UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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  ACTUANT CORPORATION
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ACTUANT CORPORATION
N86W12500 Westbrook Crossing
Menomonee Falls, Wisconsin 53051
(262) 293-1500
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 
To the Shareholders of ACTUANT CORPORATION:
 
Notice is hereby given that the Annual Meeting of Shareholders of Actuant Corporation, a Wisconsin corporation, which has adopted the business name “Enerpac Tool Group,” (“Enerpac Tool Group” or the “Company”) will be held on January 28, 2020 at 8:00 a.m. Central Time at The Westin O’Hare, 6100 N. River Road, Rosemont, Illinois, for the following purposes (all as set forth in the accompanying Proxy Statement):

1.
To elect eight directors from the nominees described in the accompanying proxy statement;
2.
To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent auditor for the fiscal year ending August 31, 2020;
3.
To hold an advisory (non-binding) vote to approve the compensation of our named executive officers;
4.
To approve an amendment to the Company’s Restated Articles of Incorporation, as amended, to change the Company’s name to “Enerpac Tool Group Corp.” (the “Name Change Proposal”); and
5.
To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
 
The Board of Directors recommends a vote FOR the election as director of each of the nominees described in the accompanying proxy statement and FOR Proposals 2, 3 and 4. The Board of Directors or proxy holders will use their discretion on other matters that may arise at the 2020 Annual Meeting.
The Board of Directors has fixed the close of business on November 22, 2019 as the record date for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting or any adjournment thereof.
Whether or not you expect to attend the Annual Meeting, please mark, sign, date and return the enclosed proxy promptly in the accompanying envelope, which requires no postage if mailed in the United States, or vote via the internet or phone (instructions on page 2). It is important that your shares be represented at the Annual Meeting, whether your holdings are large or small. If for any reason you should desire to revoke your proxy, you may do so at any time before it is voted.
 
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on January 28, 2020. The proxy statement is available on the Company’s website at www.enerpactoolgroup.com. You may obtain directions to the Annual Meeting by written or telephonic request directed to our Executive Vice President, General Counsel and Secretary, Enerpac Tool Group, N86W12500 Westbrook Crossing, Menomonee Falls, Wisconsin 53051 or by telephone at (262) 293-1500.

 
By Order of the Board of Directors,
 
E. JAMES FERLAND
Chair of the Board
 
Menomonee Falls, Wisconsin
December 13, 2019




TABLE OF CONTENTS
 
Page
General Information
The Proposals
 
Proposal 1: Election of Directors
Proposal 2: Ratification of Selection of Independent Auditors
Proposal 3: Advisory Vote to Approve Compensation of Our Named Executive Officers
Proposal 4: Approval of the Name Change Proposal
Certain Beneficial Owners
Corporate Governance Matters
 
Corporate Governance Guidelines
Board Committees, Charters, Functions and Meetings
Leadership Structure
11
Executive Sessions of Non-Management Directors
11
Independence of Directors; Financial Expertise of Audit Committee
Board Role in Risk Oversight
Compensation Risk Assessment
Use of Compensation Consultants and Other Advisors
Codes of Conduct and Ethics
Information Available Upon Request
Director Selection Procedures
Director Resignation Policy
Communications with Directors
Certain Relationships and Related Person Transactions
Compensation Committee Interlocks and Insider Participation
Report of the Audit Committee
Executive Compensation
 
Compensation Discussion and Analysis
Executive Summary
Compensation and Link to Performance
Shareholder Input on Executive Compensation Program
Oversight of the Executive Compensation Program
Assessing Competitive Compensation Practices
18
Target Level Compensation Determination
Components of Executive Compensation
Stock Ownership Requirements
23
Anti-Hedging Policy
Compensation Clawback Policy
Conclusion
Compensation Committee Report
Summary Compensation Table
Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
Equity Awards Exercised and Vested in Fiscal 2019
Employee Deferred Compensation
Equity Compensation Plan Information
Senior Officer Severance Plan and Retention Agreement
Change in Control Payments
CEO Pay Ratio
Non-Employee Director Compensation
Other Information




ACTUANT CORPORATION
N86W12500 Westbrook Crossing
Menomonee Falls, Wisconsin 53051
(262) 293-1500
 
PROXY STATEMENT
  
 
This Proxy Statement and accompanying proxy are being first mailed to
shareholders on or about December 13, 2019.

General Information
This Proxy Statement and accompanying proxy are furnished to the shareholders of Actuant Corporation (the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company for use at the Annual Meeting of Shareholders on January 28, 2020 (the “Meeting”), and at any adjournment thereof. Accompanying this Proxy Statement is a Notice of Annual Meeting of Shareholders and a form of proxy for such Meeting. The Company’s Annual Report on Form 10-K for the year ended August 31, 2019, which constitutes the 2019 Annual Report to Shareholders and accompanies this Proxy Statement, contains financial statements and certain other information concerning the Company.
Location and Date of Annual Meeting
The annual meeting will be held on January 28, 2020 at 8:00 a.m. Central Time at The Westin O’Hare, 6100 N. River Road, Rosemont, Illinois.
Record Date
The record date for shareholders entitled to notice of and to vote at the Meeting is the close of business on November 22, 2019 (the “Record Date”). As of the Record Date, 59,953,042 shares of Class A common stock were outstanding. Each share of Class A common stock outstanding on the Record Date is entitled to one vote on all matters submitted at the Meeting. No other class of capital stock was outstanding on the Record Date.
Quorum
A majority of the votes entitled to be cast, represented in person or by proxy, will constitute a quorum for action at the Meeting. Abstentions will be counted as shares present for purposes of determining the presence or absence of a quorum. Proxies submitted by banks, brokers or other holders of record holding shares for you as a beneficial owner that do not indicate a vote for some or all of the proposals because that holder does not have voting authority and has not received voting instructions from you (so-called “broker non-votes”) are also considered to be shares present for purposes of determining whether a quorum exists.
If you hold your shares in an account maintained by a bank, broker or other holder of record (referred to as holding shares in “street name”), these holders are permitted under the rules of the New York Stock Exchange to vote your shares on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditor and on the Name Change Proposal, even if they do not receive voting instructions from you, but are not permitted under the rules of the New York Stock Exchange to vote on Proposals 1 and 3 unless you timely provide them with your voting instructions. It is important, therefore, if you hold your shares through an account maintained by a bank, broker or other holder of record that you timely provide your instructions to them so that your vote with respect to these matters may be cast.
The voting requirements and the procedures described in this section and below are based upon provisions of the Wisconsin Business Corporation Law, the Company’s Restated Articles of Incorporation, as amended, and its bylaws, the rules of the New York Stock Exchange and any other requirements applicable to the matters to be voted upon.
Required Vote
Directors are elected by a plurality of the votes cast by the holders of shares entitled to vote in the election at a meeting at which a quorum is present (Proposal 1). A “plurality” means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be elected at the meeting. Shares for which authority is withheld to vote for director nominees and broker non-votes have no effect on the election of directors except to the extent the failure to vote for a director nominee results in another nominee receiving a larger number of votes.
In order to approve the ratification of PricewaterhouseCoopers LLP as our independent auditor for the fiscal year ending August 31, 2020 (Proposal 2), the votes cast FOR must exceed the votes cast AGAINST the proposal. Abstentions will have no effect on this proposal. As noted above, banks, brokers or other entities holding your shares in “street name” are permitted to vote on this proposal even if you do not provide any voting instructions.

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In order to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement (Proposal 3), the votes cast FOR must exceed the votes cast AGAINST the proposal. Abstentions and broker non-votes will not count in determining the outcome of the vote on this proposal.
Under our Restated Articles of Incorporation, as amended, the affirmative vote of two-thirds of the shares of Class A common stock outstanding on the Record Date is required to approve the Name Change Proposal (Proposal 4). Accordingly, abstentions and shares not voted on the Name Change Proposal will have the effect of a vote AGAINST the Name Change Proposal. As noted above, banks, brokers or other entities holding your shares in “street name” are permitted to vote on the Name Change Proposal, even if you do not provide any voting instructions.
Any other business that may properly come before the Meeting, or any adjournment of the Meeting, will be approved if more votes are cast FOR the proposal than are cast AGAINST the proposal. Accordingly, broker non-votes, if any, and abstentions will not be counted in determining the outcome of the votes on any such proposal. We are not aware of any other business to be addressed at the Meeting; however, other business may be addressed if it properly comes before the Meeting.
Cost of Soliciting Proxies
The cost of soliciting proxies, including the expense of forwarding to beneficial owners of stock held in the name of another, will be borne by the Company. In addition, officers and employees of the Company may solicit the return of proxies from certain shareholders by telephone or meeting. Such officers and employees will receive no compensation in addition to their regular compensation for such solicitation. EQ Proxy is assisting us in the solicitation of proxies and provides us with advice and support related to solicitation. We do not expect the total costs to us for EQ Proxy's services to exceed $7,000.
Shares held for the accounts of participants in the Company’s 401(k) Plan (the “401(k) Plan”) will be voted in accordance with the instructions of the participants or otherwise in accordance with the terms of such plan. Shares held for the accounts of the participants in the Company’s Deferred Compensation Plan (the “Employee Deferred Compensation Plan”) will be voted by the rabbi trust associated with the Employee Deferred Compensation Plan, as directed by the Company.
Voting Procedures
Via the Internet. If you hold your shares directly—that is, not in an account maintained by a bank, broker or other entity—you can vote their shares via the internet, as instructed on the proxy card. The internet procedures are designed to authenticate a shareholder’s identity to allow shareholders to vote their shares and confirm that their votes have been properly recorded. Internet voting for shareholders of record is available 24 hours a day and will close at 11:59 p.m. (CST) on January 27, 2020. The accompanying Notice instructs you how to access and review all important information in the Proxy Statement and Annual Report. You will then be directed to select a link where you will be able to vote on the proposals presented. If you hold your shares in “street name” through an account with a bank, broker or other entity, your ability to provide voting instructions via the Internet depends on the voting process of the bank, broker or other entity through which you hold the shares. Please follow their directions carefully.
By Telephone. Shareholders who hold their shares directly may vote via telephone using the toll-free number listed on the proxy card. Voting via the telephone will close at 11:59 p.m. (CST) on January 27, 2020. If you hold your shares in “street name” through an account with a bank, broker or other entity, your ability to provide voting instructions by telephone depends on the voting process of the bank, broker or other entity through which you hold the shares. Please follow their directions carefully.
By Mail. Shareholders who receive a paper proxy card may elect to vote by mail and should complete, sign and date their proxy card and mail it in the postage paid envelope provided. Proxy cards submitted by mail must be received by the time of the Meeting in order for your shares to be voted. If you hold your shares in “street name” through an account with a bank, broker or other entity, your ability to provide voting instructions by mail depends on the voting process of the bank, broker or other entity through which you hold the shares. Please follow their directions carefully.
At the Meeting. Shares held directly in your name as the shareholder of record may be voted by you in person at the Meeting. Shares held beneficially in “street name” through an account with a bank, broker or other entity may be voted by you in person at the Meeting only if you obtain a legal proxy from the bank, broker or other entity that holds your shares giving you the right to vote the shares and bring such proxy to the Meeting.
Revocation of Proxies
A proxy may be revoked, prior to its exercise, by executing and delivering a later dated proxy, by delivering written notice of the revocation of the proxy to the Corporate Secretary prior to the Meeting or by attending and voting at the Meeting. Attendance at the Meeting, in and of itself, will not constitute a revocation of a proxy.
Unless previously revoked, the shares represented by all properly executed proxies received in time for the Meeting will be voted in accordance with the shareholder’s directions. If no directions are specified on a duly submitted proxy, the shares will be voted, in accordance with the recommendations of the Board of Directors, FOR the election of the directors nominated by the Board of Directors, FOR the ratification of PriceWaterhouseCoopers LLP as the Company’s independent auditor, FOR the approval, on a non-binding basis, of the compensation of our named executive officers, FOR approval of the Name Change Proposal and in accordance with the discretion of the persons appointed as proxies on any other matters properly brought before the Meeting.

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PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members. Current director Holly A. Van Deursen, who has served as a director since 2008, will be retiring from the Board of Directors at the Meeting, at which time the size of the Board of Directors will be reduced from nine to eight. Directors are elected annually for one-year terms. Accordingly, at the Meeting, eight directors will be elected to serve until the next annual meeting of shareholders and until their successors shall be elected and qualified. The Board of Directors has nominated the eight individuals listed below for election as directors at the Meeting, each of whom is presently serving as a director of the Company. It is the intention of the persons named in the accompanying form of proxy to vote such proxy for the election of the persons named below, unless otherwise instructed by a shareholder in a completed proxy that is timely submitted. In the event any of the nominees should become unable to serve as a director, an eventuality which management has no reason to believe will occur, proxies may be voted for another nominee.
Directors standing for re-election
 
Age
 
Director Since
Alfredo Altavilla, Director
 
56
 
2018
Judy L. Altmaier
 
58
 
2019
Randal W. Baker, President and Chief Executive Officer
 
56
 
2016
J. Palmer Clarkson, Director
 
62
 
2018
Danny L. Cunningham, Director
 
64
 
2016
E. James Ferland, Non-Executive Chairman of the Board
 
53
 
2014
Richard D. Holder, Director
 
56
 
2017
Sidney S. Simmons, Director
 
61
 
2018
Alfredo Altavilla—Mr. Altavilla retired from a 29-year career at Fiat Chrysler in August 2018, mostly recently having served as Chief Operating Officer, Europe, Africa and Middle East and Head, Business Development, Fiat Chrysler Automobiles. Prior to that role, he served as Chief Executive Officer of Iveco, Fiat Chrysler’s trucks and commercial vehicles business. Mr. Altavilla brings extensive operating, business development, new product development and acquisition experience to the Board. His expertise in doing business in Europe and the Middle East also provides insights critical to the Board’s oversight of Company operations and growth strategies in those markets. Mr. Altavilla currently is on the boards of Recordati SpA, where he serves as Vice-Chairman, and Tim SpA, both of which are listed on the Milan stock exchange. He also is a Senior Advisor to CVC Capital Partners.
Judy L. Altmaier—Ms. Judy L. Altmaier served as the President of Exmark Manufacturing Co., a subsidiary of The Toro Company, from 2013 until her retirement in January 2019. Prior to that, she was Vice President, Operations and Quality Management of The Toro Company, or Toro, from 2009 until 2013. Before joining Toro, she spent more than 25 years with Eaton, holding positions of increasing responsibility including Vice President of Operations, Auto Group Americas during 2009 and Vice President, General Manager Global Engine Valve Division in Turin, Italy from 2007 until 2009. Ms. Altmaier joined Eaton in 1983 as an accountant. Ms. Altmaier has joined the Company’s Board because of her industry experience in manufacturing, operations, supply chain management, mergers and acquisitions and product development and strategy, including in the areas of automation and electrification, developed over her career with The Toro Company and Eaton. In addition, she brings significant experience in international operations and execution of growth initiatives. Ms. Altmaier serves on the Board of Allison Transmission Holdings, Inc. and is a member of its Finance and Compensation committees.
Randal W. Baker—Mr. Baker was appointed President and Chief Executive Officer of the Company in March 2016. Prior to joining the Company, Mr. Baker held multiple roles during his six-year tenure at Joy Global, including most recently as Chief Operating Officer. Prior to Joy Global, Mr. Baker was an executive with Case New Holland Inc., holding a variety of roles including President and CEO of its agricultural equipment business. Mr. Baker also held diverse leadership roles in marketing, sales, product development and engineering at Komatsu America Corporation, Ingersoll-Rand and Sandvik Corporation. Among other insights, his understanding of the Company’s markets, engineering and new product development background and operational expertise assist the Board in setting the Company’s strategy and monitoring performance.
J. Palmer Clarkson—Mr. Clarkson is President and Chief Executive Officer of Bridgestone HosePower LLC, a Florida-based industrial hose service company. Founded by Mr. Clarkson in 1990 and acquired by Bridgestone Hose in 2014, HosePower is the largest U.S. based service provider of hydraulic and industrial hoses used in construction machinery, mining, oil field equipment and general industrial applications. His areas of expertise include financial and operational management, distribution and dealer channel management, business development and capital allocation. Mr. Clarkson brings a significant understanding of the Company’s tools business and sales channels to the Board as well as strong financial and accounting experience. Mr. Clarkson has been a director of CNX Resources Corporation since May 2017. He was also a director of CONSOL Energy Inc. from May 2017 through November 2018.
Danny L. Cunningham—Mr. Cunningham is a retired Partner and former Chief Risk Officer of Deloitte & Touche, LLP, a multinational public accounting firm. He has more than 30 years of experience serving public audit clients in a broad array of industries, including manufacturing. He has practiced in both the United States and China. Mr. Cunningham possesses expertise in the

3



areas of financial reporting, auditing, accounting and risk management and also brings a strong knowledge of corporate transactions and global perspective to the Board. He also serves on the Board of WEC Energy Group and is a member of its Audit Committee.
E. James Ferland—Mr. Ferland is the retired Chairman and Chief Executive Officer of Babcock & Wilcox Enterprises, Inc. (“B&W”), a provider of energy and environmental products and services for power and industrial markets worldwide. He held those positions from July 2015, when B&W was spun-off from the Babcock & Wilcox Company, until 2018. Mr. Ferland was Chief Executive Officer of Babcock & Wilcox Company from 2012 through the date of the spin-off. He previously held various leadership roles with Westinghouse Electric Company, LLC and PNM Resources, Inc. With more than 25 years of senior management and engineering experience in diversified industries, Mr. Ferland brings to the Board extensive operations, financial and acquisition experience, knowledge of the energy markets and valuable perspectives from leading a global public company.
Richard D. Holder—Mr. Holder was most recently President and Chief Executive Officer of NN Inc, a diversified industrial manufacturing company, from June 2013 to September 2019. He is a seasoned executive with more than 25 years of international experience across a diverse set of industries and disciplines. Prior to NN, Inc., Mr. Holder held a variety of leadership positions during his twelve-year tenure at Eaton Corporation, where he last served as President of Eaton Electrical Components Group, a unit of Eaton’s Electrical Sector. Prior to joining Eaton, he held leadership roles at US Airways, AlliedSignal and Parker Hannifin. Mr. Holder brings to the Board perspectives from recently leading a global public company, along with extensive business, financial and industry experience. Mr. Holder was a director of NN, Inc. from 2013 through 2019.
Sidney S. Simmons—Mr. Simmons is a seasoned corporate attorney with over 35 years of experience. He provides legal counseling to a range of corporate clients, assisting them, among other matters, with mergers and acquisitions, business planning and structuring, and negotiating and implementing complex business transactions. In addition to his deep and broad knowledge and his experience in executing commercial transactions, he brings experience in corporate governance and legal and regulatory compliance to the Board’s deliberations as well as experience in recruiting and retaining executive talent. He has a long history of volunteer service with various national and local organizations, some of which include serving as a trustee for Catholic Charities USA and as Chairman of the Board of Directors of St. Vincent’s Health System, Inc., in Jacksonville, Florida.
 
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF THE EIGHT NOMINEES.

4



PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, an independent registered public accounting firm, performed an audit of our consolidated financial statements for the fiscal year ended August 31, 2019 and the effectiveness of our internal control over financial reporting as of August 31, 2019. The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending August 31, 2020 and the Audit Committee is presenting this selection to shareholders for ratification.
Shareholder ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent auditor is not required by the Company’s bylaws, however, the Audit Committee is submitting the selection of PricewaterhouseCoopers LLP for shareholder ratification because the Audit Committee values shareholders’ views on the Company’s independent auditors. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP. The Audit Committee also retains the right to direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
A representative of PricewaterhouseCoopers LLP will be present at the Meeting and will have the opportunity to make a statement and respond to appropriate questions.
 
OUR BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT AUDITORS.

5



PROPOSAL 3
ADVISORY VOTE TO APPROVE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
We are asking our shareholders to approve, on a non-binding advisory basis, the compensation of the executive officers named in the Summary Compensation Table included in this proxy statement (the “Named Executive Officers” or “NEOs”), as disclosed in the Compensation Discussion and Analysis section and the accompanying compensation tables and narrative discussion contained in this proxy statement. The Compensation Committee has overseen the development and implementation of our executive compensation programs, which are designed to drive long-term success and increase shareholder value. We utilize our executive compensation programs to provide competitive compensation within our industry peer group that will attract and retain executive talent, encourage our leaders to perform at a high level by linking compensation with financial and performance milestones and align our executive compensation with shareholders’ interests through the use of equity-based incentive awards.
Our overall executive compensation program is founded on three guiding principles, which we believe emphasize a pay-for-performance philosophy:
Executive compensation is aligned with our overall business strategy of driving growth opportunities and improving operating metrics, focusing on sales, earnings, cash flow and return on invested capital.
Key executives responsible for establishing and executing our business strategy should have incentive compensation opportunities that align with long-term shareholder value creation. Performance equity awards, a compensation clawback policy, stock ownership requirements and multi-year vesting periods on equity awards are important components of that alignment.
Our overall compensation targets reflect our intent to pay executive Total Direct Compensation (base salary, annual bonus opportunity and the value of share based awards) at approximately the 50th percentile of pay. In some cases, to attract and retain top talent, we may set target compensation over market rates (generally not to exceed the 75th percentile) to align with an individual’s experience profile and reflect the complexities of certain roles.
We believe that our pay-for-performance objectives result in compensation that reflects our financial results, stock price performance and other performance objectives described in the Compensation Discussion and Analysis. Accordingly, the Board of Directors requests our shareholders to approve, on an advisory basis, the compensation of our NEOs. Although the outcome of this advisory vote is non-binding, the Compensation Committee and the Board of Directors will review and consider the outcome, among other factors, when making future compensation decisions for our NEOs.
 
OUR BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE EXECUTIVE COMPENSATION SECTION AND THE ACCOMPANYING COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.



6



PROPOSAL 4
APPROVAL OF THE NAME CHANGE PROPOSAL

On October 29, 2019, the Board of Directors unanimously adopted a resolution to amend, and to recommend that the shareholders approve, an amendment to Article I of the Company’s Restated Articles of Incorporation, as amended (the “Restated Articles of Incorporation”) for the purpose of changing the Company’s corporate name from “Actuant Corporation” to “Enerpac Tool Group Corp.” Specifically, this Name Change Proposal would amend Article I of the Restated Articles of Incorporation as set forth below, with additions indicated by underlining and deletions by strike through:
“The name of the Corporation is Actuant Corporation Enerpac Tool Group Corp.”
Reasons for Name Change
In anticipation of the completion of the sale of the principal businesses comprising our former Engineered Components & Systems (“EC&S”) segment, in September 2019 we adopted the business name “Enerpac Tool Group” to simplify and accelerate the Company’s continued progression toward becoming a premier pure-play industrial tools and services company with the Enerpac brand at its core. Although we adopted the new business name, a change in our legal, corporate name requires that we amend the Restated Articles of Incorporation to reflect that change in name.
Effects of Name Change
If the shareholders approve the proposed amendment to the Restated Articles of Incorporation, the amendment will become effective upon the filing of articles of amendment to the Restated Articles of Incorporation with the Wisconsin Department of Financial Institutions, which would be filed at some time after the Meeting.
While the name change will cause us to incur certain modest costs, the Board of Directors believes that any potential confusion and costs associated with the name change will be minimal and will be outweighed by the benefits of the name change.
The name change will not have any effect on the rights of our existing shareholders. In addition, changing our name will not affect the validity or transferability of stock presently outstanding, and the Company’s shareholders will not be required to exchange any certificates presently held by them. In the future, new stock certificates will be issued reflecting the new name.
In connection with our adoption of the “Enerpac Tool Group” business name, our Class A common stock began trading on the New York Stock Exchange under the ticker symbol “EPAC” on October 7, 2019. The New York Stock Exchange has confirmed that the change in our legal, corporate name to “Enerpac Tool Group Corp.” upon the effectiveness of the proposed amendment to the Restated Articles of Incorporation will not require any further change in our ticker symbol. However, the CUSIP number identifying the shares of our Class A common stock will change as a result of the proposed change in our legal, corporate name.

OUR BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” APPROVAL OF THE NAME CHANGE PROPOSAL.


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CERTAIN BENEFICIAL OWNERS
 
The following table sets forth, as of October 15, 2019, unless otherwise indicated, certain information with respect to the beneficial ownership of common stock by persons known by the Company to beneficially own more than 5% of the outstanding shares of our Class A common stock, by the directors, by each executive officer of the Company named in the Summary Compensation Table below and by the Company’s current executive officers and directors as a group.

Beneficial Owner (1)
 
Amount and
Nature
 
 
 
Percent of
Class
More Than Five Percent Shareholders:
 
 
 
 
 
 
Blackrock, Inc.
    55 East 52nd Street
    New York, New York 10055
 
7,679,988

 
(2)
 
12.7%
Vanguard Group, Inc.
    100 Vanguard Boulevard
    Malvern, Pennsylvania 19355
 
6,460,185

 
(2)
 
10.7%
Southeastern Asset Management, Inc.
    6410 Poplar Avenue, Suite 900
    Memphis, Tennessee 38119
 
5,900,024

 
(2)
 
9.8%
Wellington Management Company, LLP
    208 Congress Street
    Boston, Massachusetts 02210
 
5,236,717

 
(2)
 
8.7%
Pzena Investment Management, LLC
320 Park Avenue, 8
th Floor
New York, New York 10022
 
4,345,098

 
(2)
 
7.2%
Clarkson Capital Partners, LLC
91 West Long Lake Road
Bloomfield Hills, Michigan 48304
 
3,208,074

 
(2)
 
5.3%
 
 
 
 
 
 
 
Named Executive Officers and Directors:
 
 
 
 
 
 
Alfredo Altavilla, Director
 
3,000

 
 
 
*
Judy L. Altmaier, Director
 

 
 
 
*
Randal W. Baker, President and Chief Executive Officer
 
150,958

 
(3)
 
*
J. Palmer Clarkson, Director
 
4,719

 
 
 
*
Danny L. Cunningham, Director
 
17,528

 
(4)
 
*
Rick T. Dillon, Executive Vice President and Chief Financial Officer
 
21,360

 
(5)
 
*
E. James Ferland, Non-Executive Chairman of the Board of Directors
 
36,204

 
(6)
 
*
Richard D. Holder, Director
 
3,831

 
 
 
*
Fabrizio Rasetti, Executive Vice President, General Counsel and Secretary
 
2,848

 
 
 
*
Roger A. Roundhouse, Former Executive Vice President, Engineered Components & Systems
 
65,130

 
(7)
 
 
John Jeffrey Schmaling, Executive Vice President, Industrial Tools & Services
 
2,263

 
 
 
*
Sidney S. Simmons, Director
 
5,014

 
(8)
 
*
Holly A. Van Deursen, Director
 
60,887

 
(9)
 
*
 
 
 
 
 
 
 
All Directors and Current Executive Officers as a group (13 persons)
 
308,612

 
(10)
 
*
                              
*
Less than 1%.
 
(1) 
Unless otherwise noted, the specified person has sole voting power and/or dispositive power over the shares shown as beneficially owned.
(2) 
Such information is as of September 30, 2019 and is based on a report issued to the Company by a third-party service provider.
(3) 
Includes 23 shares held in the 401(k) Plan. Also includes 60,221 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2019. Excludes 2,268 phantom stock units held in the Employee Deferred Compensation Plan, which are settled in the Company’s Class A common stock no less than six months following termination of employment. Mr. Baker does not have any voting or dipositive power with respect to the phantom stock units.
(4) 
Includes 2,930 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2019. Includes 8,355 phantom stock units held in the Outside Directors’ Deferred Compensation Plan, which are settled in the Company’s Class A common stock, generally within 60 days following the director’s termination of service.
(5) 
Includes 1,335 shares held in the 401(k) Plan. Excludes 804 phantom stock units held in the Employee Deferred Compensation Plan, which are settled in the Company’s Class A common stock no less than six months following termination of employment. Mr. Dillon does not have any voting or dispositive power with respect to the phantom stock units.
(6) 
Includes 11,029 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2019. Also includes 10,067 phantom stock units held in the Outside Directors’ Deferred Compensation Plan, which are settled in the Company’s Class A common stock, generally within 60 days following the director’s termination of service.
(7) 
Includes 201 shares held in the 401(k) Plan. Also includes 25,282 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2019. Excludes 1,099 phantom stock units held in the Employee Deferred Compensation Plan, which are settled in the Company's Class A common stock no

8



less than six months following termination of employment. Mr. Roundhouse does not have any voting or dipositive power with respect to the phantom stock units.
(8) 
Includes 5,014 phantom stock units held in the Outside Directors’ Deferred Compensation Plan, which are settled in the Company’s Class A common stock, generally within 60 days following the director’s termination of service.
(9) 
Includes 6,025 shares held in an individual IRA account. Also, includes 28,959 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2019. Also includes 6,524 phantom stock units held in the Outside Directors’ Deferred Compensation Plan, which are settled in the Company’s Class A common stock, generally within 60 days following the director’s termination of service.
(10) 
Includes 6,025 shares held in an individual IRA account and 1,358 shares held in the 401(k) Plan. Also includes 103,139 shares issuable pursuant to options exercisable currently or within 60 days of October 15, 2018. Also includes 29,960 phantom stock units held in the Outside Directors’ Deferred Compensation Plan, which are settled in the Company’s Class A common stock, generally within 60 days following the director’s termination of service. Shares beneficially owned by Mr. Roundhouse, a former executive officer, are not included in this amount.

The beneficial ownership information set forth above is based on information furnished by the specified persons or known to the Company and is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as required for purposes of this Proxy Statement. Shares are deemed to be beneficially owned by any person or group who has the power to vote or direct the vote or the power to dispose or direct the disposition of such shares, or who has the right to acquire beneficial ownership thereof within 60 days. Such beneficial ownership information is not necessarily to be construed as an admission of beneficial ownership for other purposes.
 

9



CORPORATE GOVERNANCE MATTERS
 
Corporate Governance Guidelines
The Board of Directors (the “Board”) has adopted the Company’s Corporate Governance Guidelines (the “Guidelines”). The Guidelines state that the Board is elected by the shareholders to provide oversight and guidance to management with a view to increasing shareholder value over the long term. The Guidelines cover various topics, including, but not limited to, director independence, board and committee composition, board operations and leadership development. The Nominating & Corporate Governance Committee of the Board monitors and oversees the application of the Guidelines and recommends to the Board any changes to the Guidelines. Each committee has a written charter that is approved by the Board and annually evaluated by the committee. While the Company has no formal policy with respect to the attendance of the directors at the Company’s annual meeting of shareholders, all current directors attended the 2019 annual meeting except for Ms. Altmaier, who joined the Board after the meeting.
Board Committees, Charters, Functions and Meetings
The Board has three standing committees—Audit, Nominating & Corporate Governance and Compensation—each of which has a charter. The Board appoints the members of these committees after considering the recommendations of the Nominating & Corporate Governance Committee. There were 12 meetings of the Board during the fiscal year ended August 31, 2019. All members of the Board serving during the fiscal year ended August 31, 2019 attended at least 75% of the aggregate number of meetings of the Board and all the committees on which they served which were held during the respective director’s period of service. Current Board committee membership and functions appear in the table below. Ms. Altmaier joined the Audit Committee and Compensation Committee on November 1, 2019 concurrent with her election as a director effective that date.
Ms. Van Deursen will retire from the Board when her current term concludes upon the election of directors at the Meeting. At that time, she will be replaced as the Chair of the Compensation Committee by Mr. Holder.
 
 
 
Committees
 
Committee Functions
Audit
Danny L. Cunningham, Chair
Alfredo Altavilla
Judy L. Altmaier
Richard D. Holder
Sidney S. Simmons

Fiscal 2019 Meetings—9
 
•    Manages oversight responsibilities related to accounting policies, internal control, financial reporting practices and legal and regulatory compliance
 
•    Reviews the integrity of the Company’s financial statements
 
•    Reviews the independent auditor’s qualifications and independence
 
•    Reviews the performance of the Company’s internal audit function and the Company’s independent auditors
 
•    Maintains lines of communication between the Board and the Company’s financial management, internal auditors and independent accountants
 
•    Prepares the Audit Committee report to be included in the Company’s annual proxy statement
 
•    Conducts an annual evaluation of the performance of the Audit Committee
Nominating & Corporate Governance   E. James Ferland, Chair
J. Palmer Clarkson
Sidney S. Simmons
Holly A. Van Deursen

Fiscal 2019 Meetings—3
 
•    Responsible for evaluating and nominating prospective members for the Board
 
•    Exercises a leadership role in developing, maintaining and monitoring the Company’s corporate governance policies and procedures
 
•    Conducts an annual assessment of the Board, Committees and Directors performance and contributions
 
•    Conducts an annual evaluation of the performance of the Nominating & Corporate Governance Committee
Compensation Holly A. Van Deursen, Chair (through January 27, 2020)
Alfredo Altavilla
Judy L. Altmaier
J. Palmer Clarkson
Richard D. Holder, Chair-elect (beginning January 28, 2020)


Fiscal 2019 Meetings—6

 
•    Determines the compensation of executive officers and makes recommendations to the Board regarding Chief Executive Officer compensation.
 
•    Administers annual (short-term) incentive compensation plans and equity-based (long-term) compensation programs maintained by the Company
 
•    Makes recommendations to the Board with respect to the amendment, termination or replacement of incentive compensation plans and equity-based compensation programs
 
•    Recommends to the Board the compensation for Board members and conducts an annual evaluation of the performance of the Compensation Committee

10



Leadership Structure
The positions of Chair of the Board and Chief Executive Officer are separated between Mr. Ferland and Mr. Baker. This allows our CEO, Mr. Baker, to focus on the day-to-day business operations, while the Board Chair leads our Board in providing strategic direction, oversight and advice to management. The Board retains the authority to modify this leadership structure as and when appropriate to best address the Company’s circumstances and advance the interests of all shareholders.
The Board Chair’s responsibilities include: presiding over executive sessions of the independent directors; liaising between the Chief Executive Officer and independent directors; consulting with the Chief Executive Officer as to appropriate scheduling and agendas of meetings of the Board; and serving as the principal conduit for communications directed from shareholders to employees and the non-employee directors.
Executive Sessions of Non-Management Directors
The non-employee directors of the Board regularly meet in the absence of management. Mr. Ferland, the Board Chair, presides at these sessions.
Independence of Directors; Financial Expertise of Audit Committee
The Board has determined that each of Mses. Altmaier and Van Deursen and Messrs. Altavilla, Clarkson, Cunningham, Ferland, Holder and Simmons (i) is independent within the definitions contained in the current New York Stock Exchange listing standards and the Company’s Corporate Governance Guidelines and (ii) has no other material relationship with the Company that could interfere with his or her ability to exercise independent judgment. In addition, the Board has determined that each member of the Audit Committee is “independent” within the definition contained in current Securities and Exchange Commission (“SEC”) rules. The Board has determined that all members of the Audit Committee meet the financial literacy requirements of the New York Stock Exchange (“NYSE”) and Mr. Cunningham qualifies as an “audit committee financial expert” as defined by the SEC.
Board Role in Risk Oversight
The Board oversees an enterprise-wide approach to risk management, which is designed to support the achievement of organizational objectives (including strategic initiatives), improve long-term organizational performance and enhance shareholder value. While the Board has the ultimate oversight responsibility for the risk management process, the committees of the Board also have responsibility for aspects of organizational risk management. In particular, the Audit Committee focuses on legal, compliance and financial risks (including internal controls) and the Compensation Committee and the Nominating & Corporate Governance Committee focus on compensation risk (as described below) and corporate governance policies and practices, respectively.
Compensation Risk Assessment
In establishing and reviewing our executive compensation program, the Compensation Committee considers, among other things, whether the Company’s compensation programs reward executives for performance and whether the programs encourage unnecessary or excessive risk taking. The Compensation Committee annually performs a compensation risk assessment including an inventory of material incentive and sales compensation plans. The Compensation Committee, with assistance from an independent compensation consultant (see below), has overseen the implementation of several mitigating factors to help reduce the likelihood of undue risk taking related to compensation arrangements, including, but not limited to, the use of various measures (core sales, earnings, total shareholder return (“TSR”), and cash flow) in a balanced mix of annual and long-term incentive plans, use of multiple types of incentives (cash, restricted stock units and performance shares), and executive stock ownership guidelines that help align incentives with long-term company stock price appreciation. The Compensation Committee and Board believe that the Company’s compensation policies and practices do not encourage unnecessary or excessive risk and are not likely to promote other behavior that could result in a material adverse event for the Company.
Use of Compensation Consultants and Other Advisors
The Compensation Committee has the authority to engage the services of outside advisors, experts and others to assist in performing its responsibilities. The Compensation Committee has utilized the services of Willis Towers Watson (“Willis”) as its executive and director compensation adviser for several years. During the fiscal year ended August 31, 2019, fees paid to Willis for services to the Compensation Committee were approximately $121,000.
The Company also uses other divisions of Willis for actuarial services related to pension plans, post-retirement healthcare plans and other benefits, and Willis also is the Company’s primary insurance broker. The Compensation Committee and the Board did not review or approve the other services provided to the Company by Willis, as those services are approved by management in the normal course of business. Fees paid to Willis for these additional services in the fiscal year ended August 31, 2019 were $1.8 million. Willis’ executive compensation consultants have not been involved in providing any of the additional actuarial or brokerage services for which the Company has engaged Willis.
In its role as the Compensation Committee’s independent compensation advisor, Willis provides written confirmation of its independence and the existence of any potential conflicts of interest. The Compensation Committee also reviews the policies and procedures Willis maintains to prevent conflicts of interest, evaluates whether there are personal or business relationships between

11



Willis and members of the Compensation Committee and validates that employees of Willis who perform consulting services do not own the Company’s common stock. After considering these factors, the scope of services provided by Willis and the amount of fees paid for executive compensation consulting and other services, the Compensation Committee has concluded that the engagement of Willis does not create a conflict of interest.
Codes of Conduct and Ethics
The Company’s Code of Business Conduct and Ethics (“Code of Conduct”) applies to all officers, directors and employees of the Company and sets out the standards of legal and ethical behavior to which all such representatives of the Company must adhere. The Company also has adopted Code of Ethics Applicable to Senior Finance Executives (“Code of Financial Ethics”), which applies to its senior corporate executive team, including its Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Corporate Controller, or persons performing similar functions. The Code of Conduct and Code of Financial Ethics are reviewed annually by the Nominating & Corporate Governance Committee.
Information Available Upon Request
Copies of the charters of the Audit Committee, Nominating & Corporate Governance Committee and Compensation Committee, the Corporate Governance Guidelines, the Code of Business Conduct and Ethics and the Code of Ethics Applicable to Senior Finance Executives are available on the Corporate Governance section of the Company’s website at www.enerpactoolgroup.com. They also may be obtained, free of charge, upon written request directed to our Executive Vice President, General Counsel & Secretary, Enerpac Tool Group, N86W12500 Westbrook Crossing, Menomonee Falls, Wisconsin 53051 or by telephone at (262) 293-1500.
Director Selection Procedures
The Nominating & Corporate Governance Committee has the lead role in identifying director candidates, including the slate of directors presented for election at the Company’s annual meeting of shareholders. The Nominating & Corporate Governance Committee will consider recommendations from shareholders concerning the nomination of directors. Recommendations should be submitted in writing to the Company and state the shareholder’s name and address, the name and address of the candidate, and the qualifications of and other detailed background information regarding the candidate.
Nominees for director are selected on the basis of experience, integrity, ability to make independent analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time to Board duties. Although it does not have a formal diversity policy, the Board is committed to an inclusive membership, embracing diversity with respect to background, experience, skills, education, special training, race, age, gender, national origin and viewpoints.
The Nominating & Corporate Governance Committee’s objective is to assemble and maintain a Board that provides an optimized mix of skills, experience and perspectives to provide oversight and strategic guidance and maximize shareholder value in the context of the Company’s current or expected circumstances. In evaluating director nominees, the Nominating & Corporate Governance Committee considers a range of factors and circumstances, including the following:
the strategic objectives and needs of the Company with respect to the particular talents and experience of its directors;
the knowledge, skills and experience of nominees, including operational, leadership and board experience;
familiarity with the Company’s markets, including international business experience;
financial literacy and expertise with accounting rules and practices;
the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members; and
the appropriate size of the Company’s Board.

The Nominating & Corporate Governance Committee also may consider such other factors in addition to the foregoing as it deems are in the best interests of the Company and its shareholders. There is no limit with regard to the number of boards on which our directors may serve, but the Board considers service on others boards as a factor in the director selection process and requires that all directors be able to devote sufficient time to fulfill their duties to the Company’s Board and committees.
The Nominating & Corporate Governance Committee believes it is appropriate that at least one, and preferably several, members of the Board meet the criteria for an “audit committee financial expert,” as defined by SEC rules, and that a majority of the members of the Board meet the definition of “independent director” under NYSE listing standards. The Nominating & Corporate Governance Committee also believes it is appropriate for the Chief Executive Officer and potentially other members of the Company’s management to serve on the Board.
The Nominating & Corporate Governance Committee identifies nominees for election to the Board by, among other considerations, evaluating the skills of the current members of the Board, their performance and contributions to deliberations, their tenure on the Board and other relevant circumstances. Current members of the Board with skills and experience to support the Company’s needs and strategic priorities and who are willing to continue to serve as directors generally are nominated for re-election, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. From time-to-time, the Nominating & Corporate Governance Committee will determine to add new directors to the Board to enhance its

12



capabilities, with such new directors being identified by a variety of means, including based on the recommendation of shareholders or existing directors or with the assistance of third-party recruiters to identify and evaluate the qualifications of candidates satisfying the Board’s criteria for new directors. Ms. Altmaier was first identified to the Nominating & Corporate Governance Committee and the Board as a candidate for election as a director by a third-party director recruiting firm.
Director Resignation Policy
In order to ensure appropriate representation on the Board, the Nominating & Corporate Governance Committee has adopted a policy regarding resignation from the Board upon a director’s retirement or a material change in principal occupation (such as the director’s cessation of employment) as of the time the director was last elected to the Board. Upon such a material change in a director’s position, a director shall offer his or her resignation as a director to the Nominating & Corporate Governance Committee, which will accept or reject the resignation offer after considering the best interests of the Company and its shareholders.
Communications with Directors
Shareholders and other interested parties who want to communicate with the Board, the non-employee directors as a group, or any individual director can write to: Enerpac Tool Group, Attention: Chair of the Board of Directors, N86W12500 Westbrook Crossing, Menomonee Falls, Wisconsin 53051. Your letter should indicate whether you are a shareholder. Depending on the subject matter, management will:
forward the communication to the director or directors to whom it is addressed;
attempt to handle the inquiry directly, for example where it is a request for information about the Company or it is a common stock related matter; or
not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.
Certain Relationships and Related Person Transactions
The Corporate Governance Guidelines and Code of Business Conduct and Ethics document the Company’s policies regarding conflicts of interest and related party transactions. Under these policies, any related party transaction or potential conflict of interest involving an executive officer, director or 5% shareholder is reviewed by legal counsel and referred to the Nominating & Corporate Governance Committee for final resolution.
The Nominating & Corporate Governance Committee has evaluated several relationships in fiscal 2019 for the existence of a potential conflict of interest:
Mr. Cunningham became a director of WEC Energy Group (“WEC”) in 2018. WEC is an electric and gas utility providing services to customers in Wisconsin, Illinois, Michigan and Minnesota, where several of the Company’s facilities and operations are located. In fiscal 2019, the Company made purchases of approximately $1 million from the utility and its affiliates. All transactions were on an arm’s-length basis. The Board has evaluated the relationship between the Company and WEC and has determined that it does not interfere with the exercise of Mr. Cunningham’s independent judgment.
On March 20, 2018, the Company entered into an agreement (the “Southeastern Agreement”) with Southeastern Asset Management (“Southeastern”) pursuant to which the Company and the Board agreed to elect J. Palmer Clarkson and Sidney S. Simmons to the Board. Additionally, Southeastern agreed that until the day following the 2019 annual meeting of shareholders it would not call or seek to call, or encourage any other party to call or seek to call, a special meeting of the shareholders of the Company.
Other than as disclosed in the preceding paragraph, during fiscal 2019 the Company is not aware of being party to any transaction in which an executive officer, director or 5% shareholder had a direct or indirect material interest.
Compensation Committee Interlocks and Insider Participation
During fiscal 2019, no member of the Compensation Committee served as an officer, former officer or employee of the Company or had a relationship disclosable under “Certain Relationships and Related Person Transactions.” Further, during fiscal 2019, no executive officer of the Company served as:
a member of the Compensation Committee (or equivalent) of any other entity, one of whose executive officers served as one of our directors or was an immediate family member of a director, or served on our Compensation Committee; or
director of any other entity, one of whose executive officers or their immediate family member served on our Compensation Committee.




13



REPORT OF THE AUDIT COMMITTEE
 
The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this report by reference therein.
The Audit Committee represents and assists the Board of Directors in fulfilling its oversight responsibility relating to (i) the integrity of the Company's financial statements and financial reporting process and the Company's systems of internal controls over financial reporting; (ii) the performance of the internal audit function; (iii) the annual independent audits of the Company's financial statements and management's report regarding the effectiveness of the Company's system of internal control over financial reporting; (iv) the compliance by the Company with legal and regulatory requirements, including the Company's disclosure controls and procedures; and (v) the fulfillment of the other responsibilities set out in the committee's charter. The Audit Committee has the responsibility for the engagement and retention of the Company's independent registered public accounting firm, the evaluation of its qualifications, independence and performance, and the approval of all audit and other engagement fees.
In discharging its responsibilities, the Audit Committee is not itself responsible for planning or conducting audits or for any determination that the Company's financial statements are complete and accurate or presented in accordance with generally accepted accounting principles. The Company's management is primarily responsible for its financial statements and the quality and integrity of the reporting process. The independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles and an opinion on the effectiveness of the Company’s internal control over financial reporting.
In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm regarding the fair and complete presentation of the Company’s results of operations and financial position and the assessment of the Company’s internal control over financial reporting. The Audit Committee has discussed significant accounting policies applied by the Company in its financial statements. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
Additionally, the Audit Committee has done, among other things, the following:
discussed with PricewaterhouseCoopers LLP the overall scope and plans for its audit;
met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of its examinations, the evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting;
reviewed and discussed the audited financial statements for the fiscal year ended August 31, 2019 with the Company’s management and PricewaterhouseCoopers LLP;
discussed with PricewaterhouseCoopers LLP those matters required to be discussed by the Public Company Accounting Oversight Board ("PCAOB") Audit Standard No. 1301, Communications with Audit Committees and SEC Regulations S-X, Rule 2-07, Communications with Audit Committees; and
received the written disclosures and the letter from PricewaterhouseCoopers LLP required pursuant to Rule 3526, “Communication with Audit Committees Concerning Independence,” of the PCAOB and discussed with PricewaterhouseCoopers LLP its independence.
Based upon the foregoing, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2019.
No member of the Audit Committee is employed by, or has any other material relationship with, the Company. The Board of Directors has determined that at least one member of the Audit Committee qualifies as an "audit committee financial expert" under Securities and Exchange Commission regulations, and the Audit Committee is comprised entirely of independent directors, as required by the New York Stock Exchange listing standards and the applicable rules of the Securities and Exchange Commission.

October 28, 2019
 
THE AUDIT COMMITTEE
 
Danny L. Cunningham, Chair
Alfredo Altavilla
Richard D. Holder
Sidney S. Simmons


14



EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section of the proxy provides information regarding the compensation program for our current Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers at August 31, 2019, collectively referred to as our Named Executive Officers (“NEOs”). Our fiscal 2019 NEOs are as follows:
Randal W. Baker, President and Chief Executive Officer
Rick T. Dillon, Executive Vice President and Chief Financial Officer
Roger A. Roundhouse, Executive Vice President, Engineered Components & Systems Segment
John Jeffrey Schmaling, Executive Vice President Industrial Tools & Services Segment
Fabrizio Rasetti, Executive Vice President, General Counsel and Secretary
Executive Summary
The Company is committed to developing and implementing an executive compensation program that directly aligns the interests of the NEOs with the long-term interests of shareholders. With this goal in mind, the Company has developed an executive compensation program that is designed to:

attract and retain highly experienced and committed executives who have the skills, education, business acumen and background to successfully lead a diversified industrial company;
motivate executives to demonstrate exceptional personal performance and consistently perform at or above expected levels during different business cycles; and
provide balanced incentives for the achievement of near-term and long-term objectives, without incentivizing executives to take excessive risk.
In fiscal 2019, the Company took a significant step towards achieving its goal of becoming a pure-play industrial tools and services company by announcing, on July 9, 2019, that it had entered into a Securities Purchase Agreement with an affiliate of One Rock Capital Partners, LLC (“One Rock”), whereby the affiliate would acquire the vast majority of the legacy Engineered Components & Systems ("EC&S") segment at a purchase price of approximately $214.5 million. The transaction with One Rock was subsequently completed on October 31, 2019. In light of these developments, the Company recast the financial statements included in its 2019 Annual Report to reflect the results of operations for the EC&S segment as discontinued operations for all periods presented.
When performance measures were established for incentive compensation awards made in fiscal 2019, the levels were set assuming the inclusion of the EC&S segment in the Company’s consolidated financial statements as part of continuing operations. The following table includes certain measures of the Company’s performance, combining items of the EC&S segment, accounted for as discontinued operations, as if it were part of continuing operations throughout the fiscal year. These measures are presented for the purpose of comparing this performance with the threshold, target and maximum performance levels established for incentive compensation awards prior to the decision to divest the EC&S segment. The performance target levels were not reset following the determination to pursue a divestiture of the EC&S segment, as the Company’s officers remained responsible for the oversight and management of the EC&S segment throughout the fiscal year notwithstanding its accounting classification as discontinued operations. Further detail with respect to the Company’s financial performance for fiscal 2019 is included in our 2019 Annual Report to Shareholders, which accompanies this Proxy Statement.


15



 
 
Year Ended August 31,
 
 
2019
 
2018
 
 
(amounts in millions, except per share amounts)
Net Sales:
 
 
 
 
Continuing Operations
 
$
655

 
$
641

Discontinued Operations
 
459

 
541

Combined (1)
 
$
1,114

 
$
1,182

Core Sales Change (1) (2)
 
1
%
 
6
%
Earnings Per Share from Continuing Operations
 
$
0.13

 
$
0.08

Adjusted Earnings Per Share from Continuing Operations(3)(5)
 
$
0.73

 
$
0.49

Net Earnings (Loss) from: (4)
 
 
 
 
Continuing Operations
 
$
8

 
$
5

Discontinued Operations
 
(257
)
 
(26
)
Combined (1) (6)
 
$
(249
)
 
$
(22
)
Adjusted EBITDA:
 
 
 
 
Continuing Operations (5)
 
$
96

 
$
85

Discontinued Operations (5)
 
50

 
60

Combined (1) (5)
 
$
146

 
$
145

Cash Provided by Operating Activities (7)
 
$
54

 
$
106

Combined Free Cash Flow (5)
 
$
27

 
$
100

Fiscal Year-end Stock Price
 
$
22.21

 
$
29.45

(1) Includes the sum of the relevant items for continuing operations and discontinued operations.
(2) Core sales change represents total sales change excluding the impact of acquisitions, divestitures and foreign currency rate changes between years.
(3)Adjusted earnings per share excludes impairment & other divestiture charges ($0.34), restructuring and other exit charges ($0.09), accelerated debt issuance costs ($0.01), depreciation and amortization true up ($0.02) and a tax adjustment expense ($0.14) in fiscal 2019 and impairment & other divestiture charges ($0.20), restructuring charges ($0.15), accelerated debt issuance costs ($0.01) and a tax adjustment expense ($0.05) in fiscal 2018. Per share amounts reflected in this footnote are net of tax.
(4) Net of income taxes.
(5) See "Reconciliation of GAAP Measures to Non-GAAP Measures" included in our 2019 Annual Report to Shareholders which accompanies this Proxy Statement.
(6) Combined totals may not foot due to rounding.
(7) Includes cash flow provided by continuing operations and cash flow provided by discontinued operations.
As a result of this financial performance, the cash bonuses earned by the Company’s NEOs in fiscal 2019 were below target. See page 19 for details of the Annual Bonus program. Profitability was the only metric achieved for the fiscal 2019 NEO cash bonuses, as both core sales growth and free cash flow generation fell short of thresholds. Similarly, the total shares vested in the form of Performance Shares (discussed on page 20) were below the target level for the most recently completed three-year performance period.
Given that both incentive compensation and overall financial performance were below target levels, we believe that the Company’s executive compensation program is effectively linked to performance.  Further, the incentive compensation programs align closely to the Company’s financial objectives of achieving core sales growth greater than our industry peers, quality of earnings, and free cash flow generation which is utilized for the purpose of strategic acquisitions, opportunistic share repurchases and debt reduction.
Compensation and Link to Performance
The Company’s executive compensation program is aligned with its overall financial and strategic objectives, which is intended to create shareholder value.
The Company’s long-term goal is to grow diluted earnings per share faster than its peers. It intends to leverage its strong brand, market positions, and dealer and distribution networks to generate organic core sales growth that exceed end-market growth rates. Organic growth is accomplished through a combination of market-share capture, product innovation and market expansion into emerging industries and geographic regions. In addition to organic growth, the Company focuses on growth through disciplined acquisitions in its core tools markets and profit margin expansion by reducing structural costs, utilizing continuous improvement techniques to drive productivity and lower costs and by enacting routine pricing initiatives to offset commodity and tariff increases. Finally, cash flow generation is critical to achieving financial and long-term strategic objectives. Strong cash flow generation is achieved by maximizing returns on assets and minimizing primary working capital needs. The cash flow that results from efficient asset management, improved profitability and profitable revenue growth is used to fund internal growth opportunities, strategic

16



acquisitions, opportunistic common stock repurchases and debt reduction, as appropriate.
Shareholder Input on Executive Compensation Program
At the annual meeting held in January 2019, shareholders overwhelmingly supported the advisory proposal to approve the compensation of our NEOs as disclosed in the proxy statement for that annual meeting, with the approval of approximately 98% of the Company's common stock that voted either “for” or “against” the proposal. The Company engages with shareholders to gather feedback on its compensation programs, which has led to changes that strengthen the link between executive pay and Company performance. We will continually assess and modify the Company’s executive compensation program to incorporate shareholder input, industry trends and competitive compensation practices.
The Compensation Committee (the “Committee”) engages in an ongoing review of the Company’s executive compensation program to evaluate whether the program supports the Company’s compensation philosophy and objectives and aligns with the Company’s business objectives. In connection with this ongoing review, and based on feedback received from shareholders, the Committee continues to implement and maintain what we believe are best practices for executive compensation, each of which reinforces the Company’s compensation philosophy. Below is a summary of those practices.
What The Company Does
 
What The Company Does Not Do
Use performance metrics to align pay with performance
 
Offer gross-ups of related excise taxes on executive severance agreements
Cap payouts under our annual cash bonus plan and performance share plans
 
Provide single-trigger change in control severance benefits
Have robust stock ownership guidelines for our CEO and NEOs
 
Pay dividends on unearned and unvested performance shares
Apply clawback provisions to annual cash bonus and equity awards for executives in case of financial restatement
 
Pay dividends on unvested restricted stock units
Engage an independent compensation consultant that reports to the Committee
 
Reprice stock options
Prohibit short sales, hedging or pledging of our stock by our executive officers and directors
 
Provide tax gross-ups in the event of a change in control
Oversight of the Executive Compensation Program
The Committee is primarily responsible for overseeing the Company’s executive compensation program and considers advice from an independent compensation consultant regarding competitive market pay practices. The Company’s CEO and management team also provide the Committee specific information related to NEO performance, compensation data and financial results.
Role of Compensation Committee
The Committee establishes the Company’s executive compensation philosophy and administers the overall executive compensation program. The Committee reviews and approves all components of the compensation program, establishes objectives for NEOs that are aligned with the Company’s business and financial strategy, and determines compensation levels for NEOs. CEO compensation is recommended by the Committee to the Board for approval. The Committee monitors the performance of NEOs (other than the CEO) through verbal updates regarding their annual reviews completed by the CEO and performs a separate evaluation of the CEO’s performance in cooperation with the Chair of the Board.
Role of Compensation Consultant
The Committee utilizes Willis as its independent compensation consultant. Willis assists the Committee by evaluating executive compensation, analyzing pay alignment with financial and stock performance, providing general compensation trends and competitive market data and benchmarking, and participating in the design and implementation of certain elements of the executive compensation program. Willis does not make specific recommendations on individual compensation amounts for the executive officers or independent directors, nor does it determine the amount or form of executive and director compensation.
Role of Management and the Chief Executive Officer
The CEO, in consultation with the Human Resources function, develops compensation recommendations for the Committee to consider. The CEO considers various factors when making recommendations, including external market data provided by Willis, the relative importance of the executive’s position within the organization, the executive’s tenure and experience and the executive’s performance and contributions to the Company’s results.
The CEO, with assistance from Human Resources and Finance personnel, monitors existing compensation plans and programs applicable to NEOs and other executives, recommends financial and other targets to be achieved under those programs, prepares analyses of financial data, peer comparisons and other briefing materials for the Committee in making its decisions, and, ultimately, implements the Committee’s decisions.

17



Assessing Competitive Compensation Practices
The Committee reviews general industry survey data as well as compensation practices for certain publicly traded U.S. companies with which the Company considers it competes for executive talent (the "Peer Group"). It also uses information from the Willis Executive Compensation Market Analysis Survey to obtain additional benchmarking for executive compensation trends for manufacturing industry companies with annual revenues comparable to the Company. The Committee does not determine the companies that are included in the Willis survey data.
The companies listed below are included in the Peer Group:
Altra Industrial Motion Corp.
Crane Co.
IDEX Corporation
Standex International Corp.
A.O. Smith Corporation
EnerSys
John Bean Technologies Corp.
TriMas Corporation
Barnes Group Inc.
EnPro Industries, Inc.
Kennametal Inc.
Woodward, Inc.
Belden Inc.
Graco Inc.
Lincoln Electric Holdings Inc.
 
Brady Corporation
Harsco Corporation
Nordson Corporation
 
Briggs & Stratton Corporation
Hillenbrand, Inc.
Rexnord Corporation
 
From time to time, the Committee has undertaken a review of the Peer Group to ensure it remains a reasonable and appropriate reference for both pay levels and design of compensation programs. The Committee chose not to conduct a review of the Peer Group in 2019, determining after consulting with Willis to adjust the Peer Group benchmark survey Willis provided in 2018 with a 3% increase for inflation and merit.
The Committee believes the adjusted Peer Group benchmarking, Willis manufacturing industry survey data and CEO recommendations (for other NEOs based on experience, expertise and demonstrated performance), accurately define competitive market compensation for executive talent. With the Company's move to become a pure-play industrial tool and services company, the Committee expects to review the Peer Group and its overall compensation benchmarking practices in 2020.
Target Level Compensation Determination
To determine NEO compensation, the Committee considers factors such as the level of responsibility, skills and experiences required by the position, the executive’s qualifications, the Company’s ability to replace the individual, the overall competitive environment, current and historical compensation levels, performance in the role, length of service, the Committee’s view of internal equity and consistency and other considerations it may feel are relevant. In analyzing these factors, the Committee reviews competitive compensation data and targets the 50th percentile of pay for Total Direct Compensation (base salary, annual cash bonus and equity incentive awards). In some cases, individual components of compensation may be over market (in order to emphasize a particular element or if individual circumstances dictate), but the total compensation package is market competitive and will generally not exceed the 75th percentile of market at target.
Components of Executive Compensation
We seek to pay the Company’s executives fairly and competitively and to link pay with performance. The main elements of executive compensation are base salary, a short-term incentive in the form of an annual cash bonus, and long-term equity incentive awards. The Company emphasizes compensation opportunities that reward executives when they deliver targeted financial results. A significant portion of executive compensation is equity-based. For fiscal 2019, incentive compensation at target (annual cash bonus and equity incentive awards) accounted for approximately 80% of Mr. Baker’s Total Direct Compensation opportunity and approximately 64% of the average Total Direct Compensation opportunity of the other NEOs.
componentsofexecutivecompen.jpg
Base Salary
Base salaries are reviewed annually and established considering the scope and complexity of the role, market competitiveness, individual performance and Company operating performance. Individual performance is evaluated based on achievement of established goals and objectives related to business performance and leadership. Generally, changes in base salary are the result of an annual merit increase, promotion, or change in role or market adjustment. Base salary increases for NEOs occurred in January 2019 and were from 0% to 5%, with increases reflecting annual merit adjustments.

18



Annual Bonus
Our NEOs, along with other leaders and substantially all U.S. employees, have an opportunity to earn an annual cash bonus based on achievement of certain performance objectives. The three performance metrics implemented within the annual bonus plan are Core Sales Growth, EBITDA Margin % and Free Cash Flow. The exhibit below illustrates the fiscal 2019 bonus plan design for the NEOs.
a2019bonusplan.jpg
Annual bonus opportunity percentages vary by NEO and are determined based on their scope of duties and responsibilities as well as market and peer group data. Annual bonus achievement can range from 0% to 200% of the target annual bonus based on actual performance. The following table summarizes the fiscal 2019 annual bonus opportunity and weighting for each NEO. 
 
 
Annual Bonus
Opportunity as a %
of Base Salary
 
Weighting of Components of
Target Annual Bonus
Name
 
Threshold
 
Target
 
Maximum
 
Combined Core Sales
 
Combined EBITDA Margin %
 
Segment Core Sales
 
Segment EBITDA Margin %
 
Combined Free Cash Flow
Randal W. Baker
 
0%
 
100%
 
200%
 
33.3%
 
33.3%
 
 
 
33.4%
Rick T. Dillon
 
0%
 
70%
 
140%
 
33.3%
 
33.3%
 
 
 
33.4%
Roger A. Roundhouse
 
0%
 
60%
 
120%
 
 
 
33.3%
 
33.3%
 
33.4%
John Jeffrey Schmaling
 
0%
 
60%
 
120%
 
 
 
33.3%
 
33.3%
 
33.4%
Fabrizio Rasetti
 
0%
 
60%
 
120%
 
33.3%
 
33.3%
 
 
 
33.4%

The annual bonus earned is based on performance against approved Core Sales, EBITDA Margin % and Free Cash Flow scales, which are established by the Committee in the first quarter of the fiscal year, considering financial plans, market conditions, year-over-year performance, non-recurring projects, and the general economic environment. Core Sales represents the net sales change between years, excluding the impact of acquisitions, divestitures and foreign currency rate changes. EBITDA and Free Cash Flow are calculated as illustrated in the “Reconciliation of GAAP Measures to Non-GAAP Measures” included in our 2019 Annual Report to Shareholders which accompanies this Proxy Statement. Following the completion of a fiscal year, the Committee approves annual bonus payouts based on the extent to which targets were achieved. Fiscal 2019 annual bonus achievement for our corporate executives is shown below:
 
 
Fiscal 2019 Bonus Scale
 
Fiscal 2019 Bonus Achievement
 
 
Threshold
 
 
 
Target
 
Maximum
 
Result
 
Bonus Payout % of Target
 
 
0%
 
50%
 
100%
 
200%
 
 
Consolidated Core Sales Metric
 
1.2%
 
2.9%
 
4.7%
 
9.7%
 
1.2%
 
—%
Consolidated EBITDA Margin % Metric
 
12.7%
 
13.2%
 
13.7%
 
14.2%
 
13.2%
 
54.2%

19



 
 
Fiscal 2019 Bonus Scale
 
Fiscal 2019 Bonus Achievement
 
 
(amounts in millions)
 
(amounts in millions)
 
 
Threshold
 
 
 
 
 
Target
 
Maximum
 
Result
 
Bonus Payout %
 
 
0%
 
75%
 
100%
 
200%
 
 
Free Cash Flow Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free Cash Flow
 
$70
 
$
70

-
$80
 
$80
 
$100
 
$27
 
—%
Minimum Free Cash Flow Conversion
 
N/A
 
>
115%
 
N/A
 
N/A
 
N/A
 
 
The blended result of the achievement outcomes above is a bonus payout of 18% of target, for Messrs. Baker, Dillon and Rasetti for fiscal 2019. The bonus payouts for Messrs. Roundhouse and Schmaling were 32.2% and 50.8% of target, respectively.
These financial measures can be impacted by a variety of non-recurring or extraordinary items (e.g., acquisitions, divestitures, business restructuring, accounting rule changes, etc.) and actual results may be adjusted for these items if not contemplated in the target setting process. Adjustments to the annual bonus financial results, if any, are reviewed and approved by the Committee.
Equity Compensation
We believe a significant portion of Total Direct Compensation should be made in the form of equity compensation due to the strong alignment created with shareholders. If the Company’s stock price declines, so does the value of the NEOs’ compensation, and vice versa. For our NEOs, the Committee approves a target award value based on the independent compensation consultant’s benchmarking data and other applicable factors such as internal equity and individual contributions. In fiscal 2018, the Company adjusted the allocation of equity awards for NEOs to be 50% in performance shares and 50% in restricted stock units to improve alignment with the equity allocation practices of the Peer Group. Prior to fiscal 2018, equity awards for NEOs were allocated in the form of 35% in stock options, 35% in restricted stock units and 30% in performance shares.
The following describes each type of award:
Performance Based Restricted Stock Units (“Performance Shares”)—Performance Share awards have a three-year performance period, with vesting based 50% on achievement of an absolute Free Cash Flow Conversion target and 50% on the Company’s TSR relative to the S&P 600 SmallCap Industrial Index (approximately 90 companies). New three-year performance cycles start annually with grants near the beginning of each fiscal year. The Committee designed the plan to include both TSR and Free Cash Flow Conversion elements to emphasize the importance of these two metrics to the long-term success of the Company. TSR aligns the interests of shareholders and executives, while strong Free Cash Flow Conversion helps ensure adequate cash generation to fund Company growth, dividends and stock buybacks. The targets and vesting scale for Performance Shares granted in fiscal 2019 were as follows:

 
Measure
 
Threshold
 
Target
 
Maximum
Vesting Scale (as a percentage of Target)
 
50%
 
100%
 
150%
Relative TSR Percentile
 
25th
 
50th
 
75th
Free Cash Flow Conversion
 
100%
 
115%
 
140%
The three-year measurement period for the fiscal 2017 Performance Share grant ended August 31, 2019 and the vesting level achieved is shown below:
 
 
Threshold (50%)
 
Target (100%)
 
Maximum (150%)
 
Actual Relative TSR Percentile
 
Actual Vesting for Relative TSR Percentile
Relative TSR Percentile
 
25th
 
50th
 
75th
 
25th
 
51%
 
 
Threshold (50%)
 
Target (100%)
 
Maximum (150%)
 
Actual Cash Flow Conversion
 
Actual Vesting for Free Cash Flow Conversion
Free Cash Flow Conversion
 
100%
 
115%
 
140%
 
105.3%
 
68%
The following tables summarize threshold, target and maximum share opportunities for the fiscal 2019 Performance Share grants for eligible NEOs as of August 31, 2019:

20



 
 
2019 Performance Shares Grant
Name
 
Threshold
 
Target
 
Maximum
Randal W. Baker
 
27,474

 
54,947

 
82,421

Rick T. Dillon
 
5,482

 
10,964

 
16,446

Roger A. Roundhouse (1)
 
5,482

 
10,964

 
16,446

John Jeffrey Schmaling
 
5,482

 
10,964

 
16,446

Fabrizio Rasetti
 
3,987

 
7,974

 
11,961

(1) Pursuant to the Retention Incentives Agreement between Mr. Roundhouse and the Company described on page 31, these Performance Share grants vested at the target level upon the consummation on October 31, 2019 of the sale of the EC&S segment.
Restricted Stock Units and Awards—Restricted stock units and restricted share awards granted prior to January 2017 generally vested 50% after three years with the remaining 50% vesting after five years. Restricted stock units granted to officers thereafter generally vest in equal annual installments over a three-year period. The Committee has the ability to vary the vesting schedule for new grants. Individuals granted restricted stock units have the ability to defer receipt and taxability of the shares beyond their normal vesting dates into the Employee Deferred Compensation Plan by providing written notice to the Company at least twelve months in advance of the award’s scheduled vest date.
The following table summarizes the number of restricted stock units and the grant date fair value of restricted stock unit awards (based on the market price of the shares on the grant date) made to each NEO during the fiscal year ended August 31, 2019.
 
 
Restricted Stock Unit Awards
Name
 
Number of Shares (#)
 
Grant Date Fair Value ($)
Randal W. Baker
 
62,330

 
1,378,116

Rick T. Dillon
 
12,438

 
275,004

Roger A. Roundhouse (1)
 
12,438

 
275,004

John Jeffrey Schmaling
 
12,438

 
275,004

Fabrizio Rasetti
 
9,046

 
200,007

(1) Pursuant to the Retention Incentives Agreement between Mr. Roundhouse and the Company described on page 31, these restricted stock unit awards vested upon the consummation on October 31, 2019 of the sale of the EC&S segment.
 Practices Regarding the Grant of Equity Compensation
The Committee has generally followed a practice of making annual grants of restricted stock unit awards to its NEOs on a single date each year, when all material information is publicly available. In fiscal 2019, the Committee granted the restricted stock unit awards at its regularly scheduled January 2019 meeting. Performance Shares were granted in October 2018 near the beginning of the three-year performance period. While the vast majority of awards to NEOs have historically been made as part of the Company’s annual grant program, the Committee occasionally makes awards to NEOs or other employees at other times, such as in connection with hiring or promotions or for retention purposes.
Retirement and Other Benefits
The Company provides additional benefit programs to its employees, including NEOs and other executives, to attract and retain them as well as to provide a competitive total compensation program. The Company's benefits philosophy is to generally provide similar benefit programs for all non-bargaining unit employees, including NEOs. Modifications may be made in cases where IRS limits or other regulations prevent equitable treatment or for competitive positioning purposes. The following table summarizes such benefit plans and eligibility for U.S. employees:

21



Type of Benefit
  
NEOs
  
Certain Other
Executives and
High Level Managers
  
Most Other
Full Time Employees
401(k) Retirement Plan
  
ü
  
ü
  
ü
Supplemental Executive Retirement Plan (SERP)
  
ü
  
Selectively
  
Not Offered
Employee Deferred Compensation Plan
  
ü
  
ü
  
Selectively
Medical/Dental/Vision Insurance
  
ü
  
ü
  
ü
Annual Physical
  
ü
  
Selectively
  
Not Offered
Life and Disability Insurance
  
ü
  
ü
  
ü
Supplemental Long Term Disability Insurance
  
ü
  
Selectively
  
Not Offered
Employee Stock Purchase Plan
  
ü
  
ü
  
ü
Vacation
  
ü
  
ü
  
ü
Tuition Reimbursement Plan
  
ü
  
ü
  
ü
Automobile Allowance/Leased Vehicle
  
ü
  
Selectively
  
Selectively
Financial Planning Services
  
ü
  
Selectively
  
Not Offered
Personal Use of Company Aircraft
  
ü
  
Selectively
  
Not Offered
401(k) Retirement Plan
Under the Company’s 401(k) Plan, most employees, including NEOs, may contribute eligible compensation up to IRS limits. The Company offers a matching contribution of $0.50 for every $1 on employee elective contributions, up to 8% of eligible pay with immediate vesting. The Company may contribute an annual, discretionary contribution of up to 3% of eligible pay, which will be 100% vested after 3 years of service.
Supplemental Executive Retirement Plan (“SERP”)
The SERP covers certain executive level employees (including the NEOs) and is designed to improve the competitive positioning of the Company's retirement programs, reward long-service employees and support executive retention and recruiting efforts. The SERP is a nonqualified defined contribution plan and the benefit is calculated by applying a SERP multiplier to total eligible compensation in a given year (base salary plus annual paid bonus). The SERP multiplier ranges from 3-6%, and is determined by a formula that takes into account the executive’s age and years of service. SERP contributions are credited to a notional interest bearing account and vest after five years of service or when the executive turns 60. The targeted combined annual NEO retirement contribution between the SERP and 401(k) Plan is approximately 7-10.5% of cash compensation, depending on age and years of service.
Employee Deferred Compensation Plan
The Company also offers a deferred compensation plan that allows U.S. employees with base salary over $120,000 to defer cash compensation and associated taxes until retirement or termination of employment. Investment options include an interest bearing account and/or a mix of investment options similar to the 401(k) plan, including a company stock account (although the plan was amended during the fiscal year ended August 31, 2019 to no longer permit investment contributions to be made into the company stock account). As a result of the unfunded nature of the plan, compensation deferrals are essentially unsecured loans from employees to the Company. Each year the Committee determines the interest rate for new deferrals. The rate for fiscal 2019 deferrals (1.89%) was based on the average of 5 and 10 year U.S. Treasury yields. The stock account return mirrors the performance of the Company’s stock price. Shares of common stock equal to the number of vested shares are transferred by the Company into a rabbi trust. When distributed, deferred amounts invested in the interest and investment accounts are paid out in cash while an appropriate number of shares of common stock (plus accrued dividends) are released from the rabbi trust to satisfy common stock fund distributions.
Contributions into the deferred compensation plan may reduce the ability to participate fully in the 401(k) plan. The same matching formula is used for deferrals in the deferred compensation plan as the 401(k) plan.
Other Benefits
Other perquisites are provided to help executives be more productive and efficient, to provide protection from potential business risk and as a competitive compensation measure. They are limited in amount, and the Company maintains a strict policy regarding the eligibility and use of these benefits, which include financial planning and personal use of the company airplane. Annual NEO personal use of the plane (which is reviewed by the Committee at least annually) is capped at 24 hours of flight time for the CEO and 12 hours for all other NEOs. The other benefits earned by our NEOs in fiscal 2019 are included in the “All Other Compensation Table” on page 26.

22



Stock Ownership Requirements
Ownership of Company stock by executives directly aligns their interests with shareholders. Accordingly, the Company maintains stock ownership guidelines for NEOs equal in value to a multiple of their base salary.
 
Position
 
Multiple of Base Salary
Required to be held in
Company Stock
CEO
 
5X
Other NEOs
 
3X
Stock ownership requirements include the value of unvested restricted stock units, consistent with Peer Group practices. Additionally, the value of “in the money” vested options, shares held in the 401(k), employee stock purchase plan and/or deferred compensation accounts, as well as shares owned outright or by immediate family members are counted towards the ownership requirements. The compliance period to achieve the ownership requirement is 5 years from the date of appointment. The Committee reviews each NEO’s compliance with these guidelines on an annual basis, and all NEOs have either met the target ownership level, or are within the five-year compliance period.
Executives are expected to hold all of their shares until the ownership requirements are met. Those who have not reached their specified targets are required to hold 50% gross value of the shares they receive so that they meet their requirements in a timely manner, with the 50% balance available to cover related income tax obligations.
Anti-Hedging Policy
The Company has adopted a policy prohibiting employees from engaging in short-term or speculative transactions involving the Company’s common stock. This policy prohibits trading in Company common stock on a short-term basis, engaging in short sales, and buying and selling puts and calls, and discourages the practice of purchasing the Company’s stock on margin.
Compensation Clawback Policy
The Company’s clawback policy for executive officers defines the economic consequences misconduct could have on their compensation. In the event of a financial restatement due to fraud or misconduct, as determined by the Board of Directors, responsible executives must reimburse the Company for their annual cash bonus, as well as equity based awards or other performance-based compensation paid to the executive based on the financial results that were the subject of the restatement.
Conclusion
We believe that we have designed an executive compensation program that effectively links pay and performance and is in the best long-term interests of shareholders. As indicated in the Committee’s charter, the Committee will continue to evaluate executive compensation to ensure future alignment between the Company's compensation program and practices. Shareholder input will continue to be an important consideration in the Committee’s annual executive compensation evaluation process.

 

23



Compensation Committee Report
 
The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K.
October 28, 2019


 
THE COMPENSATION COMMITTEE
 
Holly A. Van Deursen, Chair
Alfredo Altavilla
Palmer Clarkson
Richard D. Holder





24



Summary Compensation Table
The following table sets forth the total compensation applicable to the fiscal years ended August 31, 2019, 2018 and 2017 by the NEOs:
Name & Principal Position
 
Year
 
Salary
($)
 
Stock
Awards
($)
(4)
 
Option
Awards
($)
 
Non-Equity Incentive Plan Compensation ($) (5)
 
Change in Pension Value and Non-qualified
Deferred
Compensation
Earnings
($)
(6)
 
All Other
Compensation
($)
(7)
 
Total
($)
Randal W. Baker
 
2019
 
$
867,000

 
$
2,756,242

 
$

 
$
156,060

 
$
6,282

 
$
129,525

 
$
3,915,109

President and Chief Executive Officer
 
2018
 
867,000

 
2,625,009

 

 
1,028,262

 
2,226

 
134,350

 
4,656,847

 
 
2017
 
850,000

 
1,907,495

 
875,059

 
496,400

 
879

 
120,514

 
4,250,347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rick T. Dillon (1)
 
2019
 
$
472,654

 
$
549,993

 
$

 
$
60,165

 
$
2,950

 
$
90,495

 
$
1,176,257

Executive Vice President and Chief Financial Officer
 
2018
 
463,500

 
549,987

 

 
384,798

 

 
157,706

 
1,555,991

 
 
2017
 
320,192

 
957,472

 
392,531

 
183,960

 

 
409,468

 
2,263,623

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roger A. Roundhouse (2)
 
2019
 
$
456,692

 
$
549,993

 
$

 
$
89,838

 
$
2,308

 
$
223,971

 
$
1,322,802

Former Executive Vice President - Engineered Components & Systems Segment
 
2018
 
441,000

 
549,987

 

 
371,016

 
906

 
82,042

 
1,444,951

 
 
2017
 
420,000

 
337,986

 
182,000

 
299,376

 
908

 
54,368

 
1,294,638

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John Jeffrey Schmaling (3)
 
2019
 
$
459,808

 
$
549,993

 
$

 
$
141,732

 
$

 
$
83,616

 
$
1,235,149

Executive Vice President - Industrial Tools & Services Segment
 
2018
 
233,654

 
500,007

 

 
320,220

 

 
38,075

 
1,091,956

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fabrizio Rasetti
 
2019
 
$
382,846

 
$
400,003

 
$

 
$
41,796

 
$

 
$
142,576

 
$
967,221

Executive Vice President, General Counsel and Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Mr. Dillon joined the Company in December 2016 and base salary represents actual salary earned since then. His annual salary rate at August 31, 2017 was $450,000. Mr. Dillon also received a $600,000 restricted stock unit grant and $200,000 option grant upon joining the Company. Mr. Dillon’s fiscal 2017 annual bonus was based on full year bonus as stated in his offer letter dated November 10, 2017.
(2) 
Mr. Roundhouse ceased to serve as Executive Vice President - Engineered Components & Systems Segment on October 31, 2019 in connection with the completion of the sale of the businesses comprising the Company’s former EC&S segment on that date and his acceptance of employment with an affiliate of the buyer of such businesses on that date.
(3) 
Mr. Schmaling joined the company in February 2018 and his base salary in 2018 represents actual salary earned since then. His annual salary rate at August 31, 2018 was $450,000. Mr. Schmaling also received a $250,000 restricted stock unit grant and $250,000 performance share grant upon joining the Company. Mr. Schmaling’s fiscal 2018 annual bonus was based on full year bonus as stated in his offer letter dated January 18, 2018.
(4) 
Equity compensation awards granted in fiscal 2019 consisted of restricted stock units and Performance Shares. These equity awards are reported at a value, developed solely for purposes of disclosure in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), equal to the “grant date fair value” thereof under ASC Topic 718 of the Financial Accounting Standards Board for financial reporting purposes, except that the reported value does not reflect any adjustments for risk of forfeiture. The reported amounts for any award do not reflect any adjustments for restrictions on transferability. See Note 14 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended August 31, 2019 for a discussion of the assumptions made in determining the grant date fair values in this column. For the Performance Shares, we assumed the number of shares based on the target level of performance. As described on page 20, the payout for Performance Share ranges from 0% to 150% of the target level based on the actual performance level achieved. Assuming maximum payouts for the Performance Shares at 150% of the target level, the amounts reported above for the restricted stock units and Performance Shares for fiscal 2019 would be as follows: Mr. Baker $1,830,559; Mr. Dillion, $365,266; Mr. Roundhouse, $365,266; Mr. Schmaling, $365,266; and Mr. Rasetti, $265,654.
(5) 
Reflects amounts earned under the Annual Bonus plan. Amounts are paid in the first quarter of the subsequent fiscal year. For additional information on the Annual Bonus plan, see page 19.
(6) 
Reflects the portion of interest earned in the Employee Deferred Compensation Plan and Supplemental Executive Retirement Plan that exceeds the SEC benchmark “market” rate of 3.09%, 3.55% and 2.80% in 2017, 2018 and 2019, respectively (120% of the applicable federal long term rate). See page 22 for information on the Employee Deferred Compensation Plan, and page 30 for NEO activity in this plan.
(7) 
For fiscal 2019, these amounts consist of the following:

25



Name
 
401(k) Core and Match
 
401(k) Restoration (a)
 
SERP (b)
 
Automobile Allowance
 
Supplemental Life & Disability Insurance
 
Executive Physical
 
Personal Use of Company Plane (c)
 
Financial Planning
 
Retention Incentive Payment (d)
 
Relocation Expense
 
Total
Randal W. Baker
 
$
9,500

 
$
850

 
$
75,810

 
$
15,082

 
$
4,083

 
$

 
$
24,200

 
$

 
$

 
$

 
$
129,525

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rick T. Dillon
 
$
9,500

 
$
624

 
$
34,298

 
$
13,933

 
$
3,540

 
$

 
$
28,600

 
$

 
$

 
$

 
$
90,495

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roger A. Roundhouse
 
$
9,500

 
$
608

 
$
33,108

 
$
16,313

 
$
4,838

 
$

 
$

 
$
7,397

 
$
152,207

 
$

 
$
223,971

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John Jeffrey Schmaling
 
$
11,000

 
$

 
$
39,001

 
$
16,135

 
$
4,673

 
$
6,306

 
$

 
$
6,498

 
$

 
$

 
$
83,613

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fabrizio Rasetti
 
$
11,000

 
$

 
$
18,872

 
$
9,948

 
$
3,987

 
$
4,992

 
$
14,200

 
$
4,162

 
$

 
$
75,415

 
$
142,576

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Represents Company Restoration Contribution to the Employee Deferred Compensation Plan, as described on page 22.
(b) 
Represents Company contribution to the SERP plan as described on page 22.
(c) 
The income for personal use of the Company plane was determined by calculating the incremental cost including fuel, pilot and other variable costs.
(d) 
Represents a retention incentive payment of $139,500 and reimbursement of legal fees in the amount of $12,707 received by Mr. Roundhouse under a Retention Incentives Agreement dated April 12, 2019 between the Company and him entered into in anticipation of the contemplated sale of the businesses principally comprising the Company’s former EC&S segment. Such agreement provided for cash payment to Mr. Roundhouse upon the achievement of specified milestones in connection with the process to complete such sale, as well as a payment upon the completion of such sale and certain severance benefits. The agreement is described in greater detail on page 31.



26



Grants of Plan-Based Awards
The following table sets forth the equity compensation awards in fiscal 2019, as well as the potential range of payouts for fiscal 2019 under the Annual Bonus plan:
 
 
Grant
Date
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)
 
Estimated Future Payouts
Under Equity
Incentive Plan Awards
(2)
 
All Other
Stock
Awards:
Number
of Shares
or Units
(3) (#)
 
All Other
Option
Awards:
Number of Securities Underlying Options (#)
 
Exercise
or Base
Price of
Option
Awards
($/Sh)
 
Grant Date
Fair Value
of Stock
and Option
Awards
(4)
Name
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Randal W. Baker
 
10/30/2018
 

 

 

 

 
26,200

 
39,300

 

 

 

 
689,060

 
 
10/30/2018
 

 

 

 

 
28,747

 
43,121

 

 

 

 
689,060

 
 
1/22/2019
 

 

 

 

 

 

 
62,330

 

 

 
1,378,116

 
 
n/a
 

 
867,000

 
1,734,000

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rick T. Dillon
 
10/30/2018
 

 

 

 

 
5,228

 
7,842

 

 

 

 
137,496

 
 
10/30/2018
 

 

 

 

 
5,736

 
8,604

 

 

 

 
137,492

 
 
1/22/2019
 

 

 

 

 

 

 
12,438

 

 

 
275,004

 
 
n/a
 

 
334,250

 
668,500

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roger A. Roundhouse
 
10/30/2018
 

 

 

 

 
5,228

 
7,842

 

 

 

 
137,496

 
 
10/30/2018
 

 

 

 

 
5,736

 
8,604

 

 

 

 
137,492

 
 
1/22/2019
 

 

 

 

 

 

 
12,438

 

 

 
275,004

 
 
n/a
 

 
279,000

 
558,000

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John Jeffrey Schmaling(6)
 
10/30/2018
 

 

 

 

 
5,228

 
7,842

 

 

 

 
137,496

 
 
10/30/2018
 

 

 

 

 
5,736

 
8,604

 

 

 

 
137,492

 
 
1/22/2019
 

 

 

 

 

 

 
12,438

 

 

 
275,004

 
 
n/a
 

 
279,000

 
558,000

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fabrizio Rasetti
 
10/30/2018
 

 

 

 

 
3,802

 
5,703

 

 

 

 
99,993

 
 
10/30/2018
 

 

 

 

 
4,172

 
6,258

 

 

 

 
100,003

 
 
1/22/2019
 

 

 

 

 

 

 
9,046

 

 

 
200,007

 
 
n/a
 

 
232,200

 
464,400

 

 

 

 

 

 

 

(1) 
These columns show the range of payouts under the fiscal 2019 Annual Bonus plan described on page 19. The actual bonuses earned under this plan are included in the Summary Compensation Table on page 25.
(2) 
Reflects Performance Shares granted in fiscal 2019 under the Company’s 2017 Omnibus Plan. Refer to page 20 “Equity Compensation-Performance Based Restricted Stock” for further details on these awards.
(3) 
Reflects restricted stock units granted in fiscal 2019 under the Company’s 2017 Omnibus Plan.
(4) 
The grant date fair value of restricted stock unit awards is based on the market price of the shares on the grant date or a simulation model (Monte Carlo), depending on the type of performance condition. See Note 14 of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended August 31, 2019 for a discussion of the assumptions made in determining the grant date fair values in this column.



27



Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the outstanding equity incentive plan awards held by each NEO at August 31, 2019:
 
 
Option Awards
 
Stock Awards
Name
 
Date of
Grant
 
Number of
Securities
Underlying
Options (#)
Exercisable
 
Number of
Securities
Underlying
Options (#)
Unexercisable
 
Option
Exercise
Price
($)
 
Option
Expiration
Date
 
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
 
Market
Value of
Shares or
Units of Stock That
Have Not
Vested
($) (1)
 
Equity Incentive Plan Awards: Number of
Unearned Shares or
Units or Other Rights That
Have Not
Vested
(#) (2)
 
Equity Incentive Plan Awards: Market or Payout
Value of Unearned
Shares,
Units or Other Rights That
Have Not
Vested
($) (1)
Randal W. Baker
 
3/21/2016
 
60,220

 
60,221

 
24.42

(4)
3/21/2026

 
23,546

 
522,957

(4)

 

 
 
10/14/2016
 

 

 

 

 
12,500

 
277,625

(6)

 

 
 
10/18/2016
 

 

 

 

 

 

 
33,044

 
733,907

 
 
1/16/2017
 

 
73,130

 
26.95

(4)
1/16/2027

 
10,825

 
240,423

(5)

 

 
 
10/17/2017
 

 

 

 

 

 

 
47,853

 
1,062,815

 
 
1/22/2018
 

 

 

 

 
33,462

 
743,191

(5)

 

 
 
10/30/2018
 

 

 

 

 

 

 
54,947

 
1,220,373

 
 
1/22/2019
 

 

 

 

 
62,330

 
1,384,349

(5)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rick T. Dillon
 
12/27/2016
 

 
18,980

 
26.95

(4)
12/27/2026

 

 

 

 

 
 
1/16/2017
 

 
16,090

 
26.95

(4)
1/16/2027

 
2,381

 
52,882

(5)
6,004

 
133,349

 
 
10/17/2017
 

 

 

 

 

 

 
10,026

 
222,667

 
 
1/22/2018
 

 

 

 

 
7,011

 
155,707

(5)

 

 
 
10/30/2018
 

 

 

 

 

 

 
10,964

 
243,510

 
 
1/22/2019
 

 

 

 

 
12,438

 
276,248

(5)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roger A. Roundhouse
 
5/5/2014
 
7,331

 

 
33.93

 
5/5/2024

 

 

 

 

 
 
1/20/2015
 
8,236

 
8,235

 
22.98

(4)
1/20/2025

 
3,236

 
71,872

(4)

 

 
 
4/6/2015
 

 
6,000

 
24.46

(7)
4/6/2025

 

 

 

 

 
 
1/19/2016
 
9,715

 
9,715

 
21.41

(4)
1/19/2026

 
3,759

 
83,487

(4)

 

 
 
10/18/2016
 

 

 

 

 

 

 
6,873

 
152,649

 
 
1/16/2017
 

 
15,210

 
26.95

(4)
1/16/2027

 
2,251

 
49,995

(5)

 

 
 
10/17/2017
 

 

 

 

 

 

 
10,026

 
295,266

 
 
1/22/2018
 

 

 

 

 
7,011

 
155,714

(5)

 

 
 
10/30/2018
 

 

 

 

 

 

 
10,964

 
243,510

 
 
1/22/2019
 

 

 

 

 
12,438

 
276,248

(5)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John Jeffrey Schmaling
 
2/12/2018
 

 

 

 

 
7,154

 
158,890

(5)
10,191

 
226,342

 
 
10/30/2018
 

 

 

 

 

 

 
10,964

 
243,510

 
 
1/22/2019
 

 

 

 

 
12,438

 
276,248

(5)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fabrizio Rasetti
 
5/7/2018
 

 

 

 

 
8,334

 
185,098

(3)

 

 
 
10/30/2018