift reflects the desire to reinforce the importance of margin improvement, which is consistent with stockholder feedback, but at the same time retains an appropriate link to earnings.
The targets for operating margin as a percentage of net sales and ROIC are formed by current and projected industry conditions. The goals are challenging and reflective of stretch performance expectations. The applicable threshold and outstanding levels of performance achievement are defined for each measure and incorporate shareholder expectations and a strong pay-for-performance focus. Target percentage level achievement on the new three-year PSP performance cycle (2019-2021) is based upon averaging the amounts earned during each year in the three-year performance cycle rather than on a cumulative basis during the entire performance cycle.
We consider the target goals for PSP awards for uncompleted cycles to be confidential. The Compensation Committee believes it is important to establish incentive goals that incorporate stretch performance expectations and reward for exceeding defined performance and results.
The Compensation Committee approves all grants of stock-based compensation to the Chief Executive Officer and all other executive officers. The Chief Executive Officer, with the assistance of the Senior Vice President — Global Business Services, assists the Compensation Committee with recommendations for award levels for all other executive officers based on external competitive analyses. Our policy is that SSARs are awarded with exercise prices at or above the fair market value of the Company’s common stock on the date of the grant.
Retention Awards
In 2018, Mr. Richenhagen was granted a one-time, time-based award to encourage him to delay his retirement and, in the interim, to oversee an orderly succession process, the integration of recent acquisitions, the launch of new products and the execution of near-term strategic milestones. In the aggregate, he received 137,000 restricted stock units that vest in one installment on December 31, 2020. Vesting of the restricted stock units generally is subject to Mr. Richenhagen’s continued employment on the date of vesting, except under certain circumstances such as a change in control of the Company.
In 2019, Mr. Smith was granted a one-time, time-based award to encourage him to remain with the Company following the Company’s promotion of Mr. Hansotia to Chief Operating Officer. In the aggregate, he received 35,837 restricted stock units that vested 25% at the end of December 31, 2019, and were to vest 25% on December 31, 2020 and 50% on December 31, 2021. Mr. Smith resigned from the Company effective January 31, 2020, and as a result only received 25% of the restricted stock units.
As part of its stockholder outreach process, the Compensation Committee noted the feedback with respect to retention awards, which it will consider in the future should the situation again arise.
Clawback of Incentive Compensation
We have a Compensation Adjustment and Recovery Policy. Pursuant to the policy, if the Board learns of any misconduct by an officer of AGCO or one of its subsidiaries that contributed to our having to restate our published financial statements, it shall take, or direct to take, such action as it deems reasonably necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, take remedial action against the individual in violation of the policy. In determining whether remedial action is appropriate, the Board shall take into account such factors as it deems
relevant, including whether the misconduct reflected negligence, recklessness or intentional wrongdoing. Remedial action may include dismissal and initiating legal action against the officer.
In addition, the Board will, to the full extent permitted by governing law, in all appropriate cases, direct us to seek reimbursement of any bonus or incentive compensation awarded to an officer, or effect the cancellation of unvested, restricted or deferred equity awards previously granted to an officer, if: (i) the amount of the bonus or incentive compensation was calculated based upon the achievement of financial results that were subsequently reduced as part of a restatement; (ii) the officer engaged in intentional wrongdoing that contributed to the restatement; and (iii) the amount of the award would have been lower had the financial results been properly reported.
In determining what action to take or to require to take, the Board may consider, among other things, penalties or punishments imposed by third parties, such as law enforcement agencies, regulators or other authorities, the impact upon us in any related proceeding or investigation of taking remedial action against an officer, and the cost and likely outcome of taking remedial action. The Board’s power to determine the appropriate remedial action is in addition to, and not in replacement of, remedies imposed by such authorities.
Without by implication limiting the foregoing, following a restatement of the Company’s financial statements, we also shall be entitled to recover any compensation received by the Chief Executive Officer and Chief Financial Officer that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of 2002.
The policy further specifies that the authority vested in the Board under the policy may be exercised by any committee thereof. In addition, this policy will be evaluated after the SEC issues final rules implementing the clawback provisions set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Share Ownership and Retention Requirements
Share ownership by directors and executive officers emphasizes the alignment of their interests with those of stockholders. The Company’s stock ownership program requires (i) non-employee directors to own common stock, or other equity equivalents, equal in value to four times the value of the annual retainer, (ii) the Chief Executive Officer to own common stock, or other equity equivalents, equal in value to five times annual salary, and (iii) all other executive officers to own common stock, or other equity equivalents, equal in value to three times their respective annual salaries. Once the minimum ownership level is achieved, an individual will remain qualified if he or she continues to hold at least the number of shares that is initially required regardless of the change in market value of the underlying stock. Any person becoming a director or executive officer has four-years from his or her election to comply with the stock ownership requirements. Our directors and executive officers all currently meet these requirements.
Hedging and Pledging Policy
We have a Hedging and Pledging Policy. Board members and officers are prohibited from, directly or indirectly, (i) pledging a significant number of the Company’s equity securities, or (ii) hedging with respect to any of the Company’s equity securities. For these purposes, (a) “pledging” includes the intentional creation of any form of pledge, security interest, deposit, lien or other hypothecation, including the holding of shares in a margin account, that entitles a third-party to foreclose against, or otherwise sell, any equity securities, whether with or without notice, consent, default or otherwise, but does not include either the involuntary imposition of liens, such as tax liens or liens arising from legal proceedings, or customary purchase and sale agreements, such as Rule 10b5-1 plans, and (b) “significant” means the lesser of 1% of the Company’s outstanding equity securities and 50% of the equity securities of the Company owned by the board member or officer. Also for these purposes, “hedging” includes any instrument or transaction, including put options and forward-sale contracts, through which the board member or officer offsets or reduces exposure to the risk of price fluctuations in a corresponding equity security. “Equity securities” include common stock, voting preferred stock and options and other securities exercisable for, or convertible into, settled in, or measured by reference to, any other equity security determined on an as-exercised and as-converted basis. The equity securities attributable to a board member or officer for these purposes shall include equity securities attributable to the board member or officer under either Section 13 or Section 16 of the Exchange Act. In addition, equity securities that are pledged shall not be counted toward board member and officer ownership requirements.
Compensation Risk Assessment
The Compensation Committee regularly reviews compensation plans and practices to ensure they are appropriately structured and aligned with business objectives, and not designed to encourage executives to take unwarranted risks. Specifically, the overall design of the compensation philosophy and plans mitigate risks because: (i) the financial performance objectives of the short and long-term incentive plans are reviewed and approved annually by the Board; (ii) the plans consist of multiple performance objectives, thus lessening the focus on any one in particular; (iii) short and long-term incentive payouts are capped for all participants; and (iv) the Company has in place a clawback provision that can require the return of bonus and other incentive compensation.
Tax Considerations
Section 162(m) of the IRC generally limits to $1 million the U.S. federal tax deductibility of compensation paid in one year to any employee. Through the end of 2017, performance-based compensation was not subject to this limit on deductibility, provided that such compensation met certain requirements, including stockholder approval of material terms of compensation. The Company generally designed its compensation to meet the requirements for the exception to Section 162(m). Effective for 2018 and subsequent years, Section 162(m) was amended to eliminate the exception for performance-based compensation. As a result, all compensation in excess of $1 million, regardless of how structured, no longer is deductible. The Company did not modify its compensation programs in response to the amendment, but may do so in the future.
Retirement Benefits
We believe that offering competitive retirement benefits is important to attract and retain top executives. Our U.S.-based executives participate in a non-qualified executive defined benefit plan in addition to a traditional defined contribution 401(k) plan. For the Company’s 401(k) plan, we generally contributed approximately $12,600 to each eligible executive’s 401(k) account during 2019, which was the maximum contribution match allowable under the Company’s 401(k) plan.
For executives, who generally became eligible to participate prior to August 1, 2015, we maintain an Executive Nonqualified Pension Plan (“ENPP”), which is designed to provide competitive retirement benefits that will attract and retain our executives. The ENPP provides eligible executive officers with retirement income for a period of 15 years - for the remainder of their lives if they retire from the Company after age 65 - based on a percentage of the average of their highest three non-consecutive years of base salary and bonus during their final 10 years of employment (referred to as their “three-year average compensation”), reduced by the executive officer’s social security benefits and 401(k) employer-matching contributions, as if the executive had made the maximum contribution. The benefit paid to the executive officers is 3% of their three-year average compensation multiplied by credited years of service, with a maximum annual benefit of 60% of their three-year average compensation. Benefits under the ENPP vest if the participant has attained age 50 and has at least ten years of service (including five years as a participant in the ENPP), but are not payable until the participant reaches age 65. For executives promoted or hired after August 1, 2015, those benefits consist of a nonqualified defined contribution plan.
Severance Benefits and Change of Control
Reasonable severance benefits are necessary to attract top executives. The levels of severance benefits provided to executives are designed to take into account the difficulty executives may experience with seeking comparable employment.
Employment agreements with the executives provide severance benefits when the termination is without “cause” or for termination with “good reason.” The severance benefit depends on whether the termination involved a change of control. For terminations without “cause” or for “good reason” that do not involve a change of control, the severance benefit allows for the executives to receive his or her base salary for a period of up to two years and a pro rata portion of the bonus to which the executive would have been entitled for the year of termination had the executive remained employed for the entire year. Specifically for the NEOs, Messrs. Hansotia, Smith and Veltmaat may receive their respective base salaries and bonus amounts for one year upon termination. Mr. Beck may receive his base salary and bonus amount for two years upon termination. Mr. Richenhagen will not receive cash severance because his employment agreement stipulates that no cash severance is paid when he reaches the age of 65. A terminated executive also is entitled to receive any vested benefits under the ENPP payable beginning at age 65.
We also believe it is important to provide certain additional benefits upon a change of control in order to protect the executive’s retirement benefits and potential income that would be earned associated with our equity incentive plans. In addition, it is our belief that the interests of stockholders will be best served if the interests of our senior management are in alignment. By providing certain change of control benefits, we believe executives will not be reluctant to consider potential change of control transactions that may be in the best interests of stockholders.
The Board has approved post-employment compensation to NEOs for terminations that occur within two years of a change of control. In such case, the executive would receive a lump-sum payment equal to (i) two times his or her base salary in effect at the time of termination, (ii) a pro-rata portion of his or her bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to two times the three year average of his or her awards received during the prior two completed years and the current year’s trend (except that for Mr. Richenhagen, the lump sum payment would equal (i) three times his base salary in effect at the time of termination, (ii) a pro-rata portion of his bonus earned for the year of termination and (iii) a bonus equal to three times the three year average of Mr. Richenhagen’s awards received during the prior two completed years and the current year’s trend), and the executive would also be entitled to receive specific retirement benefits and the acceleration of vesting of outstanding equity awards.
For awards under our equity incentive plan prior to 2018, the plan allows for all unearned awards to become fully vested and exercisable, and all performance goals applicable to an award will be deemed automatically satisfied with respect to the greater of the target level of compensation expected to be attained pursuant to such award or the level of performance dictated
by the trend of the Company’s actual performance, so that all of such compensation shall be immediately vested and payable. Effective with equity awards in 2018, the “single trigger” provision, which stated that shares will vest upon a change in control, was replaced with a “double-trigger” provision that states that vesting is contingent on a change in control and either termination of employment or failure of the acquiring company to assume outstanding equity grants or provide participants with the value equal to that of the unvested equity grants.
All benefits under the ENPP that have been earned based on years of service also become vested upon a change of control.
Executives with employment agreements prior to 2017 are entitled to receive a gross-up for excise taxes due on any of the change of control payments described above, other than ordinary income taxes associated with payouts from a change of control. Based upon discussions with stockholders, we have eliminated the gross-up for excise taxes on severance payments due to a change in control for any executive receiving an initial employment agreement in 2017 and beyond.
For purposes of these benefits, a “change of control” occurs, in general, when either (i) one or more persons acquire common stock of the Company that, together with other stock owned by the acquirers, amounts to more than 50% of the total fair market value or total voting power of the stock, (ii) one or more persons acquire during a 12-month period stock of the Company that amounts to 30% or more of the total voting power of the stock, (iii) a majority of the members of our Board of Directors are replaced in any 12-month period by directors who are not endorsed by a majority of the directors then in office, or (iv) with some exceptions, one or more persons acquire assets from the Company that have a total fair market value equal to or greater than 40% of the aggregate fair market value of all of our assets.
Perquisites and Other Benefits
We believe that cash and incentive compensation should be the primary focus of compensation and that perquisites should be modest. Perquisites are periodically reviewed for executives to ensure conformity with this policy. The primary perquisites available to executives are the use of a leased automobile and the reimbursement of dues associated with a social or athletic club. We do not allow executive officers the use of our leased aircraft for personal use. Supplemental life and disability insurance is also provided for executives. The life insurance generally provides for a death benefit of six times the executive officer’s base salary.
For executives on international assignments, additional expatriate benefits are designed to compensate the employee for differences in costs of living and taxation between the executive’s home country and host country. In addition, financial assistance is provided to the assignee for expenses such as relocation, children’s education, tax preparation and home leave travel.
Executives also participate in our other benefit plans on the same general terms as other employees. These plans may include medical, dental and disability insurance coverage.
Post-Employment Compensation
Each of the NEOs is covered by an employment agreement. These agreements provide post-employment compensation and benefits in the event of certain types of termination of employment, including death, disability, involuntary termination without cause, or termination for good reason by the executive. For further detail on the post-employment compensation and benefits each NEO is entitled to in the event of certain types of termination, please refer to the tables below under the caption “Other Potential Post-Employment Payments.”
Summary
Overall, we believe our executive compensation programs accomplish the objectives for which they have been designed and are in concert with the compensation philosophy. We believe the competitive compensation that is provided to our executives is reasonable based on competitive market practices and has enabled us to attract and retain a strong management team generating strong results in a challenging industry environment. We further believe that our short-term and long-term incentive programs appropriately reward our executives for their achievement of performance goals and that these programs sufficiently align the interests of the executives with those of the stockholders.
SUMMARY OF 2019 COMPENSATION
The following table provides information concerning the compensation of the NEOs for the Company’s three most recently completed years ended December 31, 2017, 2018 and 2019.
In the column “Salary,” we disclose the amount of base salary paid to the NEO during the year. In the columns “Stock Awards” and “SSAR Awards,” we disclose the award of stock, SSARs or RSUs measured in dollars and calculated in accordance with ASC 718. For SSARs, the ASC 718 aggregate grant date fair value per share is based on certain assumptions that the Company explains in Note 10 to our Consolidated Financial Statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2019. For awards of stock, the ASC 718 aggregate grant date fair value per share is equal to the closing price of our common stock on the date of grant. The amounts disclosed as the aggregate grant date fair value of the stock awards granted under the PSP are computed at the probable outcome of the performance conditions, or “target” level. The actual amounts that will be earned are dependent upon the achievement of pre-established performance goals. Please also refer to the table below under the caption “2019 Grants of Plan-Based Awards.”
In the column “Non-Equity Incentive Plan Compensation,” we disclose amounts earned under our IC Plan. The amounts included with respect to any particular year are dependent on whether the achievement of the relevant performance measure was satisfied during the year.
In the column “Change in Pension Value and Non-Qualified Earnings,” we disclose the aggregate change in the actuarial present value of the NEO’s accumulated benefit under all defined benefit and actuarial benefit plans (including supplemental plans) in 2019.
In the column “All Other Compensation,” we disclose the sum of the dollar value of all perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000.
The Company currently has employment agreements with Messrs. Beck, Hansotia, Richenhagen, Smith and Veltmaat. The employment contracts provide for current base salaries at the following annualized rates per annum: Mr. Beck — $660,539; Mr. Hansotia — $727,100; Mr. Richenhagen — $1,385,942; Mr. Smith — $692,147; and Mr. Veltmaat — $616,177. Messrs. Beck, Hansotia, Richenhagen, Smith and Veltmaat’s employment contracts continue in effect until terminated in accordance with their terms. Actual amounts paid in the year vary slightly due to timing of pay periods. In addition to the specified base salary, the employment contracts provide that each executive officer shall be entitled to participate in benefit plans and other arrangements generally available to senior executive officers of the Company.
2019 SUMMARY COMPENSATION TABLE
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Name and Principle Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(1)
($)
|
SSAR
Awards(2)
($)
|
Non-Equity
Incentive
Plan
Compen-
sation(3)
($)
|
Change in
Pension
Value and
Non-
Qualified
Earnings(4)
($)
|
All Other
Compen-
sation(5)
($)
|
Total
($)
|
Andrew H. Beck,
Senior Vice President — Chief Financial Officer
|
2017
|
569,750
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|
—
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1,019,082
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188,760
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954,901
|
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1,046,532
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51,759
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3,830,784
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2018
|
626,725
|
|
—
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968,755
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|
172,592
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872,714
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|
312,013
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42,304
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2,995,103
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2019
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655,729
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—
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1,030,093
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206,388
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852,448
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2,073,667
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42,098
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4,860,423
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Eric P. Hansotia,
Senior Vice President — Chief Operating Officer
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2017
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456,500
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—
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379,018
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70,928
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535,566
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267,350
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56,773
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1,766,135
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2018
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489,720
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—
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365,996
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64,400
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511,451
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263,406
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51,280
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1,746,253
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2019
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710,575
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—
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1,054,619
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210,924
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923,747
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667,792
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47,840
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3,615,497
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Martin H. Richenhagen,
Chairman, President and Chief Executive Officer
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2017
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1,345,575
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—
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5,747,717
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1,063,920
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3,157,257
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3,317,011
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93,116
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14,724,596
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2018
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1,375,851
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—
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13,437,972
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985,320
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2,682,220
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2,077,025
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90,231
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20,648,619
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2019
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1,385,942
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—
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5,855,740
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1,179,360
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2,522,415
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4,226,060
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118,215
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15,287,732
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Rob Smith,
Former Senior Vice President and General Manager, Europe/Middle East
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2017
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579,601
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—
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820,237
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151,008
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874,271
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203,755
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112,843
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2,741,715
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2018
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601,219
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—
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767,836
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137,816
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753,478
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130,322
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86,875
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2,477,546
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2019
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670,062
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—
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3,014,199
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165,564
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884,929
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211,124
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97,449
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5,043,327
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Hans-Bernd Veltmaat,
Senior Vice President — Chief Supply Chain Officer
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2017
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583,625
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—
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820,237
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151,008
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880,340
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950,747
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52,843
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3,438,800
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2018
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595,298
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—
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767,836
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137,816
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746,056
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754,663
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60,952
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3,062,621
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2019
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611,690
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—
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827,784
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165,564
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715,678
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1,540,452
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49,895
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3,911,063
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(1)
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Stock Awards for 2017
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In 2017, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2017 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs.
The actual amounts that were earned under the 2017-2019 three-year performance cycle differ as previously disclosed, and were dependent upon the achievement of pre-established performance goals. The value of the awards on the date of grant at the actual achieved level of performance, which is the maximum level of performance conditions, under the 2017-2019 three-year performance cycle for the PSP, is as follows: Mr. Beck — $1,521,018; Mr. Hansotia — $568,836; Mr. Richenhagen — $8,594,370; Mr. Smith — $1,224,234; and Mr. Veltmaat — $1,224,234.
The following were the value of the RSUs on the date of grant: Mr. Beck — $258,573; Mr. Hansotia — $94,600; Mr. Richenhagen — $1,450,532; Mr. Smith — $208,120; and Mr. Veltmaat —$208,120.
Stock Awards for 2018
In 2018, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2018 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs.
The actual amounts that will be earned under the 2018-2020 three-year performance cycle differ as disclosed above, and are dependent upon the achievement of pre-established performance goals. Assuming the maximum level of performance conditions under the 2018-2020 three-year performance cycle for the PSP, the following would be the value of the award on the date of grant: Mr. Beck — $1,442,280; Mr. Hansotia — $542,640; Mr. Richenhagen — $8,211,000; Mr. Smith — $1,142,400; and Mr. Veltmaat — $1,142,400. The pre-established performance goals for the first and second year of the three-year performance cycle under the PSP were achieved but are not yet vested.
The following were the value of the RSUs on the date of grant: Mr. Beck — $247,615; Mr. Hansotia — $94,676; Mr. Richenhagen — $9,332,472, including a one-time, time-based award discussed below; Mr. Smith — $196,636; and Mr. Veltmaat —$196,636.
In 2018, Mr. Richenhagen was granted a one-time, time-based award to encourage him to delay his retirement and, in the interim, to oversee an orderly succession process, the integration of recent acquisitions, the launch of new products and the execution of near-term strategic milestones. In the aggregate, he received 137,000 restricted stock units that vest in one
installment on December 31, 2020. Vesting of the restricted stock units generally are subject to Mr. Richenhagen’s continued employment on the date of vesting, except under certain circumstances such as a change in control of the Company.
Stock Awards for 2019
In 2019, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2019 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs.
The actual amounts that will be earned under the 2019-2021 three-year performance cycle differ as disclosed above, and are dependent upon the achievement of pre-established performance goals. Assuming the maximum level of performance conditions under the 2019-2021 three-year performance cycle for the PSP, the following would be the value of the award on the date of grant: Mr. Beck — $1,537,452; Mr. Hansotia — $1,574,058; Mr. Richenhagen — $8,724,430; Mr. Smith — $1,232,402; and Mr. Veltmaat — $1,232,402. The pre-established performance goals for the first year of the three-year performance cycle under the PSP were achieved but are not yet vested.
The following were the value of the RSUs on the date of grant: Mr. Beck — $261,367; Mr. Hansotia — $267,590; Mr. Richenhagen — $1,493,525; Mr. Smith — $2,397,998, including a one-time, time-based award discussed below; and Mr. Veltmaat —$211,583.
In 2019, Mr. Smith was granted a one-time, time-based award to encourage him to remain with the Company following the Company’s promotion of Mr. Hansotia to Chief Operating Officer. In the aggregate, he received 35,837 restricted stock units that vested 25% at the end of December 31, 2019, and were to vest 25% on December 31, 2020 and 50% on December 31, 2021. Mr. Smith resigned from the Company effective January 31, 2020, and as a result only received 25% of the restricted stock units.
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(2)
|
SSARs were awarded on January 24, 2017, January 23, 2018 and January 22, 2019. The SSARs vest over four years from the date of grant, or 25% per year. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718.
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(3)
|
Non-Equity Incentive Plan Compensation for 2017. All annual incentive awards for 2017 were performance-based. These payments were earned in 2017 and paid in January or February 2018 under the IC Plan.
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Non-Equity Incentive Plan Compensation for 2018. All annual incentive awards for 2018 were performance-based. These payments were earned in 2018 and paid in February 2019 under the IC Plan.
Non-Equity Incentive Plan Compensation for 2019. All annual incentive awards for 2019 were performance-based. These payments were earned in 2019 and paid in February 2020 under the IC Plan.
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(4)
|
The change in each officer’s pension value is the change in the Company’s obligation to provide pension benefits (at a future retirement date) from the beginning of the year to the end of the year. The obligation shown in the “2019 Pension Benefits Table” presented below is the value today of a benefit that will be paid at the officer’s normal retirement age, based on the benefit formula and his or her current salary and service. The values shown in the Summary Compensation Table represent the change in the pension obligation since the prior year.
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Change in pension values during the year may be due to various sources such as:
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•
|
Service accruals: The benefits payable from the pension plans increase as participants earn additional years of service. Therefore, as each executive officer earns an additional year of service during the year, the benefit payable at retirement increases. Each of the NEOs who participate in a pension plan earned an additional year of benefit service during 2019 except for Mr. Beck who has already earned the maximum benefit service allowed under the plan.
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•
|
Compensation increases/decreases since prior year: The benefits payable from the pension plans are related to salary. As executive officers’ salaries increase (decrease), then the expected benefits payable from the pension plans will increase (decrease) as well.
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•
|
Aging: The amounts shown above are changes in the present values of retirement benefits that will be paid in the future. As the officers approach retirement, the present value of the liability increases due to the fact that the executive officer is one year closer to retirement than he was at the prior measurement date.
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•
|
Changes in assumptions: The amounts shown above are changes in the present values of retirement benefits that will be paid in the future. The discount rate used to determine the present value is updated each year based on current economic conditions. This assumption does not impact the actual benefits paid to participants. The discount rate decreased from 2018 to 2019, which resulted in a significant increase in the present value of the officers’ benefits.
|
The change in pension value is subject to many external variables discussed above, such as discount rates, that are not related to Company performance.
|
|
•
|
Plan amendments: The Company periodically amends the retirement programs in order to remain competitive locally and/or align with our global benefits strategy. There were no such amendments during 2019.
|
The pension benefits and assumptions used to calculate these values are described in more detail under the caption “Pension Benefits.”
(5)The amount shown as “All Other Compensation” includes the following perquisites and personal benefits for the year ended December 31, 2019:
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Name
|
Club Membership
($)
|
Defined Contribution Match
($)
|
Life Insurance(a)
($)
|
Car Lease and Maintenance(b)
($)
|
Other(c)
($)
|
Total
($)
|
Andrew H. Beck
|
9,400
|
|
12,600
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5,883
|
|
13,478
|
|
737
|
|
42,098
|
|
Eric P. Hansotia
|
13,125
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|
12,600
|
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3,956
|
|
17,712
|
|
447
|
|
47,840
|
|
Martin H. Richenhagen
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7,824
|
|
12,600
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|
46,911
|
|
39,647
|
|
11,233
|
|
118,215
|
|
Rob Smith
|
—
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|
—
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|
—
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|
25,288
|
|
72,161
|
|
97,449
|
|
Hans-Bernd Veltmaat
|
7,974
|
|
12,600
|
|
11,486
|
|
17,835
|
|
—
|
|
49,895
|
|
|
|
(a)
|
These amounts represent the value of the benefit to the executive officer for life insurance policies funded by the Company.
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(b)
|
These amounts represent car lease payments made by the Company for cars used by executives and/or their family members, as well as payments for related gas and maintenance costs.
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(c)
|
The amount for Mr. Beck includes commercial airfare related to attendance by Mr. Beck’s wife at a business-related event — $737. The amount for Mr. Hansotia includes commercial airfare related to attendance by Mr. Hansotia’s wife at a business-related event — $447. The amount for Mr. Richenhagen includes estate planning fees — $6,069 and commercial airfare related to attendance by Mr. Richenhagen’s wife at a business-related event — $5,164. Mr. Richenhagen’s wife accompanied Mr. Richenhagen when the Company’s corporate aircraft was used for attendance at corporate functions at no incremental cost. The amount for Mr. Smith includes housing allowance — $48,302, tax preparation fees — $18,101 and commercial airfare related to attendance by a guest of Mr. Smith at business-related events — $5,758. Mr. Veltmaat’s wife accompanied Mr. Veltmaat when the Company’s corporate aircraft was used for attendance at a corporate function at no incremental cost.
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2019 GRANTS OF PLAN-BASED AWARDS
In this table, we provide information concerning each grant of an award made to an NEO in the most recently completed year. This includes the awards under the Company’s IC Plan, as well as PSP awards, RSUs and SSARs under the LTI Plan, each of which is discussed in greater detail under the caption “Compensation Discussion and Analysis.” The “Threshold,” “Target” and “Maximum” columns reflect the range of estimated payouts under the IC Plan and the range of number of shares to be awarded under the PSP. In the fourth-to-last column, we report the number of shares of common stock underlying RSUs granted in the year. In the third- and second-to-last columns, we report the number of shares of common stock underlying SSARs granted in the year and corresponding per share exercise price. In all cases, the exercise price was equal to the closing market price of the Company’s common stock on the date of grant. In the last column, we report the aggregate ASC 718 grant date fair value of all stock and SSAR awards made in 2019. Stock awards include the annual PSP award and the RSU award.
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Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
|
All Other Stock Awards: Number of Shares of Stock or Units (#)
|
Under-
lying
SSARs
Compen-
sation
(#)
|
Exercise
Price
of SSAR
Awards
($/sh)
|
Grant
Date Fair
Value of
Stock and
SSAR
Awards
($)
|
Name
|
Award
Type
|
Grant
Date
|
Thres-
hold
($)
|
Target
($)
|
Maxi-
mum
($)
|
Thres-
hold
(# of
shares)
|
Target
(# of
shares)
|
Maxi-
mum
(# of
shares)
|
Andrew H. Beck
|
IC Plan
|
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327,865
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655,729
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1,311,458
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PSP
|
1/22/19
|
4,200
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12,600
|
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25,200
|
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|
|
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768,726
|
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RSU
|
1/22/19
|
|
|
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|
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4,284
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|
|
|
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261,367
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SSAR
|
1/22/19
|
|
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18,200
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62.85
|
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206,388
|
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Eric P. Hansotia
|
IC Plan
|
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355,288
|
710,575
|
1,421,150
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PSP
|
1/22/19
|
4,300
|
|
12,900
|
|
25,800
|
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|
|
|
|
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|
787,029
|
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RSU
|
1/22/19
|
|
|
|
|
|
|
4,386
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267,590
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SSAR
|
1/22/19
|
|
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18,600
|
|
62.85
|
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210,924
|
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Martin H. Richenhagen
|
IC Plan
|
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970,160
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1,940,319
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3,880,638
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PSP
|
1/22/19
|
23,833
|
|
71,500
|
|
143,000
|
|
|
|
|
|
|
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4,362,215
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RSU
|
1/22/19
|
|
|
|
|
|
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24,480
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|
|
|
|
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1,493,525
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SSAR
|
1/22/19
|
|
|
|
|
|
|
|
|
104,000
|
|
62.85
|
|
1,179,360
|
|
Rob Smith
|
IC Plan
|
|
335,031
|
670,062
|
1,340,124
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
1/22/19
|
3,367
|
|
10,100
|
|
20,200
|
|
|
|
|
|
616,201
|
|
RSU
|
1/22/19
|
|
|
|
|
|
|
39,305
|
|
|
|
|
|
2,397,998
|
|
SSAR
|
1/22/19
|
|
|
|
|
|
|
|
|
14,600
|
|
62.85
|
|
165,564
|
|
Hans-Bernd Veltmaat
|
IC Plan
|
|
275,261
|
550,521
|
1,101,042
|
|
|
|
|
|
|
|
|
|
|
|
PSP
|
1/22/19
|
3,367
|
|
10,100
|
|
20,200
|
|
|
|
|
|
|
|
616,201
|
|
RSU
|
1/22/19
|
|
|
|
|
|
|
3,468
|
|
|
|
|
|
211,583
|
|
SSAR
|
1/22/19
|
|
|
|
|
|
|
|
|
14,600
|
|
62.85
|
|
165,564
|
|
|
|
(1)
|
Amounts included in the table above represent the potential payout levels related to corporate objectives for the fiscal year 2019 under the Company’s IC Plan. The payment for these awards already have been determined and were paid on February 14, 2020 and February 25, 2020 to the NEOs. Refer to Note 3 of the 2019 Summary Compensation Table.
|
|
|
(2)
|
The amounts shown represent the number of shares the executive would receive if the “Threshold,” “Target” and “Maximum” levels of performance are reached.
|
OUTSTANDING EQUITY AWARDS AT YEAR-END 2019
The following table provides information concerning unexercised SSARs and stock (including RSUs) that has not been earned or vested for each NEO outstanding as of the end of the Company’s most recently completed year. Each outstanding award is represented by a separate row that indicates the number of securities underlying the award.
For SSAR awards, the table discloses the exercise price and the expiration date. For stock awards, the table provides the total number of shares of stock that have not vested (or have not been earned) and the aggregate market value of shares of stock that have not vested (or have not been earned).
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSAR Awards
|
Stock Awards
|
Name
|
Number of
Securities
Underlying
Unexercised
SSARs
Exercisable
(#)
|
Number of
Securities
Underlying
Unexercised
SSARs
Unexercisable(1)
(#)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
SSARs
(#)
|
SSAR
Exercise
Price
($)
|
SSAR
Expiration
Date
|
Number
of Shares
or Units
of Stock
That
Have
Not
Vested(2)(3)
(#)
|
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested(4)
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(5)
(#)
|
Equity Incentive
Plan Awards:
Value
Realized on
Vesting(6)
($)
|
Andrew H. Beck
|
17,800
|
|
—
|
|
—
|
|
43.88
|
1/21/2022
|
—
|
|
—
|
|
—
|
|
—
|
|
12,225
|
|
4,075
|
|
—
|
|
46.58
|
1/26/2023
|
—
|
|
—
|
|
—
|
|
—
|
|
8,250
|
|
8,250
|
|
—
|
|
63.47
|
1/24/2024
|
1,394
|
|
99,573
|
|
—
|
|
—
|
|
3,350
|
|
10,050
|
|
—
|
|
73.14
|
1/23/2025
|
15,780
|
|
878,473
|
|
3,366
|
|
187,385
|
|
—
|
|
18,200
|
|
—
|
|
62.85
|
1/22/2026
|
10,332
|
|
798,147
|
|
8,400
|
|
648,900
|
|
Eric P. Hansotia
|
6,700
|
|
—
|
|
—
|
|
43.88
|
1/21/2022
|
—
|
|
—
|
|
—
|
|
—
|
|
4,575
|
|
1,525
|
|
—
|
|
46.58
|
1/26/2023
|
—
|
|
—
|
|
—
|
|
—
|
|
3,100
|
|
3,100
|
|
—
|
|
63.47
|
1/24/2024
|
510
|
|
36,429
|
|
—
|
|
—
|
|
1,250
|
|
3,750
|
|
—
|
|
73.14
|
1/23/2025
|
5,952
|
|
331,348
|
|
1,266
|
|
70,478
|
|
—
|
|
18,600
|
|
—
|
|
62.85
|
1/22/2026
|
10,578
|
|
817,151
|
|
8,600
|
|
664,350
|
|
Martin H. Richenhagen
|
—
|
|
23,000
|
|
—
|
|
46.58
|
1/26/2023
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
46,500
|
|
—
|
|
63.47
|
1/24/2024
|
7,820
|
|
558,583
|
|
—
|
|
—
|
|
19,125
|
|
57,375
|
|
—
|
|
73.14
|
1/23/2025
|
226,588
|
|
12,614,154
|
|
19,166
|
|
1,066,971
|
|
—
|
|
104,000
|
|
—
|
|
62.85
|
1/22/2026
|
58,801
|
|
4,542,300
|
|
47,666
|
|
3,682,276
|
|
Rob Smith
|
—
|
|
3,250
|
|
—
|
|
46.58
|
1/26/2023
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,600
|
|
—
|
|
63.47
|
1/24/2024
|
1,122
|
|
80,144
|
|
—
|
|
—
|
|
2,675
|
|
8,025
|
|
—
|
|
73.14
|
1/23/2025
|
12,504
|
|
696,098
|
|
2,666
|
|
148,416
|
|
—
|
|
14,600
|
|
—
|
|
62.85
|
1/22/2026
|
35,193
|
|
2,718,662
|
|
6,734
|
|
520,202
|
|
Hans-Bernd Veltmaat
|
7,100
|
|
—
|
|
—
|
|
43.88
|
1/21/2022
|
—
|
|
—
|
|
—
|
|
—
|
|
9,750
|
|
3,250
|
|
—
|
|
46.58
|
1/26/2023
|
—
|
|
—
|
|
—
|
|
—
|
|
6,600
|
|
6,600
|
|
—
|
|
63.47
|
1/24/2024
|
1,122
|
|
80,144
|
|
—
|
|
—
|
|
2,675
|
|
8,025
|
|
—
|
|
73.14
|
1/23/2025
|
12,504
|
|
696,098
|
|
2,666
|
|
148,416
|
|
—
|
|
14,600
|
|
—
|
|
62.85
|
1/22/2026
|
8,315
|
|
642,337
|
|
6,734
|
|
520,202
|
|
|
|
(1)
|
SSAR awards vest ratably, or 25% annually, over four years beginning from the date of grant, which was January 26, 2016 for the 2016 grants, January 24, 2017 for the 2017 grants, January 23, 2018 for the 2018 grants and January 22, 2019 for the 2019 grants.
|
|
|
(2)
|
RSU awards vest in equal installments over three years beginning from the date of grant, which was January 24, 2017 for the 2017 grants, January 23, 2018 for the 2018 grants and January 22, 2019 for the 2019 grants.
|
|
|
(3)
|
The pre-established performance goals of certain one-year performance cycles under the PSP were achieved; however, the award is subject to a further vesting period. The number of shares are at the actual level of performance achieved.
|
|
|
(4)
|
The market value of RSU awards that have not vested is based on the closing price of the Company’s common stock on December 31, 2019, December 31, 2018 and December 31, 2017, which was $77.25, $55.67 and $71.43, respectively. The market value of the awards earned under the three one-year performance cycles under the PSP are based on the closing price of the Company’s common stock on December 31, 2019 and December 31, 2018, which was $77.25 and $55.67, respectively.
|
|
|
(5)
|
The amounts shown represent the number of shares awarded but unearned under the PSP in January 2018 and January 2019, respectively. The actual amounts that will be earned under the PSP are dependent upon the achievement of pre-established performance goals during the respective performance cycles.
|
|
|
(6)
|
Based on the closing price of the Company’s common stock on December 31, 2019 and December 31, 2018, which was $77.25 and $55.67, respectively.
|
SSAR EXERCISES AND STOCK VESTED IN 2019
The following table provides information concerning exercises of SSARs and similar instruments, and vesting of stock awards including restricted stock and similar instruments, during the most recently completed year for each of the NEOs. The table reports the number of securities acquired upon exercise of SSARs; the aggregate dollar value realized upon exercise of SSARs; the number of shares of stock that have vested; and the aggregate dollar value realized upon vesting.
|
|
|
|
|
|
|
|
|
|
|
SSAR Awards
|
Stock Awards
|
Name
|
Number of Shares Acquired on Exercise(1)
(#)
|
Value Realized on Exercise(2)
($)
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized on Vesting(3)
($)
|
Andrew H. Beck
|
7,949
|
|
581,831
|
|
28,850
|
|
1,912,238
|
|
Eric P. Hansotia
|
4,665
|
|
372,130
|
|
10,832
|
|
717,845
|
|
Martin H. Richenhagen
|
78,564
|
|
5,783,010
|
|
162,630
|
|
10,780,562
|
|
Rob Smith
|
6,198
|
|
453,314
|
|
32,159
|
|
2,136,086
|
|
Hans-Bernd Veltmaat
|
2,698
|
|
174,513
|
|
23,200
|
|
1,537,804
|
|
|
|
(1)
|
The number of shares acquired on exercise of SSARs is computed by dividing the value realized on exercise by the market price of the underlying securities at exercise. The number of shares acquired upon exercise is inclusive of the following shares withheld for income tax purposes: Mr. Beck — 3,607 shares, Mr. Hansotia — 1,837 shares, Mr. Richenhagen — 35,435 shares, Mr. Smith — 351 shares and Mr. Veltmaat — 1,218 shares.
|
|
|
(2)
|
The dollar amount realized upon exercise is computed by multiplying the number of shares times the difference between the market price of the underlying securities at exercise and the exercise price of the SSARs.
|
|
|
(3)
|
Shares withheld for income tax purposes related to stock vested were as follows: Mr. Beck — 13,011 shares, Mr. Hansotia — 2,787 shares, Mr. Richenhagen — 73,348 shares, Mr. Smith — 15,572 shares and Mr. Veltmaat — 7,445 shares.
|
PENSION BENEFITS
The “2019 Pension Benefits Table” provides further details regarding the executive officers’ defined benefit retirement plan benefits. Because the pension amounts shown in the “2019 Summary Compensation Table” and the “2019 Pension Benefits Table” are projections of future retirement benefits, numerous assumptions must be applied. In general, the assumptions should be the same as those used to calculate the pension liabilities in accordance with ASC Topic 715, “Compensation – Retirement Benefits,” on the measurement date, although the SEC specifies certain exceptions, as noted in the table below.
Executive Nonqualified Pension Plan
The ENPP provides the Company’s eligible executives with retirement income for a period of 15 years based on a percentage of their final average compensation, including base salary and annual incentive bonus, reduced by the executive’s social security benefits and savings plan benefits attributable to employer matching contributions. In addition, executives who remain with AGCO until age 65 will have their benefits continue as a lifetime annuity after the 15-year certain period ends (i.e., at age 80).
The key provisions of the ENPP are as follows:
Monthly Benefit. Senior executives with a vested benefit will be eligible to receive the following retirement benefits each month for 15 years beginning on their normal retirement date (age 65): 3% of final average monthly compensation times years of service up to 20 years, reduced by each of (i) the senior executive’s U.S. social security benefit or similar government retirement program to which the senior executive is eligible, (ii) the benefits payable from the AGCO Savings Plan (payable as a life annuity) attributable to the Company’s matching contributions and earnings thereon (at the maximum level), and (iii) the benefits payable from any retirement plan sponsored by the Company in any foreign country attributable to the Company’s contributions.
Final Average Monthly Compensation. The final average monthly compensation is the average of the three years of base salary and annual incentive payments under the IC Plan paid to the executive during the three years in which such sum was the highest from among the ten years prior to his or her death, termination or retirement.
Vesting. Participants become vested after meeting all three of the following requirements: (i) turn age 50; (ii) completing ten years of service with the Company; and (iii) achieving five years of participation in the ENPP. An executive must remain with the Company until age 65 with at least ten years of service (five years must include tenure as an executive officer) to vest in the life annuity portion of this benefit that begins at age 80. Alternatively, all participants will become vested in the plan in the event of a change of control.
Early Retirement Benefits. Participants may not receive retirement benefits prior to normal retirement age.
Swiss Life Collective “BVG” Foundation
The Swiss Life Collective “BVG” Foundation (“BVG”) operates a pension fund in Switzerland, for which Mr. Smith is a participant. The BVG ensures the plan meets at least the mandated requirements for minimum pension benefits. This plan is a cash balance formula, with contributions made both by the Company and Mr. Smith. Mr. Smith’s total account balance represents contributions and interest made by the Company, as well as from his prior employers. The amounts shown in the tables throughout this proxy reflect the portion of account balance attributable to contributions made while employed by the Company.
The key provisions of the BVG plan are as follows:
Retirement benefit. Upon retirement, participants will receive the value of their cash balance account. They may elect to receive their benefit as a lump sum or as an annuity. The cash balance account grows each year with pay credits (payable by the employee and the employer) and interest.
Pay credits. Each year, a participant’s cash balance account is credited with the following percentage of pensionable pay (varies by age):
|
|
|
|
Age
|
Credit as a percentage of pay
(paid by the Company)
|
Credit (standard level) as a percentage of pay
(paid by employee)
|
25 - 34
|
5.5%
|
2.5%
|
35 - 44
|
7.5%
|
3.5%
|
45 - 54
|
11.5%
|
4.5%
|
55 - 65
|
13.5%
|
5.5%
|
Pensionable pay. Payable at the annual rate of base pay.
Normal Retirement Age. Age 65 for males; age 64 for females (as in accordance with Swiss law).
Early Retirement Benefits. Participants may elect to retire from the age of 58. Annuity benefits are converted using reduced actuarial equivalence conversion factors.
Swiss Life Additional Capital Plan
Effective January 1, 2012, the BVG also operates an enhanced pension fund for executives in Switzerland, for which Mr. Smith is a participant. This plan is a cash balance formula, with contributions made only by the Company, and contributions are made retroactive to date of hire.
The key provisions of the additional capital plan are as follows:
Retirement benefit. Upon retirement, participants will receive benefits equal to that of their cash balance account. The cash balance account grows each year with pay credits (payable by the employee and the employer) and interest.
Pay credits. Each year, a participant’s cash balance account is credited with the following percentage of pensionable pay (varies by age):
|
|
|
|
Age
|
Credit as a percentage of pay
(paid by the Company)
|
Credit as a percentage of pay
(paid by employee)
|
35 - 44
|
11.0%
|
0.0%
|
45 - 54
|
16.0%
|
0.0%
|
55 - 65
|
19.0%
|
0.0%
|
Pensionable pay. Bonus pay only.
Normal Retirement Age. Age 65 for males; age 64 for females (as in accordance with Swiss law).
Early Retirement Benefits. Participants may elect to retire from the age of 58.
Vesting. 100% vested.
2019 PENSION BENEFITS TABLE
|
|
|
|
|
|
|
|
|
Name
|
Plan Name
|
Number of Years of
Credited Service
(#)
|
Present Value of
Accumulated Benefit(1)
($)
|
Payments During
Last Year
($)
|
Andrew H. Beck
|
AGCO Executive Nonqualified Pension Plan
|
20.00
|
|
8,736,934
|
|
—
|
|
Eric P. Hansotia
|
AGCO Executive Nonqualified Pension Plan
|
6.50
|
|
1,317,079
|
|
—
|
|
Martin H. Richenhagen
|
AGCO Executive Nonqualified Pension Plan
|
15.75
|
|
27,994,749
|
|
—
|
|
Rob Smith
|
Swiss Life Collective “BVG” Foundation
|
6.33
|
|
1,061,743
|
|
—
|
|
Hans-Bernd Veltmaat
|
AGCO Executive Nonqualified Pension Plan
|
11.50
|
|
6,634,188
|
|
—
|
|
|
|
(1)
|
Based on plan provisions in effect as of December 31, 2019. The executive officers participate in pension plans that will provide a monthly annuity benefit upon retirement. The values shown in this column are the estimated lump sum value today of the monthly benefits they will receive in the future (based on their current salary and service, as well as the assumptions and methods prescribed by the SEC). These values are not the monthly or annual benefits that they would receive.
|
Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings and the assumptions used to determine the present value, such as the discount rate. For 2019, the discount rate assumption used to determine the actuarial present value of accumulated pension benefits was lower than in 2018. The Company cautions that the values reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column in the Summary Compensation Table, as well as the amounts above in the Present Value of Accumulated Benefit column, are theoretical as those amounts are calculated pursuant to SEC requirements and are based on assumptions used in preparing the Company’s audited financial statements for the applicable fiscal years. The Company’s retirement plans utilize a different method of calculating actuarial present value for the purpose of determining a lump sum payment, if any. The change in pension value from year to year as reported in the table is subject to market volatility and may not represent the value that a NEO will actually accrue or receive under the Company’s retirement plans during any given year.
OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS
Each NEO’s employment agreement with the Company includes provisions for post-employment compensation related to certain employment termination events. Pursuant to the LTI Plan, all outstanding equity awards prior to 2018 become fully vested and exercisable upon a change of control. Beginning in 2018, all equity awards became subject to a “double trigger” whereby accelerated vesting is contingent on a change in control and either termination of employment or failure of the acquiring company to assume outstanding equity grants or provide participants with the value equal to that of the unvested equity grants. The LTI Plan does not provide for accelerated vesting of equity under other employment termination events. The table below and its accompanying footnotes provides specific detail on the post-employment compensation each NEO is entitled to in the event of certain employment termination events assuming termination on the last day of the prior year (December 31, 2019).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive /
Termination Scenario(1)
|
Severance
|
Bonus
|
Accelerated
Vesting of
Equity
|
Benefits
|
Retirement
Benefits
|
Death
Benefit
|
Disability
Benefit
|
280G Tax
Gross-Up
|
Estimated
Total
|
Andrew H. Beck
|
|
|
|
|
|
|
|
|
|
|
Change in Control(2)(3)(4)(5)
|
$
|
3,107,787
|
|
$
|
852,448
|
|
$
|
4,121,352
|
|
$
|
117,078
|
|
$
|
8,708,978
|
|
(10)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
16,907,643
|
|
Voluntary Termination Without Good Reason
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
(10)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
Retirement(6)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Death(7)
|
$
|
165,135
|
|
$
|
852,448
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
(10)
|
|
$
|
3,963,234
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5,770,303
|
|
Disability(8)
|
$
|
—
|
|
$
|
852,448
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
(10)
|
|
$
|
—
|
|
$
|
916,200
|
|
$
|
—
|
|
$
|
2,558,134
|
|
Involuntary With Cause
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
(10)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
Involuntary Without Cause or Good Reason Resignation(9)
|
$
|
1,321,078
|
|
$
|
852,448
|
|
$
|
—
|
|
$
|
—
|
|
$
|
789,486
|
|
(10)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,963,012
|
|
Eric P. Hansotia
|
|
|
|
|
|
|
|
|
|
|
Change in Control(2)(3)(4)(5)
|
$
|
2,768,043
|
|
$
|
923,747
|
|
$
|
2,841,343
|
|
$
|
108,832
|
|
$
|
1,267,800
|
|
(11)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,909,765
|
|
Voluntary Termination Without Good Reason
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Retirement(6)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Death(7)
|
$
|
181,775
|
|
$
|
923,747
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
4,362,600
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5,468,122
|
|
Disability(8)
|
$
|
—
|
|
$
|
923,747
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
749,400
|
|
$
|
—
|
|
$
|
1,673,147
|
|
Involuntary With Cause
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Involuntary Without Cause or Good Reason Resignation(9)
|
$
|
727,100
|
|
$
|
923,747
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,650,847
|
|
Martin H. Richenhagen
|
|
|
|
|
|
|
|
|
|
|
Change in Control(2)(3)(4)(5)
|
$
|
12,519,718
|
|
$
|
2,522,415
|
|
$
|
33,993,496
|
|
$
|
659,132
|
|
$
|
29,271,280
|
|
(12)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
78,966,041
|
|
Voluntary Termination Without Good Reason
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
Retirement(6)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
Death(7)
|
$
|
346,486
|
|
$
|
2,522,415
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
|
$
|
8,662,988
|
|
$
|
—
|
|
$
|
—
|
|
$
|
13,453,594
|
|
Disability(8)
|
$
|
—
|
|
$
|
2,522,415
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
|
$
|
—
|
|
$
|
5,271,600
|
|
|
|
$
|
9,715,720
|
|
Involuntary With Cause
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
Involuntary Without Cause, Good Reason, Resignation or Company’s Non-Renewal of Employment Agreement(9)
|
$
|
—
|
|
$
|
2,522,415
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,921,705
|
|
(12)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,444,120
|
|
Rob Smith
|
|
|
|
|
|
|
|
|
|
|
Change in Control(2)(3)(4)(5)
|
$
|
3,032,876
|
|
$
|
871,079
|
|
$
|
6,058,189
|
|
$
|
22,492
|
|
$
|
907,478
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,892,114
|
|
Voluntary Termination Without Good Reason
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
907,478
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
907,478
|
|
Retirement
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Death(7)
|
$
|
170,874
|
|
$
|
871,079
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,019,853
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,061,806
|
|
Disability(8)
|
$
|
—
|
|
$
|
871,079
|
|
$
|
—
|
|
$
|
—
|
|
$
|
415,289
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,286,368
|
|
Involuntary With Cause
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
907,478
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
907,478
|
|
Involuntary Without Cause or Good Reason Resignation(9)
|
$
|
683,495
|
|
$
|
871,079
|
|
$
|
—
|
|
$
|
—
|
|
$
|
907,478
|
|
(13)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,462,052
|
|
Hans-Bernd Veltmaat
|
|
|
|
|
|
|
|
|
|
|
Change in Control(2)(3)(4)(5)
|
$
|
2,793,736
|
|
$
|
715,678
|
|
$
|
3,289,781
|
|
$
|
120,182
|
|
$
|
6,905,785
|
|
(14
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
13,825,162
|
|
Voluntary Termination Without Good Reason
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
(14
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
Retirement(6)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Death(7)
|
$
|
154,044
|
|
$
|
715,678
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
(14
|
)
|
$
|
3,697,062
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5,000,901
|
|
Disability(8)
|
$
|
—
|
|
$
|
715,678
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
(14
|
)
|
$
|
—
|
|
$
|
841,800
|
|
$
|
—
|
|
$
|
1,991,595
|
|
Involuntary With Cause
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
(14
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
Involuntary Without Cause or Good Reason Resignation(9)
|
$
|
616,177
|
|
$
|
715,678
|
|
$
|
—
|
|
$
|
—
|
|
$
|
434,117
|
|
(14
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,765,972
|
|
|
|
(1)
|
All termination scenarios assume termination occurs on December 31, 2019, and a stock price of $77.25, which was the closing price of the Company’s common stock on the last trading day of the Company’s year ended December 31, 2019.
|
|
|
(2)
|
Upon termination within two years following a change of control, the following provisions apply to each of the NEOs:
|
|
|
•
|
Mr. Richenhagen receives a lump sum payment equal to (i) three times his base salary in effect at the time of termination, (ii) a pro-rata portion of his bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to three times the three-year average of Mr. Richenhagen’s awards received during the prior two completed years and the current year’s trend. He continues to receive life insurance and health benefits during a three-year period and disability benefits during a two-year period.
|
|
|
•
|
Messrs. Beck, Hansotia, Smith and Veltmaat receive a lump sum payment equal to (i) two times base salary in effect at the time of termination, (ii) a pro-rata portion of bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to two times the three-year average of the NEO’s awards received during the prior two completed years and the current year’s trend. Each of the NEOs continues to receive life insurance, disability and healthcare benefits during a two-year period.
|
|
|
•
|
Messrs. Beck, Hansotia, Richenhagen and Veltmaat will receive their ENPP retirement benefit payable as a lump sum. This lump sum is calculated in a similar fashion as values disclosed in the Pension Benefits Table, except it is determined based on the plan’s actuarial equivalence definition rather than the SEC prescribed assumptions. There is no enhancement to their pension benefit amount in the event of a change in control other than immediate vesting of the benefit.
|
|
|
(3)
|
All outstanding equity awards prior to 2018 held by the NEOs at the time of a change of control become non-cancelable, fully vested and exercisable, and all performance goals associated with any awards are deemed satisfied with respect to the greater of target performance or the level dictated by the trend of the Company’s performance to date, so that all compensation is immediately vested and payable.
|
|
|
(4)
|
In the case of a change of control, the retirement benefits are payable as a lump sum six months after termination of employment or, if such termination occurs more than twenty-four months after the change in control, in accordance with the terms of the ENPP. The difference between the “Retirement Benefits” values shown in the table above from the ENPP and the value shown in the “2019 Pension Benefits Table” is due to the fact that the interest and mortality assumptions prescribed by the plan in the event of a change of control are different from the assumptions used in the actuarial valuation. There is no enhancement to the benefit amount under a change of control other than immediate vesting of the benefit.
|
|
|
(5)
|
The change-in-control calculation has factored into it a value for the executive’s covenant not to compete.
|
|
|
(6)
|
As of December 31, 2019, Mr. Richenhagen is eligible for retirement benefits. Messrs. Beck and Veltmaat are vested in their ENPP benefit, but are not eligible to commence their benefits. Mr. Hansotia is not vested in his ENPP benefit.
|
|
|
(7)
|
Upon death, the following provisions apply to each of the NEOs:
|
|
|
•
|
The estate receives the executive’s base salary in effect at the time of death for a period of three months. The estate is also entitled to all sums payable to the executive through the end of the month in which death occurs, including the pro-rata portion of his bonus earned at this time. The “Death Benefit” amount represents the value of the insurance proceeds payable upon death.
|
|
|
(8)
|
Upon disability, the following provisions apply to each of the NEOs:
|
|
|
•
|
Each of the NEOs receives all sums otherwise payable to them by the Company through the date of disability, including the pro-rata portion of the bonus earned. The “Disability Benefit” amount represents the annual value of the insurance proceeds payable to the executive on a monthly basis upon disability.
|
|
|
(9)
|
Unless such termination occurs within two years following a change of control, if employment is terminated without cause or if the executive voluntarily resigns with good reason, the following provisions apply to each of the NEOs:
|
|
|
•
|
For Mr. Richenhagen, he does not receive cash severance because he is over age 65. His employment agreement stipulates that no cash severance is paid when he reaches the age of 65. Mr. Richenhagen does receives a pro-rata portion of his bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company.
|
|
|
•
|
For Mr. Beck, he receives his base salary in effect at the time of termination for a two-year severance period, paid at the same intervals as if he had remained employed with the Company. He also receives a pro-rata portion of his bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company.
|
|
|
•
|
For Messrs. Hansotia, Smith and Veltmaat, each of the NEOs receive their base salary in effect at the time of termination for a one-year severance period, paid at the same intervals as if they had remained employed with the Company. Each NEO also receives a pro-rata portion of their bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company.
|
|
|
(10)
|
Mr. Beck is currently vested in his ENPP retirement benefit. In the event of Mr. Beck’s termination due to a change of control, he will receive a $8,708,978 lump sum payment. In the event of his termination due to any other cause, he will receive a $789,486 annual annuity for 15 years beginning at age 65. The present value of this annuity (plus the value of the life annuity beginning at age 80 if he were to remain employed by the Company until age 65) equals the benefit disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019.
|
|
|
(11)
|
Mr. Hansotia is not currently vested in his ENPP retirement benefit. In the event of Mr. Hansotia’s termination due to a change of control, he will receive a $1,267,800 lump sum payment. In the event of his termination due to any other cause on December 31, 2019, he would not receive an ENPP retirement benefit.
|
|
|
(12)
|
Mr. Richenhagen is currently vested in his ENPP retirement benefit. In the event of Mr. Richenhagen’s termination due to a change of control, he will receive a $29,271,280 lump sum payment. In the event of Mr. Richenhagen’s termination due to any other cause, he will receive $1,921,705 annually as a 15-year certain and life annuity beginning at termination. The present value of this annuity plus the value of the life annuity beginning 15 years later equals the benefit disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019.
|
|
|
(13)
|
In the event of Mr. Smith’s termination due to a change of control, he will receive a $907,478 lump sum payment from his retirement plan. In the event of his termination due to death, he will receive a $2,019,853 lump sum payment. In the event of his termination due to disability, he will receive a $415,289 annual annuity until age 65. In the event of his termination due to any other cause, he will receive a lump sum payment of $907,478, which corresponds to his vested benefits as per December 31, 2019.
|
|
|
(14)
|
Mr. Veltmaat is currently vested in his ENPP retirement benefit. In the event of Mr. Veltmaat’s termination due to a change of control, he will receive a $6,905,785 lump sum payment. In the event of his termination due to any other cause, he will receive a $434,117 annual annuity for 15 years beginning at age 65. The present value of this annuity (plus the value of the life annuity beginning at age 80 if he were to remain employed by the Company until age 65) equals the benefits disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019.
|
Mr. Richenhagen’s employment agreement provides certain restrictive covenants that continue for a period of two years after termination of employment, including a non-competition covenant, a non-solicitation of customers covenant and a non-recruitment of employees covenant. If Mr. Richenhagen breaches his post-employment obligations under these covenants, the Company may terminate the severance period and discontinue any further payments or benefits to Mr. Richenhagen.
2019 CEO PAY RATIO
Our analysis began by determining that we had approximately 21,625 employees as of a November 30, 2019 determination date. Although permitted by the SEC, we did not use the 5% de Minimis rule to exclude or eliminate any employee group. Based on our consistently applied compensation measure of actual total cash compensation, we identified the median employee. The median employee’s total 2019 compensation, as determined in a manner consistent with our Summary Compensation Table, was $48,463.
Based on this methodology, we estimate the ratio of CEO pay to median employee pay is 315:1. In 2018, the CEO pay to median employee pay ratio was 427:1, which reflected a one-time stock retention award to the CEO. Without this one-time award, the ratio of CEO pay to median employee pay would have been 262:1.