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PROXY STATEMENT TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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2017 ANNUAL MEETING PROXY STATEMENT |
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March 24, 2017
Dear Fellow Stockholder:
On behalf of the Board of Directors, I am delighted to invite you to attend the 2017 Annual Meeting of Stockholders (the "Annual Meeting") of Spirit AeroSystems Holdings, Inc. (the "Company"). Details of the business to be conducted at the Annual Meeting are included in the attached Notice of Annual Meeting of Stockholders and accompanying Proxy Statement. We will meet Wednesday, April 26, 2017, at the Fairmont Washington, D.C., located at 2401 M Street NW, Washington, D.C. 20037 in the Dumbarton Room at 11 a.m. Eastern Time.
Since I joined the Company in April 2016 and became the Chief Executive Officer in August, the technologies and capabilities that make Spirit unique in the industry have continued to impress me. I have also found that the expertise and dedication of our people is second to none. Our primary focus in 2016 was on meeting our key financial targets and delivering on the quality and competitive cost commitments that make us a trusted partner to our customers, employees, stockholders and communities.
In 2016, we also made key changes to our compensation plans to better align with our values of transparency, collaboration and inspiration across the Company. By aligning targets with a greater emphasis on Company level revenue growth in both our short- and long-term plans, we are tying the growth strategy to the compensation plan to increase accountability. I am pleased to highlight some of the specific enhancements to our corporate governance and compensation plans covered in this Proxy Statement, including program changes that will be implemented beginning in 2017:
Your vote is important. Whether or not you plan to attend the Annual Meeting in person, I urge you to complete, sign and date the enclosed proxy card and return it promptly in the enclosed envelope. If you decide to attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy card.
Thank you for your continued support of Spirit AeroSystems Holdings, Inc. I look forward to greeting as many of our stockholders as possible at the Annual Meeting.
Sincerely,
Thomas C. Gentile, III
President and Chief Executive Officer
Spirit AeroSystems Holdings, Inc.
The use of cameras at the Annual Meeting is prohibited and they will not be allowed into the meeting or any other related areas, except by credentialed media. We realize that many cellular phones and other wireless mobile devices have built-in digital cameras, and while these devices may be brought into the venue, the camera function may not be used at any time.
SPIRIT AEROSYSTEMS HOLDINGS, INC.
3801 South Oliver
Wichita, Kansas 67210
Notice of 2017 Annual Meeting of Stockholders |
Wednesday, April 26, 2017
11 a.m. Eastern Time
Registration will begin at 9 a.m.
The 2017 Annual Meeting of Stockholders (the "Annual
Meeting") will begin at 11 a.m.
Place
Dumbarton Room, Fairmont Washington, D.C.
2401 M Street NW
Washington, D.C. 20037
You can vote if you were a stockholder at the close of business on March 3, 2017.
Registered Stockholders. An admission ticket is attached to your proxy card. Please bring the admission ticket with you to the meeting.
Beneficial Stockholders. Stockholders whose stock is held by a broker or bank (often referred to as "holding in street name") should come to the beneficial stockholders table. In order to be admitted, beneficial stockholders must bring account statements or letters from their brokers or banks showing that they owned the Company's Common stock as of March 3, 2017. In order to vote at the meeting, beneficial stockholders must bring legal proxies, which they can obtain only from their brokers or banks.
In all cases, stockholders must bring photo identification to the meeting for admission.
Registered Stockholders. Please vote by mail by completing, signing, dating and promptly mailing the proxy card in the enclosed addressed envelope for which no postage is required if mailed in the United States. Any proxy may be revoked at any time prior to its exercise at the meeting.
Beneficial Stockholders. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares.
The enclosed Proxy Statement is issued in connection with the solicitation of a proxy on the enclosed form by the Board of Directors of Spirit AeroSystems Holdings, Inc. for use at the Annual Meeting. The Proxy Statement not only describes the items that stockholders are being asked to consider and vote on at the Annual Meeting, but also provides you with important information about the Company. Financial and other important information concerning the Company is also contained in the Company's 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Pursuant to rules promulgated by the SEC, the Company has elected to provide access to the Company's proxy materials by sending you this full set of proxy materials, including a proxy card, and notifying you of the availability of the Company's proxy materials on the internet. This Proxy Statement and the Company's 2016 Annual Report are available at http://www.edocumentview.com/spr. The Company began distributing this Proxy Statement, a form of proxy and the 2016 Annual Report on or about March 24, 2017.
By order of the Board of Directors.
Sincerely,
Stacy Cozad
Senior Vice President, General Counsel, Chief Compliance Officer and Secretary
Spirit AeroSystems Holdings, Inc.
March 24, 2017
Whether or not you expect to attend the Annual Meeting in person, the Company urges you to vote your shares at your earliest convenience. Promptly voting your shares by completing, signing, dating and returning the enclosed proxy card will save the Company the expense and extra work of additional solicitation. An addressed envelope for which no postage is required if mailed in the United States is enclosed if you wish to vote by mail. Submitting your proxy now will not prevent you from voting your shares at the meeting if you desire to do so, as your proxy is revocable at your option.
Important Notice Regarding the Availability of Proxy Materials for Spirit AeroSystems Holdings, Inc.'s 2017 Annual Meeting of Stockholders to be Held on April 26, 2017
This Proxy Statement and the Company's 2016 Annual Report are available at http://www.edocumentview.com/spr. In accordance with SEC rules, this website does not use "cookies," track the identity of anyone accessing the website to view the proxy materials or gather any personal information.
PROXY STATEMENT
TABLE OF CONTENTS
SPIRIT AEROSYSTEMS HOLDINGS, INC.
3801 South Oliver
Wichita, Kansas 67210
Proxy Statement for the 2017
Annual Meeting of Stockholders
Unless the context otherwise requires, in this Proxy Statement (1) the "Company" means Spirit AeroSystems Holdings, Inc. and (2) "Spirit" means Spirit AeroSystems, Inc., our primary operating company and a direct wholly owned subsidiary of the Company.
General Information Regarding the Annual Meeting
This Proxy Statement, which was first mailed to stockholders on or about March 24, 2017 (the "Mailing Date"), is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of the Company to be voted at the Company's 2017 Annual Meeting of Stockholders (the "Annual Meeting"), which will be held at 11 a.m. Eastern Time Wednesday, April 26, 2017 in the Dumbarton Room at the Fairmont Washington, D.C., located at 2401 M Street NW, Washington, D.C. 20037, for the purposes set forth in the accompanying Notice of 2017 Annual Meeting of Stockholders.
Any stockholder signing and returning the enclosed proxy has the power to revoke it by (1) giving written notice of revocation of such proxy to the Company's Corporate Secretary at the address set forth in the last sentence of this paragraph, (2) completing, signing and submitting a new proxy card relating to the same shares and bearing a later date, or (3) attending the Annual Meeting and voting in person, although attendance at the meeting will not, by itself, revoke a proxy. The shares represented by the enclosed proxy will be voted as specified therein if said proxy is properly signed and received by the Company prior to the time of the Annual Meeting and is not properly revoked. The expense of this proxy solicitation will be borne by the Company. The Company's principal executive offices are located at 3801 South Oliver, Wichita, KS 67210.
The Board has fixed the close of business on March 3, 2017 as the record date (the "Record Date") for determining the holders of Common stock entitled to notice of and to vote at the Annual Meeting. On the Record Date, there were 119,126,352 shares of Class A Common stock outstanding, held of record by approximately 872 stockholders. Each outstanding share of Class A Common stock is entitled to one vote. On the Record Date, there were no shares of Class B Common stock outstanding.
The presence, in person or by proxy, of stockholders entitled to cast a majority of the votes which all stockholders are entitled to cast at the Annual Meeting is necessary to constitute a quorum for the transaction of business. The Company will count abstentions and "broker non-votes" only for the purpose of determining the presence or absence of a quorum. "Broker non-votes" occur when a person holding shares through a bank or brokerage account does not provide instructions as to how his or her shares should be voted and the broker does not exercise discretion to vote those shares on a particular matter.
Under the rules of the New York Stock Exchange ("NYSE"), brokers may exercise discretion to vote shares as to which instructions are not given only with respect to certain "routine" matters. Under the NYSE rules, Proposal 6 (ratification of the selection of our independent registered public accounting firm) is considered to be a routine matter. As a result, a stockholder's broker is permitted to vote the stockholder's shares on Proposal 6 at its discretion without instructions from the stockholder.
Proposal 1 (election of the nine members of the Board), Proposal 2 (approval of the Third Amended and Restated Certificate of Incorporation of the Company), Proposal 3 (approval of the Company's Employee Stock Purchase Plan), Proposal 4 (the Say-On-Pay Proposal) and Proposal 5 (the Say-When-On-Pay Proposal) are not considered to be routine matters. Accordingly, brokerage firms are not permitted to vote shares for which they have not received voting instructions on these proposals.
2017 Proxy Statement 1
With respect to Proposal 1 (election of the nine members of the Board), each director will be elected by a vote of the majority of votes cast. A majority of votes cast for any director means that the number of shares cast "FOR" a director's election exceeds the number of votes cast "AGAINST" that director. In the event that an incumbent nominee does not receive the requisite majority of votes cast in this election, the Company will follow the post-election resignation procedure described under the section entitled "Corporate Governance and the Board of Directors Majority Voting Policy for Director Elections." Any shares not voted (whether by abstention, "broker non-vote" or otherwise) will have no impact on the election of the members of the Board.
Proposal 2 (approval of the Third Amended and Restated Certificate of Incorporation of the Company) and Proposal 3 (approval of the Company's Employee Stock Purchase Plan) will be approved if stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to vote on such matter vote "FOR" the proposal. With respect to Proposals 2 and 3, a stockholder may vote "FOR," "AGAINST" or "ABSTAIN." Abstentions and "broker non-votes" will not be counted as votes "FOR" or "AGAINST" Proposals 2 and 3. However, because abstentions and "broker non-votes" will be counted as present at the Annual Meeting, they will have the effect of votes "AGAINST" Proposals 2 and 3.
Proposal 4 (the Say-On-Pay Proposal) represents an advisory vote and the results will not be binding on the Board or the Company. A vote "FOR" Proposal 4 by stockholders entitled to cast a majority of the votes which all stockholders present, in person or by proxy, are entitled to vote on such matter will constitute the stockholders' non-binding approval with respect to the Company's executive compensation programs. The Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. With respect to Proposal 4, a stockholder may vote "FOR", "AGAINST" or "ABSTAIN." Abstentions and "broker non-votes" will not be counted as votes "FOR" or "AGAINST" Proposal 4. However, because abstentions and "broker non-votes" will be counted as present at the Annual Meeting, they will have the effect of votes "AGAINST" Proposal 4.
Proposal 5 (the Say-When-On-Pay Proposal) represents an advisory vote and the results will not be binding on the Board or the Company. The affirmative vote of a plurality of the votes cast in person or by proxy at the Annual Meeting and entitled to vote on such matter will constitute the stockholders' non-binding approval with respect to the frequency of submission to stockholders of say-on-pay proposals. The Board will review the voting results and take them into consideration when making future decisions regarding the frequency of the advisory vote on executive compensation. With respect to Proposal 5, a stockholder may vote "FOR Every Year," "FOR Every 2 Years," "FOR Every 3 Years" or "ABSTAIN." Please select one choice only. Any shares not voted (whether by abstention, "broker non-vote" or otherwise) will have no impact on the outcome of the vote.
Proposal 6 (ratification of the selection of the Company's independent registered public accounting firm) will be approved if stockholders entitled to cast a majority of the votes which all stockholders present, in person or by proxy, are entitled to vote on the matter, vote "FOR" the proposal. With respect to Proposal 6, a stockholder may vote "FOR," "AGAINST" or "ABSTAIN." Abstentions and "broker non-votes" will not be counted as votes "FOR" or "AGAINST" Proposal 6. However, because abstentions and "broker non-votes" will be counted as present at the Annual Meeting, they will have the effect of votes "AGAINST" Proposal 6.
Votes submitted by mail will be voted by the individuals named on the card (or the individuals properly authorized) in the manner indicated. If a stockholder submits a duly executed proxy and does not specify how shares should be voted, they will be voted in accordance with the Board's recommendations. Stockholders who hold shares in more than one account must vote each proxy and/or voting instruction card received to ensure all shares owned are voted.
Votes cast by proxy or in person at the Annual Meeting will be received and tabulated by Computershare Shareowners Services, the Company's transfer agent and the inspector of elections for the Annual Meeting.
Householding of Annual Meeting Materials
Some brokers and other nominee record holders may be participating in the practice of "householding" proxy statements. This means only one copy of the Proxy Statement may have been sent to multiple stockholders in a stockholder's household. The Company will promptly deliver a separate copy of the Proxy Statement to any stockholder who contacts the Company's Investor Relations Department by writing to Spirit AeroSystems Holdings, Inc., Investor Relations, P.O. Box 780008, Wichita, KS 67278-0008, by calling (316) 523-7040 or by sending an email request to investorrelations@spiritaero.com. If a stockholder is receiving multiple copies of the Proxy Statement at the stockholder's household and would like to receive a single copy of the Proxy Statement for a stockholder's household in the future, the stockholder should contact his or her broker, other nominee record holder or the Company's Investor Relations Department to request mailing of a single copy of the Proxy Statement.
2 2017 Proxy Statement
Corporate Governance and the Board of Directors
Corporate Governance Information
The Company's Corporate Governance Guidelines and the charters of the four standing committees of the Board describe the governance practices followed by the Company. The Corporate Governance Guidelines and committee charters are intended to ensure that the Board has the necessary authority and practices in place to review and evaluate the Company's business operations, to make decisions that are independent of the Company's management and to monitor adherence to the Company's standards and policies. The Corporate Governance Guidelines are also intended to align the interests of the Company's directors and management with those of the Company's stockholders. The Corporate Governance Guidelines establish the practices the Board follows with respect to the obligations of the Board and each director; Board composition and selection; Board meetings and involvement of senior management; CEO performance evaluation and elected officer succession planning; Board committee composition, responsibilities and meetings; director compensation; director orientation and education; stockholders' advisory vote for say-on-pay; and director access to members of management, employees and independent advisors. The Board annually conducts a self-evaluation to identify opportunities to improve Board performance.
The Corporate Governance Guidelines and committee charters are reviewed periodically and updated as necessary to reflect changes in regulatory requirements and evolving oversight practices. The Corporate Governance Guidelines comply with corporate governance requirements contained in the listing standards of the NYSE and make enhancements to the Company's corporate governance policies.
In 2016, the Corporate Governance and Nominating Committee reviewed and assessed the adequacy of the Corporate Governance Guidelines and considered various corporate governance principles that merit consideration by the Board. As a result of its review, the Corporate Governance and Nominating Committee recommended certain improvements to the Corporate Governance Guidelines, which it amended in July 2016.
Current copies of the Corporate Governance Guidelines and Code of Ethics and Business Conduct are available under the "Investor Relations" portion of the Company's website, www.spiritaero.com.
NYSE corporate governance requirements require that a majority of the Board of Directors consists of independent directors. The NYSE rules also require that each of the Compensation Committee and Corporate Governance and Nominating Committee be composed solely of "independent directors," as defined under the rules of the NYSE.
In addition, the rules under the Securities Exchange Act of 1934 and NYSE rules require that the Company's Audit Committee be composed exclusively of independent directors.
The Board annually examines and makes a determination of each director's and each nominee's independence based on criteria set forth in the NYSE rules. The Board considers all relevant circumstances when examining director independence. For directors employed by, or serving as directors of, companies with which the Company does business in the ordinary course, the Board examined the amount paid by the Company to those companies and by those companies to the Company. The Board also examined the directors' memberships on other public and private company boards, civic and not-for-profit boards, as well as any executive positions the directors may hold and any consulting and other services they may provide.
Based on this analysis, the Board has determined the following directors and nominees meet the standards of independence under the Company's Corporate Governance Guidelines and applicable NYSE listing standards, including that each such director and nominee is free of any relationship that would interfere with his or her individual exercise of independent judgment: Mr. Chadwell, Ms. Esteves, Mr. Fulchino, Mr. Gephardt, Mr. Johnson, Mr. Kadish, Mr. Plueger and Mr. Raborn. Independent directors currently comprise a majority of the Board and will continue to comprise a majority following the Annual Meeting if all of the nominees for directors are elected. Following the Annual Meeting, if all of the nominees for directors are elected, the Company's Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Risk Committee will each be comprised solely of independent directors.
2017 Proxy Statement 3
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Certain Relationships and Related Person Transactions
Related person transactions have the potential to create actual or perceived conflicts of interest between the Company and its directors, executive officers, beneficial holders of more than 5% of any class of the Company's Common stock or their respective immediate family members. The Board, as advised by the Corporate Governance and Nominating Committee, reviews such matters as they pertain to transactions with related persons as described by Item 404(a) of the SEC's Regulation S-K.
The Board determined the related person transactions disclosed herein are fair to, and in the best interests of, the Company.
The Board has adopted a written Related Person Transaction Policy that is communicated to the appropriate level of management and can be found under the "Investor Relations" portion of the Company's website, www.spiritaero.com. Under the policy, a related person transaction is any transaction or series of related transactions, including financial transactions or relationships (including any indebtedness or guarantee of indebtedness) and any transactions involving employment, consulting or similar relationships, in which the Company or any of its subsidiaries was, is or will be a participant, where the amount involved exceeds $120,000 and in which a Related Person (as defined in the policy) had, has or will have a direct or indirect "material interest" as determined by the Corporate Governance and Nominating Committee and/or the Company's General Counsel (or other members of the Company's legal department).
The Corporate Governance and Nominating Committee and the Company's General Counsel (or other members of the Company's legal department), are responsible for reviewing these transactions and may take into consideration, among other things, (1) the materiality of the transaction to either the Company or the Related Person; (2) the actual or perceived conflict of interest between the Company and the Related Person; (3) the impact on the transaction of applicable corporation and fiduciary duty laws and rules; (4) whether and to what extent the transaction is on terms and conditions that would be obtained on an arm's-length basis in a transaction with unrelated third persons; (5) whether any products or services provided by the Related Person or other aspects of the transaction that benefit the Company are of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources, or if there are other compelling business reasons for the Company to enter into the transaction; (6) disclosure considerations; (7) the potential impact of the transaction on the Company's relations with its customers, suppliers, stockholders and securities markets; (8) the Company's Corporate Governance Guidelines and Code of Ethics and Business Conduct; (9) the potential impact of the transaction on the objectivity of the Related Person; and (10) the fairness to and best interests of the Company and its stockholders.
After review of the relevant facts and circumstances, if the Corporate Governance and Nominating Committee concludes the related person transaction is fair to, and in the best interests of, the Company and its stockholders, it may approve or ratify the transaction. If the Corporate Governance and Nominating Committee declines to approve or ratify any related person transaction, the Company's General Counsel, in coordination with the affected business unit or corporate function, will review the transaction, determine whether it should be terminated or amended in a manner that is acceptable to the Corporate Governance and Nominating Committee, and advise the Corporate Governance and Nominating Committee of his or her recommendation. The Corporate Governance and Nominating Committee will then consider the recommendation at its next meeting. If the General Counsel does not ultimately recommend the transaction to the Corporate Governance and Nominating Committee or if the Corporate Governance and Nominating Committee does not approve the transaction, the proposed transaction will not be pursued or, if the transaction has already been entered into, the Corporate Governance and Nominating Committee will determine an appropriate course of action with respect to the transaction.
Below are the transactions that occurred or have continued since the beginning of the fiscal year 2016 or any currently proposed transactions in which, to the Company's knowledge, the Company or any of its subsidiaries was or is a party and the amount involved exceeded $120,000, and in which any director, director nominee, executive officer, holder of more than 5% of any class of the Company's Common stock, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
Anthony Kondrotis, husband of Krisstie Kondrotis, Senior Vice President, Business Development and Business & Regional Jet Programs, is employed by Spirit as Vice President, Unclassified Defense Programs. In 2016, Anthony Kondrotis received $708,339 in compensation from Spirit, which included salary and 5,420 shares of restricted stock, comprising (1) a time-based LTI award of 4,280 shares of restricted stock with a grant date fair value of $185,645 and (2) a performance-based LTI award of 1,140 shares of restricted stock with a grant date fair value of $61,925. As of the Record Date, Anthony Kondrotis had received $499,452 in compensation from Spirit in 2017, consisting of salary, a
4 2017 Proxy Statement
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
performance bonus and grants of 4,442 shares of restricted stock, comprising (1) a time-based LTI award of 2,649 shares of restricted stock with a grant date fair value of $162,172 and (2) a performance-based LTI award of 1,793 shares of restricted stock with a grant date fair value of $109,767. The grant date fair values of the aforementioned grants are calculated in accordance with FASB's authoritative guidance on stock-based compensation accounting.
The Corporate Governance and Nominating Committee is responsible for identifying and evaluating qualified potential candidates to serve on the Board and recommending to the Board for its selection those nominees to stand for election as directors at the Company's Annual Meeting of Stockholders. While the Corporate Governance and Nominating Committee has established no minimum eligibility requirements for candidates to serve on the Board, in performing its duties, the Corporate Governance and Nominating Committee considers any criteria approved by the Board or that the Corporate Governance and Nominating Committee deems appropriate, including but not limited to the candidate's judgment, skill, education, diversity, age, relationships and experience with businesses and other organizations; whether the candidate meets the independence requirements of applicable legal and listing standards; the organization, structure, size and composition of the Board and the interplay of the candidate's experience with the experience of other Board members; the qualifications and areas of expertise needed to further enhance the deliberations of the Board; whether the candidate maintains a security clearance with the Department of Defense ("DoD"); and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board.
Each potential candidate to serve on the Board must satisfy the requirements of the Company's certificate of incorporation and bylaws, conform to high standards of integrity and ethics and have a commitment to act in the best interest of the Company and its stockholders.
The Corporate Governance and Nominating Committee will consider stockholder recommendations for candidates to the Board on the same basis that it considers all other candidates recommended to it. To formally nominate a director candidate to the Corporate Governance and Nominating Committee, a stockholder must follow the procedures described in the Company's bylaws, including to provide the Company with a written notice that includes: (1) the name, age, business address and residence address of the nominating stockholder and the person to be nominated; (2) the principal occupation of the person to be nominated; (3) a representation that the nominating stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person to be nominated; (4) the total number of all shares of Class A Common stock and other securities of the Company that are owned beneficially and of record by the person to be nominated and by the nominating stockholder and, if such securities are not owned solely and directly by the nominating stockholder or the proposed nominee, the manner of beneficial ownership (beneficial ownership has the same meaning as provided in Regulation 13D under the Securities Exchange Act of 1934, as amended (the "Exchange Act")); (5) a description of all arrangements or understandings between the nominating stockholder or any of its affiliates or associates, and any others acting in concert with any of the foregoing, each person to be nominated, and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by the nominating stockholder; (6) such other information regarding such nominating stockholder and each person to be nominated by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or been intended to be nominated, by the Board; (7) any additional information as necessary to permit the Company to determine if each person to be nominated is independent under applicable listing standards, any applicable rules of the SEC and any publicly disclosed standards used by the Company in determining and disclosing the independence of its directors; (8) the consent of the person to be nominated to serve as a director of the Company, if so elected; (9) a written representation and agreement, in the form provided by the Company's Corporate Secretary upon written request, relating to the nominee's compliance, in his or her individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, if elected as a director, with the Company's corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines, any other Company code of conduct, policies and guidelines or any rules, regulations and listing standards, in each case as applicable to Company's directors; and (10) a written representation and agreement that the person to be nominated (A) is not and will not become a party to any agreement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the proposed nominee, if elected as a director of the Company, will act or vote on any issue or question, and (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director unless the terms of such agreement, arrangement or understanding have been provided to the Company. The Company may request any proposed nominee to furnish such other information as
2017 Proxy Statement 5
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
may reasonably be required by the Company to determine the qualifications of the proposed nominee to serve as a director of the Company.
All director candidate recommendations and formal nominations for membership to the Board for the 2018 Annual Meeting of Stockholders must be sent to the Company at the address set forth below and received by November 24, 2017 (120 days preceding the one-year anniversary of the Mailing Date). The Company's presiding officer at the Annual Meeting of Stockholders may refuse to acknowledge the nomination of any person not made in compliance with the procedures required by the Company's bylaws.
Effective November 29, 2016, the Board amended the Company's bylaws primarily to implement a proxy access provision, which provides eligible stockholders with an additional avenue for director nominations. Pursuant to the proxy access provision, a stockholder (or a group of up to 20 stockholders) owning 3% or more of the Company's outstanding common stock continuously for at least three years (an "Eligible Stockholder") may nominate, and shall have the right to include in the Company's proxy materials, directors constituting up to the greater of two individuals or 20% of the Company's Board, provided that the Eligible Stockholder and the nominee(s) satisfy the requirements specified in the Company's bylaws. An Eligible Stockholder's nominee(s) for the Board shall be included in the Company's Proxy Statement for presentation at the Company's 2018 Annual Meeting of Stockholders if the nomination is received by the Company at its offices no later than November 24, 2017 (120 days preceding the one-year anniversary of the Mailing Date) and such nomination satisfies the other requirements as specified in the Company's bylaws.
Stockholder recommendations and nominations for candidates to the Board as described above should be sent to the Company's Corporate Secretary at 3801 South Oliver St., Wichita, KS 67210.
Experience, Qualifications, Attributes and Skills of the Members of the Board of Directors
The Board believes that the Board, as a whole, should possess a combination of skills, professional experience and diversity of backgrounds necessary to oversee the Company's business. In addition, the Board believes there are certain attributes that every director should possess, as reflected in the Board's membership criteria. Accordingly, the Board and the Corporate Governance and Nominating Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board's overall composition and the Company's current and future needs.
The Corporate Governance and Nominating Committee is responsible for developing and recommending criteria for director nominees to the Board for approval. As discussed above, while the Corporate Governance and Nominating Committee has established no minimum eligibility requirements for candidates to serve on the Board, in performing its duties, the Corporate Governance and Nominating Committee considers any criteria approved by the Board or that the Corporate Governance and Nominating Committee deems to be appropriate. All of the Company's Board members share certain qualifications and attributes consistent with the general criteria set forth in the Company's Corporate Governance Guidelines. For example, each of them possesses specific skills and experience aligned with the Company's strategic direction and operating challenges and that complement the overall composition of the Board. In addition, each Board member has demonstrated certain core business competencies, including high achievement and a record of success, financial literacy, a history of making good business decisions and exposure to best practices. All of the Company's Board members also possess interpersonal skills that maximize group dynamics, including respect for others, strong communication skills and confidence to ask thought-provoking questions. The Board members are enthusiastic about the Company and devote sufficient time to be fully engaged in their roles as Board members. Finally, all of the Company's non-employee directors satisfy the independence requirements of the NYSE and the SEC rules.
The Corporate Governance and Nominating Committee annually reviews the Board's requirements for Board members and the appropriate criteria for membership to the Board.
The Board recognizes that the Company is more effectively governed when a diversity of viewpoints, backgrounds, opinions, skills, expertise, experiences and industry knowledge are represented on the Board. Accordingly, in October 2011, the Corporate Governance and Nominating Committee adopted the Board of Directors Diversity Policy for considering diversity in identifying nominees for director. The Board of Directors Diversity Policy provides that, in nominating candidates for election to the Board at each Annual Meeting of Stockholders, the Corporate Governance and Nominating Committee and the Board shall select individuals who represent a diversity of viewpoint, professional experience, education, skill, expertise, industry knowledge and such other factors as the Corporate Governance and Nominating Committee and the Board believe would enhance the diversity of the Board and the effective governance of the Company. Accordingly, diversity of thought, experience, gender, race and ethnic background are considered in the director evaluation process. As discussed below under the heading "Proposal 1: Election of Directors Information
6 2017 Proxy Statement
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
Regarding Nominees for Election as Directors," the Company's directors have experience with businesses that operate in industries in which the Company and its subsidiaries operate, including commercial aviation, aviation supply and maintenance, and defense industries, or that involve important skills necessary to advise the Company in strategic areas including finance, general management, labor negotiations, governmental affairs and business strategy. The Corporate Governance and Nominating Committee has taken the specific experience, qualifications, attributes and skills of the individual Board members into account in concluding that each nominee should continue to serve on the Board.
Majority Voting Policy for Director Elections
The Company's bylaws provide for simple majority voting in the election of directors in uncontested elections. Pursuant to the Company's bylaws, in an uncontested election of directors, any incumbent director who does not receive more votes "FOR" than votes "AGAINST" is required to promptly tender his or her resignation to the Board for the Board's consideration.
Upon receipt of a resignation of a director tendered as a result of a failed stockholder vote, the Corporate Governance and Nominating Committee will make a recommendation to the Board as to whether to accept or reject the resignation. In considering the tendered resignation, the Board will consider the Corporate Governance and Nominating Committee's recommendation as well as any other factors it deems relevant, which may include:
Any director who has tendered his or her resignation may not participate in the deliberations of the Corporate Governance and Nominating Committee or in the Board's consideration of the Corporate Governance and Nominating Committee's recommendation with respect to such director. The Board will act on a tendered resignation within 90 days following certification of the stockholder vote for the Annual Meeting and will promptly disclose its decision and rationale as to whether to accept the resignation (or the reasons for rejecting the resignation, if applicable) in a press release, in a filing with the SEC or by other public announcement, which may include a posting on the Company's website.
If a director's resignation is accepted by the Board, or if a nominee for director who is not an incumbent director is not elected, the Board may fill the resulting vacancy or may decrease the size of the Board pursuant to the Company's bylaws.
Stockholders and other interested persons may send communications to the Board, the chairman of the Board, individual members of the Board, members of any committee of the Board, or one or more non-employee directors by letter addressed to Investor Relations at Spirit AeroSystems Holdings, Inc., 3801 South Oliver, Wichita, KS 67210, or by contacting Investor Relations at (316) 523-7040. These communications will be received and reviewed by the Company's Investor Relations office. The receipt of concerns about the Company's accounting, internal controls, auditing matters or business practices will be reported to the Company's Audit Committee. The receipt of other concerns will be reported to the appropriate committee(s) of the Board. Our employees also can raise questions or concerns confidentially or anonymously using the Company's Ethics Hotline. This hotline provides our employees, suppliers and other stakeholders with a mechanism for reporting unethical activities and/or financial irregularities to the Board anonymously. Such persons are able to file reports via a web-based process or a toll free telephone number. Data reported to the Ethics Hotline is reviewed quarterly with the Audit Committee and with the Company's independent registered public accounting firm to help ensure that the Company's ethics and compliance programs remain effective. The Ethics Hotline is operated by a third-party service provider and is available 24 hours a day, 7 days a week and 365 days a year. Receipt of communications clearly not appropriate for consideration by members of the Board, such as unsolicited advertisements, inquiries concerning the products and services of the Company and harassing communications, are not forwarded to members of the Board.
2017 Proxy Statement 7
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
The Company separates the roles of chief executive officer of the Company and chairman of the Board in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the chairman of the Board provides guidance to the chief executive officer, sets the agenda for Board meetings and presides over meetings of the full Board. Because Mr. Johnson, the chairman of the Board, is not an employee of the Company and has been determined to be an "independent director," as defined under the rules of the NYSE, the Board has not deemed it necessary to appoint a lead independent director. The chairman of the Board also presides at all executive sessions of non-employee directors and serves as the focal point for directors regarding resolving conflicts with the chief executive officer or other directors and coordinating feedback to the chief executive officer on behalf of directors regarding business issues and Board management. The Board generally holds executive sessions four times a year without the chief executive officer or other employees present, unless the presence of the chief executive officer and/or any other employees is requested by the Board.
The Board of Directors' Role in Risk Oversight
The Board oversees an enterprise-wide approach to risk management designed to support the achievement of organizational objectives, including strategic objectives, to achieve planned long-term organizational performance and enhance stockholder value. A fundamental part of risk management is not only understanding the risks of a company and what steps are required to manage those risks, but also understanding what level of risk is appropriate for that company. The involvement of the full Board in setting the Company's business strategy is a key part of its assessment of management's appetite for risk and also a determination of what constitutes an appropriate level of risk for the Company.
The Board's role in the Company's risk oversight process includes receiving regular reports from members of the Company's senior management on areas of material risk to the Company. The Board (or the appropriate committee in the case of risks that are under the purview of a particular committee) receives these reports from the appropriate "risk owner" within the organization to enable it to understand the Company's risk identification, risk management and risk mitigation strategies.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Board has delegated to the Risk Committee and the Audit Committee primary oversight of the risk management process. The Risk Committee provides oversight of management's guidelines, policies and processes for assessing, monitoring and mitigating the Company's critical enterprise risks, including the major strategic, operational, financial and compliance risks inherent in the Company's business and core strategies, determines which risks need to be included on the Board's agenda for discussion and assists the Board in its oversight of the Company's management of key risks that have the potential to significantly affect the Company's ability to execute its strategy and achieve its strategic business objectives and performance goals.
The Audit Committee, in collaboration with the Risk Committee, focuses on a broad range of legal, financial and operational risks, including internal controls, disclosure issues, contract accounting, Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") compliance, Ethics Hotline reports and legal and regulatory issues, including compliance with SEC rules and regulations. The Audit Committee annually reviews a comprehensive annual risk assessment report from the Company's internal auditors. The internal audit report surveys risks throughout the business, focusing on primary areas of risk, including operational, financial, contractual, legal and regulatory, strategic and reputational risks. The Audit Committee, in collaboration with the Risk Committee, looks at the relative magnitude of these risks and management's mitigation plan and provides strategic advice to the Company about ways to reduce and contain risk.
In addition, in setting compensation, the Compensation Committee strives to create incentives that encourage a level of risk-taking behavior consistent with the Company's business strategy. Such incentives are also designed to align the Company's executives' interests with those of the Company's stockholders by tying executive compensation to stockholder return and value.
Finally, the Board's Corporate Governance and Nominating Committee, in collaboration with the Risk Committee, assists with risk mitigation by ensuring the Board and its committees are composed of individuals with the appropriate credentials and backgrounds to assist the Company with its risk mitigation efforts, while ensuring the Company complies with all applicable NYSE, SEC and other public company governance requirements.
8 2017 Proxy Statement
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
The Board has four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Risk Committee. At the April 20, 2016 Board meeting, Ms. Esteves and Messrs. Plueger and Raborn were reappointed to the Audit Committee; Messrs. Chadwell, Fulchino, Gephardt and Johnson were reappointed to the Compensation Committee; Messrs. Chadwell, Fulchino, Gephardt, Johnson and Kadish were reappointed to the Corporate Governance and Nominating Committee; and Ms. Esteves and Messrs. Kadish, Plueger and Raborn were reappointed to the Risk Committee. Nine formal meetings of the Audit Committee, six formal meetings of the Compensation Committee, four formal meetings of the Corporate Governance and Nominating Committee and four formal meetings of the Risk Committee were held in 2016.
Below is a description of the duties and composition of each standing committee of the Board. Each committee has authority to engage legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities. Directors hold committee memberships for a term of one year until the next Annual Meeting of Stockholders or, if later, until their successors are elected and qualified, or until their death, retirement, resignation or removal.
Audit Committee. In accordance with the Company's Audit Committee Charter, the Audit Committee is responsible for, among other things, (1) selecting and overseeing the independent registered public accounting firm; (2) pre-approving the overall scope of the audit and quarterly financial review; (3) reviewing the independent registered public accounting firm's report describing the auditing firm's internal quality-control procedures and any material issues raised by the most recent internal quality-control review or peer review of the auditing firm; (4) in collaboration with the Risk Committee, reviewing and discussing with management the Company's risk assessment and risk management practices; (5) in collaboration with the Risk Committee, overseeing the Company's risk policies and processes relating to financial statements, financial systems, financial reporting processes, compliance and auditing; (6) reviewing and discussing with management and the independent registered public accounting firm the Company's financial reporting and accounting processes, the Company's financial statements and the independent registered public accounting firm's annual audit report; (7) overseeing the Company's financial reporting activities; (8) reviewing and discussing with management, the independent registered public accounting firm and the internal auditor, the Company's transactions with related parties and its identification of accounting for and disclosure of such transactions; (9) reviewing with the chief financial officer and chief audit executive the Company's internal audit system of audit and financial controls and the results of internal audits; (10) meeting periodically and separately with management, internal auditors and the independent registered public accounting firm; (11) reviewing procedures for the receipt, retention and treatment of complaints, including anonymous complaints from employees, concerning accounting, accounting controls, audit matters and regulatory compliance; (12) overseeing and reviewing the Company's Code of Ethics and Business Conduct and Insider Trading Policy and overseeing and reviewing the oversight and effectiveness of the Company's ethics and compliance program; (13) preparing the report of the Audit Committee to be included in the Company's proxy statement; (14) conducting a self-evaluation of the performance of the Audit Committee and reassessing its charter; and (15) reporting to the full Board.
In 2016, the Audit Committee reviewed and reassessed the adequacy of the Audit Committee Charter. As a result of its review, the Audit Committee recommended certain improvements to the Audit Committee Charter, which it amended in July 2016. A current copy of the written Audit Committee Charter is available under the "Investor Relations" portion of the Company's website, www.spiritaero.com.
The Company's Audit Committee consists of Ms. Esteves and Messrs. Plueger and Raborn, with Mr. Raborn serving as chairman. All of the Audit Committee members have been determined to be independent within the meaning of the NYSE listing standards, and each of Ms. Esteves and Mr. Raborn has been determined to be an "audit committee financial expert," as such term is defined in Item 407(d)(5) of SEC Regulation S-K.
Compensation Committee. In accordance with the Company's Compensation Committee Charter, the Compensation Committee is responsible for, among other things, (1) developing and modifying, as appropriate, a competitive compensation philosophy and strategy for the Company's directors and executive officers that promotes the recruitment and retention of talented individuals; (2) reviewing and approving goals and objectives with respect to compensation for the Company's chief executive officer; (3) reviewing and approving the evaluation process and compensation structure for the Company's officers; (4) establishing and reviewing policies concerning perquisite benefits, including adopting a perquisite allowance policy for senior executives and other officers; (5) reviewing the Company's equity and other stock-based incentive plans and recommending any changes to those plans; (6) reviewing the Company's incentive compensation arrangements to confirm that incentive pay does not expose the Company to unnecessary or excessive risk,
2017 Proxy Statement 9
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
and reviewing the relationship among the Company's risk management policies and practices, corporate strategy and senior executive compensation; (7) reviewing the results of periodic say-on-pay advisory votes by the Company's stockholders and determining the weight to be given to those results in making compensation decisions; (8) reviewing and discussing with management the Compensation Discussion and Analysis section in the Company's annual proxy statement; (9) determining whether employment contracts and severance arrangements should be established with senior executive officers and approving the terms of those agreements and arrangements; (10) discussing the relationship between the Company's executive compensation and financial and share performance; (11) discussing the ratio between the total annual compensation for the Company's chief executive officer and the median annual compensation of the Company's other employees; (12) adopting a policy or providing in executive employment agreements for the clawback of unearned incentive compensation if the Company is required to restate its financials due to material noncompliance with financial reporting requirements; (13) preparing the Compensation Committee's report for inclusion in the Company's proxy statement; (14) reviewing director compensation; (15) conducting a self-evaluation of the performance of the Compensation Committee and reassessing its charter; and (16) reporting to the full Board. In addition, the Compensation Committee has the authority to elect any officer whom the Board has authority to elect, other than the chief executive officer.
In 2016, the Compensation Committee reviewed and reassessed the adequacy of the Compensation Committee Charter. No changes were made to the Compensation Committee Charter in 2016. A current copy of the written Compensation Committee Charter is available under the "Investor Relations" portion of the Company's website, www.spiritaero.com.
The Company's Compensation Committee consists of Messrs. Chadwell, Fulchino, Gephardt and Johnson, with Mr. Fulchino serving as chairman. All of the members of the Compensation Committee are independent within the meaning of the NYSE listing standards.
Corporate Governance and Nominating Committee. In accordance with the Company's Corporate Governance and Nominating Committee Charter, the Company's Corporate Governance and Nominating Committee's purposes are to assist the Board in identifying individuals qualified to become members of the Board consistent with the criteria established by the Board, to determine the composition of the Board and its committees, to develop and implement the Company's corporate governance principles and to oversee risks related to the Company's governance structure or from related person transactions and collaborate with the Risk Committee with respect to the same. The Corporate Governance and Nominating Committee is responsible for, among other things, (1) leading the search for and selecting nominees for election as directors; (2) developing qualifications for director candidates; (3) evaluating the composition and size of the Board and its committees and overseeing the function of the Board's committees; (4) formulating a policy for the consideration of diversity in the identification, evaluation and nomination of director candidates; (5) developing and recommending to the Board a set of corporate governance guidelines, reviewing and recommending any changes to the guidelines and considering other corporate governance principles that may merit consideration by the Board; (6) evaluating and recommending ways to enhance communications and relations with the Company's stockholders; (7) developing and recommending to the Board procedures for the self-evaluation of the Board and its committees; (8) periodically evaluating and proposing to the Board for its review, and monitoring, a plan of succession for the chief executive officer and other senior executive officers of the Company, and recommending to the Board candidates for appointment to such positions; (9) assisting the Board in determining the most appropriate organizational format and structure for the Company; (10) reviewing and ratifying or prohibiting any related person transactions or relationships in accordance with the Company's Related Person Transaction Policy, and overseeing the disclosure of related person transactions; (11) conducting a self-evaluation of the performance of the Corporate Governance and Nominating Committee and reassessing its charter; and (12) reporting to the full Board.
In 2016, the Corporate Governance and Nominating Committee reviewed and reassessed the adequacy of the Corporate Governance and Nominating Committee Charter. As a result of its review, the Corporate Governance and Nominating Committee recommended certain improvements to the Corporate Governance and Nominating Committee Charter, which it amended in July 2016. A current copy of the written Corporate Governance and Nominating Committee Charter is available under the "Investor Relations" portion of the Company's website, www.spiritaero.com.
The Company's Corporate Governance and Nominating Committee consists of Messrs. Chadwell, Fulchino, Gephardt, Johnson and Kadish, with Mr. Chadwell serving as chairman. All of the members of the Corporate Governance and Nominating Committee are independent within the meaning of NYSE listing standards.
Risk Committee. In accordance with the Company's Risk Committee Charter, the Company's Risk Committee's purposes are to (1) provide oversight of management's guidelines, policies and processes for assessing, monitoring and
10 2017 Proxy Statement
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
mitigating the Company's critical enterprise risks, including the major strategic, operational, financial and compliance risks inherent in the Company's business and core strategies; (2) determine which risks should be included on the Board's agenda for discussion; and (3) assist the Board in its oversight of the Company's management of key risks that have the potential to significantly affect the Company's ability to execute its strategy and achieve its strategic business objectives and performance goals.
In 2016, the Risk Committee reviewed and reassessed the adequacy of the Risk Committee Charter. As a result of its review, the Risk Committee recommended certain improvements to the Risk Committee Charter, which it amended in July 2016. A current copy of the written Risk Committee Charter is available under the "Investor Relations" portion of the Company's website, www.spiritaero.com.
The Risk Committee consists of Ms. Esteves and Messrs. Kadish, Plueger and Raborn, with Mr. Kadish serving as chairman. All of the members of the Risk Committee have been determined to be independent within the meaning of NYSE listing standards.
Other Committees. The Board may establish other committees as it deems necessary or appropriate from time to time, including special committees.
Board Meetings and Attendance; Attendance at Annual Meeting of Stockholders
During fiscal year 2016, there were fifteen formal meetings of the Board and additional actions by unanimous written consent. Other than Christopher E. Kubasik, who served as director until the end of his term on April 20, 2016, all of the then-current directors attended at least 75% of the aggregate of (1) the total number of meetings (whether regular or special meetings) of the Board (held during the period for which such person was a director), and (2) the total number of meetings held by all committees of the Board on which the director served (during the period that such director served) and a majority of the then-current directors attended 100% of such meetings. Recognizing that director attendance at the Annual Meeting of Stockholders can provide the Company's stockholders with an opportunity to communicate with Board members about issues affecting the Company, the Company actively encourages the members of the Board to attend its Annual Meeting of Stockholders. The Company held its 2016 Annual Meeting of Stockholders on April 20, 2016 and it was attended by all then-current members of the Board other than Christopher E. Kubasik, whose term as a director ended on the day of the 2016 Annual Meeting of Shareholders.
Executive Sessions of Non-Employee Directors
The non-employee directors meet in executive session at least four times a year and generally at every regularly scheduled Board meeting to consider such matters as they deem appropriate, without the Company's chief executive officer or other management present unless the presence of the Company's chief executive officer or other management is requested by the Board. In accordance with NYSE listed company rules, "non-employee" directors are those directors who are not executive officers of the Company. Among the items the non-employee directors meet privately in executive sessions to review is the performance of the Company's chief executive officer and recommendations of the Compensation Committee concerning compensation for employee directors and other senior executive officers. Mr. Johnson, who serves as the chairman of the Board, acts as the chair of the executive sessions of the non-employee directors.
Compensation Committee Interlocks and Insider Participation
None of the Company's executive officers served during fiscal year 2016 or currently serves, and the Company anticipates that none will serve, as a member of the board of directors or compensation committee of any entity (other than the Company) that has one or more executive officers that serves on the Company's Board or Compensation Committee.
There are no family relationships among executive officers and directors of the Company.
2017 Proxy Statement 11
Compensation of Non-Employee Directors
Non-employee directors' compensation is set by the Board at the recommendation of the Compensation Committee. In developing its recommendations, the Compensation Committee is guided by the following goals: compensation should fairly pay directors for work required in companies similar in size and scope to the Company; compensation should align directors' interests with the long-term interests of the Company's stockholders; and the structure of the compensation should be simple, transparent and easy for stockholders to understand.
The Compensation Committee reviews and recommends to the Board for its approval all compensation of the Company's non-employee directors, but no member of the Compensation Committee may act to fix his or her own compensation except as uniformly applied to all of the Company's non-employee directors for their service on the Board.
Following the approval of the 2014 Omnibus Incentive Plan (the "OIP") at the Company's 2014 Annual Meeting of Stockholders, the Board established a Director Stock Program under the OIP (to replace the then-existing Director Stock Plan), pursuant to which grants to directors of restricted stock or restricted stock units have been made beginning in 2014. In January 2016, the Board modified the Director Stock Program to provide that, beginning with the director term commencing at the 2015 Annual Meeting of Stockholders, restricted stock grants awarded to non-employee directors under the Director Stock Program in a given term will vest upon the completion by such director of such term.
In 2016, following a review of benchmark board compensation data for Fortune 500 companies prepared by Willis Towers Watson, the Compensation Committee changed director compensation for purposes of aligning director compensation with the market median (using a peer group established by revenue level and the Company's peer group of listed aerospace and defense companies (see Proxy Peer Group Table, page 31)). Non-employee directors receive an annual board retainer fee of $195,000 for their service as Board members. Annual board retainer fees are paid in accordance with the terms of the Director Stock Program under the OIP. At least $100,000 of the annual board retainer fee is paid in either shares of restricted Common stock or restricted stock units of the Company, which are subject to vesting upon the completion by the applicable director of his or her then current term. Directors have the option to receive the remaining $95,000 of their compensation in cash, restricted stock or restricted stock units. Non-employee directors who serve on any of the Board's committees receive additional individual retainer fees. The chairman of the Board receives an additional annual retainer fee of $85,000, the chairman of the Audit Committee receives an additional annual retainer fee of $25,000, the chairman of the Compensation Committee receives an additional annual retainer fee of $18,000 and the chairman of each of the Board's other committees receives an additional annual retainer fee of $12,000. In addition to the foregoing committee fees, a fee of $1,000 per committee meeting attended is paid to each non-employee director who serves on a committee of the Board. Beginning in 2016, directors are given the option to receive the individual board retainer fees for serving on Board committees in either all cash or all restricted stock or restricted stock units. The annual board retainer fees and additional individual retainer fees are payable quarterly in arrears to all directors who have served the full quarter ended prior to the date of payment. No additional or other compensation is paid to the Company's executive officers who are also members of the Board. All directors are reimbursed for their out-of-pocket expenses incurred in connection with their director services. The Company does not provide perquisite allowances to non-employee directors; however, perquisites and personal benefits have been provided to Messrs. Lawson and Gentile in their capacity as employees under the standards described in the Company's Perquisite Allowance Plan, which is discussed below in the Compensation Discussion and Analysis section. Fees earned or paid to non-employee directors in 2016 are listed in the "Director Compensation for Fiscal Year 2016" table below.
The Company maintains a minimum stockholding requirement for non-employee directors. In May 2012, the minimum stockholding requirement was set at the greater of (1) the number of shares of the Company's Common stock with an aggregate market value of $250,000 and (2) 12,500 shares. Effective July 2015, the minimum stockholding requirement was increased to the greater of (1) the number of shares of the Company's Common stock with an aggregate market value of $400,000 and (2) 12,500 shares. Non-employee directors have four years after the adoption of the most recent increased minimum stockholding requirement to accumulate the increased amount of shares. Restricted stock units held by directors are counted in determining whether the minimum stockholding requirements are satisfied. Newly appointed members of the Board are permitted four full years of service on the Board during which to attain the minimum stockholding requirement. Information regarding the current stock ownership of the Company's directors can be found below under "Stock Ownership Information Regarding Beneficial Ownership of Principal Stockholders, Directors and Management."
12 2017 Proxy Statement
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Director Compensation for Fiscal Year 2016
The following table presents information concerning compensation attributable to the Company's non-employee directors for the fiscal year ended December 31, 2016.
Name |
Fees Earned or Paid in Cash ($) |
Stock Awards(2) ($) |
All Other Compensation(3) ($) |
Total ($) |
|||||||||||||||
Charles L. Chadwell |
| | 110,125 | | | | 123,800 | | | | | | | 233,925 | | ||||
Irene M. Esteves |
| | 3,000 | | | | 201,038 | | | | | | | 204,038 | | ||||
Paul Fulchino |
| | 14,000 | | | | 195,022 | | | | | | | 209,022 | | ||||
Richard Gephardt |
| | 61,500 | | | | 195,022 | | | | | | | 256,522 | | ||||
Robert Johnson |
| | 180,000 | | | | 100,014 | | | | | | | 280,014 | | ||||
Ronald T. Kadish |
| | 119,000 | | | | 100,014 | | | | | | | 219,014 | | ||||
Christopher E. Kubasik(1) |
| | 50,500 | | | | | | | | | | | 50,500 | | ||||
John L. Plueger |
| | 3,000 | | | | 201,038 | | | | | | | 204,038 | | ||||
Francis Raborn |
| | 137,000 | | | | 100,014 | | | | | | | 237,014 | | ||||
| | | | | | | | | |
(1) | | Mr. Kubasik ceased serving as a member of the Board upon the conclusion of his then-current term on April 20, 2016. |
(2) | | Represents the full aggregate grant date fair values, computed in accordance with Financial Accounting Standards Board's (FASB) authoritative guidance on stock-based compensation accounting, for awards of restricted stock and restricted stock units granted in 2016. Additional information concerning the Company's accounting for restricted stock and restricted stock unit awards may be found in Note 15 to the Company's consolidated financial statements in its Annual Report on Form 10-K for 2016. |
(3) | | The amount of perquisites and other personal benefits has been excluded for all directors as the total value of each director's perquisites and other personal benefits was less than $10,000. |
2017 Proxy Statement 13
Information Regarding Beneficial Ownership of Principal Stockholders, Directors and Management
The following table sets forth, as of the Record Date (unless otherwise stated below), information regarding the beneficial ownership of the Company's Class A Common stock by all directors, nominees for director, each person who has served as the Company's chief executive officer during a portion of fiscal year 2016, the Company's chief financial officer and the three other most highly compensated executive officers serving as executive officers at the end of the last fiscal year (collectively, the "Named Executive Officers" or "NEOs"), and the Company's directors and all executive officers as a group. It also sets forth the ownership of any person or group who is known by the Company to be the beneficial owner of more than five percent of the Company's Common stock together with such beneficial owner's address.
Name |
Amount and Nature of Beneficial Ownership |
Percentage of Class A Common Stock(+) |
|||||
Five Percent Stockholders | | | | | |||
The Vanguard Group | | | 10,933,232 | (1) | | 9.18% | |
100 Vanguard Blvd. |
|
| | | |||
Hound Partners, LLC | | | 9,121,770 | (2) | | 7.66% | |
Hound Performance, LLC | | | | | |||
Jonathan Auerbach |
| | | | |||
Darsana Capital Partners LP | | | 9,000,000 | (3) | | 7.56% | |
Darsana Capital Partners GP LLC Darsana Master Fund LP Darsana Capital GP LLC |
|
| | | |||
Anand Desai |
|
| | | |||
Barrow, Hanley, Mewhinney & Strauss, LLC | | | 6,561,041 | (4) | | 5.51% | |
2200 Ross Avenue, 31st Floor |
| | | | |||
Scopia Capital Management LP | | | 6,554,159 | (5) | | 5.50% | |
Scopia Management, Inc. Matthew Sirovich |
|
| | | |||
Jeremy Mindich |
|
| | | |||
Directors, Director Nominees and NEOs |
|
|
|
|
|||
Charles L. Chadwell | | | 28,464 | (6) | | * | |
Irene M. Esteves | | | | (7) | | | |
Paul Fulchino | | | 54,504 | | | * | |
Richard Gephardt | | | 11,534 | (8) | | * | |
Robert Johnson | | | 13,778 | (9) | | * | |
Ronald T. Kadish | | | 26,170 | (10) | | * | |
John L. Plueger | | | 2,000 | (11) | | * | |
Francis Raborn | | | 29,644 | (12) | | * | |
Thomas C. Gentile | | | 32,666 | | | * | |
Larry A. Lawson | | | | (13) | | * | |
Sanjay Kapoor | | | 25,930 | | | * | |
Samantha Marnick | | | 4,398 | | | * | |
Duane F. Hawkins | | | 9,319 | | | * | |
Michelle J. Lohmeier | | | 11,655 | | | * | |
All directors and executive officers as a group (18 persons) | | | 336,655 | (14) | | * | |
| | | | |
* | | Represents beneficial ownership of less than 1%. |
14 2017 Proxy Statement
STOCK OWNERSHIP
(+) | | Class A Common stock has one vote per share. |
(1) | | Information is based on an amended Schedule 13G filed on February 13, 2017 by The Vanguard Group, Inc., a corporation formed under the laws of the State of Pennsylvania ("Vanguard"). Vanguard reported 10,933,232 shares of Class A Common stock beneficially owned by it and certain of its affiliates. According to the Schedule 13G, Vanguard has sole voting power over 73,257 reported shares, shared voting power over 14,437 reported shares, sole dispositive power over 10,852,534 reported shares and shared dispositive power over 80,698 reported shares. |
(2) | | Information is based on an amended Schedule 13G filed on February 14, 2017 by Hound Partners, LLC, a limited liability company formed under the laws of Delaware ("Hound Partners"), Hound Performance, LLC, a limited liability company formed under the laws of Delaware ("Hound Performance") and Jonathan Auerbach. Each of Hound Partners and Mr. Auerbach reported beneficial ownership of 9,121,770 shares of Class A Common stock of which Hound Performance reported beneficial ownership of 8,930,783 shares of Class A Common stock. According to the Schedule 13G, each of Hound Partners, Hound Performance and Mr. Auerbach has shared voting power and shared dispositive power over the aforementioned shares that such party beneficially owns. According to the Schedule 13G, all securities reported in the Schedule 13G are owned by advisory clients of Hound Partners, none of whom own more than 5% of the Company's Class A Common stock. The Schedule 13G states that Jonathan Auerbach may be considered a control person of Hound Partners. |
(3) | | Information is based on an amended Schedule 13G filed on February 14, 2017 by Darsana Capital Partners LP, a limited partnership formed under the laws of Delaware ("Darsana Capital"), Darsana Capital Partners GP LLC, a limited liability company formed under the laws of Delaware ("Darsana Capital Partners GP"), Darsana Master Fund LP, a limited partnership formed under the laws of the Cayman Islands ("Darsana Master"), Darsana Capital GP LLC, a limited liability company formed under the laws of Delaware ("Darsana Capital GP") and Anand Desai. Each of Darsana Capital, Darsana Capital Partners GP, Darsana Master, Darsana Capital GP and Anand Desai reported beneficial ownership of 9,000,000 shares of Class A Common stock, and shared voting and dispositive power over 9,000,000 shares of Class A Common stock. |
(4) | | Information is based on an amended Schedule 13G filed on February 10, 2017 by Barrow, Hanley, Mewhinney & Strauss, LLC, a limited liability company formed under the laws of the Delaware ("Barrow"). Barrow reported beneficial ownership of 6,561,041 shares of Class A Common stock. According to the Schedule 13G, Barrow has sole voting power over 1,612,078 shares of Class A Common stock, shared voting power over 4,948,963 shares of Class A Common stock and shared dispositive power over 6,561,041 shares of Class A Common stock. According to the Schedule 13G, the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, shares beneficially owned by Barrow are held by certain clients of Barrow, none of whom own more than 5% of the Company's Class A Common stock. |
(5) | | Information is based on an amended Schedule 13G filed on February 10, 2017 by Scopia Capital Management LP, a limited partnership formed under the laws of Delaware ("Scopia"), Scopia Management, Inc., a corporation formed under the laws of New York ("Scopia Management"), Matthew Sirovich and Jeremy Mindich. Each of Scopia, Scopia Management and Mr. Mindich reported beneficial ownership of 6,554,159 shares of Class A Common stock, and Mr. Sirovich reported beneficial ownership of 6,649,159 shares of Class A Common stock. According to the Schedule 13G, each of Scopia, Scopia Management and Messrs. Mindich and Sirovich has shared voting power and shared dispositive power over 6,554,159 shares, and Mr. Sirovich has sole voting power and sole dispositive power over 95,000 shares. According to the Schedule 13G, all securities reported in the Schedule 13G are owned by advisory clients of Scopia, none of whom own more than 5% of the Company's Class A Common stock. The Schedule 13G states that Messrs. Mindich and Sirovich may be considered control persons of Scopia Capital GP LLC. |
(6) | | Excludes restricted stock units for which benefits will be paid, at the Board's option, in cash or shares of the Company's Class A Common stock at market value of the Company's Class A Common stock upon Mr. Chadwell's termination of service with the Company and its affiliates, 4,339 of which vested as of the Record Date and 545 of which will vest at the conclusion of the Company's current directorship term, which is expected to be on April 26, 2017, assuming Mr. Chadwell remains a director until such date. |
(7) | | Excludes restricted stock units for which benefits will be paid, at the Board's option, in cash or shares of the Company's Class A Common stock at market value of the Company's Class A Common stock upon Ms. Esteves' termination of service with the Company and its affiliates, 2,987 of which vested as of the Record Date and 4,378 of which will vest at the conclusion of the Company's current directorship term, which is expected to be on April 26, 2017, assuming Ms. Esteves remains a director until such date. |
(8) | | Excludes 5,790 restricted stock units for which benefits will be paid, at the Board's option, in cash or shares of the Company's Class A Common stock at market value of the Company's Class A Common stock upon Mr. Gephardt's termination of service with the Company and its affiliates, all of which vested as of the Record Date. |
(9) | | Represents shares owned by the RDJ Trust of which Mr. Johnson is a beneficial owner as a trustee of the RDJ Trust. |
(10) | | Represents shares owned by the Ronald T. Kadish Trust of which Mr. Kadish is a beneficial owner as a trustee of the Ronald T. Kadish Trust. |
(11) | | Excludes restricted stock units for which benefits will be paid, at the Board's option, in cash or shares of the Company's Class A Common stock at market value of the Company's Class A Common stock upon Mr. Plueger's termination of service with the Company and its affiliates, 8,648 of which vested as of the Record Date and 4,378 of which will vest at the conclusion of the Company's current directorship term, which is expected to be on April 26, 2017, assuming Mr. Plueger remains a director until such date. |
(12) | | Represents shares owned by the Francis Raborn Revocable Trust of which Mr. Raborn is a beneficial owner as a trustee of the Francis Raborn Revocable Trust. |
(13) | | Excludes 70,656 shares, which were scheduled to vest in February 2017 pursuant to the terms of Mr. Lawson's Retirement and Consulting Agreement, subject to, among other things, his compliance with his covenant not to compete. The Company has suspended vesting of these shares in accordance with the terms of the Retirement and Consulting Agreement because Mr. Lawson is not continuing to comply with his restrictive covenants. See "Potential Payments on Termination or Change-in-ControlTermination of EmploymentRetirement and Consulting Agreement" on page 53. |
(14) | | Includes shares issued to employees and directors of the Company and Spirit which are subject to certain vesting requirements and may vest within 60 days of the Record Date and excludes other shares issued to employees and directors of the Company and Spirit which are subject to certain longer vesting requirements. Excludes restricted stock units for which benefits will be paid, at the Board's option, in cash or shares of the Company's Class A Common stock upon termination of service with the Company and its affiliates of the directors holding such restricted stock units, 21,764 of which vested as of the Record Date and 9,301 of which will vest within 60 days of the Record Date. |
2017 Proxy Statement 15
STOCK OWNERSHIP
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, or "Section 16(a)," requires directors, executive officers and persons who own more than 10 percent of any registered class of a company's equity securities, or "reporting persons," to file with the SEC initial reports of beneficial ownership and report changes in beneficial ownership of common stock and other equity securities. Such reports are filed on Form 3, Form 4 and Form 5 under the Exchange Act, as appropriate. Reporting persons holding the Company's stock are required by the Exchange Act to furnish the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on the Company's review of copies of these reports and written representations from such reporting persons, the Company believes that all filings required to be made by reporting persons holding the Company's stock were timely filed for the year ended December 31, 2016 in accordance with Section 16(a).
Mark J. Suchinski, the Company's Vice President and Corporate Controller, inadvertently failed to timely report a grant by the Company on February 9, 2016 of 1,500 shares of Class A Common stock under its long-term incentive program under the OIP. The grant of such shares was subsequently reported on a Form 4 that was filed on May 16, 2016.
16 2017 Proxy Statement
Proposal 1: Election of Directors
The Board is currently comprised of nine directors. On July 25, 2016, Larry A. Lawson resigned from the Board concurrent with his retirement from the position of President and Chief Executive Officer of the Company and Spirit. The Board appointed Thomas C. Gentile, III, to fill the vacancy created by Mr. Lawson's resignation. The Board will consist of nine directors following the Annual Meeting.
The Company's Corporate Governance and Nominating Committee has nominated each of the nine persons listed below for election as directors. If elected at the Annual Meeting, each of the nine nominees will hold office until the next Annual Meeting of Stockholders and until their successors are elected and qualified, or until their death, retirement, resignation or removal. The Company does not have a mandatory retirement age for its directors. All of the nominees, except for Mr. Gentile, have served as directors of the Company since the 2016 Annual Meeting of Stockholders, and Mr. Gentile has served as a director since July 25, 2016.
Each nominee for election has agreed to serve, if elected, and the Company has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, it is the intention of the proxy holders to vote such proxy for such other person or persons as designated by the present Board to fill such vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them "FOR" the nominees named below. For each director nominee, the votes that stockholders cast "FOR" a director nominee must exceed the votes that stockholders cast "AGAINST" such director nominee in order for such director nominee to be elected.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES.
Information Regarding Nominees for Election as Directors
The following sets forth certain information with respect to the nine nominees for election as directors of the Company at the Annual Meeting based on information furnished to the Company by each nominee and highlights the specific experience, qualifications, attributes and skills of the individual nominees that have led the Corporate Governance and Nominating Committee to conclude that each should continue to serve on the Board:
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Charles L. Chadwell, 76. Mr. Chadwell became a director of the Company April 22, 2008. Until
his retirement in 2002, Mr. Chadwell served as Vice President and General Manager of Commercial Engine Operations for General Electric Aircraft Engines. Prior to that, he held a variety of general management and senior management positions at
General Electric Aircraft Engines. From January 2007 to July 2012, Mr. Chadwell served on the board of directors of BE Aerospace, Inc. Qualifications, Experience, Key Attributes and Skills: Mr. Chadwell has significant experience in supply base and manufacturing operations within the commercial aviation industry gained from his extensive experience with The General Electric Company and his senior
management positions at General Electric Aircraft Engines. Mr. Chadwell also brings to the Board experience as a public company director. |
2017 Proxy Statement 17
PROPOSAL 1: ELECTION OF DIRECTORS
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Irene M. Esteves, 58. Ms. Esteves became a director of the Company May 8, 2015.
Ms. Esteves was formerly Chief Financial Officer of Time Warner Cable Inc., a post she held from July 2011 to May 2013. She previously served as Executive Vice President and Chief Financial Officer of XL Group plc from May 2010 to June
2011. Prior to that position, Ms. Esteves was Senior Vice President and Chief Financial Officer of Regions Financial Corporation from April 2008 to February 2010. Ms. Esteves currently serves on the boards of directors of Level 3
Communications, Inc. and Aramark. Ms. Esteves previously served on the board of directors of TW Telecom Inc. from June 2014 to October 2014 and the board of directors of Timberland Co. from June 2003 to June 2009. Qualifications, Experience, Key Attributes and Skills: Ms. Esteves has broad experience in finance and business strategy across multiple industries. Ms. Esteves also brings to the Board experience as a public company director. |
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Paul Fulchino, 70. Mr. Fulchino became a director of the Company November 15, 2006. From
January 2000 until his retirement in February 2010, Mr. Fulchino served as Chairman, President and Chief Executive Officer of Aviall, Inc., which became a wholly owned subsidiary of The Boeing Company ("Boeing") September 20, 2006.
From 1996 through 1999, Mr. Fulchino was President and Chief Operating Officer of BE Aerospace, Inc., a leading supplier of aircraft cabin products and services. From 1990 to 1996, Mr. Fulchino served in the capacities of President and
Vice Chairman of Mercer Management Consulting, Inc., an international general management consulting firm. Earlier in his career, Mr. Fulchino held various engineering positions at Raytheon Company. Mr. Fulchino currently serves on the
board of directors of Wesco Aircraft Holdings, Inc. Qualifications, Experience, Key Attributes and Skills: Mr. Fulchino possesses extensive knowledge and expertise regarding the commercial aviation industry, the Company's customers and supply base, and compensation and human resource matters. Mr. Fulchino also brings to the Board public company board experience. |
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Thomas C. Gentile, III, 52. Mr. Gentile became a director of the Company July 25, 2016, and
was appointed as the Company's and Spirit's President and Chief Executive Officer, effective August 1, 2016. From April 2016 until his appointment as the Company's President and Chief Executive Officer, Mr. Gentile served as the Company's
and Spirit's Executive Vice President and Chief Operating Officer. From June 2014 until he joined the Company, Mr. Gentile served as President and Chief Operating Officer of General Electric Capital Corporation. Mr. Gentile previously held
management positions as President and CEO of General Electric Healthcare Systems from June 2011 until June 2014 and as President and CEO of General Electric Aviation Services from January 2008 until June 2011. Qualifications, Experience, Key Attributes and Skills: As the
Company's President and Chief Executive Officer (and former Executive Vice President and Chief Operating Officer) and the former President and CEO of General Electric Aviation Services, Mr. Gentile has demonstrated success in managing large,
complex global technology businesses across a multitude of industries. He brings a deep understanding of aviation program management, product development, strategy and business development. Prior to joining the Company, Mr. Gentile spent nearly
20 years in executive officer roles with General Electric, including the aforementioned three and a half years at General Electric Aviation Services, during which time he acquired significant knowledge and experience relating to aircraft
manufacturing and business development. |
18 2017 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
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Richard Gephardt, 76. Mr. Gephardt became a director of the Company November 15, 2006.
Mr. Gephardt was a member of the U.S. House of Representatives from 1977 to 2005, during which time he served as the Majority and Minority Leader. Since 2005, Mr. Gephardt has served as President and CEO of Gephardt Group, a
multi-disciplined consulting firm. Mr. Gephardt currently serves on the board of directors of Centene Corporation. From July 2009 to May 2016, Mr. Gephardt served on the board of directors of CenturyLink, Inc. From March 2009 to May
2015, Mr. Gephardt served on the board of directors of Ford Motor Company. From April 2005 to April 2015, Mr. Gephardt served on the board of directors of United States Steel Corporation. From June 2007 to July 2009, Mr. Gephardt
served on the board of directors of Embarq Corporation, and from January 2008 to March 2009, he served on the board of directors of Dana Holding Corporation. Qualifications, Experience, Key Attributes and Skills: Mr. Gephardt brings significant governmental affairs and public relations experience to the Board as a former member of the U.S. House of Representatives from 1977 to 2005 (during which time he served as House Majority Leader from 1989 to 1995 and as Minority Leader from 1995 to 2003). Additionally, Mr. Gephardt has significant labor management and union experience and provides a wide range of management consulting services in his capacity as President and CEO of Gephardt Group, a multi-disciplinary consulting firm. Mr. Gephardt also brings to the Board significant public company board experience, including his current service on the board of directors of Centene Corporation and recently concluded service on the board of directors of CenturyLink, Inc., each a Fortune 500 company. |
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Robert Johnson, 69. Mr. Johnson became a director of the Company November 15, 2006 and serves
as Chairman of the Board. From August 2006 until his retirement in December 2008, Mr. Johnson served as the Chief Executive Officer of Dubai Aerospace Enterprise Ltd. Mr. Johnson was Chairman of Honeywell Aerospace from January 2005
through January 2006, and from 2000 to 2004, he was its President and Chief Executive Officer. From 1994 to 1999, he served as AlliedSignal's President of Marketing, Sales and Service and as President of Electronic and Avionics, and earlier as Vice
President of Aerospace Services. Prior to joining Honeywell in 1994, he held management positions at AAR Corporation for two years and General Electric Aircraft Engines for 24 years. Mr. Johnson currently serves on the boards of directors
of Roper Technologies, Inc. and Spirit Airlines, Inc. From September 2003 to March 2007, Mr. Johnson served on the board of directors of Phelps Dodge Corporation and from January 2005 to September 2012, Mr. Johnson served on the
board of directors of Ariba, Inc. Qualifications, Experience, Key Attributes and Skills: Mr. Johnson has significant experience with commercial aviation, airlines and aviation suppliers, as well as expertise in marketing, sales and production arising out of his prior service with Dubai Aerospace
Enterprise Ltd., Honeywell Aerospace, AlliedSignal and General Electric Aircraft Engines. Mr. Johnson also brings to the Board significant public company board experience, having served on the boards of directors of a diverse group of
public companies, including Phelps Dodge Corporation, a Fortune 500 company at the time Mr. Johnson served on its board. |
2017 Proxy Statement 19
PROPOSAL 1: ELECTION OF DIRECTORS
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Ronald T. Kadish, 68. Mr. Kadish became a director of the Company November 15, 2006.
Mr. Kadish served over 34 years with the U.S. Air Force until he retired on September 1, 2004 at the rank of Lieutenant General. During that time, Mr. Kadish served as Director, Missile Defense Agency and Director, Ballistic
Missile Defense Organization, both of the DoD. In addition, Mr. Kadish served in senior program management capacities, including the F-16, C-17 and F-15 programs. On June 30, 2015, Mr. Kadish retired from Booz Allen Hamilton, where he
had served as an Executive Vice President since February 15, 2005 and assumed a position as Senior Executive Advisor, which he continues to hold. Mr. Kadish served on the board of directors of Orbital Sciences Corp. from 2005 until the
merger of Orbital Sciences Corp. with the aerospace and defense businesses of Alliant Techsystems Inc. February 9, 2015, after which Mr. Kadish has continued to serve on the board of directors of the post-merger surviving company,
Orbital ATK, Inc. Qualifications, Experience, Key Attributes and Skills: Mr. Kadish provides the Board with unique expertise in military, program management, security, international and governmental matters, including having served three decades with the U.S. Air Force, rising to the rank of Lieutenant General. Mr. Kadish also brings to the Board experience as a public company director. |
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John L. Plueger, 62. Mr. Plueger became a director of the Company July 29, 2014.
Mr. Plueger currently serves as Chief Executive Officer and President of Air Lease Corporation ("ALC"), a post he has held since July 2016. From March 2010 to July 2016, he served as ALC's President and Chief Operating Officer. He has also
served on the board of directors of ALC since March 2010. Prior to joining ALC, Mr. Plueger spent 23 years in top executive roles with International Lease Finance Corporation, where he served as acting Chief Executive Officer from February
2010 to March 2010, President and Chief Operating Officer from 2002 to February 2010 and on its board of directors from 2002 to 2010. Mr. Plueger's professional experience also includes testifying before the U.S. House of Representatives as an
aircraft leasing industry expert witness as well as responding to European Commission formal inquiries concerning aerospace industry-related mergers and acquisitions. Mr. Plueger is also a Certified Public Accountant. Qualifications, Experience, Key Attributes and Skills: Mr. Plueger has more than 28 years of aviation industry experience, providing the Company's board with operational and aviation expertise and broad aerospace industry experience. In addition, Mr. Plueger has significant experience in finance and accounting matters as a Certified Public Accountant, having received his training as an auditor from Price Waterhouse. Mr. Plueger also brings to the Board experience as a public company director. |
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Francis Raborn, 73. Mr. Raborn became a director of the Company November 15, 2006. Until his
retirement in 2005, Mr. Raborn served as Vice President and Chief Financial Officer of United Defense Industries, Inc., commencing with its formation in 1994 and as a director since 1997. Mr. Raborn joined FMC Corporation ("FMC"), the
predecessor of United Defense Industries, Inc., in 1977 and held a variety of financial and accounting positions, including Controller of FMC's Defense Systems Group from 1985 to 1993, and Controller of FMC's Special Products Group from 1979 to
1985. Mr. Raborn currently serves on the board of directors of Allison Transmission Holdings, Inc. Qualifications, Experience, Key Attributes and Skills: Mr. Raborn has significant experience in finance, accounting, defense, production and manufacturing, including through his tenure as Vice President and Chief Financial Officer of United Defense Industries,
Inc., and his service in a variety of senior financial and accounting positions at FMC Corporation. Mr. Raborn also brings to the Board public company board experience. |
20 2017 Proxy Statement
Compensation Discussion and Analysis
This Compensation Discussion and Analysis contains statements regarding the Company's performance targets and goals. These targets and goals are discussed in the limited context of the Company's compensation program and should not be considered statements of the Company's management's expectations or estimates of the Company's results or other guidance. The Company specifically cautions investors not to apply these statements to other contexts.
In 2016, the Company was focused on ensuring the quality and competitive costs that make us a trusted partner. We had strong operational and financial performance as demonstrated by a record number of aircraft deliveries on key Airbus and Boeing programs while meeting targets for revenue, operating income and cash flow, as reflected in the share price performance.
The Company achieved a number of milestones in 2016. One of the most significant was finalizing our agreement with Airbus on the A350 XWB. By reaching a comprehensive long-term agreement with Airbus, we have eliminated significant uncertainty and strengthened our relationship with an important partner.
We delivered significant milestones to Boeing in 2016, such as the delivery of the 500th B787 and the first B737 MAX thrust reverser with a composite inner wall.
Our supply chain also saw great progress in 2016. We have hundreds of suppliers, some of which are critical to our success. To help ensure that these partnerships continue to be strong, we implemented a process that gives us a platform to sit down with our suppliers and talk about how to work together to achieve targets for world-class cost, quality and delivery.
Some of the other milestones achieved in 2016 include:
Adjusted EBIT and Adjusted Free Cash Flow are non-GAAP financial measures. Please refer to Appendix A for an explanation of these measures and reconciliations to GAAP financial measures.
2017 Proxy Statement 21
EXECUTIVE COMPENSATION
The charts in this Executive Summary help summarize the Company's performance in 2016 and include certain measures that are tied to compensation through the Company's short-term incentive program (STI Program) and long-term incentive program (LTI Program), each under the OIP.
The Company's three-year annualized total stockholder return of approximately 20% demonstrates the Company is creating long-term value for its stockholders. The Company's stock delivered a one-year total stockholder return of approximately 17% in 2016, increasing stockholder wealth by $1.2 billion, reflecting that stock performance continued to improve in 2016 under the Company's leadership and clear strategic focus on performance. Over the last three years, the Company's total stockholder return was second highest among the Company's peers (see Proxy Peer Group Table, page 31).
To ensure the Company continues its commitment to and alignment with stockholder value in the Company's pay programs, the Company annually grants to qualifying employees restricted shares with a value that is directly tied to its share price. In addition, to strengthen this tie to pay-for-performance, the Company's annual grants to qualifying employees under the OIP include performance-based, long-term incentive grants tied to the Company's total stockholder return compared to that of its peer group.
22 2017 Proxy Statement
EXECUTIVE COMPENSATION
This Compensation Discussion and Analysis describes the philosophy, objectives and features of the Company's executive compensation program, which is generally applicable to each of the Company's senior officers.
The Company's compensation programs are designed to reward the Company's executives for delivering both shorter-term performance results and longer-term stockholder value. Through the Company's programs, the Company is able to provide a competitive total compensation package while aligning executives' interests with those of the Company's stockholders. The following highlights the key considerations the Company's Compensation Committee considers in the development, review and approval of the NEOs' compensation:
Compensation Program Decisions
The Company's decisions on executive compensation reflect the Company's commitment to pay for performance and to increase alignment between the interests of executives and stockholders. Decisions made by the Company's Compensation Committee with respect to 2016, as well as material changes to executive compensation set to become effective in 2017, are described below.
2017 Proxy Statement 23
EXECUTIVE COMPENSATION
Compensation Decisions and Actions | ||
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Key 2016 | | The following provides a high-level overview of compensation decisions for 2016. |
Compensation | | |
Decisions | | Base Salaries |
See pages 33-34 for further details |
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Effective April 1, 2016, Thomas C. Gentile, III was appointed Executive Vice President and Chief Operating Officer of the Company and Spirit. Effective August 1, 2016, following Mr. Gentile's appointment as President and Chief Executive Officer, the Company adjusted his annual compensation to reflect his new position with the Company and Spirit with the intention of aligning his target pay at the market median, resulting in an increase of 10% to his base salary, from $1,000,000 to $1,100,000. |
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In connection with the Company's annual performance reviews and after consideration of competitive pay practices and the Company's pay philosophy, effective February 5, 2016, our Named Executive Officers (other than Mr. Gentile) earned salary increases of 4% - 8%, as reflected in the table below. In addition, effective June 1, 2016, in order to aid retention and reflect their evolving roles within the Company, Mr. Kapoor and Ms. Marnick received additional salary increases of 8% and 14%, respectively. |
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| NEO | |
Salary as of January 1, 2016 |
Salary as of February 5, 2016 (% increase) |
New June 1, 2016 salary (% increase) |
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| Mr. Lawson | | | $ | 1,225,000 | | | $ | 1,274,000 | | (4%) | | | | | ||||
| | Mr. Kapoor | | | $ | 565,000 | | | $ | 600,000 | | (6%) | | $ | 650,000 | | (8%) | | |
| | Ms. Marnick | | | $ | 400,000 | | | $ | 430,000 | | (8%) | | $ | 490,000 | | (14%) | | |
| | Mr. Hawkins | | | $ | 480,000 | | | $ | 500,000 | | (4%) | | | | | |||
| | Ms. Lohmeier | | | $ | 450,000 | | | $ | 475,000 | | (6%) | | | | |
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See pages 34-36 for further details. |
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Short-Term Incentive Program | ||||||
| | In 2016, the Compensation Committee continued to refine the design of the STI Program. In order to better align with market practice, the Compensation Committee adjusted STI Program component weightings applicable to the CEO and, separately, those applicable to the other NEOs. Specifically, the Program/Functional Performance component was removed from the CEO's STI award considerations, while the weighting for Program/Functional Performance was increased for the rest of the NEOs to strengthen the focus on alignment and accountability of the Company's various programs. There were no 2016 changes to our NEOs' target STI awards. The 2016 STI Program design adjustments are as follows: | ||||||
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24 2017 Proxy Statement
EXECUTIVE COMPENSATION
See pages 36-37 for further details. |
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Long-Term Incentive Program |
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| | The Company's Long-Term Incentive ("LTI") design remained unchanged for 2016, with 75% of individuals' awards being time-based and 25% of individuals' awards being performance-based, determined by the Company's total shareholder return ("TSR") relative to the TSR of the Company's proxy peer group, with the three-year TSR tracking period coinciding with the Company's fiscal year. | ||||||
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| | The following NEOs received target LTI award increases in 2016: | | |||||
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| NEO | Target LTI Award as of January 1, 2016* | Increased Target LTI Award** | |||||
| Mr. Gentile | | 300% | | 400% (effective August 1, 2016) | | ||
| | Mr. Lawson | | 500% | | 535% (effective February 5, 2016) | | |
| | Mr. Kapoor | | 200% | | 220% (effective February 5, 2016) | | |
| | Ms. Marnick | | 160% | | 190% (effective June 1, 2016) | | |
| | Mr. Hawkins | | 170% | | 200% (effective February 5, 2016) | |
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| * Target LTI award is as of April 1, 2016 for Mr. Gentile, who became an executive officer of the Company on that date. | |||||||
| | ** February 2016 target increases were effective prior to grant date of 2016 LTI awards, which were made on February 9, 2016. |
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Other 2016 Compensation Decisions |
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| | In May 2016, the Board granted Mr. Kapoor and Ms. Marnick special one-time awards under the LTI Program of restricted shares of the Company's Class A Common stock with fair values, as calculated in accordance with applicable accounting rules, of $1,376,568 and $717,520, respectively, in order to aid retention and to reflect their evolving roles within the Company. Fifty percent of the shares granted to each of Mr. Kapoor and Ms. Marnick under this special grant will vest in each of June 2017 and June 2018 in each case if the Board determines prior to the vesting date that Mr. Kapoor or Ms. Marnick, as applicable, has achieved satisfactory performance. | ||||||
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Effective June 1, 2016, Ms. Marnick began receiving an annual contribution of $100,000 in deferred compensation in order to aid retention and to reflect her evolving role within the Company. Effective August 1, 2016, upon Mr. Gentile's appointment as President and Chief Executive Officer, Mr. Gentile's annual deferred compensation was increased from $500,000 to $600,000. |
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Effective August 1, 2016, following Mr. Lawson's retirement as President and Chief Executive Officer, Mr. Lawson began providing consulting and transition services to Spirit, for which he will receive annual compensation of $150,000 subject to, among other things, compliance with a covenant not to compete. See "Potential Payments on Termination or Change-in-ControlTermination of EmploymentRetirement and Consulting Agreement" on page 53. |
2017 Proxy Statement 25
EXECUTIVE COMPENSATION
2017 Program Updates |
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The following provides a high-level overview of compensation decisions for 2017 to date. |
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| | Base Salaries and Target Incentive Compensation | ||||||
| | Effective February 3, 2017, in recognition of Mr. Gentile's strong performance, his annual base salary was increased by approximately 4.5% from $1,100,000 to $1,150,000, and his target LTI award was increased from 400% to 450% of his annual base salary. | ||||||
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Effective February 3, 2017, in recognition of Mr. Hawkins' strong performance, his annual base salary was increased by 4% from $500,000 to $520,000 and his target LTI award was increased from 200% to 220% of his annual base salary. |
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| | Short-Term Incentive Program Design | ||||||
| | For 2017, in order to better align with the Company's strategic execution requirements and values of transparency, collaboration and inspiration, the Compensation Committee continued to adjust STI Program component weightings applicable to all NEOs other than the CEO. Specifically, the Program/Functional Performance component was removed from the STI award considerations while the weighting for Company Performance was increased to 75% to strengthen the focus on alignment with the Company's overall performance to the execution requirements. The Individual Performance component for 2017 STI awards will take into account each NEO's performance as it relates to the aforementioned values. The STI Program component weightings for the CEO remain unchanged from 2016. The 2017 STI Program design is as follows: | ||||||
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| | | | | ||||
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| In addition, to align with our growth strategy, for 2017 STI awards, the weightings applicable to the different metrics comprising the Company Performance component will be: 20% Revenue (increased from 10% in 2016) 30% EBIT (decreased from 40% in 2016) 50% Free Cash Flow (unchanged from 2016) |
||||||
|
Long-Term Incentive Program |
|||||||
| | For 2017, in order to align with market trends, stockholder expectations and the Company's long-term strategy of increasing cash and revenue growth, the Compensation Committee updated the design of the LTI Program to a more performance-based structure. Specifically, the percentage of LTI awards comprised of time-based stock awards was decreased from 75% to 60% while the percentage comprised of performance-based awards was increased from 25% to 40%. Free Cash Flow as a percentage of revenue was added as an additional metric for evaluating Company performance in 2017, and as a result, half of performance-based awards will be based on a ranking of the Company's TSR, expressed as a percentile, relative to the TSR of a group of the Company's peers, and the other half will be based on Free Cash Flow as a percentage of revenue. These adjustments are as follows: | ||||||
| | | |
| | |||
| |
26 2017 Proxy Statement
EXECUTIVE COMPENSATION
Executive Compensation Governance and Practices
Best Practices In The Company's Program | What the Company Doesn't Do | |
| ||
Pay for performance Target pay based on market norms Benchmark against relevant market data Deliver total direct compensation primarily through variable pay Use relevant corporate measures in short-term incentive awards Set challenging short-term incentive award goals Pay long-term incentive entirely in stock Maintain robust stock ownership requirements Offer market-competitive benefits Consult with an independent advisor on pay Double-trigger provisions for change-in-control Clawback of incentive compensation when warranted |
| No ongoing new defined benefit SERP accruals No tax gross-ups for change-in-control severance No share recycling (other than in the context of forfeited shares) No enhanced retirement formulas or inclusion of long-term incentives in pensions No enhanced health and welfare benefit plans for executives No dividend payments on restricted stock grants until they vest No accumulation of dividends on unvested performance-based restricted stock grants awarded after 2016 |
Bold font indicates new updates in 2017. |
|
|
|
Aligning Pay with Performance | | |
The Company's success depends largely on the contributions of its employee team and their efforts to deliver strong business results and increase stockholder value. This understanding supports the Company's commitment to pay for performance and shapes its approach to providing competitive total compensation packages. The Company uses a balance of short-term and long-term incentives as well as cash and non-cash compensation to reward NEOs for their roles in meeting company objectives. Under the Company's pay-for-performance philosophy, executive officers have the opportunity to earn in excess of market median levels when their performance exceeds expectations. Conversely, if performance falls below expectations, the Company's incentive plans pay below target levels. |
|
Elements of Executive Compensation The elements of executive compensation provided to the Company's NEOs in 2016 consisted of: Base salary Short-term cash incentives (under the STI Program) Long-term stock incentives (under the LTI Program) Retirement and other benefits. |
|
2017 Proxy Statement 27
EXECUTIVE COMPENSATION
The Company's incentive compensation components for NEOs are intended to link compensation performance with the full spectrum of the Company's business goals, some of which are short-term, while others take several years to achieve.
The table below summarizes the average historical short-term incentive award payouts to all NEOs for 2016, 2015 and 2014.
Over time, the Company's incentive compensation programs have demonstrated the Company's commitment to pay for performance. The Company's STI award payouts have historically been below the Company's targets when the Company does not meet its performance goals.
In addition, the Company's stock ownership guidelines require all senior executives to meet specific ownership targets based on position. This requirement, together with our LTI awards under the LTI Program, subject these executives to the same long-term stock price volatility the Company's stockholders experience and further align the Company's executives' interests with those of its stockholders. See "Stock Ownership Guidelines" on page 39 for details.
Effective August 1, 2016, following a change in Mr. Gentile's position from Executive Vice President and Chief Operating Officer to President and Chief Executive Officer, the Company adjusted his annual compensation to reflect his new role within the Company. Effective August 1, 2016, Mr. Gentile's annual base salary was increased by 10% from $1,000,000 to $1,100,000, his target LTI award was increased from 300% to 400% of his annual base salary and his annual deferred compensation was increased from $500,000 to $600,000. Effective February 3, 2017, in recognition of Mr. Gentile's strong performance, his annual base salary was increased by approximately 4.5% to $1,150,000, and his target LTI award was increased to 450% of his annual base salary. Mr. Gentile's target STI award for both 2016 and 2017 is equal to 140% of his annual base salary.
|
28 2017 Proxy Statement
EXECUTIVE COMPENSATION
The Compensation Committee continues to examine existing and new compensation programs and objectives to ensure that those of the Company remain appropriate and consistent with the Company's overall philosophy and objectives.
Role of the CEO
Each year, the Company's NEOs prepare and discuss their self-evaluations of their performance with the Company's CEO, who presents a compensation recommendation for each other NEO to the Compensation Committee. These recommendations are based on the CEO's review of their performance, job responsibilities and importance to the Company's overall business strategy, as well as the Company's compensation philosophy. Although these recommendations are given significant weight, the Compensation Committee retains full discretion when determining compensation for the Company's executive officers.
The CEO also prepares a self-evaluation and presents it to the Compensation Committee.
Role of the Compensation Consultant
The Compensation Committee retains the authority to approve and monitor all compensation and benefit programs (other than broad-based welfare benefit programs). To add rigor in the review process and to inform the Compensation Committee of market trends, the Compensation Committee utilized the services of Willis Towers Watson in 2016. Willis Towers Watson assisted the Compensation Committee in benchmarking the Company's executive compensation and reviewing trends and regulatory implications for executive pay and developing incentive plan design alternatives. This information was also used by the Compensation Committee in establishing the Company's NEOs' base salaries and target goals for compensation plan awards.
Willis Towers Watson is engaged by the Company's management with the prior and ongoing approval of the Compensation Committee and provides executive compensation consulting services that support the Compensation Committee's goal to align the interests of the Company's executive officers with those of the Company's stockholders.
2017 Proxy Statement 29
EXECUTIVE COMPENSATION
Willis Towers Watson and its affiliates did not provide any other services to the Company in 2016. The Compensation Committee has considered the factors specified by the SEC in determining that Willis Towers Watson provides independent advice.
Mercer Human Resources Consulting is also engaged by the Company's management to provide non-executive compensation consulting services to the Company.
Consideration of Advisory Stockholder Vote on Executive Compensation
The Company believes it is appropriate to seek the views of its stockholders on the design and effectiveness of the Company's executive compensation program. At the Company's 2014 Annual Meeting of Stockholders, the Company held its second non-binding, advisory stockholder vote on executive compensation (the Say-On-Pay vote) under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and received greater than 96% support from the votes of the Company's stockholders present, in person or by proxy, and entitled to vote on the matter. As an advisory vote, the results of this stockholder vote are not binding upon the Company; however, the Compensation Committee, which is responsible for designing and administering the Company's executive compensation program, values the opinions expressed by the Company's stockholders in their vote and considered the outcome of this vote when it made compensation decisions for the NEOs.
In addition, at the 2011 Annual Meeting of Stockholders, the Company's stockholders approved holding the advisory vote every three years (the Say-When-On-Pay vote). In accordance with the advisory vote of the Company's stockholders at the 2011 Annual Meeting of Stockholders, and as determined by the Compensation Committee and the Board, the Company has included an advisory vote on executive compensation in this Proxy Statement. Furthermore, as required by the Dodd-Frank Act, we are again seeking the Say-When-On-Pay vote from our stockholders (see "Proposal 5" on page 63 of this Proxy Statement). After careful consideration of the different options for advisory vote frequency, the Board determined that conducting an advisory vote on the compensation of the Company's NEOs every year is in the best interests of the Company. Accordingly, the Board is recommending to the Company's stockholders that they vote for a one-year interval for such advisory vote.
Benchmarking the Company's 2016 Executive Compensation Program
The Company's executive compensation program total direct compensation consisting of base salary, STI awards and LTI awards is compared to that of the Company's peers in order to determine competitive levels to support the attraction and retention of the Company's executive officers.
The Company benchmarks executive compensation against a peer group of comparably sized (in terms of revenue) U.S.-based companies (emphasizing aerospace, defense and auto component manufacturers). The companies specified below were included in the Willis Towers Watson peer group analyses for 2016. The graph below demonstrates that the peers represent a reasonable range of smaller and larger companies (based on revenues). Note that Precision Castparts Corp.
30 2017 Proxy Statement
EXECUTIVE COMPENSATION
was removed from the 2016 peer group as a result of its acquisition by Berkshire Hathaway, as a result of which it ceased to be a public company.
In addition to using such peer group to benchmark executive compensation, the Company also measures its TSR relative to this peer group to determine the degree to which the LTI performance-based stock grants it made in 2016 vest.
For 2017, the Company anticipates B/E Aerospace being removed from the Company's peer group as a result of the expected acquisition of B/E Aerospace by Rockwell Collins, which was announced in October 2016 and is expected to close in 2017, following which B/E Aerospace will cease to be a publicly traded company.
The Company also uses a broad survey sample for benchmarking executive compensation. In 2015, in connection with setting 2016 pay, the Compensation Committee reviewed compensation benchmarking based on national proprietary compensation surveys. Specifically, data was prepared principally using a custom cut of Willis Towers Watson's Executive Compensation survey. Comparable benchmarking was also conducted in 2016 in connection with establishing 2017 pay.
The composition of the survey group may vary somewhat from year to year based on survey participation. The survey analysis considers companies in relevant industries (aerospace and defense, machinery, auto components and electrical equipment) as well as companies in a broad array of industries, when necessary, to complement data limitations. Survey data was size-adjusted to approximate the Company's revenue either through regression or by limiting the survey sample to comparably sized companies.
The Compensation Committee believes overall executive compensation should be designed to be competitive with comparable companies, to reward effective execution of the Company's goals and the individual objectives set for its executive officers and to recognize exceptional performance and results.
2017 Proxy Statement 31
EXECUTIVE COMPENSATION
Elements of the Executive Compensation Program
The following table describes how elements of executive compensation are intended to satisfy the Company's compensation objectives.
Elements |
Key Features/Link to Program Objectives |
Award Form |
Fixed or Variable |
Payout Range |
2017 Changes |
|||||
Base Salary | | Fixed compensation to attract and retain executives Generally set at a competitive level commensurate with market median Adjusted to reflect experience, responsibility and performance levels of executive talent as well as prior positions held |
| Cash | | Fixed | | N/A | | Maintain market median |
Short-Term Incentive Award |
|
Annual performance-based cash award Supports pay-for-performance philosophy Motivates executives to achieve the Company's near-term focus on cash and quality that drives the Company's long-term performance |
| Cash | | Variable | | 0-200% of target | | Eliminated Program/Functional Performance component Increased Individual Performance component weighting from 20% to 25% Increased Company Performance component weighting from 40% to 75% Added double-trigger mechanism for payments in the event of a change-of-control Implemented clawback policy |
Long-Term Incentive Award |
|
Time-based restricted stock component (75% of award in 2016) to support retention needs and reward high-potential employees Performance-based restricted stock component (25% of award in 2016) tied to relative TSR Aligns the interests of the Company's executives with the interests of its stockholders |
| Equity | | Variable | |
Time-based: N/A Performance-based: 0-200% of target |
|
Decreased weighting of time-based component to 60% Increased weighting of performance-based component to 40% Tied performance-based component to an equal weighting of relative TSR and Free Cash Flow as a percentage of revenue Added double-trigger mechanism for payments in the event of a change-of-control Implemented clawback policy For new grants, deferred dividends on time-based restricted stock grants until they vest and eliminated dividends on unvested performance-based restricted stock grants |
32 2017 Proxy Statement
EXECUTIVE COMPENSATION
Elements |
Key Features/Link to Program Objectives |
Award Form |
Fixed or Variable |
Payout Range |
2017 Changes |
|||||
Retirement | | Retirement Savings Plan (RSP/401(k)); (CEO and NEOs participate in the same retirement benefits as other employees) Legacy frozen plans: Supplemental Employee Retirement Program (SERP) and Pension Value Plan (PVP) Deferred Compensation Plan (available to all executives) |
| Benefit | | N/A | | N/A | | |
Other Benefits | | Qualified Health Plans (CEO and NEOs participate in same health benefits as other employees) |
| Benefit | | N/A | | N/A | | |
| | Perquisites |
| Benefit | | N/A | |
CEO: up to $25,000 Other NEOs: up to $13,000 |
|
Added double-trigger mechanism for payments in the event of a change-of-control |
CEO Employment Agreement
Mr. Gentile was hired as the Company's and Spirit's Executive Vice President and Chief Operating Officer April 1, 2016, and effective August 1, 2016, he was appointed as the Company's and Spirit's President and Chief Executive Officer. Mr. Gentile's Employment Agreement, which was entered into in connection with his initial hiring and not his subsequent appointment as President and Chief Executive Officer, provides for compensation as follows:
Base Salaries
Effective August 1, 2016, following a change in Mr. Gentile's position from Executive Vice President and Chief Operating Officer of the Company and Spirit to President and Chief Executive Officer, the Company adjusted his annual compensation to reflect his new position with the Company and Spirit, with the intention of aligning his target pay at the market median, resulting in an increase of 10% to his base salary, from $1,000,000 to $1,100,000.
In connection with the Company's annual performance reviews and after consideration of competitive pay practices and Spirit's pay philosophy, effective February 5, 2016, our Named Executive Officers (other than Mr. Gentile) earned salary increases of 4% - 8%, as reflected in the table below. In addition, effective June 1, 2016, in order to aid retention and
2017 Proxy Statement 33
EXECUTIVE COMPENSATION
reflect their evolving roles within the Company, Mr. Kapoor and Ms. Marnick received additional salary increases of 8% and 14%, respectively.
NEO |
Salary as of January 1, 2016 |
Salary as of February 5, 2016 (% increase) |
New June 1, 2016 salary (% increase) |
|||
Mr. Lawson |
| $1,225,000 | | $1,274,000 (4%) | | |
Mr. Kapoor |
| $565,000 | | $600,000 (6%) | | $650,000 (8%) |
Ms. Marnick |
| $400,000 | | $430,000 (8%) | | $490,000 (14%) |
Mr. Hawkins |
| $480,000 | | $500,000 (4%) | | |
Ms. Lohmeier |
| $450,000 | | $475,000 (6%) | | |
| | | | | | |
Following Mr. Lawson's retirement on July 31, 2016, he began providing consulting and transition services to Spirit, for which he is entitled to receive annual compensation of $150,000, subject to, among other things, compliance with a covenant not to compete.
For 2017 base salary changes, please refer to "2017 Program Updates" on page 26.
Short-Term Incentive Awards
The Company generally targets annual incentive awards at a level that, when combined with base salaries, results in total annual compensation that, subject to individual exceptions based on performance or prior positions held, is at or around the market median when target performance is met, above the market median when the Company performs well and below market median when the Company misses its goals.
Each year the Board establishes performance objectives, targeted achievement levels and weighting to be used for the annual STI award determination based on a recommendation from the Compensation Committee. For 2016, the Compensation Committee continued to refine the design of the STI Program in order to better align with market practice. The Compensation Committee adjusted STI Program weightings applicable to the CEO (including removing the Program/Functional Performance component) and also separately adjusted STI Program weightings applicable to the other NEOs. Beginning in 2016, STI awards for the CEO are determined based on two components: (1) Company Performance (80% weighting) and (2) Individual Performance (20% weighting). With respect to fiscal year 2016, pursuant to the terms of his employment agreement, Mr. Gentile is guaranteed a short-term incentive award of no less than 57.5%. For all other NEOs, in 2016, STI awards were determined based on three components: (1) Company Performance (40% weighting), (2) Program/Functional Performance (40% weighting) and (3) Individual Performance (20% weighting). For 2017 STI Program changes please refer to "2017 Program Updates" on page 26.
The Company Performance component of each NEO's 2016 STI award is scored based on the performance of the Company as measured against three quantitative metrics adopted by the Compensation Committee: (1) EBIT, (2) Revenue and (3) Free Cash Flow. The Program/Functional component of each NEO's (other than the CEO's) STI award is scored based on specified performance criteria applicable to the program or functional group for which such NEO is responsible. These criteria consist of various financial, operational and strategic elements. The Individual Performance component of each NEO's 2016 STI award was evaluated based on the achievement of individual performance goals.
As summarized in the table below, the 2016 STI Program design uses a two-step approach to determine the amount of STI award payouts.
Step 1: Applying the formula
For the CEO:
| | | | | | | | |
Company Performance Score (80% weighting) |
| + | | Individual Performance Score (20% weighting) |
| = | | Final Score |
| | | | | | | | |
For all other NEOs
| | | | | | | | | | | | |
Company Performance Score (40% weighting) |
| + | | Program/Functional Performance Score (40% weighting) |
| + | | Individual Performance Score (20% weighting) |
| = | | Final Score |
| | | | | | | | | | | | |
Step 2 for all NEOs: Applying the final score
| | | | | | | | | | | | |
Final Score | | × | | Base Salary | | × | | STI Target Percentage | | = | | Final STI Award Payout |
| | | | | | | | | | | | |
34 2017 Proxy Statement
EXECUTIVE COMPENSATION
STI Program Performance Results
Company Performance (80% weighting for the CEO and 40% weighting for all other NEOs):
In 2016, the Company exceeded its target performance goal with respect to the Revenue and Free Cash Flow (cash provided by operating activities, less capital expenditures) metrics and fell slightly short of achieving its target performance goal with respect to the EBIT (earnings before interest and taxes) metric of the Company Performance component. As a result, the Compensation Committee determined a 1.49 score had been achieved with respect to Company Performance, representing a weighted score of 1.19 for the CEO (representing 80% of his total STI score) and 0.60 for all other NEOs (representing 40% of their total STI scores). The table below summarizes the Company's performance relative to the Company Performance goals for 2016.
|
| 2016 Company Performance Summary | ||||||||||
| | | | | | | | | | | | |
Measure |
Weighting % | Threshold | Target | Maximum | Actual Result | Assessment | ||||||
Revenue |
| 10% | | $6.60 billion | | $6.69 billion | | $6.80 billion | | $6.79 billion* | | Exceeded Target |
EBIT |
| 40% | | $800 million | | $914 million | | $950 million | | $903 million* | | Exceeded Threshold |
Free Cash Flow |
| 50% | | $300 million | | $352 million | | $400 million | | $420 million* | | Exceeded Maximum |
| | | | | | | | | | | | |
Program/Functional Performance (40% weighting for all NEOs except the CEO):
With respect to the Program/Functional Performance component of the 2016 STI awards, each program or functional group was assigned a score based on its performance measured against the performance criteria assigned to such program or functional group. The performance of each program or functional group was measured based on strategic, financial and operational metrics. The scores assigned to members of the Company's executive leadership team, including all NEOs, were different depending on the program or function they led. For Messrs. Kapoor and Hawkins and Mmes. Marnick and Lohmeier, program and function scores ranged from 1.37 to 1.55 due to the extent to which their respective programs or functions met or exceeded certain target goals.
Individual Performance (20% weighting for all NEOs):
The Individual Performance component is intended to further align executive compensation with performance in the Company's focus areas in any given year by establishing relevant individual performance metrics that relate to each NEO's assignments. With respect to the measurement of the Individual Performance component for 2016 STI awards, the Compensation Committee used a scoring scale of 0.0 to 2.0, with 0.0 being for unacceptable performance and 2.0 being for exceptional performance. All of our NEOs other than Mr. Lawson, who did not receive an individual performance score for 2016, received individual scores ranging from 1.2 to 1.7.
Individual performance factors reflect the following:
2017 Proxy Statement 35
EXECUTIVE COMPENSATION
Based on Company, Program/Functional and individual performance results (as detailed above), the Compensation Committee believes the annual incentive compensation awarded to the NEOs for 2016 was appropriate and achieved the objectives of the executive compensation program. Mr. Lawson, our former President and Chief Executive Officer, is not included in the table below because pursuant to the terms of his Retirement and Consulting Agreement with the Company and Spirit, subject to, among other things, compliance with a covenant not to compete, Mr. Lawson was entitled to an STI award of $1,115,000 in respect of 2016, representing 58.33% of his target 2016 STI award.
|
| |||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||
NEO |
Base Salary* ($) |
× |
Target (% of Base Salary) |
= |
Target Award ($) |
× | | |
Company Performance (80% weighting for CEO, 40% weighting for other NEOs) |
+ |
Programs/ Functional Performance (40% weighting for NEOs other than CEO) |
+ |
Individual Performance (20% weighting for all NEOs) |
| | = |
2016 Total Payout ($) |
|||||||||||||||||||||||||||||||
Mr. Gentile |
| 1,041,803 | | | | 140 | | | | 1,458,525 | | | | | 1.192 | | | | | N/A | | | | | 0.340 | | | | | | 2,234,460 | | | |||||||||||||||
Mr. Kapoor |
| 625,888 | | | | | 100 | | | | | 625,888 | | | | | | |
0.596 |
| | |
0.620 |
| | |
0.340 |
| | | | | 973,882 | | | |||||||||||||
Ms. Marnick |
| 462,213 | | | | 100 | | | | 462,213 | | | | | 0.596 | | | | | 0.620 | | | | | 0.340 | | | | | | 719,204 | | | |||||||||||||||
Mr. Hawkins |
| 498,087 | | | | | 100 | | | | | 498,087 | | | | | | |
0.596 |
| | |
0.596 |
| | |
0.326 |
| | | | | 756,097 | | | |||||||||||||
Ms. Lohmeier |
| 472,610 | | | | 100 | | | | 472,610 | | | | | 0.596 | | | | | 0.548 | | | | | 0.256 | | | | | | 661,653 | | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The STI awards paid in 2017, in respect of 2016 performance, were paid fully in cash and are considered to have been earned in 2016. These cash awards for the NEOs are reported as 2016 compensation in the "Non-Equity Incentive Plan Compensation" column of the "Summary Compensation Table."
For 2017, the Company will eliminate the Program/Functional Performance component of STI awards. For additional details of 2017 STI Program changes, please refer to "2017 Program Updates" on page 26.
Long-Term Incentive Awards
LTI awards under the LTI Program are an important component of compensation, as they provide long-term, equity-based variable incentive compensation in keeping with the Company's executive compensation philosophy for the entire executive group. LTI awards consist of a time-based stock award that comprises 75% of a participant's annual LTI award, and a performance-based stock award tied to the Company's TSR relative to the TSR of a group of the Company's peers (see Proxy Peer Group Table, page 31) that comprises 25% of a participant's annual LTI award, assuming target performance goals are achieved. Time-based LTI awards vest in three equal installments on each of the first, second and third anniversaries of the grant date.
With respect to performance-based awards under the LTI Program, the number of shares that vest with respect to a grant is determined based on the ranking of the Company's TSR, expressed as a percentile, relative to the TSR of a group of the Company's peers over a three-year tracking period as compared to threshold, target and maximum performance goals. Participants are initially granted a number of unvested shares equal to the number of vested shares to which the participant would be entitled upon achievement of the target performance goal. For grants made in 2016, the tracking period runs from January 1, 2016, to December 31, 2018, with the vesting date being the three-year anniversary of the grant. For grants made in 2016, the TSR for the Company and each member of its peer group for the tracking period will be determined by calculating the percentage increase in the dividend adjusted, weighted-average closing share price for the 20 trading days ending December 31, 2018, over such weighted-average share price for the 20 trading days ending December 31, 2015. The Company's TSR percentile ranking with respect to its peer group will then be measured against threshold, target and maximum performance goals, which correspond to threshold, target and maximum vesting percentages. The table below sets forth these performance goals and vesting percentages:
|
| | Threshold | Target | Maximum | |||
Performance Goal |
| (Percentile Ranking) | | 25th | | 50th | | 90th |
Vesting Percentage |
| (% of Target Performance-Based Award) | | 25.00% | | 100.00% | | 200.00% |
If the Company's TSR percentile ranking falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the performance-based award that a participant will receive is interpolated on a straight-line basis. If the Company's TSR percentile ranking is below the threshold performance goal,
36 2017 Proxy Statement
EXECUTIVE COMPENSATION
the participant will not be entitled to any vested performance-based shares, and if the Company's TSR percentile ranking is equal to or higher than the maximum performance goal, the participant will be entitled to a number of vested performance-based shares equal to 200% of the target performance-based share award. The number of vested shares to which a participant is entitled increases at a higher rate as the Company's TSR moves from the threshold goal to the target goal compared to the rate of increase as the Company's TSR moves from target goal to maximum goal. That is, the straight-line interpolation used to determine the percentage of the performance-based award to which a participant is entitled has a steeper incline from the threshold goal to the target goal than from the target goal to the maximum goal. This asymmetry reflects the importance the Company places on incentivizing executives to meet the Company's performance goals.
The following NEOs received target LTI award increases in 2016:
NEO | Target LTI Award as of January 1, 2016* | Increased Target LTI Award** | ||
Mr. Gentile | | 300% | | 400% (effective August 1, 2016) |
Mr. Lawson | | 500% | | 535% (effective February 5, 2016) |
Mr. Kapoor | | 200% | | 220% (effective February 5, 2016) |
Ms. Marnick | | 160% | | 190% (effective June 1, 2016) |
Mr. Hawkins | | 170% | | 200% (effective February 5, 2016) |
| | | | |
The table below outlines the Company's NEOs' annual LTI stock awards made in February 2016 (reflecting fair value as calculated in accordance with applicable accounting rules).
NEO |
2016 Time-Based LTI Award ($) |
2016 Performance-Based LTI Award ($) |
|||||||||
Mr. Gentile* |
| | N/A | | | | N/A | | | ||
Mr. Lawson |
| | 5,111,961 | | | | 1,704,018 | | | ||
Mr. Kapoor |
| | 990,034 | | | | 330,048 | | | ||
Ms. Marnick |
| | 516,032 | | | | 172,031 | | | ||
Mr. Hawkins |
| | 750,041 | | | | 250,035 | | | ||
Ms. Lohmeier |
| | 605,645 | | | | 201,907 | | | ||
| | | | | |
In addition, in May 2016, the Board granted Mr. Kapoor and Ms. Marnick special one-time awards under the LTI Program of restricted shares of the Company's Class A Common stock with fair values, as calculated in accordance with applicable accounting rules, of $1,376,568 and $717,520, respectively. Fifty percent of the shares granted to each of Mr. Kapoor and Ms. Marnick under this special grant will vest in each of June 2017 and June 2018 if the Board determines prior to each vesting date, in each case, that Mr. Kapoor or Ms. Marnick, as applicable, has achieved satisfactory performance.
For 2017, in order to align with market trends, the Company will increase the weighting of performance-based LTI awards to 40%, which will be tied to two equally-weighted measures: the Company's TSR relative to the TSR of a group of the Company's peers and the Company's Free Cash Flow as a percentage of revenue. For additional details of 2017 LTI Program changes, please refer to "2017 Program Updates" on page 26.
2017 Proxy Statement 37
EXECUTIVE COMPENSATION
Executive Recruitment
Factors Guiding the Company's Decisions to Support Attraction, Motivation and Retention of Top Talent
The Company has structured a variety of compensation arrangements and approved various payments to recruit executive talent. The Compensation Committee has approved long-term incentive stock awards and cash payments designed to compensate individual executive officers for compensation they would forgo by leaving their prior employers. More specifically, Mr. Gentile's employment agreement provided for a signing bonus consisting of restricted shares of Class A Common stock valued at $3,000,000 to compensate for forgone compensation benefits from Mr. Gentile's previous employer. This award is included in the "Stock Award" column of the "Summary Compensation Table." The Compensation Committee believes its decision to approve this stock grant was reasonable and necessary to achieve our overall goals and was consistent with our compensation philosophy.
Perquisites
Perquisites and other benefits represent a small part of the overall compensation package for the Company's executive officers. Beginning with fiscal year 2012, all individual perquisites for the participants were eliminated and replaced with an annual allowance of $25,000 for the Company's CEO and up to $13,000 for each other participant, including each of the Company's other NEOs. Any portion of a participant's annual allowance that is not used by him or her by the end of the applicable calendar year lapses and does not carry over to the following calendar year, nor is any remaining balance paid out to the participants, unless a change-in-control occurs (see "Potential Payments Upon Termination or Change-in-Control" on page 50). The Board and the Compensation Committee may also increase or decrease allowance amounts at any time.
The Company's executive security procedures prescribe the level of personal security to be provided to the CEO. These security procedures are based on business-related security concerns and have been assessed by an independent security consulting firm and deemed necessary and appropriate for the protection of the Company's CEO. These security procedures provide for the Company's CEO to use Company aircraft for personal travel for security reasons, and as a result, Messrs. Lawson's and Gentile's use of the Company's aircraft during their respective terms as CEO represented a significant perquisite provided to them in addition to those perquisites provided to them under the Company's Perquisite Allowance Plan.
The Compensation Committee periodically reviews competitive market data to ensure that the Perquisite Allowance Plan is reasonable and within market practice.
38 2017 Proxy Statement
EXECUTIVE COMPENSATION
Health Benefits/Retirement Plans
The Company provides its executive officers, including the Company's NEOs, benefits provided to all of Spirit's other salaried, non-union employees, including medical and dental insurance and tax-qualified defined contribution plan participation under the Spirit AeroSystems Holdings, Inc. Retirement & Savings Plan ("RSP"). These benefits are important for retaining the Company's executive officers and enhancing their compensation through tax-excluded or tax-deferred vehicles. The Company's contributions to the RSP on behalf of the NEOs are included in the "All Other Compensation" column of the "Summary Compensation Table." This plan furthers the Company's and Spirit's objectives of attracting and retaining well-qualified employees and executive officers as it is the Company's only active retirement plan.
In connection with the formation of the Company as a stand-alone company and the acquisition of the assets of the Company from Boeing, the Company adopted a supplemental executive retirement plan (SERP) in order to attract certain employees from Boeing. The SERP provides deferred compensation benefits to those of the Company's executive officers and certain other members of management who previously participated in Boeing's Supplemental Executive Retirement Plan for Employees of Boeing prior to the acquisition of Boeing's operations in Wichita, Kansas; Tulsa, Oklahoma; and McAlester, Oklahoma; by an investor group led by Onex Partners LP and Onex Corporation resulting in the incorporation and commencement of operations of the Company (the "Boeing Acquisition"). Also in connection with the Boeing Acquisition, the Company adopted the Pension Value Plan (PVP) for those former employees of Boeing who did not retire from Boeing by August 1, 2005. Both the SERP and the PVP are frozen plans, so no additional employees are becoming participants in the plans and no current participants are accruing any additional benefits. The PVP allowed the transfer of pension values from Boeing pension plans. The PVP is fully paid for by the Company, and the Company's employees are vested after reaching five years of service. None of the NEOs received benefits under the SERP or PVP in 2016.
The Company sponsors the RSP, a qualified plan covering certain eligible employees. Under the RSP, the Company makes a matching contribution of 75% of the employee's contributions to a maximum 6% of compensation match based on employee contributions of 8% of compensation. Compensation for this plan is base pay, subject to compensation limits prescribed by the IRS. The matching contributions are immediately 100% vested.
Non-matching contributions, based on an employee's age and vesting service, are made at the end of each calendar year for certain employee groups. Each NEO is eligible for these contributions for each year that he or she (1) is employed by Spirit as of December 31 and (2) receives a year of vesting service. If age plus vesting service totals less than 60, employees receive 1.5% of base salary as a non-matching Company contribution; if age plus vesting service totals at least 60 but less than 80, employees receive 3% of base salary; and if age plus vesting service totals at least 80, employees receive 4.5% of base salary contribution. These contributions are 25% vested at two years, 50% vested at three years, 75% vested at four years, and 100% vested at five years of vesting service, which includes prior service with Boeing.
The Company makes post-retirement medical and dental coverage available to all employees who retire from the Company at age 55 or later, provided they have at least 10 years of service and participated in the Company's medical and dental plans prior to retirement. Employees pay the full cost of coverage for this benefit; the Company does not pay any subsidy. For employees previously employed by Boeing whom Spirit hired as of June 17, 2005, the Company provides subsidized post-retirement medical coverage upon early retirement after attaining age 62 with 10 years of service. Subject to paying the same employee premiums as an active employee, early retirees may maintain their medical coverage until attainment of age 65 or Medicare eligibility due to disability prior to age 65.
In addition, prior to December 16, 2016, the Company provided all employees with an accrued time off benefit. Under the accrued time off benefit, employees received between 16 and 25 days (based on tenure and/or individual contracts) of earned time off per year. In December 2016, the CEO approved the elimination of the accrued time off benefit for all U.S. senior managers and executives, including the NEOs, effective December 15, 2016. In connection with the elimination of the benefit, in December 2016, Spirit provided each eligible employee with a lump sum payout equivalent to his or her accrued but unused earned time off balance as of December 15, 2016. The lump sum payouts for the NEOs are reported as 2016 compensation in the "All Other Compensation" column of the "Summary Compensation Table."
The Company maintains stock ownership guidelines for its NEOs and other senior executives to further promote alignment of management and stockholder interests. The ownership requirements (measured by the value of the Company's stock required to be held) are based on a multiple of base salary tied to pay grade.
2017 Proxy Statement 39
EXECUTIVE COMPENSATION
The stock ownership guidelines establish the following target levels for Company stock ownership:
Officer Level |
Target Level (Multiple of Annual Base Salary) | |||||
Chief Executive Officer |
| | 5x | | | |
Executive Vice Presidents/Senior Vice Presidents |
| | 3x | | | |
Vice Presidents |
| | 1x | | |
Non-employee directors are expected to own the greater of $400,000 worth of stock by market value or 12,500 shares or RSUs. Shares that satisfy the stock ownership guidelines include:
The stock ownership guidelines require that the CEO and other senior officers accumulate their required positions within five years of the adoption of the guidelines, or for new officers, within five years of being hired or promoted into the officer position. In addition, increases in an officer's target level resulting from salary increases or promotions are required to be achieved within five years of the event requiring the increase. The Company believes that five years provides a reasonable goal for executives to accumulate shares through earned incentive awards.
During the five-year accumulation period, the CEO and other senior elected officers are expected to continuously accumulate qualifying equity until they meet the minimum stock ownership guideline. The Company reviews on an annual basis the ownership position of the CEO and each of the other senior elected officers who is required to adhere to these guidelines. Based on the review conducted in 2016, the Company determined that the CEO and each of the other senior elected officers own appropriate amounts of Company stock in light of the minimum stock ownership guidelines and the portions of their respective accumulation periods that have passed. The Company may restrict any officer from liquidating any of his or her then-current holdings in Company stock, except for those shares which are sold to meet Company tax withholding requirements. The Company may modify or waive the requirements of the guidelines, at its discretion, if it determines that compliance would result in severe hardship for an officer.
Compensation in Connection with Termination of Employment
The Company believes competitive severance protection is an appropriate incentive in attracting and retaining talent. The Company has provided for termination compensation through certain individual employment agreements in the form of salary and benefit continuation for a moderate period of time following involuntary termination of an executive officer's employment. The Company has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances surrounding termination, including other compensation available at such time. The Company also considers the need to protect the Company's business and confidential and proprietary information through non-competition, non-solicitation and similar agreements, and the desire to provide for effective transitions between departing executives and continuing or new management.
You can find additional information regarding the Company's practices in providing compensation in connection with termination of employment under the heading "Potential Payments Upon Termination or Change-in-Control" on page 50.
Compensation in Connection with Change-in-Control
The Company maintains several programs of broad application designed to provide compensation in connection with a change-in-control of the Company. Specifically, the Company's STI awards, LTIP awards (made prior to the adoption of the OIP), LTI awards and Perquisite Allowance Plan provide for certain compensation in connection with a change-in-control of the Company as discussed under "Potential Payments Upon Termination or Change-in-Control" on page 50. Beginning in 2017, as described below, benefits under the STI Program, LTI Program and Perquisite Allowance Plan are subject to a "double-trigger."
Short-Term Incentive Awards
Beginning in 2017, in the event of a change-in-control of the Company, each STI award participant whose employment is terminated without cause (as defined in the OIP) or who terminates his or her employment for good reason (as defined
40 2017 Proxy Statement
EXECUTIVE COMPENSATION
in the OIP), either in anticipation of the change-in-control or during the period beginning 30 days before the date of the change-in-control and ending two years after the change-in-control, will be entitled to receive an award of cash in an amount equal to the full-year STI award that the participant would have been entitled to receive for the year during which such termination occurs had the target performance metrics established for that year been met. Prior to 2017, all participants in the STI award program employed on the date of a change-in-control or terminated without cause within 90 days prior to the change-in-control would have been entitled to receive the benefits described in the immediately preceding sentence upon the occurrence of the change-in-control.
Long-Term Incentive Awards
With respect to long-term incentive awards made prior to the adoption of the OIP, upon the occurrence of a change-in-control of the Company (1) each long-term incentive award participant who is employed by Spirit on the date of the change-in-control or who was terminated without cause within 90 days prior to the change-in-control will be entitled to receive an award of cash in an amount equal to the value of the full-year long-term incentive award that would have been made to such participant within the 12-month period following the change-in-control if not for the occurrence of the change-in-control and (2) any outstanding unvested long-term incentive award shares previously granted to each such participant will vest immediately.
With respect to LTI awards made to LTI Program participants through 2016, except as otherwise provided in a participant's award agreement, the unvested LTI awards of a participant who is employed by Spirit on the date of a change-in-control, or whose employment was involuntarily terminated by Spirit (other than for cause) within the ninety (90) days preceding a change-in-control, become fully vested upon a change-in-control. The foregoing notwithstanding, if the vesting of an unvested LTI award is subject to performance conditions, the portion that vests will, at the discretion of the Compensation Committee, be determined based upon actual performance through the date of the change-in-control or, if the Compensation Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance.
With respect to LTI awards made to LTI Program participants beginning in 2017, except as otherwise provided in a participant's award agreement, if a change-in-control of the Company occurs, unvested LTI awards of a participant whose employment is terminated without cause (as defined in the OIP) or who terminates his or her employment for good reason (as defined in the OIP), either in anticipation of the change-in-control or during the period beginning 30 days before the date of the change-in-control and ending two years after the change-in-control, become fully vested upon termination of employment. Each such participant will also receive a cash award equal to the dollar value of the LTI award that would have been made to the participant in the ordinary course of business within the 12-month period following the date of termination based on the participant's annual base pay in effect on the date of termination. Prior to 2017, all participants in the LTI Program employed on the date of a change-in-control or terminated without cause within 90 days prior to the change-in-control would have been entitled to receive the benefits described in the immediately preceding sentence upon the occurrence of the change-in-control. The foregoing notwithstanding, if the vesting of an unvested LTI award is subject to performance conditions, the portion that vests will, at the discretion of the Compensation Committee, be determined based upon actual performance through the later of the date of the change-in-control or the date of termination, or, if the Compensation Committee determines that measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance.
Perquisite Allowance Plan
Beginning in 2017, the Perquisite Allowance Plan provides that, upon the occurrence of a change-in-control of the Company, each participant whose employment is terminated without cause (as defined in the OIP) or who terminates his or her employment for good reason (as defined in the OIP) either in anticipation of the change-in-control or during the period beginning 30 days before the date of the change-in-control and ending two years after the change-in-control, will be entitled to receive a cash award equal to any remaining unused portion of his or her allowance for the year in which the termination occurs, plus an amount equal to the participant's full allowance for the calendar year in which the termination occurs, which is intended to enable the participant to transition to self-funding. Prior to 2017, all participants in the Perquisite Allowance Plan would have been entitled to receive the benefits described in the immediately preceding sentence upon the occurrence of the change-in-control, whether or not their employment was terminated in connection with the change-in-control.
2017 Proxy Statement 41
EXECUTIVE COMPENSATION
Accounting and Tax Treatment of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), imposes a $1 million limit on the amount that a public company may deduct for compensation paid to a company's chief executive officer or any of a company's three other most highly compensated executive officers (other than its chief financial officer) who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for "qualifying performance-based" compensation (i.e., compensation paid only if the individual's performance meets pre-established objective goals based on performance criteria approved by stockholders).
The Company believes it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, the Company has not adopted a policy that all compensation must qualify as deductible under Section 162(m), and not all amounts currently paid under the Company's compensation programs qualify as performance-based compensation excluded from the limit on deductibility. The OIP permits the Company to make short-term and long-term incentive awards that meet the performance-based criteria to allow such awards to be deductible.
The Company has adopted FASB's authoritative guidance on stock-based compensation accounting, which generally requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value and to recognize this cost over the requisite service period or immediately if there is no service period and there are no other vesting requirements. The notes to the Company's consolidated financial statements, included in the Company's Annual Report on Form 10-K for fiscal year 2016 filed with the SEC, contain further information concerning the Company's policies with respect to FASB's authoritative guidance on stock-based compensation accounting.
The Compensation Committee establishes and oversees the design and functioning of the Company's executive compensation program. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section in this Proxy Statement with the Company's management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2017 Annual Meeting of Stockholders and also be incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year 2016.
Compensation Committee
Paul
Fulchino, Chairman
Charles L. Chadwell
Richard Gephardt
Robert Johnson
42 2017 Proxy Statement
EXECUTIVE COMPENSATION
The following table summarizes compensation information for the fiscal year ended December 31, 2016, for (1) Mr. Gentile, our Chief Executive Officer, (2) Mr. Lawson, our former Chief Executive Officer, (3) Mr. Kapoor, our Chief Financial Officer and (4) our three other NEOs. The following table also summarizes compensation information for the fiscal years ended December 31, 2014 and 2015 for those of the foregoing officers who were listed as NEOs in the Company's Proxy Statements for its 2015 and 2016 Annual Meetings of Stockholders.
Name and Principal Position | Year |
Salary ($) |
Bonus ($) |
Stock Awards(16) ($) |
Non-Equity Incentive Plan Compensation(18) ($) |
All Other Compensation(20) ($) |
Total ($) |
|||||||||||||||||||||
Thomas C. Gentile, III, | | 2016 | | 770,773 | (7) | | | | 3,000,045 | | | | 2,234,460 | (7) | | | 169,476 | (21) | | 6,174,754 | | |||||||
President & CEO(1) | | | | | | | | | | | | | | | ||||||||||||||
Larry A. Lawson, | | 2016 | | 758,746 | (8) | | | | 25,283,088 | (17) | | | 1,115,000 | (19) | | | 3,922,034 | (22) | | 31,078,868 | | |||||||
Former President & | | 2015 | | 1,255,284 | (9) | | | | 6,125,004 | | | | 1,955,465 | (9) | | | 1,077,379 | (23) | | 10,413,132 | | |||||||
CEO(2) | | 2014 | | 1,123,082 | (9) | | | | 4,567,550 | | | | 2,114,941 | (9) | | | 1,127,139 | (24) | | 8,932,712 | | |||||||
Sanjay Kapoor, | | 2016 | | 624,229 | (10) | | | | 2,696,650 | | | | 973,882 | (10) | | | 127,208 | (25) | | 4,421,969 | | |||||||
EVP & | | 2015 | | 561,144 | (10) | | | | 1,130,068 | | | | 592,160 | (10) | | | 28,701 | (26) | | 2,312,073 | | |||||||
CFO(3) | | 2014 | | 545,184 | | 100,000 | (14) | | 1,050,046 | | | | 908,250 | | | | 502,170 | (27) | | 3,101,596 | | |||||||
Samantha Marnick, | | 2016 | | 460,465 | (11) | | | | 1,405,583 | | | | 719,204 | (11) | | | 213,332 | (28) | | 2,798,584 | | |||||||
EVP and Chief | | | | | | | | | | | | | | | ||||||||||||||
Administration Officer(4) | | | | | | | | | | | | | | | ||||||||||||||
Duane F. Hawkins, | | 2016 | | 497,684 | (12) | | | | 1,000,076 | | | | 756,097 | (12) | | | 57,905 | (29) | | 2,311,762 | | |||||||
SVP and General | | 2015 | | 450,384 | (12) | | | | 630,079 | | | | 462,396 | (12) | | | 22,899 | (30) | | 1,565,758 | | |||||||
Manager, Boeing & | | | | | | | | | | | | | | | ||||||||||||||
Defense Programs(5) | | | | | | | | | | | | | | | ||||||||||||||
Michelle J. Lohmeier, | | 2016 | | 472,125 | (13) | | | | 807,552 | | | | 661,653 | (13) | | | 135,198 | (31) | | 2,076,528 | | |||||||
SVP and General | | 2015 | | 245,774 | | 250,000 | (15) | | 1,165,055 | | | | 450,000 | | | | 222,820 | (32) | | 2,333,649 | | |||||||
Manager, Airbus Programs(6) | | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | |
(1) | | Mr. Gentile was appointed Executive Vice President and Chief Operating Officer of the Company and Spirit, effective April 1, 2016, and President and Chief Executive Officer of the Company, effective August 1, 2016. |
(2) | | Mr. Lawson retired from his positions as the Company's President and Chief Executive Officer, effective July 31, 2016. Compensation in this table reflects Mr. Lawson's compensation from the Company in 2016, including pursuant to his Retirement and Consulting Agreement. |
(3) | | Mr. Kapoor was appointed Senior Vice President and Chief Financial Officer of the Company, effective September 23, 2013. |
(4) | | Ms. Marnick was not an NEO in the fiscal years ended December 31, 2014, and December 31, 2015. |
(5) | | Mr. Hawkins was not an NEO in the fiscal year ended December 31, 2014. |
(6) | | Ms. Lohmeier was appointed Senior Vice President and General Manager, Airbus Programs of the Company, effective June 10, 2015. |
(7) | | From April 1, 2016, until July 31, 2016, in his capacity as the Company's Executive Vice President and Chief Operating Officer, Mr. Gentile's annual base salary was $1,000,000 and his target STI award was 140% of his base salary. Effective as of Mr. Gentile's appointment as President and Chief Executive Officer on August 1, 2016, Mr. Gentile's base salary increased to $1,100,000. Accordingly, Mr. Gentile's annual salary for 2016 and cash compensation earned as a short term incentive award under the OIP for 2016 performance were prorated based on the portion of the year for which his new compensation arrangement applied. |
(8) | | Effective as of February 5, 2016, Mr. Lawson's annual base salary increased from $1,225,000 to $1,274,000. Accordingly, Mr. Lawson's annual salary for 2016 was prorated based on the portions of the year for which his new compensation arrangements applied. |
(9) | | Effective as of (a) February 7, 2014, Mr. Lawson's annual base salary increased from $1,000,000 to $1,050,000 and (b) January 30, 2015, Mr. Lawson's (i) annual base salary increased from $1,050,000 to $1,225,000 and (ii) target STI award increased from 115% to 150% of his base salary. Accordingly, Mr. Lawson's annual salary for 2014 and 2015 and cash compensation earned as a short term incentive award under the OIP for 2014 and 2015 performance were prorated based on the portions of the years for which his new compensation arrangements applied. |
(10) | | Effective as of (a) January 30, 2015, Mr. Kapoor's annual base salary increased from $525,000 to $565,000, (b) February 5, 2016, Mr. Kapoor's annual salary increased from $565,000 to $600,000 and (c) June 1, 2016, Mr. Kapoor's annual salary increased from $600,000 to $650,000. Accordingly, Mr. Kapoor's annual salary for 2015 and 2016 and cash compensation earned as a short term incentive award under the OIP for 2015 and 2016 performance were prorated based on the portions of the years for which his new compensation arrangements applied. |
(11) | | Effective as of (a) February 5, 2016, Ms. Marnick's annual salary increased from $400,000 to $430,000 and (b) June 1, 2016, Ms. Marnick's annual base salary was increased from $430,000 to $490,000. Accordingly, Ms. Marnick's annual salary for 2016 and cash compensation earned as a short term incentive award under the OIP for 2016 performance were prorated based on the portion of the year for which her new compensation arrangements applied. |
(12) | | Effective as of (a) January 30, 2015, Mr. Hawkins' annual base salary increased from $400,000 to $420,000, (b) June 12, 2015, Mr. Hawkins' annual base salary increased from $420,000 to $480,000 and (c) February 5, 2016, Mr. Hawkins' annual base salary increased from $480,000 to $500,000. Accordingly, Mr. Hawkins' annual salary for 2015 and 2016 and cash compensation earned as a short term incentive award under the OIP for 2015 and 2016 performance were prorated based on the portions of the years for which his new compensation arrangements applied. |
2017 Proxy Statement 43
EXECUTIVE COMPENSATION
(13) | | Effective as of February 5, 2016, Ms. Lohmeier's annual base salary was increased from $450,000 to $475,000. Accordingly, Ms. Lohmeier's annual salary for 2016 and cash compensation earned as a short term incentive award under the OIP for 2016 performance were prorated based on the portion of the year for which her new compensation arrangements applied. |
(14) | | Represents a portion of the signing bonus payable under Mr. Kapoor's employment agreement. |
(15) | | Represents the cash signing bonus payable under Ms. Lohmeier's employment agreement. |
(16) | | Represents the dollar amount computed based on the individual award grant date fair values reported in the applicable year's Grants of Plan-Based Awards Table in accordance with FASB's authoritative guidance on stock-based compensation accounting. Additional information concerning the Company's accounting for stock awards may be found in Note 15 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for 2016. The following table sets forth the grant date fair value of the time-based and performance-based LTI awards of restricted stock made under the OIP in 2016 and the maximum values of the performance-based LTI awards, assuming a 200% maximum payout: |
|
Name |
Grant Date Fair Value of 2016 Time-Based Awards ($) |
Grant Date Fair Value of 2016 Performance-Based Awards ($) |
Maximum Value at Grant Date of Performance Based Share Grants ($) |
| ||||||||||||
Thomas C. Gentile, III, |
| | 3,000,045 | * | | | | | | | | | | |||
Larry A. Lawson** |
| | 5,111,961 | | | | 1,704,018 | | | | 3,408,036 | | | |||
Sanjay Kapoor |
| | 990,034 | | | | 330,048 | | | | 660,096 | | | |||
Samantha Marnick |
| | 516,032 | | | | 172,031 | | | | 344,062 | | | |||
Duane F. Hawkins |
| | 750,041 | | | | 250,035 | | | | 500,070 | | | |||
Michelle J. Lohmeier |
| | 605,645 | | | | 201,907 | | | | 403,814 | | |
* | | Consists of restricted Class A shares issued as part of a signing bonus. |
** | | As described further in note (17) below, pursuant to the terms of Mr. Lawson's Retirement and Consulting Agreement, subject to, among other things, compliance with a covenant note to compete, Mr. Lawson is entitled to continued vesting of the Existing Awards (as defined in note (17) below). |
| Values for the performance-based LTI awards are based on the probable ranking of the Company's TSR relative to the TSR of a group of the Company's peers. | |
|
The grant date fair value of $54.32 per share for the performance-based LTI awards was determined using a Monte Carlo simulation model. The value was determined using the historical stock price volatilities of the companies in the Company's peer group over the most recent three-year period, assuming dividends for each company are reinvested on a continuous basis and at a risk-free rate of interest of 3.09%. |
|
|
In addition to the annual time-based and performance-based awards set forth above, the following table sets forth the grant date fair value of the special one-time LTI awards of restricted stock made to Mr. Kapoor and Ms. Marnick in May 2016, which awards vest over time subject to confirmation by the Board of satisfactory performance: |
Name |
Grant Date Fair Value 2016 Special One-Time Awards ($) |
| ||||
Sanjay Kapoor |
| | 1,376,568 | | | |
Samantha Marnick |
| | 717,520 | | |
(17) | | In addition to the $6,815,979 grant date fair value of the stock grants awarded to Mr. Lawson as an LTI award under the OIP in February 2016, includes $18,467,109 representing the aggregate fair value, as calculated in accordance with applicable accounting rules as of June 7, 2016, the date of Mr. Lawson's Retirement and Consulting Agreement, of unvested restricted stock awards previously granted to Mr. Lawson under the LTIP and OIP (the "Existing Awards") that would have otherwise been forfeited upon Mr. Lawson's retirement, but, as a modification to the terms thereof, the Company agreed, pursuant to the terms of Mr. Lawson's Retirement and Consulting Agreement, would remain outstanding and vest as if Mr. Lawson remained employed by Spirit, subject to, among other things, compliance with a covenant not to compete. These amounts reflect the Company's accounting expense and do not necessarily correspond to the actual value that will be realized by Mr. Lawson. The aggregate fair value of the Existing Awards is comprised of (i) $3,037,275 for 64,010 shares of restricted stock originally granted as a time-based award under the LTIP in 2013, (ii) $1,633,229 for 34,420 shares of restricted stock originally granted as a time-based LTI award in 2014 under the OIP, (iii) $2,330,955 for 25,353 shares of restricted stock originally granted as a performance-based LTI award in 2014 under the OIP (which award would have a payout of $4,661,910, assuming a 200% maximum payout), (iv) $2,977,298 for 62,746 shares of restricted stock originally granted as a time-based LTI award in 2015 under the OIP, (v) $1,528,401 for 23,744 shares of restricted stock originally granted as a performance-based LTI award in 2015 under the OIP (which award would have a payout of $3,056,802, assuming a 200% maximum payout), (vi) $5,592,220 for 117,855 shares of restricted stock originally granted as a time-based LTI award in 2016 under the OIP and (vii) $1,367,732 for 31,370 shares of restricted stock originally granted as a performance-based LTI award in 2016 under the OIP (which award would have a payout of $2,735,464, assuming a 200% maximum payout). |
(18) | | Represents cash compensation earned by each NEO under the STI program under the OIP for fiscal years 2014, 2015 and 2016. |
44 2017 Proxy Statement
EXECUTIVE COMPENSATION
(19) | | Pursuant to the Company's and Spirit's Retirement and Consulting Agreement with Mr. Lawson, subject to, among other things, compliance with a covenant not to compete, Mr. Lawson was entitled to a cash payment of $1,115,000, equal to 58.33% of his target award under the STI Program for fiscal year 2016. |
(20) | | "Personal airplane usage," as referenced in notes 21-24 and 31, is included in All Other Compensation as a perquisite, and consists of the incremental cost to the Company of personal usage of its corporate airplane. The incremental cost to the Company for personal airplane usage is calculated based on a methodology that includes the weighted average cost of fuel, maintenance expenses, parts and supplies, landing fees, ground services, catering and crew expenses associated with such use, including those associated with "deadhead" flights related to such use. Because the corporate airplane is used primarily for business travel, the methodology excludes fixed costs that do not change based on usage. Fixed costs include pilot salaries, the purchase or lease costs of the airplane and the cost of maintenance not related to personal travel. Executives, their families and invited guests occasionally fly on the corporate airplane as additional passengers on business flights. In those cases, the aggregate incremental cost to the Company is a de minimis amount, and as a result, no amount is reflected in the Summary Compensation Table. Executives, directors, their families and invited guests also occasionally fly on the corporate airplane as additional passengers on personal flights that are attributed to another executive, in which case the entire incremental cost is allocated to the executive who arranged for the personal flight. The Company does not grant bonuses to cover, reimburse or otherwise "gross-up" any income tax owed for personal travel on the corporate airplane. |
(21) | | Includes (a) financial and tax professional services, (b) country club membership fees, (c) personal use of country club membership paid for by the Company, (d) $64,513 for relocation expenses, (e) personal airplane usage, (f) $74,848 for a one-time payout for accrued but unused time off and (g) $858 for Company contributions toward life insurance. |
(22) | | Includes (a) admission fee for a recreational event, (b) vehicle storage costs, (c) personal use of country club membership paid for by the Company, (d) personal airplane usage, (e) $21,451 for Company contributions to defined contribution plans, (f) $3,000,000 for Company contributions to non-qualified deferred compensation plan, (g) $399 for Company contributions toward life insurance coverage (h) $509,600 in severance payments and $60,000 in payment for consulting and transition services pursuant to the terms of Mr. Lawson's Retirement and Consulting Agreement, (i) $6,515 for Company payments for COBRA continuation coverage and (j) $281,389 for a one-time payout (in connection with his retirement) for accrued but unused time off. |
(23) | | Includes (a) personal use of country club membership paid for by the Company, (b) a personal item, (c) $36,363 for personal airplane usage, (d) $13,500 for Company contributions to defined contribution plans, (e) $1,000,000 for Company contributions to non-qualified deferred compensation plan, and (f) $2,516 for Company contributions toward life insurance coverage. |
(24) | | Includes (a) financial professional services, (b) residential security lighting, (c) personal use of country club membership paid for by the Company, (d) $57,908 for personal airplane usage, (e) $16,951 for Company contributions to defined contribution plans, (f) $1,000,000 for Company contributions to non-qualified deferred compensation plan, and (g) $2,612 for Company contributions toward life insurance coverage. |
(25) | | Includes (a) educational costs, (b) personal use of country club membership paid for by the Company, (c) $17,475 for Company contributions to defined contribution plans, (d) $95,031 for a one-time payout for accrued but unused time off and (e) $858 for Company contributions toward life insurance coverage. |
(26) | | Includes (a) vehicle costs, (b) $13,500 for Company contributions to defined contribution plans and (c) $2,201 for Company contributions toward life insurance coverage. |
(27) | | Includes (a) $470,251 for relocation expenses reimbursed by the Company, (b) vehicle costs, (c) personal use of country club membership paid for by the Company, (d) $13,125 for Company contributions to defined contribution plans and (e) $1,397 for Company contributions toward life insurance coverage. |
(28) | | Includes (a) accounting professional services, (b) vehicle costs, (c) $17,475 for Company contributions to defined contribution plans, (d) $100,000 for Company contributions to non-qualified deferred compensation plan, (e) $82,147 for a one-time payout for accrued but unused time off and (f) $858 for Company contributions toward life insurance coverage. |
(29) | | Includes (a) financial professional services, (b) vehicle costs, (c) $14,913 for Company contributions to defined contribution plans, (d) $29,134 for a one-time payout for accrued but unused time off and (e) $858 for Company contributions toward life insurance coverage. |
(30) | | Includes (a) vehicle costs, (b) financial professional services, (c) $7,743 for Company contributions to defined contribution plans and (d) $2,156 for Company contributions toward life insurance coverage. |
(31) | | Includes (a) financial professional services, (b) transportation and other travel-related expenses, (c) personal airplane usage (d) $19,654 for Company contributions to defined contribution plans (e) $47,390 for Company contributions to non-qualified deferred compensation plan, (f) $52,890 for a one-time payout for accrued but unused vacation and (g) $858 for Company contributions toward life insurance coverage. |
(32) | | Includes (a) $124,977 representing a "gross-up" equal to all required tax withholdings with respect to the cash portion of the signing bonus paid to Ms. Lohmeier, (b) $58,925 for relocation expenses reimbursed by the Company, (c) vehicle costs, (d) gym membership, (e) financial professional services, (f) travel-related expenses, (g) $25,274 for Company contributions to non-qualified deferred compensation plan and (h) $644 for Company contributions toward life insurance coverage. |
2017 Proxy Statement 45
EXECUTIVE COMPENSATION
Grants of Plan-Based Awards for Fiscal Year 2016
The following table presents information regarding grants of plan-based awards to the NEOs during the fiscal year ended December 31, 2016.
| | |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) |
Estimated Future Payouts Under Equity Incentive Plan Awards(3) |
All Other Stock Awards: Number of Shares of Stock(4) or |
Grant Date Fair Value of Stock and Option |
||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||
Name |
Grant Date |
Threshold ($) |
Target ($) |
Maximum ($)0 |
Threshold (#) |
Target (#) |
Maximum (#) |
Units (#) |
Awards(8) ($) |
|||||||||||||||||||||||||||||||||
Thomas C. Gentile, III, | | | N/A | | | | 364,631 | | | 1,458,525 | | | 2,917,049 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
President & CEO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||
| | 5/8/16 | | | | | | | | | | | | | | | | | | | | | | | | 65,332 | (5) | | | 3,000,045 | | | ||||||||||
Larry A. Lawson, | | | N/A | | | | 477,884 | | | 1,911,538 | | | 3,823,076 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
Former President & | | | 2/9/16 | | | | | | | | | | | | | | 7,843 | | | 31,370 | | | 62,740 | | | | | | | | 1,704,018 | | | |||||||||
CEO(1) | | | 2/9/16 | | | | | | | | | | | | | | | | | | | | | | | | 117,855 | | | | 5,111,961 | | | |||||||||
Sanjay Kapoor, | | | N/A | | | | 156,472 | | | 625,888 | | | 1,251,776 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
EVP & | | | 2/9/16 | | | | | | | | | | | | | | 1,519 | | | 6,076 | | | 12,152 | | | | | | | | 330,048 | | | |||||||||
CFO | | | 2/9/16 | | | | | | | | | | | | | | | | | | | | | | | | 22,825 | | | | 990,034 | | | |||||||||
| | 5/4/16 | | | | | | | | | | | | | | | | | | | | | | | | 28,275 | (6) | | | 1,376,568 | | | ||||||||||
Samantha Marnick, | | | N/A | | | | 115,553 | | | 462,213 | | | 924,426 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
EVP and Chief | | | 2/9/16 | | | | | | | | | | | | | | 792 | | | 3,167 | | | 6,334 | | | | | | | | 172,031 | | | |||||||||
Administration | | | 2/9/16 | | | | | | | | | | | | | | | | | | | | | | | | 11,897 | | | | 516,032 | | | |||||||||
Officer | | | 5/4/16 | | | | | | | | | | | | | | | | | | | | | | | | 14,738 | (7) | | | 717,520 | | | |||||||||
Duane F. Hawkins, | | | N/A | | | | 124,522 | | | 498,087 | | | 996,175 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
SVP and General | | | 2/9/16 | | | | | | | | | | | | | | 1,151 | | | 4,603 | | | 9,206 | | | | | | | | 250,035 | | | |||||||||
Manager, Boeing & | | | 2/9/16 | | | | | | | | | | | | | | | | | | | | | | | | 17,292 | | | | 750,041 | | | |||||||||
Defense Programs | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Michelle J. Lohmeier, | | | N/A | | | | 118,152 | | | 472,609 | | | 945,219 | | | | | | | | | | | | | | | | | | N/A | | | |||||||||
SVP and General Manager, | | | 2/9/16 | | | | | | | | | | | | | | 929 | | | 3,717 | | | 7,434 | | | | | | | | 201,907 | | | |||||||||
Airbus Programs | | | 2/9/16 | | | | | | | | | | | | | | | | | | | | | | | | 13,963 | | | | 605,645 | | | |||||||||
| | | | | | | | | | | | | | | | | | | |
(1) |
|
In addition to the grant date fair value of new stock awards issued to Mr. Lawson under the OIP in 2016, pursuant to the terms of Mr. Lawson's Retirement and Consulting Agreement, subject to, among other things, compliance with a covenant not to compete, Mr. Lawson will be entitled to continued vesting of the Existing Awards (as defined in note (17) to the Summary Compensation Table), which would have otherwise been forfeited upon his retirement, as described further in note (17) to the Summary Compensation Table. The aggregate fair value of the Existing Awards, in each case as of June 7, 2016, the date of Mr. Lawson's Retirement and Consulting Agreement, equals $18,467,109, comprised of (i) $3,037,275 for 64,010 shares of restricted stock originally granted as a time-based award under the LTIP in 2013, (ii) $1,633,229 for 34,420 shares of restricted stock originally granted as a time-based LTI award in 2014 under the OIP, (iii) $2,330,955 for 25,353 shares of restricted stock originally granted as a performance-based LTI award in 2014 under the OIP, (iv) $2,977,298 for 62,746 shares of restricted stock originally granted as a time-based LTI award in 2015 under the OIP, (v) $1,528,401 for 23,744 shares of restricted stock originally granted as a performance-based LTI award in 2015 under the OIP, (vi) $5,592,220 for 117,855 shares of restricted stock originally granted as a time-based LTI award in 2016 under the OIP and (vii) $1,367,732 for 31,370 shares of restricted stock originally granted as a performance-based LTI award in 2016 under the OIP. |
(2) | | 2016 STI cash awards, paid in February 2017, were granted and earned in 2016. The actual cash awards for the NEOs for 2016 are reported in the "Non-Equity Incentive Plan Compensation" column of the "Summary Compensation Table." The threshold, target and maximum figures were calculated on a weighted average basis, giving effect to any changes made to the applicable NEO's base salary or STI target during 2016. |
(3) | | Range represents the number of performance-based LTI awards of restricted stock that will vest at the end of the three-year performance period based on the ranking of the Company's TSR relative to the TSR of a group of the Company's peers. With respect to unvested performance-based restricted stock grants awarded prior to 2017, dividends accumulate on the actual number of shares (if any) that are earned in connection with such awards, as determined at the end of the relevant performance period. |
(4) | | Except with respect to the LTI awards to Messrs. Gentile and Kapoor and Ms. Marnick described in notes (4)-(6) below, represents time-based LTI awards of restricted stock that vest annually at a rate of 33% beginning February 9, 2017 if such NEO remains employed by the Company or any of its subsidiaries on each annual vesting date. Dividends accumulate on unvested time-based LTI restricted stock awards, but are paid out only if and when the awards vest. |
(5) | | 2016 time-based LTI award of restricted stock vests annually at a rate of 50% beginning on April 1, 2017, if Mr. Gentile remains employed by the Company or any of its subsidiaries on each annual vesting date. |
(6) | | 2016 special one-time LTI award of restricted stock vests annually at a rate of 50% beginning on June 4, 2017, if the Board makes a determination prior to each annual vesting date that Mr. Kapoor has achieved satisfactory performance. |
(7) | | 2016 special one-time LTI award of restricted stock vests annually at a rate of 50% beginning on June 4, 2017, if the Board makes a determination prior to each annual vesting date that Ms. Marnick has achieved satisfactory performance. |
(8) | | Represents the grant date fair value of each equity award computed in accordance with FASB's authoritative guidance on stock-based compensation accounting and includes amounts from awards granted in 2016. Additional information concerning the Company's accounting for stock awards may be found in Note 15 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for 2016. |
46 2017 Proxy Statement
EXECUTIVE COMPENSATION
Outstanding Equity Awards at End of Fiscal Year 2016
The following table presents information concerning the number and value of unvested restricted stock grants to the NEOs under its LTIP and OIP outstanding as of December 31, 2016. The Company has not granted any options or option-like awards.
| Stock Awards | ||||||||||||||||||||
| | | | | | | | | | ||||||||||||
Name |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested(7) ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(8) (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7) ($) |
|||||||||||||||||
Thomas C. Gentile, III, | | | 65,332 | (1) | | | 3,812,122 | | | | | | | | | | | ||||
President & CEO | | | | | | | | | | | | | | ||||||||
Larry A. Lawson, | | | 279,032 | (2) | | | 16,281,517 | | | | 20,117 | (9) | | | 1,173,827 | | | ||||
Former President & CEO | | | | | | | | | | | | | | ||||||||
Sanjay Kapoor, | | | 50,778 | (3) | | | 2,962,896 | | | | 32,346 | (10) | | | 1,887,389 | | | ||||
EVP & CFO | | | | | | | | | | | | | | ||||||||
Samantha Marnick, | | | 38,125 | (4) | | | 2,224,594 | | | | 16,893 | (11) | | | 985,707 | | | ||||
EVP and Chief Administration Officer | | | | | | | | | | | | | | ||||||||
Duane F. Hawkins, | | | 33,468 | (5) | | | 1,952,858 | | | | 2,428 | (12) | | | 141,674 | | | ||||
SVP and General Manager, Boeing & Defense Programs | | | | | | | | | | | | | | ||||||||
Michelle J. Lohmeier | | | 27,741 | (6) | | | 1,618,687 | | | | 929 | (13) | | | 54,207 | | | ||||
SVP and General Manager, Airbus programs | | | | | | | | | | | | | | ||||||||
| | | | | | | | | |
(1) | | Represents restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning on April 1, 2017, if Mr. Gentile continues to be employed by the Company or any of its subsidiaries on each such vesting date. |
(2) | | Represents (a) 64,010 restricted Class A shares granted under the LTIP that will vest on May 8, 2017, (b) 34,420 restricted Class A shares granted under the OIP that will vest on May 8, 2017, (c) 62,747 restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning February 7, 2017, and (d) 117,855 restricted Class A shares granted under the OIP that will vest annually at a rate of 33% beginning February 9, 2017, in each case, if Mr. Lawson provides transition and consulting services to Spirit pursuant to, and otherwise complies with certain specified obligations, including a covenant not to compete, under, that certain Retirement and Consulting Agreement and General Release, dated June 7, 2016, among Mr. Lawson, the Company and Spirit. |
(3) | | Represents (a) 8,464 restricted Class A shares granted under the LTIP that will vest on September 23, 2017, (b) 7,912 restricted Class A shares granted under the OIP that will vest on May 8, 2017, (c) 11,577 restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning February 7, 2017 and (d) 22,825 restricted Class A shares granted under the OIP that will vest annually at a rate of 33% beginning February 9, 2017, in each case if Mr. Kapoor continues to be employed by the Company or any of its subsidiaries on each such vesting date. |
(4) | | Represents (a) 15,842 restricted Class A shares granted under the LTIP that will vest on May 7, 2017, (b) 4,239 restricted Class A shares granted under the OIP that will vest on May 8, 2017, (c) 6,147 restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning February 7, 2017 and (d) 11,897 restricted Class A shares granted under the OIP that will vest annually at a rate of 33% beginning February 9, 2017, in each case if Ms. Marnick continues to be employed by the Company or any of its subsidiaries on each such vesting date. |
(5) | | Represents (a) 6,105 restricted Class A shares granted under the LTIP that will vest on May 7, 2017, (b) 3,616 restricted Class A shares granted under the OIP that will vest on May 8, 2017, (c) 6,455 restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning on February 7, 2017, and (d) 17,292 restricted Class A shares granted under the OIP that will vest annually at a rate of 33% beginning on February 9, 2017, in each case if Mr. Hawkins continues to be employed by the Company or any of its subsidiaries on each such vesting date. |
(6) | | Represents (a) 13,778 restricted Class A shares granted under the OIP that will vest annually at a rate of 50% beginning on February 7, 2017 and (b) 13,963 restricted Class A shares granted under the OIP that will vest annually at a rate of 33% beginning on February 9, 2017, in each case if Ms. Lohmeier continues to be employed by the Company or any of its subsidiaries on each such vesting date. |
(7) | | Market value calculated by multiplying the number of shares by $58.35, the closing price per share of the Company's Class A Common stock on the last trading day of its fiscal year 2016. |
(8) | | Represents (a) performance-based LTI awards granted in 2016 with a performance tracking period running from January 1, 2016, to December 31, 2018, (b) performance-based LTI awards granted in 2015 with a performance tracking period running from January 1, 2015, to December 31, 2017, and (c) performance-based LTI awards granted in 2014 with a performance tracking period running from May 1, 2014, to April 30, 2017. Performance-based LTI awards are earned and paid out in shares of Class A common stock at the end of the three-year tracking period based upon the ranking of the Company's TSR relative to the TSR of a group of the Company's peers over such period. The number of shares of stock shown is based upon the achievement of a threshold performance goal. In addition, the totals for Mr. Kapoor and Ms. Marnick include a special one-time award of restricted stock granted by the Board in 2016 that will vest annually at a rate of 50% beginning on June 4, 2017, if the Board makes a determination prior to each vesting date that, as applicable, Mr. Kapoor or Ms. Marnick has achieved satisfactory performance. |
2017 Proxy Statement 47
EXECUTIVE COMPENSATION
(9) | | Represents the following performance-based LTI awards: (a) 6,338 shares of restricted stock granted in 2014, (b) 5,936 shares of restricted stock granted in 2015 and (c) 7,843 shares of restricted stock granted in 2016. |
(10) | | Includes the following performance-based LTI awards: (a) 1,457 shares of restricted stock granted in 2014, (b) 1,095 shares of restricted stock granted in 2015 and (c) 1,519 shares of restricted stock granted in 2016. Also includes a special one-time award of 28,275 shares of restricted stock granted by the Board in 2016 that will vest annually at a rate of 50% beginning on June 4, 2017, if the Board determines prior to each vesting date that Mr. Kapoor has achieved satisfactory performance. |
(11) | | Includes the following performance-based LTI awards: (a) 781 shares of restricted stock granted in 2014, (b) 582 shares of restricted stock granted in 2015 and (c) 792 shares of restricted stock granted in 2016. Also includes a special one-time award of 14,738 shares of restricted stock granted by the Board in 2016 that will vest annually at a rate of 50% beginning on June 4, 2017, if the Board determines prior to each vesting date that Ms. Marnick has achieved satisfactory performance. |
(12) | | Represents the following performance-based LTI awards: (a) 666 shares of restricted stock granted in 2014, (b) 611 shares of restricted stock granted in 2015, and (c) 1,151 shares of restricted stock granted in 2016. |
(13) | | Represents a performance-based LTI award of 929 shares of restricted stock granted in 2016. |
48 2017 Proxy Statement
EXECUTIVE COMPENSATION
Option Exercises and Stock Vested for Fiscal Year 2016
The following table presents information concerning the vesting of restricted stock for the NEOs during the fiscal year ended December 31, 2016. The Company has not granted any options or option-like awards.
| Stock Awards | ||||||||||
| | | | | | ||||||
Name |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting(6) ($) |
|||||||||
Thomas C. Gentile, III, President & CEO | | | | | | | | | | ||
Larry A. Lawson, Former President & CEO | | | 225,812 | (1) | | | 10,330,932 | | | ||
Sanjay Kapoor, EVP & CFO | | | 33,451 | (2) | | | 1,488,305 | | | ||
Samantha Marnick, EVP and Chief Administration Officer | | | 28,008 | (3) | | | 1,286,499 | | | ||
Duane F. Hawkins, SVP and General Manager, Boeing & Defense Programs | | | 12,949 | (4) | | | 590,565 | | | ||
Michelle J. Lohmeier, SVP and General Manager, Airbus Programs | | | 6,890 | (5) | | | 302,127 | | | ||
| | | | | |
(1) | | Represents 160,024 Class A shares of restricted Common stock awarded by the Company under the LTIP and 65,788 Class A shares of restricted Common stock awarded by the Company under the OIP. |
(2) | | Represents 19,751 Class A shares of restricted Common stock awarded by the Company under the LTIP and 13,700 Class A shares of restricted Common stock awarded by the Company under the OIP. |
(3) | | Represents 20,696 Class A shares of restricted Common stock awarded by the Company under the LTIP and 7,312 Class A shares of restricted Common stock awarded by the Company under the OIP. |
(4) | | Represents 6,105 Class A shares of restricted Common stock awarded by the Company under the LTIP and 6,844 Class A shares of restricted Common stock awarded by the Company under the OIP. |
(5) | | Represents Class A shares of restricted Common stock awarded by the Company under the OIP. |
(6) | | Class A shares of restricted stock granted as one-time awards under the LTIP to Mr. Lawson vested on April 6, 2016, at $45.92, the closing price of the Company's Class A Common stock on the vesting date. Class A shares of restricted stock granted as one-time awards under the LTIP to Mr. Kapoor vested on September 23, 2016, at $44.00, the closing price of the Company's Class A Common stock on the vesting date. Other Class A shares of restricted Common stock awarded by the Company under the LTIP vested on May 7, 2016, and May 8, 2016, and other Class A shares of restricted Common stock awarded by the Company under the OIP vested on May 8, 2016, and February 7, 2016. The closing price of the Company's Class A Common stock on May 9, 2016, the first market trading day after the May 7, 2016, and May 8, 2016, vesting dates, which fell on a Saturday and Sunday respectively, was $46.19. The closing price of the Company's Class A Common stock on February 8, 2016, the first market trading day after the February 7, 2016, vesting date, which fell on a Sunday, was $43.85. |
Nonqualified Deferred Compensation
The following table presents information concerning each of the Company's defined contribution or other plans that provides for the deferral of compensation of the NEOs on a basis that is not tax qualified.
Name |
Executive Contributions in Last FY ($) |
Registrant Contributions in Last FY ($)(1) |
Aggregate Earnings in Last FY ($) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last FYE ($) |
|||||||||||||||||||||
Thomas C. Gentile, III, President & CEO | | | | | | | | | | | | | | | | | | | | | | |||||
Larry A. Lawson, Former President & CEO | | | 0 | | | | 3,000,000 | | | | 195,924 | | | | 0 | | | | 8,171,499 | (2) | | |||||
Sanjay Kapoor, EVP & CFO | | | | | | | | | | | | | | | | | | | | | | |||||
Samantha Marnick, EVP and Chief Administration Officer | | | 0 | | | | 100,000 | | | | 1,921 | | | | 0 | | | | 101,921 | | | |||||
Duane F. Hawkins, SVP and General Manager, Boeing & Defense | | | | | | | | | | | | | | | | | | | | | | |||||
Programs | | | | | | | | | | | | | | | | | ||||||||||
Michelle J. Lohmeier, SVP and General Manager, Airbus | | | 0 | | | | 47,390 | | | | 781 | | | | 0 | | | | 73,445 | (3) | | |||||
Programs | | | | | | | | | | | | | | | | | ||||||||||
| | | | | | | | | | | |
(1) | | Contributions to the DCP labeled as "Registrant Contributions" are included as part of "All Other Compensation" in the "Summary Compensation Table. |
(2) | | $2,000,000 of Mr. Lawson's aggregate balance at the 2016 fiscal year end had been reported as compensation to Mr. Lawson in the "Summary Compensation Table" of the Company's prior years' proxy statements. |
(3) | | $25,274 of Ms. Lohmeier's aggregate balance at the 2016 fiscal year end had been reported as compensation to Ms. Lohmeier in the "Summary Compensation Table" of the Company's proxy statement filed for the 2015 fiscal year. |
The Company sponsors the Spirit AeroSystems Holdings Deferred Compensation Plan ("DCP"). This nonqualified plan allows eligible Spirit employees to defer receipt of a portion of their base salary or short-term incentive compensation. In addition, the DCP allows for discretionary contributions by the Company into a separate account in the DCP. Deferred
2017 Proxy Statement 49
EXECUTIVE COMPENSATION
amounts and amounts which the Company contributes to its employees' accounts in the DCP are credited with a rate of return equal to 120% of the applicable federal long-term rate for October of the prior fiscal year. For 2016, the interest crediting rate was 3.09%. Accumulated amounts are payable to the participant in either a lump sum or installments upon separation from employment with Spirit, or at the end of the deferral period selected by the participant upon enrollment in the DCP.
There were no "above-market" earnings (defined by SEC rule as that portion of interest that exceeds 120% of the applicable federal long-term rate) under the DCP during fiscal year 2016, as the Company used 120% of the applicable federal long-term rate to determine the amounts to be contributed.
Potential Payments Upon Termination or Change-in-Control
Termination of Employment
Spirit maintains employment agreements with certain NEOs, pursuant to which certain payments may be made, or benefits provided, in the event the executive's employment is terminated. Mr. Lawson entered into a retirement and consulting agreement in connection with his retirement from his positions as the Company's and Spirit's President and Chief Executive Officer, effective July 31, 2016 (as described in more detail below under "Retirement and Consulting Agreement"). In addition, upon termination of employment, amounts may become payable to the NEOs pursuant to the DCP and the STI Program under the OIP.
Employment Agreements
Employment agreements entered into by Spirit with Messrs. Gentile and Kapoor and Ms. Lohmeier provide for varying types and amounts of payments and additional benefits upon termination of employment, depending on the circumstances of the termination.
50 2017 Proxy Statement
EXECUTIVE COMPENSATION
Mr. Gentile as a signing bonus under his employment agreement will be immediately fully vested upon such termination.
In the event Mr. Kapoor's employment terminates due to involuntary termination by Spirit without cause or termination by Mr. Kapoor for good reason, he will be entitled to termination benefits, pursuant to which Spirit will (1) continue to pay Mr. Kapoor an amount equal to his base salary in effect immediately before termination of his employment for a period of 12 months, (2) pay the costs of COBRA medical and dental benefits coverage after termination for a period of 12 months, (3) cause any unvested STIP shares held by Mr. Kapoor to become immediately vested and (4) pay any unpaid portion of Mr. Kapoor's cash sign-on bonuses awarded pursuant to his employment agreement. Also in the event of such a termination, any of the signing bonus shares that were awarded to Mr. Kapoor under the LTIP or OIP pursuant to his employment agreement that are not fully vested at the time of such termination will automatically vest in full at such time.
In the event Ms. Lohmeier's employment terminates due to involuntary termination by Spirit without cause or termination by Ms. Lohmeier for good reason, she will be entitled to termination benefits, pursuant to which Spirit will (1) continue to pay Ms. Lohmeier an amount equal to her base salary in effect immediately before termination of her employment for a period of 12 months, and (2) pay the costs of COBRA medical and dental benefits coverage after termination for a period of six months.
Generally, any termination of the employment agreements with Messrs. Gentile and Kapoor and Ms. Lohmeier by Spirit other than for cause, death or disability constitutes a termination without cause. Termination of Mr. Kapoor due to expiration of his employment period without renewal also constitutes a termination without cause, and termination of Ms. Lohmeier due to expiration of her initial two-year employment term without renewal also constitutes a termination without cause.
Under Messrs. Gentile's and Kapoor's and Ms. Lohmeier's employment agreements, termination by the executive for "good reason" is defined to mean voluntary termination of employment by the executive within 90 days after the following conditions (provided that notice is given to Spirit and the conditions remain uncured after a specified amount of time thereafter): (1) after one year but within three years after commencement of employment with respect to Mr. Gentile or within two years after commencement of employment with respect to Ms. Lohmeier, the executive is assigned to a position that is a "diminished position;" or (2) solely with respect to Mr. Kapoor and Ms. Lohmeier, upon a change-in-control of Spirit or within twelve months thereafter, the executive is not offered continued employment with Spirit or a successor in a position other than a "diminished position." A position is defined to be a "diminished position" if it reflects: (1) a material diminution in base compensation; (2) a material diminution in authority, duties or responsibilities; (3) a change in reporting requirements; (4) relocation of the executive's principal office to a location greater than 50 miles from Wichita, Kansas; or (5) any action or inaction with respect to the terms and conditions of the applicable NEO's employment that constitutes a material breach by Spirit of the employment agreement.
The continued receipt of payments and benefits by Mr. Gentile, Mr. Kapoor or Ms. Lohmeier upon termination of his or her employment due to involuntary termination without cause is conditioned upon the execution of a release of claims against the Company and satisfaction, for a period of the longer of 12 months after termination of employment or the period in which Spirit is continuing to pay such executive his or her base salary, of a covenant not to compete and a covenant not to solicit customers or employees of Spirit.
Spirit's employment agreements with Ms. Marnick and Mr. Hawkins provide for certain benefits upon termination of such executives' employment by Spirit without cause within two years after the effective date of their respective agreements, which has since passed for these executives. Accordingly, upon termination of their employment, salary and benefits continue only through the date of termination, except as provided under the DCP and/or STI Program, as described below.
2017 Proxy Statement 51
EXECUTIVE COMPENSATION
Deferred Compensation Plan
Pursuant to the DCP, the NEOs participating in the DCP are entitled to receive payment of amounts credited to their deferred compensation accounts under the DCP upon a separation from service with Spirit and its affiliates. Amounts are payable in a lump sum or in up to 15 annual installment payments, as elected by each participant (subject to the terms and conditions set forth in the DCP).
Payment to a participant of any employer matching or discretionary contributions made under the DCP is subject to satisfaction by the participant of noncompetition and nonsolicitation requirements during the term of the participant's employment and for so long as the participant receives payments under the DCP and confidentiality requirements. In addition, the participant must not have been terminated for cause.
For purposes of the DCP, a termination for cause means a separation from service involving (1) gross negligence or willful misconduct in the exercise of the executive's responsibilities; (2) breach of fiduciary duty with respect to Spirit; (3) material breach of any provision of an employment contract; (4) the commission of a felony crime or crime involving moral turpitude; (5) theft, fraud, misappropriation or embezzlement (or suspicion of the same); (6) willful violation of any federal, state or local law (except traffic violations and other similar matters not involving moral turpitude); or (7) refusal to obey any resolution or direction of the executive's supervisor or the Board. The Compensation Committee determines, in its sole discretion, whether an executive has incurred a separation from service that is a termination for cause under the DCP.
Short-Term Incentive Program
Under the STI Program, in the event of a "Qualifying Retirement" by a STI Program participant, (1) if such Qualifying Retirement occurs 90 days or more after the beginning of the relevant plan year, the participant will be entitled to receive a prorated STI award (based on the portion of such year that has elapsed prior to such participant's Qualifying Retirement), paid in cash, based on the full-year STI award performance metrics actually achieved for such year and (2) any outstanding STI awards previously granted to such participant in the form of unvested shares will vest immediately. A "Qualifying Retirement" is defined, for purposes of the STI Program, as a voluntary termination of employment on or after attaining the age of 55 with at least 10 years of service with the Company and its affiliates or the age of 60 with at least five years of such service.
Summary Tables and Information
The following summarizes the amounts potentially payable upon termination of employment for Messrs. Gentile and Kapoor and Ms. Lohmeier, assuming termination occurred on December 31, 2016. For purposes of presenting amounts payable over a period of time (e.g., salary continuation), the amounts are shown as a single total but not as a present value (i.e., the single sum does not reflect any discount). Ms. Marnick and Mr. Hawkins would not be entitled to any payments upon termination other than salary and benefits through the date of termination.
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|
Voluntary Termination ($) |
Termination for Cause ($) |
Involuntary Termination Without Cause ($) |
Termination by Executive for Good Reason ($) |
Termination Due to Death or Disability ($) |
||||||||||||||||||||
Salary Continuation |
| | | | | | | | | | 1,100,000 | (1) | | | 1,100,000 | (1) | | | | | | |||||
Medical/Dental Insurance |
| | | | | | | | | | 17,736 | (2) | | | 17,736 | (2) | | | | | | |||||
| | | | | | | | | | | |
(1) | | Annual base salary of $1,100,000 for 12 months. |
(2) | | Average monthly Company contribution toward medical and dental coverage ($1,387 medical and $91 dental) for 12 months. |
52 2017 Proxy Statement
EXECUTIVE COMPENSATION